Powerfleet, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of the consolidated financial condition and results of operations of Powerfleet, Inc. and its subsidiaries (“Powerfleet,” the “Company,” “we,” “our” or “us”) should be read in conjunction with the condensed consolidated financial statements and related notes thereto appearing in Part I, Item 1 of this report and Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended March 31, 2026 (our “Form 10-K”). Many of the amounts and percentages in this section have been rounded for convenience of presentation, but actual recorded amounts have been used in computations. Accordingly, some information may appear not to be computed accurately. Cautionary Note Regarding Forward-Looking Statements This report contains “forward-looking statements” (within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), which may include statements concerning our beliefs, plans, objectives, goals, expectations, strategies, anticipations, assumptions, estimates, intentions, future events, future revenues or performance, capital expenditures, integration and transformation initiatives, product and technology development, and other information that is not historical information. Forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause our actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements. When used in this report, the words “seek,” “estimate,” “expect,” “anticipate,” “project,” “plan,” “contemplate,” “continue,” “intend,” “believe,” “may,” “will,” “could,” “should,” “would” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but there can be no assurance that we will realize our expectations or that our beliefs will prove to be correct. There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this report. Important factors that could cause our actual results to differ materially from those expressed or implied as forward-looking statements herein include, but are not limited, to: • we may not fully realize the anticipated benefits of our acquisitions and ongoing business transformation initiatives, and these integration and business transformation initiatives may adversely affect our business, financial condition and results of operations; • significant losses, accumulated deficits and an inability to achieve or sustain profitability may adversely affect our financial condition and the market price of our common stock; • future global economic, political and business conditions, including inflation, interest rate increases, foreign exchange instability, geopolitical conflicts, sanctions, export controls and the potential imposition of tariffs; • the commercial, financial, reputational and regulatory risks to our business associated with operating across multiple geographies, including exposure to foreign exchange fluctuations and economic instability in certain emerging markets; • disruptions in our global supply chain, performance issues or failures by subcontractors, and reliance on a limited number of suppliers for critical components and services; • the loss of any of our key customers, reductions in customer demand or purchasing levels, and reliance on third-party channel partner relationships, including telecommunication companies and regional distributors; • changes in technology, products and customer expectations, which may be more rapid, costly or difficult to address, or less effective, than anticipated; • risks associated with the deployment and use of artificial intelligence and machine learning technologies, including operational, legal, regulatory and reputational risks arising from their development, use or outputs; • potential breaches, disruptions or failures of our information technology systems, including risks that could impair operations, customer access to services, or vendor and customer relationships; • our inability to adequately protect our intellectual property rights or defend against third-party intellectual property claims; • our ability to obtain additional capital to fund our operations; and • other risks and uncertainties disclosed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), including the risks set forth under “Risk Factors” in our Form 10-K. There may be other factors of which we are currently unaware or which we currently deem immaterial that may cause our actual results to differ materially from the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date they are made and are expressly qualified in their entirety by the cautionary statements included in this report and by the risk factors and other disclosures contained in our filings with the 35 SEC. