Due to US market investment and changing the accounting estimate relating to the amortisation of development costs EROAD expects it will report a net loss before tax for the year between $5.5 million and $6.5 million.
In its quarterly update to the market released on April 24, EROAD says its contracted units grew 30% from 36,953 at March 31, 2016 to 48,041 at March 31, 2017.
The transport services provider says it is expecting unit sales will continue to grow steadily and firmly in New Zealand and Australia and more modestly in the US.
Changes to accounting estimates will contribute approximately $1.5 million to the loss, with investment in the US positioning for the Electronic Logging Device (ELD) market opportunities providing the greater balance.
EROAD chief financial officer Jason Dale says earnings before interest income and expense, taxation, depreciation, amortisation “EBITDA”, is expected to be between $6.0 million to $7.0 million for the year.
“The difference between EBITDA and the projected net loss primarily arises because the positive operating cash contribution from our New Zealand business exceeds the US loss and non-cash amortisation and depreciation expenses for the year,” says Dale.
Dales says EROAD annually reviews the intangible asset amortisation method and profile. The Board has agreed to recommended changes to the profile and method of amortisation of intangibles, which better align to EROAD’s business model.
“The move will see EROAD amortise development costs on a straight-line basis. The change from an upfront amortisation charge per unit to a monthly straight line charge better reflects the leasing and subscription nature of our business,” says Dale.
“These variations in the method are non-cash expenses that would have an impact on the full year result, but not on cash flow. Subject to audit clearance, this will result in higher amortisation charges to the P&L in FY17, and subsequent years,” he says.
“In the US, sales growth continued to be modest, as anticipated, as the business built its sales and marketing capability and engaged in extensive market research in advance of going to market with our in-cab, hardware-based ELD,” says Dale.
EROAD’s device was the first on the US government register to offer permanent in-cab hardware as part of a comprehensive solution for ELD.
“The investment in preparing to capture opportunities from the ELD market in FY18 has contributed a majority of the larger loss in FY17 of approximately $5 million. The US recorded orders of 377 units in the month of March, shows early signs of interest in our ELD offerings,” says Dale.
EROAD will report its full-year result on May 30, 2017.
