Eroad Limited · NZX:ERD
Eroad — FY2023 Earnings Presentation
33 slides from Eroad's earnings presentation, May 24, 2023
Slide 1: Financial Results FY23
EROAD (NZX: ERD ASX: ERD) Financial Results For the 12 months ended 31 March 2023 (FY23) 24 May 2023
Slide 2: Important Information
Important Information The information in this presentation is of a general nature and does Non-GAAP Measures not constitute financial product advice, investment advice or any EROAD has used non-GAAP measures when discussing financial recommendation. Nothing in this presentation constitutes legal, pe
Slide 3: Agenda
Agenda 1. FY23 Result Overview • Operational Overview & Key Metrics • Geographic • Financial • Hardware Replacement & Integration MARK HEINE, CEO 2. EROAD Strategy • Key Market Opportunities • Strategy • Cost Out 3. Outlook & Guidance MARGARET WARRINGTON, CFO PAGE 3
Slide 4: Key Highlights
Key Highlights FY23 RESULTS IN LINE WITH GUIDANCE GIVEN IN MAY 2022, WITH CASH BURN IMPROVING IN H2 FY23 Reported revenue $174.9m Reported EBIT $1.7m $20m Cost-out +52.2% vs pcp $10m (annualised) completed in FY23, Normalised EBIT1,2 $(4.5)m additional $10m (annualised) targeted Normalised Revenue1
Slide 5: FY23 Result Overview
01 FY23 Result Overview PAGE 5
Slide 6: Operational Overview
Operational Overview CREDIBLE RESULTS AND CAPABLE OF DELIVERING ON STRATEGY Refreshed strategy • Outputs of November review: right-size the cost base; move to generate positive FCF; better capitalise on growth opportunities in key markets • Strategic review announced at March investor day, with Gold
Slide 7: Key Metrics
Key Metrics FOCUSED EXECUTION DELIVERS GOOD RESULTS AGAINST REFRESHED STRATEGY Goal Metric FY22 FY23 Strategy FY26 Targets 11% – 13% AMRR* $134.6 $153.7 Grow customer base in-line with market growth CAGR Churn 7% 5% Maintain historical churn rate 5% – 7% SaaS Quality Average Lease Rebalance toward l
Slide 8: Revenue & EBIT
Revenue & EBIT FINANCIAL RESULTS HAVE DELIVERED ABOVE GUIDANCE, FULFILLING OUR COMMITMENT TO DELIVERING ON OUR PROMISES Normalised Revenue1 Operating Costs2 Normalised EBIT3 $m $m 7 $m 165.3 126.3 Guidance 5.1 (159 to 164) 5 4.5 3 113.6 86.3 91.6 1 81.2 61.2 54.1 -1 -0.9 -3 Guidance -5 (-6 to -3 ) -
Slide 9: New Zealand
New Zealand CASH GENERATIVE MARKET WITH A FOCUS ON MULTI-PRODUCT ADOPTION Net unit adds 9,539 1,556 Customers added EBITDA NZ$53.7m FY23 NZ Developments Growth of 8.9% YoY services Growth of 18.8% YoY (13,387 subscriptions) • 1,092 customers renewed their plans with EROAD, Asset Retention Rate repre
Slide 10: Australia
Australia OPPORTUNITIES TO LEVERAGE TRANS TASMAN FLEETS REMAINS A FOCUS Unit net adds 1,537 290 Customers added EBITDA NZ$2.2m FY23 AU Developments Growth of 10.9% YoY services Growth from $0.1m in FY22 (1,699 subscriptions) • 51 customers renewed their plans with EROAD, Asset Retention Rate represe
Slide 11: North America
North America SOLID GROWTH WITH MOMENTUM BUILDING IN OUR ENTERPRISE FOCUS FY23 NA Developments Net unit adds 7,376 404 Customers added EBITDA NZ$18.1m Growth of 8.4% YoY services Growth of 93% YoY following • 110 customers renewed their (2,625 subscriptions) acquisition of Coretex in FY22 plans with
