The EROAD board of directors says the company is unlikely to meet its FY16 profit forecast for the US business.
This follows a decision to accelerate investment in the US to expand more quickly into states beyond Oregon, reorganise teams, and to bring forward the launch of new services for the International Fuel Tax Agreement (IFTA) and Electronic Hours of Service (HOS) markets.
The new forecast is only for the US business. The New Zealand / Australia business is performing in line with forecast to date for the FY16 year.
Chairperson Michael Bushby says the board considered these moves to be the right strategic decision to grow long-term shareholder value, and now had a clearer view of the impact on sales in Oregon for FY16.
The business has completed a new forecast of the US business to provide clearer guidance for the current year.
Bushby says market reception to EROAD’s products and services in the US remained very positive.
Chief executive Steven Newman says the company was continuing to refine its US sales model and had accepted slower Oregon WMT sales in the short term to establish sales teams in neighbouring states sooner than anticipated.
Nearly half of EROAD’s sales staff are locating outside Oregon by March 2016.
“Each new state has its regulatory complexities that sales teams need to understand to develop their sales approach. Equipping and training sales teams in new states takes time,” says Newman
“This has taken resource away from Oregon WMT sales in the short term, but this is the right thing to do for the longer term,” he says.
“We estimate our expansion into the three neighbouring states of Idaho, Washington and California provides us with access to an additional 500,000 trucks registered for Oregon WMT, IFTA or HOS,” says Newman.
As at 30 August 2015, EROAD’s Total Contracted Units were 30,372 compared to an expectation of 30,717, a shortfall for the year-to-date of 345 Units or 1%.
Total Contracted Units for the US, by 31 March 2016, are expected to be between 6,000 and 6,500 compared to a forecast of 12,440 Units.
Total Contracted Units for EROAD, by 31 March 2016, are expected to be between 39,000 and 40,000, or around 10% behind the forecast.
Technical regulations for Electronic Logging Devices (ELDs) that must be installed in 4.5 million trucks across the US by October 2017 to meet Hours of Service (HOS) requirements expected in October 2015.
EROAD is well-placed to be among the first approved ELD providers in the US because it accelerated some R & D.
“We are already meeting clients in these new states that wish to use our products to meet their HOS obligations,” says Newman.
IFTA applies to 2.9 million trucks in North America.
EROAD now offers IFTA services in four states and, with continued investment and indirect sales, is expecting to offer IFTA services covering some additional US states by March 2016.
