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Greetings. Welcome to the PowerFleet's Second Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Carolyn Capaccio of Alliance Advisors IR. You may begin.

Thank you, operator, and good morning, everyone. Welcome to PowerFleet's Second Quarter 2025 Conference Call. With me on the call this morning are CEO, Steve Towe; and CFO, David Wilson. 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 it intend to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances. During this call, management will present both GAAP and certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's press release, and the press release is available on the Investors section of the company's website at ir.powerfleet.com. Steve?

Good morning, everyone, and thank you for joining us today. We're pleased to share another strong set of numbers that reflects our strategic focus and continued robust execution. Having reached the half year mark following the close of the MiX transaction early in April, I'll begin by calling out the first half FY '25 financial headlines versus the prior year. Revenue of $152 million is up by $12 million or 9%. EBITDA of $28 million is up by $9 million or a highly impressive 46%. We have secured $13.5 million in annual run rate cost synergies in the first half of the year, or said differently, a full 50% of the $27 million 2-year target of efficiencies to be realized from the MiX deal. This number set is a testament to the intensity and execution ability of our team, our business combination playbook, our differentiated product strategy, and our ability to weather macro headwinds. These numbers are highly satisfying at a time where significant management focus was on the deep integration of two similar-sized businesses plus winning the race and consummating the Fleet Complete transaction. We are delighted with the progress we have made to bring game-changing scale and resources to the business. We're ahead of where we were expected to be just 6 months into the MiX combination, which gives us the ability to make further decisive decisions on shaping the future business as we bring Fleet Complete into the family and underpin our bold ambitions for the company. Recapping on Fleet Complete, the acquisition is highly strategic, adding further scale and quality across key dimensions. It brings a talented team, which aligns well with our culture and goals, a strong North American revenue base with 70% of revenue from this region and 88% of revenue through high-margin services. It brings go-to-market strength, especially through partnerships with some of the largest telecommunication providers in North America. It brings a low-touch, high-velocity in-cab AI camera solution to address the fastest-growing segment in the market. Its state-of-the-art FC Hub platform that complements our Unity data highway ecosystem, plus an established and cohesive team of 100 software engineers to accelerate the execution of the Unity product road map. It also brings an established back-office system that offers a proven blueprint to accelerate the modernization of PowerFleet Group's internal system stack, which is essential for achieving $11 million in annual cost synergies from the MiX transaction targeted for fiscal year '26. And finally, an incremental $10 million in annual cost synergies assigned to the Fleet Complete deal. The transaction represents a tremendous opportunity to accelerate our growth trajectory and expand our market reach. With cross-sell, upsell pipeline already building very nicely between the PowerFleet and MiX customer bases, adding Fleet Complete's value propositions and subscriber base into the equation gives us high confidence we will reach our midterm accelerated double-digit growth targets. We're now taking stock of our new size and scale and consciously calibrating our approach with the new combined entity. We will only focus going forward on strategic high-quality revenue streams that maximize our resources to achieve our core group objectives. We're obsessive about laying the foundations for sustained performance and greater midterm value creation for our shareholders through a measured path to accelerated profitable growth. As a further testament and proof point to the compelling solutions we deliver to customers, we're proud this quarter to be recognized by ABI Research as the #1 global market leader in AI-powered smart cold chain solutions. Our platform provides a robust suite of capabilities, including real-time temperature and location monitoring, regulatory compliance and advanced analytics, critical for protecting perishable goods across global supply chains. Together with our Unity platform, we deliver secure actionable insights that meet the demands of today's cold chain logistics industry. Ahead of sharing further forward-looking thoughts and an overview of November 20 Investor Day, I'll hand the call over to David to provide additional detail and insights into our financial results. David?