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances occurring after the date the statement was made or to reflect the occurrence of unanticipated events, or otherwise. Overview We are a global provider of Artificial Intelligence-of-Things solutions providing valuable connected business intelligence for managing high-value enterprise and mid-market assets that improve operational efficiencies. We are headquartered in Woodcliff Lake, New Jersey, with offices located around the globe. On April 2, 2024, we acquired MiX Telematics, and on October 1, 2024, we acquired Fleet Complete. Since the closing of these acquisitions, we have made significant progress in integrating the businesses into our operations, with alignment of core functions and early realization of operational synergies. Recent Developments High interest rates, moderating but persistent inflationary pressures, fluctuations in currency exchange rates, continued supply chain disruptions, and ongoing geopolitical conflicts, such as the conflicts in the Middle East, have contributed to significant global economic uncertainty. In addition, disruptions in global trade, including the imposition of tariffs, export controls and other trade restrictions, as well as evolving monetary and fiscal policies in major economies, have further effected macroeconomic stability and created additional uncertainty for global commerce. More recent disruptions, including periodic shipping constraints in key maritime routes, have also contributed to supply chain volatility. Our products incorporate specialized electronic components, including cellular communication modules, GPS chipsets and other semiconductors, which are available from a limited number of suppliers. Integrating new components can require modification of our device firmware. During the three months ended June 30, 2026, we experienced production delays within one of our product lines that resulted in the deferral of certain customer orders. A contributing factor to these delays was firmware compatibility issues that we identified while validating certain new components. We are working to resolve these issues and currently expect to do so during the quarter ending September 30, 2026, although we can provide no assurance as to the timing of resolution. Component transitions of this nature may require additional engineering time and expense and could delay the completion and delivery of finished products in future periods. While we have identified the effects of these matters on our results for the quarter, as discussed under “Results of Operations” below, the dynamic and uncertain nature of the current macroeconomic environment means we cannot reasonably estimate the ultimate impact of these developments on our financial condition, results of operations or cash flows in future periods. Such effects could persist for an extended period of time. Risks to Our Business We expect that many customers who utilize our solutions will do so as part of a large-scale deployment of these solutions across multiple or all divisions of their organizations. A customer’s decision to deploy our solutions throughout its organization will involve a significant commitment of its resources. Accordingly, initial implementations may precede any decision to deploy our solutions enterprise-wide. Throughout this sales cycle, we may spend considerable time and expense educating and providing information to prospective customers about the benefits of our solutions, and there can be no assurance that our solutions will be deployed on a wider scale by the customer. The timing of the deployment of our solutions may vary widely and will depend on the specific deployment plan of each customer, the complexity of the customer’s organization and the difficulty of such deployment. Customers with substantial or complex organizations may deploy our solutions in large increments on a periodic basis. Accordingly, we may receive purchase orders for significant dollar amounts on an irregular and unpredictable basis. Long sales cycles, as well as our expectation that customers will tend to place large orders sporadically with short lead times, may cause our revenue and results of operations to vary significantly and unexpectedly from quarter to quarter. These variations could materially and adversely affect the market price of our common stock. 36 Our ability to increase our revenues and generate net income will depend on a number of factors, including, for example, our ability to: • increase sales of products and services to our existing customers; • convert our initial programs into larger or enterprise-wide purchases by our customers; • increase market acceptance and penetration of our products; and • develop and commercialize new products and technologies. Additional risks and uncertainties to which we are subject are described under the heading “Risk Factors” in our Form 10-K. Critical Accounting Policies For the three-month period ended June 30, 2026, there were no significant changes to our critical accounting policies as identified in our Form 10-K. 37 Results of Operations The following table sets forth, for the periods indicated, certain operating