EROAD Limited reported a solid half-year result delivering strong growth in Units on Depot and successfully establishing its business in Oregon, USA.
On track to deliver a full year results in line with Prospectus Prospective Financial Information (PFI)
Units on Depot 18,586 up by 79% since 30 September 2013
Revenue at $7.9m up by 82% on same period last year
Annualised Recurring Revenue reaches $16.0 million, up by 72% since 30 September 2013
Customer Retention Rate remains strong at 99.2%
Net Profit before tax and costs of listing $0.1 million, up compared to a loss of $0.4 million for the same period last year
Opened new office in Portland, Oregon
Half-year to September 30, 2014
25 November 2014 EROAD (NZX:ERD) today reports performance in line with expectations for its first half year as an NZX Listed company, achieving strong growth in Units on Depot, and increasing market share in New Zealand.
“I am very pleased with what has been achieved during the six months. To have grown strongly and to be on track to deliver full year PFI, whilst executing the successful NZX listing is a testament to the depth of the EROAD team,” said EROAD Chairman, Michael Bushby.
Revenue totalled $7.9 million for the six months, up from $4.3 million for the same period last year. Strong take up of rented Units helped contribute to the increase in Annualised Recurring Revenue (ARR) to $16.0 million, some $6.7 million above 30 September 2013. With customers recognising the benefits of EROAD’s services a high customer retention rate of 99.2% also helped to increase ARR.
The launch of EROAD’s Electronic Logbook, which was approved by NZTA in July 2014, as well as the launch of its Data Analytics service, further enriched the customer offer and helped to support revenue growth.
In New Zealand, EROAD added as customers some of the largest national fleets during the six months, including Halls, Ritchies and TIL (Transport Investments Ltd, known for its general freight brands Hooker Pacific, TNL (Freighting & Distribution), and Roadstar Transport).
In addition EROAD enjoyed considerable success in supplying services to Councils and Government departments across the country. Around one quarter of New Zealand’s regional councils are now customers, particularly of EROAD’s EhuboLITE and Elocate solutions.
In Oregon EROAD has made good progress since launch in April, 2014, including opening a new office in Portland. We have grown sales staff to forecast and have seen a corresponding lift in sales activity in line with expectations.
Outlook for full year to March 2015
EROAD’s strategic priorities remain unchanged. The company is enhancing its product and services offering as well as targeting its sales and marketing initiatives in response to what it continues to learn from its operations in New Zealand, Australia and the US.
Overall we expect our full year results to be in line with PFI based on strong sales in New Zealand balancing lumpy sales in Australia, with Oregon on track with expectations.
“Our results for the half year are very pleasing and demonstrate continued strong demand for our products and services in our important New Zealand market, acceptance of our products and services internationally, and we continue to build momentum in these markets,” said CEO Steven Newman
Consistent with its Dividend Policy, EROAD does not intend to pay an interim dividend for the year 31 March 2015.
New Zealand’s move toward Electronic RUC
We are seeing a continued steady move in the transport sector towards electronic Road User Charges (eRUC). EROAD has collected $533 million in RUC since 2009, up from $402 million at March 2014. EROAD now has an annualised RUC collection rate of nearly $300 million per annum. This represents over 26% of New Zealand’s total annualised Heavy Vehicle RUC, up from 19% at September 2013.
The efficiency benefits that EROAD delivers to its customers has helped drive the growth in electronic RUC. A growing focus on health and safety and compliance among heavy transport operators is an increasingly important driver of demand for EROAD’s products and services. New services like Virtual Speed Camera, EROAD Electronic Logbook, and Driver Vehicle Inspection Log have been developed and launched in New Zealand to help our customers improve safety on New Zealand roads. These services have been developed with a rollout to international markets in mind.
Since entering the Oregon Weight Mile Tax (WMT) market in April 2014 we have refined upward our estimate of market size. The experience of our sales teams is that many fleets with vehicles subject to WMT also operate other vehicles. This has increased our assessment of EROAD’s potential addressable market in Oregon to beyond the 306,000 heavy vehicles registered for WMT. As an example EROAD has recently won three new customers that have a total of 142 vehicles registered for WMT and a further 154 vehicles not subject to WMT but still requiring commercial services. Having selected EROAD for the WMT vehicles these three customers are now considering equipping all other vehicles with EROAD’s service.
EROAD has opened a new, bigger office in Portland, Oregon, and has introduced a new offer to customers for rental Units in response to customer demand. This means operators in Oregon now have an option of purchasing Units at the start of their service or renting Units as part of their service plan. Depending on market response, and uptake of this new rental offer, some revenue will be deferred with a corresponding increase in Annualised Recurring Revenue (ARR). However, at this time it is too early to project any clear trend in customer preference.
Research and Development
Investment in our technology platform and suite of services remains a key focus for development. Development of products relating to USA International Fuel Tax Agreement (IFTA), International Registration Plan (IRP), Hours of Service (HOS) as well as Electronic Logging Device (ELD) is progressing well. In addition, the development of services to meet Health and Safety requirements, including driver behaviour, analytics and camera capability are all progressing according to plan. These services are on track to be completed in early 2015 and we will be well placed to roll out for New Zealand, Australia and Oregon for FY2016.
EROAD is experiencing the challenges faced by New Zealand’s technology sector in attracting talent in a tight global market. However, we are having some success as we increasingly look overseas to attract the talent we need.
Creating a deeper profile to our senior management team for the business and adding additional capability to support growth was top priority for the first six months of the financial year.
Jeff Honey, Insights & Analytics Manager: Jeff’s appointment enables EROAD to build capability in data analytics. Jeff’s background in insights and analytics includes senior roles at BNZ and Vodafone.
Andy Thackwray, Senior Manager, Strategy & Market Development: As a member of the strategy and market development team, Andy’s focus is on EROAD’s global expansion. He is relocating to Melbourne to grow our Australian business by applying his expertise in managing regulatory and stakeholder environments and identifying business opportunities in the Australian transport sector.
Reg Williams, Customer Experience and Acquisition Manager: Reg manages EROAD’s customer contact operations including retention, upsell and in-house sales, and helpdesk. He has also developed and implemented an in-house training programme for all customer-facing staff including in-field sales. His appointment enables EROAD to deliver a seamless, high-quality experience across the full customer lifecycle, in all markets.
Tony McNaught, Corporate Affairs Manager: After working as an advisor to EROAD since 2007, and advising the company through the IPO process, Tony has joined EROAD to support further growth through mergers and acquisitions, investor relations and strategy support.
Michael Swarbrick, Vice President of Sales - North America: Formerly EROAD’s Commercial Manager – NZ, Michael Swarbrick has relocated to grow our North American sales. He now leads our Portland-based commercial team which is responsible for sales in Oregon and neighbouring states.
Summary financial statements
Attached to this release are unaudited summary financial statements. The summary financial statements for the six months ended 30 September 2014 and the comparative financial information for the six months ended 30 September 2013 have been prepared under the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).
For a detailed description of EROAD’s business, and terms including Units on Depot, Annualised Recurring Revenue and Retention Rate, which are non GAAP measures used by EROAD to manage the business, please refer to our Prospectus dated 18 July 2014 on our website. www.eroad.co.nz/global/investors