Thank you, Steve, and great to reconnect with so many of you on today's call. Before diving into detailed numbers, I'd like to echo Steve's perspectives on the rich set of opportunities now under our direct control following the close of the Fleet Complete transaction. We have everything necessary to be a major player in our dynamic, rapidly expanding market. With so many moving parts, maintaining discipline and focus is crucial. We're committed to taking the necessary time to validate and align resources effectively, ensuring focused execution on what matters most, while maintaining our primary focus on accelerating EBITDA growth through our cost synergy program and bringing our key growth vectors to bear to achieve double-digit revenue growth in fiscal 2024. Ahead of reviewing our detailed results, a quick reminder of key pro forma adjustments -- pro forma comparisons. All prior-period comparisons are based on pro forma financials for the combined MiX and PowerFleet businesses, whereas our 10-Q will reflect only legacy PowerFleet numbers. Onetime expenses. This quarter's expense includes $3.9 million in onetime costs for transactions and restructuring, excluded from adjusted EBITDA and EPS for ongoing run rates. Amortization impact. Results also include $1.2 million in noncash amortization related to the MiX acquisition, impacting service gross margins by 2%. Now let's review our financial performance for the quarter starting with revenue, which increased by 7% year-over-year to $77 million from $72 million. Our differentiated safety-centric product solutions continue to drive growth with product revenue up 13% to $20.3 million. This strong performance underscores the resilience of our global portfolio with notable revenue increases in Europe and the Middle East, up 74% and 63%, respectively. Strong product demand also contributed to robust margins, which reached 35% this quarter after adjusting for $700,000 in inventory write-offs related to integration efforts to streamline our product offerings. While margins were slightly below last year's tough 36.2% comparison, they improved by 300 basis points sequentially and comfortably exceeded our near-term guidance of over 30%. Service revenue grew in line with our annual guidance of 5%, reaching $56.7 million compared to $54.1 million in the prior year, with growth impacted by previously announced churn in the legacy MiX customer base. Steve will discuss in more detail, we're actively reorientating our customer-facing function to secure a substantial improvement in retention and consequently, revenue growth. This initiative includes a rigorous analysis of customer segments to differentiate those we will prioritize for long-term growth from those where we will focus on optimizing cash. Moving on to service margins, which were 61.7% compared to 62.7% in the prior period, mainly due to noncash charges of $1.2 million for the amortization of intangible assets related to the MiX transaction. On an adjusted basis, service gross margin expanded by 100 basis points year-over-year to 63.7%. Combined gross margins came in at 53.7%, down from 56.1% in the prior year, with the decrease in entirely attributable to $700,000 in integration-related inventory write-offs and $1.2 million in amortization of acquisition-related intangibles. Excluding these expenses, total gross margin of 56.1% matched the prior year. Turning to operating expenses, which totaled $40.8 million for the quarter. This included $3.9 million in onetime transaction and restructuring costs versus $2 million in the prior year. After adjusting for these costs, total OpEx of $36.9 million was down over 5% versus $39 million in the prior year, with the realization of cost synergies, the key driver. On an adjusted basis, SG&A expenses were $33.4 million or 43.4% of revenue, down from 48.5% in the prior year. Within SG&A, general and administrative expenses improved sequentially to 31% of revenue from 33.6%, reducing G&A spend, while growing revenue remains a key priority and is anticipated to be a major contributor to EBITDA margin expansion in the near to medium term. R&D investments, including $2.4 million in capitalized software totaled, $5.8 million or 7.5% of revenue, down from 9.3% in the prior year, where we were still optimizing spend post the Movingdots acquisition. As highlighted on our Q1 call, this level of investment is efficient and reflects the cost effectiveness of high-quality engineering talent in South Africa. Turning to adjusted EBITDA, which increased by 41% to $14.5 million, up from $10.3 million. This increase was driven by strong top line performance, resulting in an additional $2.9 million in gross margin after accounting for $1.9 million in amortized intangibles and restructuring costs plus the flow-through benefit of cost synergies on OpEx. Net loss attributable to common stockholders was $1.9 million or $0.02 per basic and diluted share compared to a loss of $0.06 in the prior year. After adjusting for onetime expenses and the amortization of acquisition-related intangibles, net profit attributable to common stockholders was $2.7 million or $0.02 per basic share compared to a loss of $0.01 in the prior year. Closing with cash and the balance sheet. Excluding $61.9 million in equity proceeds from the Fleet Complete transaction, we closed the quarter with net debt of $119.1 million, consisting of $27.2 million in cash and $146.3 million in total debt. Adjusting for $1.9 million in unsettled transaction costs, Pro forma net debt stands at $121 million, up from $110 million at the close of the MiX transaction. This $11 million increase in pro forma net debt is largely due to an $8.2 million working capital burn for the first half of the year, driven by a rise in net receivables attributable in part to strong top line performance. Consistent with prior guidance, we anticipated a net cash burn in the first half of fiscal 2025 with recovery expected in the second half. This guidance is not impacted by the Fleet Complete transaction with deal proceeds projected to substantially cover the purchase price and associated fees and Fleet Complete's free cash flow expected to fully service the cash interest on the additional $125 million in debt raised to consummate the transaction. Finally, we are reaffirming our financial guidance for fiscal 2025 to capture the impact of the Fleet Complete transaction. The updated guidance reflects 6 months of Fleet Complete annual revenue and EBITDA of approximately $105 million and $25 million, respectively. This guidance also reflects the pre-acquisition accounting treatment, which remains subject to review as we work to conform to U.S. GAAP standards. Annual revenue is expected to exceed $352.5 million, and we expect revenue for the third quarter to exceed $100 million. Annual EBITDA, including $5 million in annualized run rate synergies, is expected to exceed $72.5 million, with EBITDA for the third quarter expected to exceed $20 million. Net debt at March 31, 2026, is expected to be approximately $235 million. That concludes my remarks. Steve?