information expressed as a percentage of revenue: Three Months Ended June 30, 2025 2026 Revenues: Products 17.0 % 14.9 % Services 83.0 % 85.1 % Total revenues 100.0 % 100.0 % Cost of revenues: Cost of products 12.7 % 11.7 % Cost of services 33.1 % 33.1 % Total cost of revenues 45.8 % 44.8 % Gross profit 54.2 % 55.2 % Operating expenses: Selling, general and administrative expenses 51.5 % 51.0 % Research and development expenses 4.7 % 3.9 % Total operating expenses 56.2 % 55.0 % (Loss) profit from operations (2.1) % 0.2 % Interest income 0.2 % 0.2 % Interest expense (6.5) % (6.3) % Other expense (1.2) % (0.4) % Net loss before income taxes (9.5) % (6.2) % Income tax expense (0.3) % (1.2) % Net loss (9.9) % (7.5) % Non-controlling interest — % (0.2) % Net loss attributable to common stockholders (9.9) % (7.6) % 38 Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025 REVENUES. Revenues increased by $6.7 million, or 6.4%, to $110.8 million in the three months ended June 30, 2026, from $104.1 million in the same period in 2025. Product revenues decreased by $1.2 million, or 6.7%, to $16.5 million for the three months ended June 30, 2026, from $17.7 million in the prior-year period. The decrease primarily reflected the timing of late-in-the-quarter shipments within one of our product lines, including the deferral of certain customer orders arising from production delays, to which firmware compatibility issues associated with new components were a contributing factor. Services revenue increased by $7.8 million, or 9.1%, to $94.3 million in the three months ended June 30, 2026, compared to $86.5 million in the same period in 2025. The increase in services revenues for the combined business (reflecting Powerfleet following the completion of the MiX Combination and FC Acquisition) was driven primarily by Unity safety and AI video solutions. COST OF REVENUES. Cost of revenues increased by $2.0 million, or 4.2%, to $49.6 million in the three months ended June 30, 2026, from $47.6 million for the same period in 2025, primarily attributable to higher costs associated with the growth in services revenue, partially offset by lower product-related costs resulting from the decline in product revenues. Gross profit was $61.2 million in the three months ended June 30, 2026, compared to $56.5 million for the same period in 2025. As a percentage of revenues, gross profit increased to 55.2% in the three months ended June 30, 2026, from 54.2% in the same period in 2025. This was primarily driven by an increase in higher margin services revenue that comprised 85.1% of total revenues in the three months ended June 30, 2026, compared to 83.0% for the same period in 2025. Cost of products decreased by $0.3 million, or 2.0%, to $13.0 million in the three months ended June 30, 2026, from $13.2 million in the same period in 2025. Gross profit for products was $3.5 million in the three months ended June 30, 2026, compared to $4.4 million in the same period in 2025. As a percentage of product revenues, gross profit decreased to 21.3% in the three months ended June 30, 2026, from 25.1% in the same period in 2025. Gross profit as a percentage of product revenues was negatively impacted by an unfavorable shift in product mix. Cost of services increased by $2.2 million, or 6.5%, to $36.7 million in the three months ended June 30, 2026, from $34.4 million in the same period in 2025. The amortization of acquisition intangibles for the MiX Telematics, Fleet Complete and RTS transactions contributed $6.1 million and $5.8 million in the aggregate to cost of services for the three months ended June 30, 2026 and 2025, respectively. Gross profit for services was $57.7 million in the three months ended June 30, 2026, compared to $52.1 million in the same period in 2025. As a percentage of services revenues, gross profit increased to 61.1% in the three months ended June 30, 2026, compared to 60.2% in the same period in 2025. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative (“SG&A”) expenses increased by $2.9 million, or 5.3%, to $56.5 million in the three months ended June 30, 2026, compared to $53.7 million in the same period in 2025. The increase was driven primarily by higher investments in go-to-market initiatives, including higher sales and marketing costs. These increases were partially offset by a $0.9 million and $1.4 million decrease in acquisition-related and restructuring charges for the period ended June 30, 2026, compared to June 30, 2025. As a percentage of revenues, SG&A expenses were 51.0% for the three months ended June 30, 2026, compared to 51.5% in the same period in 2025. RESEARCH AND DEVELOPMENT EXPENSES. Research and development (“R&D”) expenses decreased by $0.5 million, or 10.2%, to $4.4 million in the three months ended June 30, 2026, compared to $4.9 million in the same period in 2025, primarily due to an increase in R&D costs capitalized as a result of a greater portion of employee hours being devoted to projects that qualified for capitalization. As a percentage of revenues, R&D expenses were 3.9% in the three months ended June 30, 2026, compared to 4.7% in the same period in 2025. NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS. Net loss attributable to common stockholders was $8.4 million, or $(0.06) per basic and diluted share, for the three months ended June 30, 2026, as compared to net loss of $10.2 million, or $(0.08) per basic and diluted share, for the same period in 2025. The $1.8 million decrease in net loss was driven primarily by an increase in gross profit, partially offset by the increase in SG&A expenses. 