Transport technology company EROAD is acknowledging its “unsatisfactory” share price performance but is promising investors it is putting the steps in place to be cash flow positive by FY26.
That was the message at its July 28 annual shareholders meeting led by newly appointed chair Susan Paterson.
The meeting also followed a recent decision by the board to reject a $147m takeover bid by Volaris (an operating group of Toronto Stock Exchange-listed Constellation Software) at $1.30 per share.
EROAD, which is listed on the NZX and ASX, said the non-binding indicative offer (NBIO) for all its shares “materially undervalues EROAD’s business”.
This was reiterated to shareholders at the annual meeting, with Paterson saying the board undertook a “thorough review process”.
“We have taken this process very seriously and taken our time to assess a number of measures in determining this outcome, including our own expectations of the future performance of the business …
“Ultimately the board remains deeply committed to maximising value for our shareholders. We believe we have the vision, plan and people in place to do so,” she says.
Paterson says EROAD’s share price performance is “related to the market but also of our own making”.
It currently sits around $1.41 per share, and has seen a steady decline from its high of more than $6 per share in 2021.
“The board has been acutely aware of this, but firmly believes that with the hard work largely done, our strategic plan in place and given where we are along our path towards reaching positive free cash flow, we are now at the point where shareholders will start to reap the rewards,” Paterson says.
FY23 and FY24 focus
Towards the end of 2022, EROAD undertook an in-depth strategic review of its business with the support of global consulting group McKinsey & Company.
As a result of the review, the board settled on a plan to optimise its business around new targets which focus on cash and efficiency across the entire EROAD business and growing its North America business.
As part of those efforts, the company cut costs by $10m in FY23 with an additional $10m targeted in the current financial year.
In North America, EROAD has recently been working with advisers from Goldman Sachs to identify partnership options to contribute expertise, additional market access and potentially also contribute fresh capital.
Paterson says discussions with various parties are ongoing and the company had hoped to make an announcement in time for the annual meeting but the “opportunities take time to consummate, and we continue to prioritise those discussions”.
Meanwhile, chief executive Mark Heine highlighted some of EROAD’s achievements with the company now servicing more than 10,000 customers.
This includes around 250,000 drivers driving over 227,000 units being monitored by EROAD which travel over 9.2 billion kilometres annually.
The company also celebrated a recent milestone with more than 100,000 connections in North America.
“This significant milestone ensures we are a credible player in the North American market, and validates the strength of our offering, together with the ability of our EROAD team to market, sell, install and support our customer base,” Heine says.
Growth in New Zealand
In New Zealand, EROAD added over 9500 net units, up almost 9% year-on-year. More than 1000 customers renewed their plans, which represented over 28,000 units being renewed for another term.
Key enterprise customers Bidfood and Higgins renewed their contracts, representing collectively over 1200 units.
Another key highlight was winning a whole-of-fleet contract with Fonterra for a total of more than 500 units, with 50 units installed during FY23.
“We have worked hard over the years to build a strong market position in New Zealand,” Heine says.
“However, we do not take this position or our customers for granted and we are proud to maintain an ongoing focus on continuous improvement.”
EROAD has also been developing a decarbonisation tool that will be available in New Zealand from later this year.
This solution is designed to help customers to operate sustainable and more cost-effective heavy vehicle fleets.
“Inspired by EROAD’s 2022 Sustainability Survey, this solution has emerged from customer feedback, which notes the continued challenges operators have in tracking and measuring sustainability performance, which hampers the successful pursuit of their environmental priorities,” Heine says.
“Overall NZ remains a cash generative market for us and we continue to focus on multi-product adoption and broadening how we support our current customer fleets as well as winning new customers.
“There remains scope for further opportunities and we expect to maintain good growth here in FY24. We also launched our 3G replacement program in New Zealand which presents further opportunities for product upgrades,” Heine says.
EROAD released its full-year report in May which saw reported revenue growth of 52% to $174.9m.
Its results were in line with guidance and reflected a full 12-month contribution from Coretex following its acquisition in December 2021.
It posted a total net loss of $3m compared to a net loss of $9.6m in the previous year. Normalised EBIT saw a loss of $4.5m at the midpoint of the company’s guidance (loss between $3m and $6m).