Thank you, David. We're highly energized by the expanded opportunities gained through the Fleet Complete acquisition and our great start out of the blocks following our combination with MiX. Over the next 6 months leading into fiscal year '26, we've entered another period of intense blocking and tackling to shape the organization and harmonize our overall value proposition to the market with an acute focus on channel and customer upsells. This groundwork will allow us to focus extensively on becoming a high-velocity growth business. Our attention as a business is firmly set on 3 core priorities that chart our path forward: one, maximizing efficiency to rapidly expand EBITDA and enable strategic reinvestment; two, underpinning accelerated revenue growth; and three, driving customer stickiness and wallet share from our phenomenal customer and subscriber base. Starting with maximizing efficiencies, our immediate focus is on expanding EBITDA through the realization of cost synergies. We're well on track to achieve $16 million in annual savings this year. Additionally, the Fleet Complete transaction mitigates $11 million in synergies slated for fiscal '26, and opens up the potential for an extra $10 million in savings. This positions us to drive meaningful EBITDA gains over the next 6 quarters. Modernizing and aligning our back-office systems and infrastructure is a top priority, and we're focusing closely on working with the Fleet Complete team to confirm that their established systems can meet over 80% of our future operational needs. We anticipate completing this assessment by early December, after which we'll launch a well-resourced accelerated plan to transition our major operating hubs to the new infrastructure by Q3 2026. This initiative not only enables us to realize cost synergies, but also enhances our capability to effectively manage and scale our global operations. Turning to underpinning revenue growth. We believe our product portfolio is now the most comprehensive in the industry. We are investing heavily in our Unity platform as well as focusing more go-to-market resources on our in-warehouse and AI camera solutions. Each of these propositions is designed to meet the evolving needs of our customers, positioning us competitively within high-demand market segments. Unity's device-agnostic data ingestion and analytics capabilities resonate strongly across multiple industries, and we firmly believe this differentiation will drive robust adoption and expanded usage across regions and our client base. Moving to Fleet Complete, which offers multiple avenues for accelerated growth, with top priorities including the following: one, the massive market reach from its established channel relationships, particularly in the strategically vital North American market. We are actively qualifying our solutions suite with some of the world's largest telecommunication carriers, positioning this activity as a springboard for accelerated growth starting early in fiscal year 2026. Two, the FC Hub solution, which accesses the high-velocity mid-market segment. This best-in-class solution in North America is now being evaluated for product market fit across our extensive global markets. Initial results are encouraging, especially for South Africa, where significant untapped demand aligns well with FC Hub's capabilities. And then number three, the recently launched quick install AI camera solution unlocks substantial opportunities in this rapidly expanding marketplace. Layering on productivity from our sales team investments currently in motion, driving pipeline conversion from our cross-sell and upsell activities from our expanded solution set, and launching the combined value proposition to our highly robust and scaled indirect channels, all give us a clear and credible path to double-digit growth starting in fiscal year '26. Turning to our third priority, driving customer stickiness and wallet share, we are undertaking a comprehensive initiative to redefine our retention model across the combined business. This effort includes adding additional enterprise relationship managers and customer success managers to allow our renewals and retention teams to focus on actively managing accounts with an emphasis on long-term customer value. Through these efforts, we're building a framework for consistent proactive engagement that strengthens customer loyalty and drive sustainable growth in our subscription base. These efforts are part of a broader strategy to segment our revenue streams, investing in high-growth areas with strong potential, while retaining flexibility to manage select segments for cash optimization. The data ingestion and systems integration capabilities of our Unity platform push our solutions to be mission-critical status for our clients and drive added stickiness and commitment. Ahead of opening up the call for Q&A, I'll share quickly an overview of the upcoming November 20 Investor Day, where we will share strategic insights driving PowerFleet's growth trajectory. The session will focus on several critical areas, including the PowerFleet mission and valuation opportunity. ABI's research of the TAM and the power of Unity to unlock market share. Additional insights on our ability to scale revenue growth to north of 20% over time. A deep dive into EBITDA expansion and cost synergy realization program for both the MiX and Fleet Complete transactions. The next level of understanding on Fleet Complete as a business. A deep dive into Unity, including product demo and 2 panel discussions. The first dominated by key customers on the value unlock PowerFleet provides and the second, dominated by channel partners, including senior leaders from large telecommunication providers on the market and the mutual strategic benefits from partnering with PowerFleet. The in-person event will be held at Sofitel New York with presentation starting at 1:00 p.m. Eastern Time and concluding around 4:00 to 4:30 Eastern Time. While attendance in person is by invitation only and focused on analysts and institutional investors, the event will also be streamed live. I'll now turn back to the operator for Q&A. Operator?