39 Non-GAAP Financial Information We use certain measures to assess the financial performance of our business. Certain of these measures are termed “non-GAAP measures” because they exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure calculated and presented in accordance with GAAP, or are calculated using financial measures that are not calculated in accordance with GAAP. These non-GAAP measures include adjusted EBITDA. An explanation of the relevance of the non-GAAP measure, a reconciliation of the non-GAAP measure to the most directly comparable measure calculated and presented in accordance with GAAP and a discussion of its limitations is set out below. We do not regard this non-GAAP measure as a substitute for, or superior to, the equivalent measure calculated and presented in accordance with GAAP or that calculated using financial measure that is calculated in accordance with GAAP. Adjusted EBITDA We define adjusted EBITDA as net loss attributable to common stockholders before non-controlling interest, interest expense (net), other expense (net), income tax expense, depreciation and amortization, stock-based compensation, foreign currency losses, restructuring-related expenses, derivative mark-to market adjustment, acquisition-related expenses and integration-related expenses. Upon further review of our non-GAAP financial reporting, we refined our definition of adjusted EBITDA by removing recognition of pre-October 1, 2024 contract assets (Fleet Complete). Comparative information has been adjusted to conform with the updated presentation. We have included adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measure that our management and board of directors use to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short and long-term operational plans. In particular, the exclusion of certain expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results. Because our method for calculating adjusted EBITDA may differ from other companies’ methods, the non-GAAP measures may not be comparable to similarly titled measures reported by other companies. A reconciliation of net loss attributable to common stockholders (the most directly comparable financial measure presented in accordance with GAAP) to adjusted EBITDA for the periods shown is presented below. 40 Reconciliation of Net Loss Attributable to Common Stockholders to Adjusted EBITDA Three Months Ended June 30, 2025 (1) 2026 (In thousands) Net loss attributable to common stockholders $ (10,234) $ (8,440) Non-controlling interest — 183 Interest expense, net 6,590 6,749 Other expense, net 23 26 Income tax expense 362 1,373 Depreciation and amortization 16,031 16,207 Stock-based compensation 1,853 3,107 Foreign currency losses 1,161 1,336 Restructuring-related expenses 2,442 1,038 Derivative mark-to-market adjustment 104 (919) Acquisition-related expenses 1,130 228 Integration-related expenses 675 640 Adjusted EBITDA $ 20,137 $ 21,528 (1) Following the closing of the FC Acquisition, we included an EBITDA adjustment related to the recognition of pre-October 1, 2024, contract assets. This adjustment represented recoveries, through customer billings, of the contract asset recognized at acquisition for hardware delivered by Fleet Complete prior to October 1, 2024. This adjustment was intended to give investors a clearer view of underlying operating performance and cash generation. The goal was to better align adjusted EBITDA with operating cash flows.  For the three months ended June 30, 2025 and 2026, we reported adjusted EBITDA of $20.1 million and $21.5 million, respectively. During the same periods, we also invoiced recoveries of $1.5 million and $0.9 million, respectively, which are included in cash flows from operating activities in the condensed consolidated statement of cash flows. Our use of adjusted EBITDA has limitations as analytical tools and should not be considered as performance measures in isolation from, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are: • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation; • adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; • other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure; and • certain of the adjustments (such as restructuring-related expenses and integration-related expenses) made in calculating adjusted EBITDA are those that management believes are not representative of our underlying operations and, therefore, are subjective in nature. Because of these limitations, adjusted EBITDA should be considered alongside other financial performance measures, including profit (loss) from operations, net loss and our other results. 