Slide 12: Operational Efficiency
Operational Efficiency MANAGEMENT FOCUS ON GAINING EFFICIENCY ACROSS ALL COST MEASURES Cost to acquire customers Customer acquisition cost (CAC) Cost to support & service as a % of revenue per unit as a % of revenue 20% 18% $690 16% 14% $587 13% 13% 14% 3% 6.4% 12% 2% 2% 5.9% $451 10% 4.6% 8% 6% 11%
Slide 13: Operating Costs
Operating Costs COST-OUT PROGRAM HAS HELPED TO RE-ALIGN COST BASE FOR IMPROVED PROFITABILITY Operating cost as a % of normalised revenue1 Cost-out program estimated impact on Personnel costs FY22 FY23 $m 46% 40% 16% 14% 7% 5% 5% 5% 3% 2% 2% 3% 4% 4% 2% 2% 0% 1% Bad Debts Saas Personnel Transaction c
Slide 14: Cash Flow Bridge
Cash Flow Bridge CASH FLOWS IMPROVED SIGNIFICANTLY OVER THE COURSE OF FY23 & CONTINUE IN RIGHT DIRECTION Cost-out program driving improvement in free cash flow Free cash flow to the firm1 FY22 to FY23 to the firm1 $m $m H1 FY22 H2 FY22 H1 FY23 H2 FY23 0 -5 -10 -8.2 -15 -14.6 -20 -25 -21.7 -30 -30.5
Slide 15: Debt
Debt REDUCING CASH BURN STRENGTHENS FUNDING CAPACITY AND STRATEGIC PLANS CAN BE EXECUTED WITHIN $90M DEBT FACILITY Normalised(1) monthly cash burn has improved Sufficient liquidity to fund strategic plan $m $m 10 8 6 4.2 4 1.8 2 0 H1 FY23 H2 FY23 Consistent cash burn improvement and total liquidity
Slide 16: R&D
R&D R&D % OF REVENUE IMPROVES AS RE-FOCUSING INITIATIVES DRIVE EFFICIENCY Research & Development decreasing as % of revenue on strategic shift Commentary 40 $m 30% 28% 37.2 • Total R&D spend of $37.2m in 35 FY23 is inclusive of a full year 23% 31.7 25% 22% 23% 30.0 of Coretex’s results and 30 19% te
Slide 17: 3G Hardware Replacement
3G Hardware Replacement UNIT REPLACEMENT PROGRAM PROGRESSING TO PLAN, WITH 37% OF ALL UNITS IN ANZ ALREADY 4G COMPATIBLE Upgrades to ANZ network • With One New Zealand (formerly Vodafone New Zealand) turning off its 3G service in August 2024, EROAD is accelerating the swap-out of older model product
Slide 18: Integration Progress
Integration Progress INTEGRATION WITH CORETEX REALIGNED TO STRATEGIC PRIORITIES & PROGRESSING WELL INTEGRATION STREAM PROGRESS Background Personnel Complete • Following the acquisition of Coretex in December 2021, integration was planned within 12-18 months initially focused on Locations & Assets Co
Slide 19: Strategy Update
02 Strategy Update PAGE 19
Slide 20: Repositioning To Generate Cash & Drive Growth
Repositioning To Generate Cash & Drive Growth RIGHT-SIZING THE FOUNDATIONS TODAY ALLOWS EROAD TO SCALE EFFICIENTLY, RESPOND TO MARKET DRIVERS QUICKER AND BE MORE AGILE TO CUSTOMER NEEDS PLATFORM PLATFORM TODAY TOMORROW Multiple solutions Scalable platforms supporting range centred around of offering
Slide 21: Strategy Timeframe
Strategy Timeframe OPTIMISING BUSINESS OPERATIONS UNDERWAY, AFTER WHICH RESOURCES CAN BE DEPLOYED TO ACHIEVE SCALEABLE GROWTH Turnaround the core Future Growth Approach Corporate overhead reduction Efficiency in ANZ / Growth in NA Growth in NA Verticals Timing FY23 FY24 ~3-5 years Value focus Head
Slide 22: Cost-out Program