[Operator Instructions] Your first question for today is from Scott Searle with ROTH Capital.

Congrats on the quarter and looking forward to the Analyst Day next week. Maybe, Dave, just to quickly dive in on the gross margin front for clarification. Product gross margin is now at 35%. Is that the level we should be thinking about going forward? And on the services side, a little bit below, I think, the target range. Can you talk about how we should expect that to be trending over the next several quarters?

Yes. Scott, thank you. In terms of product margin, it was a strong quarter. Obviously, it was up 300 basis points sequentially. I would say a blend of both quarters is probably a better way to think about it. In terms of sort of the base guidance, the base guidance has been north of 30%. So that will give you a feel there. In terms of service margins, it has been impacted in the first half of the year. There's been some acceleration in terms of in-vehicle device depreciation in the South African business, especially. That is something that is actively been addressed by new leadership, and that is expected to dissipate in the second half of the year. So if you think about our guidance, our guidance for blended margins is sort of 57.5 percentage points. I think with the headwind of the in-vehicle device depreciation dropping in the second half of the year, blended margins of 57.5% for second half, I think, makes a lot of sense.

Great. And Steve, trying not to preempt you too much for your Analyst Day next week, but the commentary around getting to double-digit growth, it sounds like you're starting to see the breadcrumbs of decent visibility and increasing comfort on that front. A couple of items. I just want to clarify, in terms of talking about the 20% growth that you did at the time of the Fleet Complete acquisition when it closed, is that opportunity to get to 20% plus just purely from the existing logos? And then if you could maybe just extrapolate and expand a little bit on what you're seeing right now that's starting to give you that comfort? Is it the broader portfolio? Is it the existing accounts? I know you've talked about warehouse, AI camera, Unity. Can you kind of take us through where you're seeing the interest level from the customers?

Yes. So I think you're absolutely right, Scott. I mean, confidence grows with us every quarter. We've taken on a seismic task in terms of bringing these 3 companies together. And you always have a thesis, but does that thesis play out. And I think the credibility and the substance we're seeing in terms of pipeline growth across multiple areas that you've discussed there, a lot from the existing base, but we are also winning some significant new business as well. And that is really because of the Unity device-agnostic play. I think the more and more traction where people are looking for visibility in their warehouses and over the road and therefore, the overall visibility of their operation, that is a key win. And I think where we're consolidating data into a single pane of glass, that is a real, real pain point for customers. So that's where we're really seeing people who have multiple providers saying, how the heck can I make sense of this stuff? And we have a real ability to do so. The market drivers remain the same: safety, compliance, sustainability and optimization. And I think if you look at the comprehensive product portfolio set we have across the group now, as I said in the prepared remarks, it's second to none in terms of those capabilities. And a customer can grow into the solutions as well. So they can hit specific pain points. The ROIs are fast in terms of getting their payback. And ultimately, when we're kind of ticking more and more boxes across their estate, that's giving us confidence that we are going to be that vendor of choice. So early days, we're 6 months into MiX. We are 6 weeks into Fleet Complete. But all the smells in the kitchen are exactly what we want them to be. And I think we can really break down, and you'll see this in the Investor Day, if you look at those different market drivers and you look at where we're at today and the ability for us to, first of all, get to double-digit growth and then to accelerate that growth, I think there's a high level of credibility and confidence that we have in our abilities to do so. But to your point, we'll save a lot of it for next week, where we're being very open house. We're being transparent. We want our investors and shareholders to really kind of see what's behind our confidence, and we're confident that you will get to see that not only from us, but from also our customers and partners as well.

Great, Steve. And if I could just slip another one in, just telco in that channel seems like it's going to be pretty powerful for you. It certainly has been for Fleet Complete. What's the initial reaction that you're seeing there? And what's the real key interest level from them? And then one of the big questions from investors is always around getting to the table with Samsara and Geotab. So maybe just some quick thoughts in terms of how you're doing on that front? Are you getting to the table? And are you starting to turn some heads?

So look, I mean, you're going to hear from the telco senior leadership themselves. So I think the fact that they are wanting to become a part of our Investor Day is testament in itself. But they just want to go fast, right? So there are certain parameters that you have to go through in order to launch products and solutions. So I think if they said anything is, can you get there quicker? Because I think they see the broader portfolio as a real opportunity. Fleet Complete has been very much focused in the mid-market segment. So they have a lot of enterprise business that they feel that our solutions can bring. They feel there's a very high quality to the solutions that we have. And the likes of the in-warehouse opportunity and some of the cold chain stuff that we talked about in the prepared remarks has never been touched by those guys. But they have demand for it. So it's a real strong opportunity for us. It's down to us to execute well and resource properly. But you'll hear from those guys themselves in terms of that opportunity. And what I think the moves that we've made in the last 6 months have really kind of built our credibility and status in the marketplace. So you see various industry reports that now mentioned the three of us, Samsara, Geotab and PowerFleet. We're the new kid on the block, but more customers now, more RFPs are coming our way because we have that portfolio, and from a high-performance business perspective, we're starting to demonstrate that level of credibility and track record that proper organizations want to have proper partners. And we're now definitely really seeing those opportunities come to us that maybe as individual businesses we didn't see come in.

Your next question is from Gary Prestopino with Barrington.