41 Liquidity and Capital Resources Overview On April 2, 2024, we completed the MiX Combination, pursuant to which MiX Telematics became our indirect, wholly owned subsidiary. Concurrently with the closing, we redeemed all outstanding shares of our Series A Preferred Stock for approximately $90.3 million using proceeds from the RMB Term Facilities and incremental borrowing capacity available under our refinanced Hapoalim credit facilities. Since the closing of the MiX Combination, we have continued to optimize our capital structure through the refinancing of existing debt facilities, including the A&R Credit Agreement and RMB Facilities Agreements (as defined below). These transactions have enhanced our liquidity and extended our debt maturities, while increasing our available revolving borrowing capacity to support working capital and growth initiatives. Debt Facilities Hapoalim Debt On March 18, 2024, our wholly owned subsidiaries Powerfleet Israel and Pointer entered into the A&R Credit Agreement with Hapoalim, which refinanced the prior facilities under, and amended and restated, the prior credit agreement, dated August 19, 2019 (as amended, the “Prior Credit Agreement”). The A&R Credit Agreement provides an aggregate borrowing capacity of approximately $50 million, consisting of two NIS-denominated term loans totaling $30 million (Hapoalim Term Facility A and Hapoalim Term Facility B) and two revolving credit facilities totaling $20 million (Hapoalim Revolving Credit Facility C and Hapoalim Revolving Credit Facility D). Powerfleet Israel drew $30 million in March 2024, using a portion to repay approximately $11.2 million under the prior term loans under the Prior Credit Agreement and distributing the remainder to us. In December 2024, the Borrowers entered into an amendment to the A&R Credit Agreement, increasing the principal amount available under Hapoalim Revolving Credit Facility D from $10 million to $20 million. As of June 30, 2026, Powerfleet Israel had utilized approximately $19.3 million under the Hapoalim Revolving Credit Facilities. Borrowings are secured by first ranking and exclusive fixed and floating charges, including over the entire share capital of Pointer and over the assets of Pointer and excluding the Borrowers’ holdings in specified foreign subsidiaries. Interest rates for borrowings under Hapoalim Term Facility A and Hapoalim Term Facility B are Hapoalim’s prime rate + 2.2% per annum and Hapoalim’s prime rate + 2.3% (Hapoalim’s prime rate was 5.25% at June 30, 2026), respectively. The Hapoalim Term Facilities will mature on March 18, 2029, with Hapoalim Term Facility A amortizing quarterly and Hapoalim Term Facility B due at maturity. Interest rates for borrowings under Hapoalim Revolving Credit Facility C is, with respect to NIS-denominated loans, Hapoalim’s prime rate + 2.5% and, with respect to U.S. dollar-denominated loans, SOFR + 2.15%. Borrowings under Hapoalim Revolving Credit Facility D bear interest at SOFR + 2.59%. In addition, Pointer is required to pay a credit allocation fee in NIS, in each case, equal to 0.5% per annum on undrawn and uncancelled amounts of the Hapoalim Revolving Credit Facilities during the period commencing on March 18, 2024 and ending on the last day of the applicable availability period of the Hapoalim Revolving Credit Facilities. The Hapoalim Revolving Credit Facilities are available for successive one-month periods until and including February 27, 2027, unless the Borrowers deliver prior notice to Hapoalim of their request not to renew the Hapoalim Revolving Credit Facilities. RMB Debt On March 7, 2024, we entered into the Facilities Agreement with RMB, pursuant to which RMB agreed to provide us with the RMB Term Facilities totaling $85 million, composed of RMB Term Facility A and RMB Term Facility B, each having a principal amount of $42.5 million. We drew $85 million in March 2024, which primarily funded our Series A Preferred Stock redemption. On October 31, 2025, we and RMB agreed to amend and restate the Facilities Agreement to, among other things, (i) extend the final maturity date of RMB Term Facility A by 12 months, (ii) update the interest rates of the RMB Term Facilities, and (iii) update certain financial covenants to conform to the facility agreement (the “Facility Agreement”) with RMB relating to the New RMB Term Facility. Pursuant to a First Amendment and Restatement Agreement with RMB, which amended and restated the Facilities