Eroad Limited · NZX:ERD
Eroad — H1 FY24 Earnings Presentation
42 slides from Eroad's earnings presentation, Nov 29, 2023
Slide 1: EROAD Financial Results H1 FY24
EROAD (NZX: ERD ASX: ERD) Financial Results For the 6 months ended 30 September 2023 (H1 FY24) 29 November 2023 1
Slide 2: Important Information
Important Information The information in this presentation is of a general nature and does not Non-GAAP Measures constitute financial product advice, investment advice or any EROAD has presented certain non-GAAP financial measures as part of its recommendation. Nothing in this presentation constitut
Slide 3: Agenda
Agenda Result Overview Operational Overview & Key Metrics Geographic Financial 4G Hardware Upgrade Program MARK HEINE, CEO EROAD Strategy Strategy Partnerships Region Collaboration Market Opportunities Outlook & Guidance MARGARET WARRINGTON, CFO 3
Slide 4: H1 FY24 Result Overview
01 H1 FY24 Result Overview 4 P AGE 4
Slide 5: H1 FY24 Financial Results
H1 FY24 FINANCIAL RESULTS Reported Revenue Reported EBIT Normalised EBIT Free Cash Flow3 Cost Out (Annualised) $88.9m $0.4m $1.9m $(0.2)m $8.5m +13.4% H1 FY23 $1.0m H1 FY23 Normalised2 vs FCF positive later half Further identified of $78.4m1 ($3.4m) H1 FY23 calendar year 2024 following $10m FY23 HY
Slide 6: Connection Growth and Normalised Revenue Growth
Normalised Connection Growth Revenue Growth North America boosted by Sysco rollout and Enterprise expansions ~13% YoY normalised revenue growth Net New Connections driven by 11.7% increase in connected MILESTONE by Region units and favourable foreign exchange. North America accounted for 53% of unit
Slide 7: Positive Momentum
Positive Momentum Strong interim results affirm our strategic direction STRONG FOUNDATIONS CONSISTENT EXECUTION OF STRATEGY Three complementary business units Profitable growth at scale • New Zealand business generates strong positive free cash • Sysco install substantially completed flow, inclusive
Slide 8: Delivering on Strategy
Delivering on Strategy Operational Overview Sustainable, Profitable Growth Financial Headroom Normalised Price Uplift Cost Out Capital Liquidity Cash burn 6% 3% $0.9m / month $8.5m $50m $59.4m Australia & North Down 79% from H1 FY23 Annualised Raised Available New America Savings Zealand Implemented
Slide 9: Delivering on Strategy: Enterprise Accounts
Value of Delivering on Strategy Operational Overview Enterprise Net New Enterprise Logo 3,000 Won Programmed Onboard new accounts Won • (3,000 for 5 years) in AU and show value Strategic Priority: Win, Retain • Renewed (1,400) Hato Hone St John NZ Renew Contracts 2,800 and Expand Renewed • Received
Slide 10: Key Metrics Trend
Key Metrics Trend Focused execution delivers strong results against refreshed strategy Targeting Free Cash Flow1 positive late calendar 2024, neutrality in FY25 2 Implementation of refreshed strategy provides pathway to sustainable, profitable growth Goal Metric FY22 FY23 H1 FY24 FY26 Targets Strate
Slide 11: New Zealand H1 FY24
New Zealand H1 FY24 New Zealand Strong cash generative market with a focus on multi-product adoption CUSTOMER EXPANSION 346 customers expanded their services by an additional 8,794 5,028 94% 346 connections Net unit Asset Retention Rate Customers CUSTOMER LOYALTY adds 4G Hardware Upgrade added servi
Slide 12: North America H1 FY24
North America H1 FY24 North America Solid growth with momentum building in enterprise focus SYSCO 9,000+ UNIT UPDATE: Sysco rollout substantially completed Additional 1,400+ connections supplied above initial contract 8,335 93.9% 149 CUSTOMER LOYALTY Net unit Asset Retention Customers 93% of new uni
Slide 13: Australia H1 FY24
Australia H1 FY24 Australia Solid growth with momentum building in enterprise focus NEW ENTERPRISE Programmed Australia (3,000) 5 year term 2,372 97.4% 88 CUSTOMER LOYALTY Boral renewed (1,900) Net unit Asset Retention Customers and expanded (1,345) adds Rate added services Received confirmation (su
Slide 14: HY24 Financials