Cost-out Program ALREADY HALFWAY THROUGH COST-OUT PROGRAM, WITH TARGETED PLANS FOR THE REMAINING $10M FY23: Completed $10m (annualised) cost-out FY24: Targeted $10m (annualised) cost-out • Right-sized personnel • Product simplification • Reduced actual and planned positions • Consolidate product sui
Slide 23: Trading Update & Outlook
03 Trading Update & Outlook PAGE 23
Slide 24: Outlook & Guidance
Outlook & Guidance COMMITTED TO DELIVERING A PATH TO SUSTAINABLE, PROFITABLE GROWTH North America strategic partnership update • EROAD has undertaken a review to identify partnership options to contribute a combination of additional market access, expertise and capital to gain further growth in the
Slide 25: Appendix
04 Appendix PAGE 25
Slide 26: Statement of Income
Statement of Income NZ$m FY23 FY22 Change ($) Revenue 174.9 114.9 60.0 Revenue increased $60m primarily due to the inclusion of a full year of Coretex revenue versus only four months in Operating expenses (129.7) (93.9) (35.8) the prior year. Earnings before interest, taxation, Strength of the USD h
Slide 27: Cash Flow Statement
Cash Flow Statement NZ$m FY23 FY22 Change ($) Cash received from customers 165.2 109.4 55.8 Operating CF increased $15.5m primarily due to the Payments to suppliers and employees (128.9) (92.2) (36.7) inclusion of a full year of Coretex results versus only four Investment in contract fulfilment asse
Slide 28: Balance Sheet
Balance Sheet NZ$m FY23 FY22 Change ($) Cash 8.1 13.9 (5.8) PP&E increased $16.1m partially due to responding to Restricted bank accounts 11.6 14.7 (3.1) global supply chain uncertainties over the past 12-18 months that have driven growing inventory levels to Costs to acquire and contract fulfilment
Slide 29: ARPU Trend
ARPU Trend NZ$ Local $ NZ$m FY22 FY23 FY22 FY23 North American ARPU NZ$56.38 NZ$58.77 US$39.02 US$36.65 New Zealand ARPU NZ$56.45 NZ$55.70 NZ$56.45 NZ$55.70 Australian ARPU NZ$38.99 NZ$46.35 A$36.69 A$42.27 PAGE 29
Slide 30: Unit Count
Unit Count ANZ North America 227,149 217,519 208,697 95,058 90,596 87,682 132,703 126,203 122,193 116,488 108,414 33,992 35,437 96,106 35,294 34,002 86,240 31,227 77,600 24,660 20,955 59,538 17,757 132,091 126,923 121,015 48,041 9,736 43,430 98,711 36,953 6,102 86,899 90,766 31,298 5,301 77,187 82,4
Slide 31: Free Cash Flow By Region
Free Cash Flow By Region Inflows Outflows Total NEW ZEALAND NORTH AMERICA AUSTRALIA CORPORATE & DEVELOPMENT $40.8m $2.2m $0.9m $(62.4)m H&A Assets - Hardware & Accessory Assets • CA Assets - Customer Acquisition Assets • CE EBITDA – Corporate and Elimination EBITDA • H&A under Construction - Hardwar
Slide 32: Glossary
Glossary ANNUALISED MONTHLY RECURRING REVENUE EBITDA FY (FINANCIAL YEAR) SAAS (AMRR) A non-GAAP measure representing Earnings Financial year ended 31 March. Software as a Service, a method of software delivery A non-GAAP measure representing monthly before Interest, Taxation, Depreciation and in whi
Slide 33: Contact
33 EROAD acknowledges the Indigenous Nations, First Peoples, Tangata Whenua and Custodians of the lands and waterways on which our offices reside in New Zealand, Australia and the United States of America. We express gratitude and appreciation to these peoples for sharing their culture and tradition