A couple of questions. At this point, have you integrated MiX to the point where you can actually cross-sell Unity?

So the answer to that is we're delighted to say yes. So we said that we would produce the single pane of glass within 6 months. We achieved that. So MiX customers can now enjoy both the Heritage PowerFleet portfolio alongside the MiX portfolio plus all of the Unity data services as well. So team did a phenomenal job of executing on time to do that.

Okay. And then in terms of Fleet Complete, that's a 6-month endeavor, right? So we should be looking towards maybe July?

That is correct. But already, the team have been able to get visibility of the in-warehouse solutions into FC Hub. They see a significant opportunity for that set of solutions into their base. And we've already completed the first step of doing that to give base visibility. So more work to be done, to your point. We put a 6-month time line around these things, but the Fleet Complete team are very fast out of the blocks on that one.

Okay. And maybe you could help us here. In terms of the legacy business, which is just the legacy PowerFleet, can you maybe give us some idea of that legacy customer base? What has been the uptake of Unity? And what are some of the more successful modules that you've sold?

So in terms of the Unity services into that base, we're probably at 20% to 30% of the full base having the value-added services from a data perspective. Where we're seeing huge traction is around our safety and compliance solutions, whether that's in the warehouse or over the road. As we've previously said, the kind of logistics, low-end trailer tracking solutions, which was a big part of that base dried up. But we've been able to pivot and weather those headwinds to continue to grow the business. But the drive is really around those value-added modules, particularly around safety, the pedestrian warning solutions that we have are getting particularly strong traction. And really around managing resources in both over the road and in the warehouse in that customer base, in particular, skilled resources are becoming less and less. So the ability to make sure that the right people are doing the right things with the equipment that they're either using or driving has been where we've got significant traction.

And could you just remind us what is the payback? What's the return on investment for someone taking...

It's, on average, breakeven within 12 months. You should see a minimum of a 3x to 4x return on investment over a 3-year period.

Your next question for today is from Anthony Stoss with Craig-Hallum.

Looking forward to seeing you next week as well. Steve, I wanted to focus in on the safety products growth rate, pretty impressive at 13%. And I'm curious when you now take in Fleet Complete and their strong safety product, what's the plan? Is it to integrate into one unified safety platform? Are you going to keep the Fleet Complete safety products separate? And also, if you wouldn't mind sharing kind of what your views on growth rates for the safety products?

Yes. So we're not going to freeze our customer base and freeze our market. So our midterm view is to get to one full safety solution that is great for enterprise and great for mid-market folks as well. And to be able to -- both sides of the house have very strong, compelling, and I think, in some cases, unique propositions to do so. But we'll do that over time. And where we're obviously focusing is where is our biggest bang for the buck to get incremental growth in the short to medium term. And that's kind of the product evolution strategy that we're working on. So where I alluded to before, those pedestrian safety solutions in the warehouse being available to FC Hub customers without just having a full end-to-end safety solution, one platform across the company yet, getting that tactically done is super key. And we see those growth rates expanding. You add into that the safety stuff that we're doing around AI cameras. And this is a 20% to 40% growth opportunity for us within that segment of the market. You have to be really good at it. The quality of products and the quality of data needs to be super, super strong, which I think is something that is definitely part of our DNA. And there is work to do to harmonize all of that to give it a very slick end-to-end experience. But even right now, we're seeing this very strong move forward. So we will build more and more of the company around that. We're launching it in more and more territories. The regulations in different territories are really playing into our hands. So once we're out of this first kind of year of putting these three companies together and we've harmonized the organization, the majority of our focus is on that growth curve, then we're very, very confident that both the safety and the compliance solutions will lead us to very nice accelerated growth.

Your next question is from Dylan Becker with William Blair.

Really nice job here. Maybe, Steve, starting for you. You guys are doing an exceptional job on realizing those synergies kind of earlier and sounds like kind of incremental confidence in hitting those targets and building kind of pipeline to support that as well on the revenue side. I guess, how should we think about the opportunity to accelerate maybe some of the reinvestment flow that back into areas like go-to-market and engineering to help kind of capture more of the revenue synergy side of the equation?