HY24 Financials Programmed Australia A leading provider of Staffing, Facility Management, Maintenance and Care services 3,000 units to use MyEROAD 14
Slide 15: Revenue & EBIT
Revenue & EBIT Financial results delivered above guidance, demonstrating our commitment to deliver on our promises Normalised Revenue1 Normalised Operating Costs2 Normalised EBIT3 $88.9m $1.9m $78.4m $62.0m $62.8m $(3.4)m H1 FY23 H1 FY24 H1 FY23 H1 FY24 H1 FY23 H1 FY24 Revenue of $88.9m is up 13.4%
Slide 16: Operational Efficiency
Operational Efficiency Management focus on gaining efficiency across all cost measures Cost to acquire customers Customer acquisition cost Cost to support & service as a % of revenue (CAC) per unit as a % of revenue $690 3% 2% $587 3% $405 11% 11% 8% 6.4% 5.9% 5.9% H1 FY22 H2 FY23 H1 FY24 H1 FY22 H2
Slide 17: Operating Costs
Operating Costs Cost-out program to deliver cost base for profitable growth Operating cost as a % of normalised revenue1 Maintaining operating costs at stable levels NZ$m (approximate) 50% H1 FY23 H1 FY24 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Operating costs have decreased versus the prior period St
Slide 18: Research & Development
Research & Development R&D % of revenue decreases as re-focusing initiatives drive ROI and speed to market R&D decreasing as % of revenue on strategic shift NZ$m 25.0 30% • Total R&D spend of $14.7m 28% 28% in H1 FY24, 17% of revenue. 24% 25% 20.0 • Compares to $20.5m 24% in H1 FY23. 19% 20% 15.0 6.
Slide 19: Cash Flow Trend
Cash Flow Trend Cash flow continues to improve through execution Positive free cash flow to the firm trajectory Monthly cash burn continues to reduce H1 FY22 H2 FY22 H1 FY23 H2 FY23 H1 FY24 $4.1m -0.2 -8.2 -14.6 $0.9m1 -21.7 -30.5 H1 FY23 H1 FY24 Free cash flow to the firm estimated to be consistent
Slide 20: Liquidity
Liquidity Strong balance sheet for strategic execution Bank Facilities Sufficient liquidity to fund strategic plan (post-raise) Secured new 3-year $80m bank facility in $80m October in conjunction with capital raise. Bank Facility Amortisation will reduce the facility limit to $60m $15.1m $59.4m at
Slide 21: 4G Hardware Upgrade Program ANZ
4G Hardware Upgrade Program ANZ Unit replacement program progressing to plan, with 46% of all units in ANZ already 4G compatible Upgrades to ANZ network Rollout Key dates progress • EROAD is accelerating the swap out of 2/3G devices to 4G devices over a 2-3 year period • We remain confident in our p
Slide 22: Strategy Update
02 Strategy Update 22 P AGE 22
Slide 23: Strategy Timeframe
Strategy Timeframe Optimising business operations underway, clearing the way for scaleable growth WE ARE HERE 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 Headcount reduction Accelerate
Slide 24: Sustainability
Sustainability Positioned for emerging social and environmental trends Market Trend EROAD Intelligence EROAD Better World Despite increasing pressure to reduce EROAD core products already track, Layering carbon reduction targets into environmental impact, sustainability measure and control leading i
Slide 25: North American Strategic Partnership Update
North American Strategic Partnership Update As communicated at March 2023 Investor Day Strategic Partner Rationale Partnership Focus Areas Large EROAD commenced Cold Chain Construction searching for partners in Enterprise North America to assist with: • Go to market channels • Technology partnership
Slide 26: Strategic Collaborators: Technology
Strategic Collaborators: Technology Accelerating adoption through intelligence + accessibility Technology: Microsoft OEM: ThermoKing • Enables use of Generative AI to • Partnered with Trane accelerate development of Technologies for direct CoreTemp integrations with their Thermo King Transport Refri
Slide 27: Leveraging our strengths for growth
Leveraging our strengths for growth Shared innovations and solutions – three complementary markets • Shared product development for economies of scale • Sustainability features in NZ products supportive of long-term North American trends • Large established enterprise customers • Workflow solutions
