Transportation technology firm EROAD has increased revenue 78% to $85.4 million for its first half FY23 result.
It follows a cost-cutting programme including the layoff of around 40 staff, reducing the number of office leases and renegotiating contracts with suppliers.
It expects revenue growth momentum to continue to build in FY23 and beyond reflecting continued strong growth in New Zealand and the improved product market fit with the CoreHub product in North America.
The result includes a full six-month contribution from Coretex following its acquisition last year.
Annualised monthly recurring revenue increased 18% to $158.3m reflecting growth across all markets and a foreign exchange benefit of $13.6m.
EBIT increased from a loss of $400,000 restated in H1 FY22 to a reported profit of $1m. It made a net profit of $552,000 and a net loss of $5.7m from continuing operations.
The company says it continued to execute its growth strategy, growing contracted units to 217,519 and 1019 customers adding products and services to their plan such as Clarity Connect Cameras, Enterprise Data Connector, Logbook and Inspect subscriptions.
New Zealand continues to deliver “strong and stable growth”, it says.
North America saw gross sales of 7,572 units, more than three times that of H1 FY21, with around 75% of new sales coming from Coretex subscriptions.
“However, in North America, EROAD continues to be impacted by high churn in small-to-medium Ehubo customers as a result of the macro-economic conditions and the increased competitiveness.”
EROAD continued to benefit from high asset retention rates for both EROAD and Coretex customers despite the challenging and competitive environment.
It successfully renewed 918 customers contracts over H1 FY23, representing around 21,336 contracted units. This included one of EROAD’s largest North American enterprise customers, ABC Supply, for over 6000 subscriptions through to at least August 2024. ABC Supply is one of North America’s largest wholesale distributors of roofing, siding, and other select exterior and interior building products, and has been partnering with EROAD since 2019.
EROAD was also awarded a contract to supply its CoreHub technology and SaaS solutions to North American foodservice operator Sysco for over 9000 trucks, with further growth potential. EROAD and Sysco will work together to rollout EROAD’s solutions across the next 12 months. Sysco will utilise EROAD’s fully integrated solutions to provide supply chain assurance for critical food service distribution throughout North America.
Chief executive Mark Heine says he’s proud of the progress the EROAD team has made against its strategic priorities.
“We moved early on a cost-out programme to ensure we are able to deliver profitable growth,” he says.
Meanwhile, research and development spend increased from $13.3m in H1 FY22 to $20.5m in H1 FY23. EROAD expects to spend around $38m for FY23.
Looking forward
EROAD is reconfirming FY23 revenue guidance narrowed to between $154m – $164m subject to foreign exchange movements (previous guidance $150m – $170m).
The company says there are a number of headwinds on operating costs, however management has been focused on cost reduction initiatives to help offset the impact of inflationary and supply chain pressures.
It remains on track to achieve a FY23 normalised EBIT of between $5m loss and breakeven.
The company expects revenue growth momentum to continue to build in FY23 and beyond reflecting continued strong growth in New Zealand and the improved product market fit with the CoreHub product in North America.
The enterprise pipeline remains “robust” with a total of 22 customers at the pilot stage across all the markets, representing around 32,300 contracted units.
“Times are tough for most businesses and industries, as such it’s not surprising that buying decisions are just taking longer, which we expect will push out the timing to reach EROAD’s $250m revenue target beyond FY25.
“EROAD continues to have significant growth opportunities as it is beginning to see the benefits of the improved market fit of Coretex products with higher gross sales in North America and good conversion of pilot opportunities to sales.
“Businesses continue to increasing their demand for solutions focused on sustainability, data and managing assets,” it says.