Yes. So great question, and we are truly delighted with the progress we've made. And we've got the path to achieve the $21 million that we need to in terms of what we've promised in terms of our guidance. We are going much deeper than that just in terms of pivoting our cost base to be able to supplement, as we've said, both on the sales front and on the customer success front. And the model that we have will allow us to toggle. So as we go through this journey, if we want to put our foot on the accelerator, if we can see the market opportunity to do so, and we have a balance and trade-off that we want to use on EBITDA, then we will have the ability to do so. But the first step for us is really that kind of credibility and sustainable profitability, which allows us to have that optionality. And we'll continue to do the blocking and tackling that we set out to do. We've got another period to come in the next 6 months, which you can obviously understand from the transformation that we're putting into building this business. But we do see the opportunity to have the dry powder ready should the growth come at the speed that we want to. And if we have to want to put our foot on the accelerator, we will certainly do so. But we'll do that in a very controlled manner, in a very sensible manner, and we'll take feedback as we go in terms of when to do that and how to do that. So there's a lot of good positive customer sentiment. We are restructuring this business to be one overall combined business over time that will have real strong horsepower at the front end. And that's the next stage of our plan. And so far, so good. So we'll continue to do what we do, and then we'll see what opportunities open up for us in the future.

Okay. Perfect. Yes, I think that's fair. And I'm sure we'll hear more, obviously, next week as well, too. Maybe, David, switching to you on the product revenue side, I know you guys kind of called it out in the release or the prepared remarks, but it's been exceptionally strong in the first half. Obviously, there's a lot of value in pairing kind of core telematics with safety and kind of compounding that value proposition for customers. I guess, one, how are you thinking about that as kind of an unlock on the safety side and maybe a way to think about product revenues as the leading indicator for what's to come on the services side as we think about accelerated revenue growth as well?

Yes. No. Obviously, two points. Firstly, both the margin and the size of the revenue, that speaks to a product that's highly valued by the market, which basically means it's a differentiated product. And so entirely focused in terms of getting those devices out and really spreading them and huge opportunity to cross-sell and upsell within our existing customer base, especially as we bring both the MiX legacy customer base with ours. So a massive sort of increase just in terms of the size of the market where we have direct live engagement. So absolutely focused on that. And you're right, in terms of the growth, product has been performing exceptionally well. It's been leading the growth. Over time, we do expect service revenue to be growing at a faster rate than product revenue. And we're kind of going through that evolution over the next few quarters. So the great news is, we're clearly providing something to the market that they value. And secondly, not only is the product revenue a good sort of onetime pickup, but it's really the annuity revenue attached to it. We have a differentiated solution. We have complementary solutions that the market values. That gives us a great opportunity to expand share of wallet within existing customers over the few quarters, the few years as the business progresses.

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

Steve, first one for you. You called out some of the strength across Europe and the Middle East in particular this quarter. Any more color you can provide in terms of what you saw from a mix perspective? Did it skew enterprise or mid-market? Anything in terms of new logo versus expansion? Kind of curious what drove the strength there?

Yes. So I think a couple of things. So first of all, we have new leadership in the European territory. So I think driving a real sales and science of sales methodology and getting on the front foot. And to your point, that has allowed us to capitalize on some new logo business, which is great. And then I think the second thing we've seen is the expanded portfolio play. So whether that is in warehouse in the region into the MiX base, whether that is some of the safety solutions that MiX have brought into the PowerFleet base, we've seen a nice pickup on both sides. And it's been a bonus for us. So these territories have underperformed in general. We now feel we're putting the right structure in, the value proposition is right and harmonized for the markets, and we expect to be able to grow those markets. And the response from either side of the customer base to the broader proposition, whether that's MiX or it's been PowerFleet, has been super strong. And the alignment of the team to really get on that front foot to be able to demonstrate the solutions to a single pane of glass is bringing us again that just level of credibility and expertise that maybe was missing as individual business.