Slide 28: R&D Investments for growth
R&D Investments for growth Strategic R&D allocations across retention and growth areas globally • Ongoing maintenance spend in platforms and 58% 41% New Zealand systems for existing Total R&D investment customers for retention. is for net new growth Includes new gen trailer tracker, decarbonisation
Slide 29: Market Share
Market Share Significant growth achievable through market share gain in North America NEW ZEALAND AUSTRALIA NORTH AMERICA Cash generative geography with Opportunity to leverage leading Largest market with leading market position in New Zealand market position for significant long-term Opportunity to
Slide 30: Outlook & Guidance
03 Outlook & Guidance 30
Slide 31: Outlook & Guidance
Outlook & Guidance On track to delivering a path to sustainable, profitable growth FY24 Guidance reconfirmed • Revenue growth of between 6 – 9% • Cost-out program to continue FY24 Guidance • EBIT of $0m to $5m normalised for 4G hardware upgrade programme Revenue $175m – $180m Free Cash Flow neutral
Slide 32: Appendix
04 Appendix 32
Slide 33: Statement of Income
Statement of Income NZ$m H1 FY24 H1 FY23 Change ($) Revenue 88.9 85.4 3.5 Reported Revenue increased $3.5m primarily due to unit growth of approximately 25,000 Operating expenses (63.3) (64.6) 1.3 units since 30 Sep 2022. The prior year Earnings before interest, taxation, depreciation included $7.0m
Slide 34: Cash Flow Statement
Cash Flow Statement NZ$m H1 FY24 H1 FY23 Change ($) Cash received from customers 88.5 78.0 10.5 Operating Cash Flow increased $12.4m Payments to suppliers and employees (58.4) (64.4) 6.0 primarily due to the unit growth, foreign Investment in contract fulfilment assets (5.6) (3.6) (2.0) exchange imp
Slide 35: Balance Sheet
Balance Sheet NZ$m H1 FY24 FY23 Change ($) Cash 16.8 8.1 8.7 Cash increased $8.7m following partial proceeds received from the capital raise (final Restricted bank accounts 18.2 11.6 6.6 $15m of proceeds were received post balance Costs to acquire and contract fulfilment costs 8.2 7.6 0.6 date) and
Slide 36: ARPU Trend
ARPU Trend NZ$ Local $ NZ$m H1 FY23 H1 FY24 H1 FY23 H1 FY24 North American ARPU NZ$57.25 NZ$60.23 US$36.18 US$36.85 New Zealand ARPU NZ$55.50 NZ$58.17 NZ$55.50 NZ$58.17 Australian ARPU NZ$46.51 NZ$46.67 A$42.02 A$43.16 36
Slide 37: Unit Count
Unit Count 242,884 227,149 217,519 208,697 North America Australia 103,393 New Zealand 95,058 90,596 87,682 132,703 126,203 18,008 116,488 122,193 15,636 14,643 108,414 33,992 14,099 35,437 96,106 35,294 34,002 86,240 5,072 31,227 2,874 77,600 24,660 2,373 2,120 20,955 1,513 59,538 17,757 48,041 116
Slide 38: Free Cash Flow to the Firm By Region
Free Cash Flow to the Firm By Region Inflows Outflows Total NEW ZEALAND NORTH AMERICA AUSTRALIA CORPORATE & DEVELOPMENT $21.9 $8.0m $0.2m $(30.8)m 38 H&A Assets - Hardware & Accessory Assets • CA Assets - Customer Acquisition Assets • CE EBITDA – Corporate and Elimination EBITDA • H&A under Construc
Slide 39: Delivering intelligence you can trust for a better world tomorrow
OUR PURPOSE: Delivering intelligence you can trust for a better world tomorrow Delivering Intelligence Trust Better World Tomorrow Knowing our The best people Earned trust Always taking We think customers needs, powered by through the the wider beyond today and meeting them cutting edge validity of
Slide 40: Integrated solutions overview
Integrated solutions overview EROAD provides a complete connected network that turns disparate customer data into action Compliance and assurance Health & Safety Productivity Sustainability • RUC and fuel tax compliance • Driver behaviour • GPS tracking and • Fuel management and — Electronic, automa
Slide 41: Glossary
Glossary ANNUALISED MONTHLY RECURRING REVENUE (AMRR) EBITDA A non-GAAP measure representing monthly A non-GAAP measure representing Earnings FY (FINANCIAL YEAR) SAAS Recurring Revenue for the last month of the before Interest, Taxation, Depreciation and Financial year ended 31 March. Software as a S
Slide 42: Contact
42 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