Eroad grows revenue amid pandemic, issues limited guidance

Eroad has reported $45.8m revenue for the six months to September 30 – a 19 per cent increase over the year-ago period – amid the pandemic.

The Auckland-based, NZX/ASX-listed maker of fleet-tracking technology made a net profit of $1.0 million, against a year-ago loss of $0.1m

Ebitda increased from $11.9m in the first half of FY2020 to $15.3m.

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The quarter saw Eroad dual-list on the ASX during September, raising $53m at the same time with a $3.90 per share placement – representing a 10 per cent discount on the stock’s trading price at the time.

A trust associated with cofounder and CEO Steven Newman sold 1.4 million shares or 10 per cent of its holding – but remains the largest shareholder with its 18 per cent stake.

Eroad had early confirmed in an October 28 trading update that its installed base grew by 3379 units for the three months ended 30 September 2020, ending the quarter at
122,193.

This is slightly higher than the guidance provided at the time of EROAD’s capital raise. The company said earlier this year that it is targetting an installed base of 250,000.

The company sells various tracking services associated with its tracking hardware on monthly subscriptions.

Average revnue per unit per month (arpu) for the first half increased from the year-ago $57.60 to $58.80.

Eroad has introduced several new software-as-a-service (or cloud) features this year in a bid to increase arpu, including crash and rollover alerts (in partnership with St John Ambulance, a new private mode, and “MyEroadDashboard”, which consolidates fleet metrics into a single-view dashboard.

October saw it add the Clarity Dashcam as another value-add for worldwide customers – to keep an eye on the road and an eye on drivers. Earlier, Newman told the Herald that tighter management appealed to trucking fleet owners during the time of the pandemic. North American customers also got the new Eroad Go logistics product.

The recessionary effect of the coronavirus was offset but a jump in online purchasing and thus deliveries, plus the need for tighter cost-controls implemented via tracking technology such as Eroad’s.

Eroad did not offer any forecast numbers today, but Newman did say that his comany expects revenue in the second-half to be stronger than the first.

The CEO said FY2022 growth would be stronger than FY2021, though still below 2020’s 30 per cent clip.

Ebitda margin would be flat in FY2022 but improve going into FY2023, Newman said.

The CEO said there had been no layoffs amid the Covid crunch. “That’s one of the things I’m most proud of. We didn’t lose any capacity. We didn’t let anyone go, and we took no wage subsidies.”

Staff numbers stayed stable during the half at 300. Newman says part of the $53m raise will be used to hire up to 60 more, the better to accelarate more products and services.

He says digitisation of the trucking and logistics business was already well underway, but has been accelerated by Covid-19. Eroad is investing in new products to ride the wave.

Newman has had an eye on the presidential transition in Eroad’s key US market. His hope that a deadlock over long-overdue infrastructure spending will be broken. He sees a tranistion from fuel taxes to road user charges (as measured by technology like Eroad’s) as a key funding mechanism as America looks to finally upgrade or replace aging roads and bridges.

He also sees the Biden administration restoring envirnomental measures rolled back by President Donald Trump, and a a generally greater empahsis on green measures – again providing more scope for telematics technology that can help chose the most cost and fuel-efficient path from A-to-B.

Automated vehicles pose a degree of long-term threat to Eroad. Newman said he’s seen a big drop-off in interest in this area during the pandemic, even as the electrification of fleets has accelerted.

On the prowl

Newman hopes that the series of recent vaccine announcements “will improve the mindset of customers”, some of whom have been putting of purchases of Eroad product amid recession uncertainty.

“But in some ways, things are worse than they’ve every been,” he adds. Over the past 24 hours, the US has reported 178,000 new cases and 2216 deaths. Companies could be grapplling with recession in North America long after the vaccines arrive en masse, he says.

Regardless, Newman says Eroad’s organic growth and recent profit-raise mean it can continue to expand in the US and other markets regardless. With some rivals on the back-foot, some of the capital could end up funding acquisitons, he says.

Eroad shares, which touched $2.00 during the height of the lockdowns in March, closed yesterday at $4.40. The stock is up 41.4 per cent for the year.

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