Agreement (as amended and restated, the “Amended and Restated Facilities Agreement” and, together with the Facility Agreement, the “RMB Facilities Agreements”), interest is payable quarterly, at a fixed annual rate of 8.699% until March 31, 2027 and, thereafter, 4.85% 42 per annum plus the applicable term SOFR reference rate, with respect to RMB Term Facility A, and a fixed annual rate of 8.979%, with respect to RMB Term Facility B, with principal repayments for RMB Term Facility A and RMB Term Facility B due March 31, 2028 and March 31, 2029, respectively. MiX Telematics also maintains the RMB General Facility, repayable on demand, with a 365-day term and an interest rate linked to the South African prime rate minus 0.75% per annum. Repayment of the RMB General Facility, including capitalized interest, is due by the earlier of (a) the Available Date (as defined therein) or (b) April 2, 2026, unless extended by agreement between MiX Telematics and RMB. As of June 30, 2026, $18.1 million of the RMB General Facility was utilized. Subsequent to June 30, 2026, we continued discussions with RMB regarding the establishment of a new general banking facility, which would extend and replace the RMB General Facility, and certain additional operational banking facilities in connection with the transition of our South African transactional banking relationship to RMB. The proposed arrangements include a general banking facility intended to support working capital and cash management requirements, as well as additional operational banking facilities supporting transactional banking activities. The proposed facilities have received credit approval from RMB and remain subject to the execution of definitive documentation and receipt of certain corporate approvals. We expect to finalize the arrangements following completion of these internal approval and documentation processes. RMB has not demanded, and has indicated that it does not intend to demand, repayment of the RMB General Facility. On September 27, 2024, we entered into the Facility Agreement with RMB, pursuant to which RMB agreed to provide us with the New RMB Term Facility totaling $125 million. We drew $125 million on October 1, 2024 to fund a portion of the purchase price for the FC Acquisition. Interest is payable quarterly at an interest rate of 5% per annum plus the applicable term SOFR reference rate and matures on October 31, 2029. On February 5, 2026, we entered into the RMB Revolving Credit Facilities Agreement with RMB, pursuant to which RMB agreed to provide us and MiX Telematics with the RMB Revolving Credit Facilities, composed of RMB Revolving Credit Facility A in the aggregate principal amount of $10 million and RMB Revolving Credit Facility B in the aggregate principal amount of R180 million. RMB Revolving Credit Facility A bears interest at 2.50% per annum (provided no event of default is continuing), plus the three-month SOFR reference rate (or, if unavailable, an interpolated, historic or interpolated historic SOFR rate, or, if none of the foregoing are available, the three-month Treasury bill rate). RMB Revolving Credit Facility B bears interest at 1.95% per annum (provided no event of default is continuing), plus the South African rand overnight index average. Interest is payable quarterly in arrears. The RMB Revolving Credit Facilities will mature one year from the closing date of the RMB Revolving Credit Facilities Agreement. As of June 30, 2026, $5.0 million of the RMB Revolving Credit Facilities was utilized. Debt obligations are further discussed in Note 13, “Short-Term Bank Debt and Long-Term Debt” to our condensed consolidated financial statements included elsewhere in this Form 10-Q. Liquidity Position As of June 30, 2026, we had cash and cash equivalents (including restricted cash) of $36.7 million and working capital of $15.5 million, compared to cash and cash equivalents (including restricted cash) of $40.8 million and working capital of $21.2 million as of March 31, 2026. As of June 30, 2026, Pointer had $19.3 million outstanding under the Hapoalim Revolving Credit Facilities, with $10.7 million of remaining borrowing capacity. As of June 30, 2026, $18.1 million of the RMB General Facility was outstanding. As of June 30, 2026, $5.0 million of the RMB Revolving Credit Facilities was outstanding and the $5.0 million remained available for borrowing. No amounts were outstanding under the RMB Revolving Credit Facility B, which had available borrowing capacity of R180 million or $11.0 million at June 30, 2026. In the aggregate, we had approximately $29.9 million of available short-term borrowing capacity as of June 30, 2026. We continue to monitor the effects of inflation, foreign currency volatility, and regional geopolitical instability, including the ongoing conflicts in the Middle East, on our supply chain and operating cash flows. There remains uncertainty