Gary Prestopino: No. No. Go ahead. I’m sorry, Steve. Go ahead.
Steve Towe: So our ambition, obviously, is to focus on high quality SaaS recurring revenue and that type of business just doesn’t really fit the mold of what we’re trying to achieve moving forward.
Gary Prestopino: Okay. So in 2023, as you finish this evaluation, I think, you said, you’ve got parties that may be willing to take over the business in these various regions. We would expect that there will be further adjustments to the sales in 2023 going forward as you move out of these countries. Is that correct?
David Wilson: Yeah. That’s correct. So for those regions in 2022 was about $13 million worth of revenue. So that is right.
Steve Towe: Yeah.
Gary Prestopino: Okay. All right. That’s good to hear and I guess that’s fairly low margin or problematic.
Steve Towe: I mean, these regions are quality businesses. The way the business was previously run was independent territories. So there’s a lot of complexity
Gary Prestopino: Right.
Steve Towe: and some differentiation in those local territories. And look, we’ve got phenomenal growth opportunities in some good core territories where we have great established customer bases and large momentum. If you look, as we said, in terms of U.S., one of the big questions was, could we really drive the U.S.? I think in a year of transformation, we’ve proven that out. If we look at our Mexican business unit growing at 30%-odd a year, that is very strong. We’re now going to have a good, strong European business alongside it. So we just want to not spread ourselves too thin. We have dilution in our activities and distraction by some of these smaller territories that we believe may be better served in different organizations or smaller organizations. So we — it’s a very focused strategy on high quality growth and we think it’s smart and true and sensible to do what we’re doing there.
Gary Prestopino: No. That’s fine. So, look, then just looking at the quarter a little bit here and I realize these are my numbers, but it looked like you had been on a run rate of close to high $2s million, $2.8 million, $2.9 million or 2 point, I’m sorry, $2.8 million of adjusted EBITDA Q2, Q3. Step down of $1.4 million this quarter. Obviously, some of that is related to the business that you jettisoned. But I’m also looking at this and seeing the service revenue was only up about, I think, 5% year-over-year and after being up in the high single digits Q2, Q3. So what would explain that step down in the growth in service revenue, I mean, if you’ve got the subscribers there, how does that go down?
David Wilson: Yeah. So I can pick that one up. So there was $300,000 of FX impact between Q3 and Q4. So that was a step down. There was also, and I am sorry, I’m not answering your question directly, but in terms of nonrecurring revenue, it’s a small part of our business. It’s probably sort of sub 3% of our total services revenue, but that was actually down $150,000 sequentially. So that one-time revenue was just lower in Q4 than it was in Q3. So, again, that probably had some impact in terms of the jump-off point you’re expecting going into the quarter.
Steve Towe: And I’d just add some of those contracts that we decided with the customers to move on. We — they’re moving off the platform. So there was an agreement there to terminate some service contracts as well.
Gary Prestopino: Okay. Okay. That’s good. So then in terms of this acquisition that you’ve made. First of all, is Movingdots is Swiss Re the sole account right now of this Movingdots or are they out selling it to other insurance companies or fleets or whatever? How does that work?
Steve Towe: Yeah. So, obviously, a percent — a good percentage of their go-to-market business within Swiss Re. So they are one of the world’s largest reinsurers. So they have a number of products
Gary Prestopino: Right. Correct.
Steve Towe: and are selling it into their base as part of their proposition, but they also have some independent relationships with other insurers on a global basis, plus their previous heritage to insurance was kind of core fleet telematics, which they have some customers as well. So this is a business where the product and the capability of the team is fantastic. The rationale for the relationship is around now proving that out in the market and really going and maximizing the sales opportunity and that’s why it’s such a better together story. I think Swiss Re are very aware to go and sell this at scale through and deploy it through channels that PowerFleet can bring is going to be far more effective than where they have been and that’s why this makes this such a good synergistic acquisition.
Gary Prestopino: Well, that’s the question I wanted to pose to you. I mean I realize you still haven’t closed this, but obviously, Swiss Re trying to sell this to other insurance companies, that’s simply not going to work in a lot of cases because it’s insurance-to-insurance. But is the plan here to try and expand this product on the European Continent to other insurance companies, as well as any business that you’re doing in the legacy business of PowerFleet. I mean how do you see growing this, I guess?
Steve Towe: So, first of all, I think, it’s independently recognized and it’s been interesting over the last probably four months or five months with analysts, investors alike, people now really seeing the synergy between insurance, safety, risk and telematics. So that
Gary Prestopino: Right.
Steve Towe: that vertical is growing and we want to be the market leader in that. And even if you include things like the move to electric vehicles, then the insurance risk premiums again changed as part of that. We have great technology around electric vehicles. If you look at our industrial space and safety and risk in the warehouse, and you can see from the stellar growth we’re getting around pedestrian safety, there’s a synergy there between insurance risk and saving lives in warehouses. So for us, it’s right at the heartbeat of where we want to play and where we want to put the organization. From a B2B perspective and B2B2C perspective, we have great channels available already. We have relationships with the likes of AXA, Swiss Movingdots both smartphone and as a sensor plus hardwired telematics.
So we think this is not only good for Europe, but for a lot of our other territories and channels that we have open today. And if — when we actually kind of put this into Unity, we’re leading with safety and security. So this will bring — this will expedite our capabilities and will give us real competitive advantage. And where it’s going to be super strong in terms of credibility is, this has been proven out by an insurer. So for the risk — for the take-up of insurance companies selling this into their bases, we believe there’s a very open door for us to now go and take advantage commercially.
Gary Prestopino: Okay. That all sounds good. And then what’s the revenue model here, Steve?
Steve Towe: In terms of subscription versus hardware and service, you mean?