Okay. Perfect. Great color. And then I don't know if Steve or Dave, you want to take this one. But in terms of the reorientating of the customer-facing teams, can you just elaborate a little bit more on -- is that just the customer success team? Is that part of your kind of whole go-to-market organization? And realizing that Fleet Complete just closed, they obviously have their own customer success team in place. What's the right timing to think about when the bigger lift will kind of be done there?

Yes. So the lift will be over the next 6- to 9-month period. Obviously, this quarter is a quarter of discovery, right, in terms of what we've actually got on both sides. But I think if we look at the businesses and where there's been some less than optimal growth in the individual businesses previously, I think there's a much stronger job that we can do in terms of in-life management of customers, whether that is around retention, whether retention turns into migration, whether it turns into cross-sell, upsell, improvement in wallet share, whether it's through improved stickiness through the integration. There's so much opportunity that we have. And I think going from good to great in that particular discipline will really help our growth rates. And so it's something that we've identified as things that are areas of improvement for the businesses. So we're looking to do that, not just around the retention piece, but we see the retention piece as a cornerstone to drive that in-life management for extra services, extra wallet share. So it's multidimensional. And we've got both sides of the house really now looking at what is that combined model. How do we look at the segmentation of our customer base? How do we look at the strength of our customer base? How do we look at the feedback we're getting from customers in terms of how can they spend more money with us, how do they stay for us longer and how do they expand. So very exciting opportunity. It does take time. It takes an evolution in terms of process. It takes an evolution in terms of talent, but it is a major upside opportunity for this business.

Your next question is from Greg Gibas with Northland Securities.

Congrats on the results. I think most of my questions have been answered. Looking forward to the Investor Day. But I wanted to follow up, I guess, just ask for your updated outlook and I guess, performance within the Israel business and maybe how it's trended of late?

Yes, I can take that. So in terms of the outlook, the outlook is consistent with what we shared from a guidance standpoint early October. So no change there. We have a focus in terms of maximizing the rate of growth going into financial year 2026. So as we sort of covered in detail in the script, it really is about how do we get everything lined up, how do we get the organization well positioned. So we have a springboard going into next year. When you think about things, for example, like the channel sales, clearly very well positioned there in terms of what it can drive. So no real change there in terms of the guidance. And sorry, the other part of your question, Greg?

So it was kind of actually just related to the Israel business. I know it's a decent chunk...

Yes, the Israel business has performed well in unbelievably trying circumstances. So it's done well. It's been able to grow despite some of the challenges. So delighted with how it's reacted. Obviously, if you think about what we sell from a solution standpoint, safety, security is a key value prop. And with the change in the macro there and the focus there, that has been a driver of demand as well. But Israel is holding up very well than we probably expected in pretty trying circumstances.

Got it. That's helpful, David. And I wanted to follow up on churn. I know obviously, more than offset by kind of demand across service being still up 5%. But maybe as it related to fiscal Q1 churn relatively in Q2? And just, I guess, wanted to get a sense of how it's trended relative to your expectations.

Yes. We've been very clear that there was a churn headwind entering into the year in terms of year-over-year churn with the impact on the MiX business, especially. There was a very large customer, and there was also some business attached to an acquisition that they did where that recurring revenue stream has not held up. So that's been the sort of the year-over-year headwind. In terms of the overall performance, it's sort of tracking pretty much as we would have expected. So no major changes there.

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

Thanks, everybody, for spending more time with us. We are going to ask that you spend even more time with us. So look forward to meeting many of you in person next week. And hopefully, if you can't make it, then you can still make the virtual attendance. But we're delighted with the progress we're making. We very much want to be collaborative and open book in terms of how we're going to reach our objectives, and we look forward to seeing you to delve into more detail around that next week. You have a great day, and we'll speak to you soon. Thank you. Bye-bye.