surrounding the potential impact of such events on our results of operations and cash flows. Management is proactively managing liquidity through reductions in discretionary operating expenses and capital expenditures and increased utilization of available credit facilities to preserve cash. 43 Capital Requirements and Outlook Our primary sources of liquidity are cash generated from operations, existing cash balances, and available borrowing capacity under our revolving facilities. Although we expect to generate incremental cash flow benefits through operational synergies, we have not yet generated sufficient cash flow solely from operations to fund all our capital and financing needs. Our future capital requirements will depend on several factors, including, but not limited to: • the timing and success of new product launches; • revenue growth and margin trends; • integration costs and realized synergies from recent business combinations and acquisitions; • the pace of discretionary spending and capital investments; and • potential strategic acquisitions. We believe that our current cash balances, expected cash flows from operations, and borrowing capacity under our existing credit facilities will be sufficient to meet our operating, debt service, and capital expenditure requirements for at least the next 12 months. We may, however, seek additional financing or capital market transactions to support long-term strategic initiatives or refinance existing debt. Operating Activities During the three months ended June 30, 2026, net cash provided by operating activities was $8.4 million, compared to net cash provided by operating activities of $4.7 million for the same period in 2025. The net cash provided by operating activities for the three months ended June 30, 2026 primarily included $16.2 million for depreciation and amortization expense, $3.0 million for bad debts expense, $3.1 million of non-cash charges for stock-based compensation, $0.6 million for inventory reserve adjustments, $1.2 million for ROU asset amortization and $1.2 million for other non-cash items, partially offset by $1.5 million for deferred income taxes and $0.9 million for derivative mark-to-market adjustment. Changes in operating assets and liabilities included: • a decrease in accounts receivables of $0.9 million; • an increase in deferred costs of $3.0 million; • a decrease in inventory, net of reserve of $0.7 million; • an increase in prepaid expenses and other assets of $2.1 million; and • a decrease in lease liabilities of $1.0 million; partially offset by • an increase in accounts payable of $0.7 million; and • an increase in deferred revenue of $0.1 million. Cash flows from operating activities for the three months ended June 30, 2026 include approximately $0.9 million ($1.5 million for the three months ended June 30, 2025), which represent recoveries, through customer billings, of the contract asset recognized at acquisition for hardware delivered by Fleet Complete prior to October 1, 2024. Under ASC 606, such hardware was identified as a separate performance obligation satisfied at the point of delivery, resulting in the recognition of a contract asset at the acquisition date for hardware delivered prior to the acquisition. This contract asset is being recovered post-acquisition through customer billings. Investing Activities Net cash used in investing activities for the three months ended June 30, 2026 was $9.0 million, compared to net cash used in investing activities of $11.8 million for the same period in 2025. The net cash used by investing activities was primarily due to $4.9 million for the purchase of fixed assets and $4.1 million for capitalized software development costs. The net cash used in investing activities of $11.8 million in the same period in 2025 was primarily due to $8.1 million for the purchase of fixed assets and $3.7 million for capitalized software development costs. Financing Activities During the three months ended June 30, 2026, net cash used in financing activities was $4.1 million, compared to $6.8 million net cash used in financing activities for the same period in 2025. The cash used in financing activities was 44 primarily due to the repayment of long-term debt of $1.7 million and repayment in short-term bank debt of $2.5 million. The net cash used in financing activities during the three months ended June 30, 2025 was primarily due to the repayment of short-term bank debt of $5.4 million and repayment of long-term debt of $1.3 million. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Impact of Recently Issued Accounting Pronouncements The Company is subject to recently issued acc ounting standards, accounting guidance and disclosure requirements. For a description of these new accounting standards, see Note 23 to our consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q, which is incorporated herein by refer ence. 45