PowerFleet CEO sees $200m revenue in 3 years

David Mahlab and Chris Wolfe / Photo: Eyal Izhar, Globes

The merger of ID Systems with Pointer Telocation created a company with 600,000 subscribers and 900 employees, including 350 in Israel.

Several years ago, when Pointer Telocation CEO David Mahlab was looking for ways to expand his company's activity to the US market, he tried to acquire ID Systems, but found no common language with that company's management, and dropped the idea. Three years ago, Chris Wolfe was appointed CEO of ID Systems in order to help it recover. The connection between the two companies was renewed, and a common language was found, leading to cooperation in products and culminating in the deal in which ID Systems acquired Pointer Telocation for $140 million. This deal was completed in early October, and the merged company is now named PowerFleet, with Wolfe as CEO and Mahlab as CEO of international activity.

Wolfe visited Israel this week, his eighth visit in the past year, to meet with local investors with holdings in PowerFleet's shares, which are still listed on the Tel Aviv Stock Exchange (TASE), as Pointer Telocation was. In a joint "Globes" interview with Mahlab, Wolfe tells why he decided to acquire Pointer Telocation, rather than merely cooperate with it. "We worked together and developed products for the US. David wanted to bring Pointer Telocation to the US, and ID Systems was historically active mainly in the US and Europe. There's no geographic overlap between the companies, but there's a lot of synergy in their activity. After three years of working together, it was clear that we were working on similar things, and the combination was logical," he says. According to Wolfe, the merged company's growth profile provides a good mix: "We grew by 20%, and they grew by a little over 10%. Together, we have 600,000 subscribers worldwide and repeat revenue."

Mahlab: "The two companies were small before the merger. Reaching the market as a single entity was one of the important things for the deal. As a small player, you're punished in the market in competition with big companies."

Wolfe: "Still, despite their small size, the companies got big customers."

The synergy mentioned by Wolfe and Mahlab involves mainly development and the supply chain, and in the long term, also research and development in infrastructure, such as IT.

Mahlab says, "The merged company's vision is not just synergy and saving on costs, but revenue growth. Our strength as a merged company will help us get more combined revenue. This is the real vision. I don't hold saving money lightly, but it's not enough; the main thing is increasing revenue."

PowerFleet currently as 350 employees in Israel out of its worldwide total of 900 employees.

"Globes": How committed is PowerFleet to employees in Israel?

Wolfe: "We wouldn't have acquired Pointer Telocation without the quality of the people. In the past, I worked at Qualcomm in San Diego and managed the international division. I knew, and had a lot of respect for, Israelis' technological capability, and also their business ability. David built a great team here, with highly developed capabilities."

What about trading on the TASE? Is there a commitment to a specific time period, after which you plan on delisting PowerFleet?

"We're not thinking about delisting. We have a lot of investors, employees, a large proportion of our activity, and a substantial proportion of the company's revenue and profits in Israel. We have great investors here who support us, and we think that being traded in Israel is a good thing for us. I met with Israeli investors several times, and they're excited about the deal. Some of them bought more shares."

"In acquisitions, we look for people, products, and position"

On the other hand, DBSI Investments, which was the main shareholder in Pointer Telocation, took advantage of the opportunity, and sold its shares in PowerFleet immediately after the merger

"DBSI prefers to control a company. In any case without Yossi (Ben Shalom, one of DBSI's owners and chairman of Pointer Telocation, S. H.-V.), and without his support, this deal would never have happened. I have a lot of respect for him."

The largest shareholder in PowerFleet now, with a 17.4% stake, is US private equity fund Abry Partners, which funded the deal with a $50 million investment in senior convertible shares (debt was taken from Bank Hapoalim at the same time). Abry Partners has two representatives on the board of directors. Wolfe says, "The great thing is that they are very knowledgeable about transportation, and have a lot of connections in the field. This helps us to understand the deal flow on the global level, find acquisition opportunities, and know what acquisitions opportunities our competitors have."

In other words, we can expect more acquisitions from you in the near future.

"We're always looking at more acquisitions, although we've got a lot of work right now. In acquisitions, we're looking for people, products, and position. Pointer Telocation is a good example of that. I call it a 'heavy metal' industry with a car and a person. The products have to be very high-quality, and that's the distinction and the reason for the Pointer Telocation acquisition."

Actually, without the acquisition of Pointer Telocation, ID Systems would not make a profit (according to GAAP accounting rules).

"That's true. I was hired by the company to lead a turnaround. Three years ago, we changed the business model, and the more license sales we have, the more profit we make. We are now a company that focuses on the verticals in the market. We're a B2B company - we sell products for fleets (fleets of vehicles, trucks, and so on, S.H.-V.) that sell to their customers. We also have B2C in specific places, such as locating a stolen vehicle."

Among other things, PowerFleet provides solutions for forklifts and technologies that enable a vehicle carrying refrigerated products (food, for example) to control the change in temperature. Wolfe says that customers with mixed fleets containing vehicles made by different manufacturers like the company's solutions, because they make the fleet uniform.

PowerFleet's prominent customers include Avis and Walmart. At the same time, Wolfe notes that following the acquisition of Pointer Telocation, no one customer accounts for over 10% of PowerFleet's revenue.

"One of the world's 10 biggest telematics companies"

When Wolfe and Mahlab are asked about their main competitors, they mention many names of competitors according to the type of activity, among them, for example, Omnitracs, which came from Qualcomm; a subsidiary of tire manufacturer Michelin in Brazil; and mobile communications companies in the US. "Telematics makes it possible to receive data and control it for use in other business," Mahlab says in explaining what attracts many companies to the sector. These are systems that integrate communications and information. According to Wolfe and Mahlab, the main competition comes from the auto manufacturers themselves, which offer solutions in this area. They emphasize that PowerFleet is one of the world's 10 biggest telematics companies, with 600,000 subscribers.

Still even after the deal, PowerFleet is not a huge company. What is the likelihood that you will be acquired by another company?

Wolfe: "Anything can happen, but we're not concerned about it; we focus on performance. I think that right now, the market doesn't understand our potential, and we still have to educate the market. The fourth quarter will be the first quarter in which the companies' results are consolidated, and once the market sees the performance and the integration, it will reward us."

He adds that PowerFleet's vision is to help revolutionize customers with innovation. "If we can't help a customer change his business, why bother doing it at all?" he asks rhetorically.

PowerFleet's target is $150 million in revenue by 2020. "In every market in which we operate, the average annual growth is 14-18%, and the average is 15%. We can definitely predict $200 million in revenue in another three years," Wolfe says. He assets that in contrast to the names of the other companies in the industry, which are quite "vague," the name PowerFleet was chosen because it "represents exactly what we do: enhance the customer's fleet, so that he gets more out of his assets and people. Beyond that, it's important to us for it to be safe."

Other than ID Systems, were there other companies that wanted to acquire Pointer Telocation?

Mahlab: "No. We had a long romance with ID Systems. Point Telocation itself changed a lot in recent years. It came a long way, from a company worth $15 million to a company sold for $140 million."

When you announced the deal, you told "Globes," "On a personal level, I have to get used to sitting in the back seat." Have you gotten used to it already?

Mahlab (laughs): "It's a process. Chris has found out more than once that it's not easy."

David Mahlab and Chris Wolfe / Photo: Eyal Izhar, Globes
David Mahlab and Chris Wolfe / Photo: Eyal Izhar, Globes
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