Jarden analysts Guy Hooper and Nick Yeo called it “An in-line result, with operating momentum soft in our view.”
The pair, who have a neutral rating and a $1.05 12-month target price, said in a post-results note: “In our view, maintenance of FY25 guidance is disappointing given the required execution to meet FY26 targets for a revenue CAGR [compound annual growth rate] of +11%-13%, which itself is in line with forecast market growth.”
On a conference call, Eroad co-CEOs Mark Heine and David Kenneson talked up new tools developed under an AI collaboration with Microsoft and the potential to expand into the light commercial vehicle market, through a new collaboration with Geotab – a maker of low-cost fleet tracking solutions – as our Government aims to expand road user charges to all petrol vehicles “by 2027″ as Heine put it (Transport Minister Simeon Brown termed it “as soon as 2027″).
There were some 4.8 million light commercial vehicles in the Australasian market. Around half had no telematics technology, Heine said. Being a Geotab reseller would help reach that market.
In response to analyse questions, Heine said the arrangement would not cannibalise Eroad’s higher-value products because Geotab did not direct sales. It only worked through reseller deals. However, he also conceded that Eroad’s reseller deal with the Canadian firm was non-exclusive.
“We are encouraged by a better focus on profitability and new partnerships announced. However, we seek more detail on how meaningful these opportunities can become,” Jarden’s Hopper and Yeo said.
“We’re very confident of hitting our 2026 targets,” Eroad chief financial officer Margaret Warrington said on the conference call.
She saw the firm’s new AI dashcam (more on which below), more sales to existing enterprise customers and new customers would see it hitting its marks. (If so, Warrington won’t be around to see it. The firm said today she had resigned effective on February 21 to return to Summerset as CFO. She was previously head of finance for the retirement village group before joining Eroad in 2020.)
Race to the 3G switch-off
Eroad partners with One New Zealand for mobile connectivity for its in-cab units in NZ – around a third of which are on the telco’s older 3G network, soon to be shuttered.
Last month, One NZ delayed the switch-off of its 3G network again, this time from March 2025 to December 2025 (rivals Spark and 2degrees are working to the same timeframe for their respective 3G switchoffs Australian partner Telstra shutoff its 3G network in October).
Asked about customers working through the 3G shutdown, One NZ head of sustainability and corporate affairs Nicky Preston told the Herald, “The biggest one for us is Eroad.” There was no possibility of an extension beyond December next year. “The more we delay it, the harder it becomes to innovate on the network. At some point we’ve just got to make it happen,” Preston said. The telco had been engaging with Eroad on its 4G upgrade for more than two years.
4G upgrade costs for Australia and NZ customers are in-line with the previously announced $24-$30m, according to Eroad’s half-year investor presentation, including $7-$9m in FY25.
“We’re two-thirds [67%] of the way through. The percentage of all ANZ customer on 4G has increased from 55% six months ago, so progressing well, we’re on track to achieve it all by December next year,” Heine said.
“We’re accelerating … We’ll use the Christmas break for some larger customers to do the install, but at the moment, we’ve got good engagement, and we’ll just keep ramping up the switch out over the course the next 12 months.”
An 8% revenue bump to $95.9m was partly through sales growth – Eroad’s total customer base across its key NZ, Australia and US markets increased to a new high of 253,930 from the year-ago 250,890. A 3% price increase for non-enterprise customers from July and favourable exchange rates also contributed.
Full-year guidance
There was one change to full-year guidance, with forecast R&D speed increasing from the previous $32m to $35m (although as a percentage of the projected higher revenue R&D would fall from 18% to 17%).
Revenue guidance remains $190-$195m.
Ebit guidance remains $5m to $10m, excluding 4G upgrade costs.
The firm says full-year free cash flow will be “positive”.
Growth opportunities
Heine has seized on the Government’s to expand road user charges to petrol vehicles as early as 2027.
RUCs were applied to light electric vehicles – those between 1000kg and 3000kg – from April 1 this year. RUCs will apply to heavy EVs – those over 3000kg – from December next year.
The co-CEO sees the transition as a potential opportunity for Eroad to expand in the light commercial vehicle segment.
Today, its customer base is stacked with enterprise customers with large fleets of trucks, such as Fonterra in NZ and food distribution giant Sysco in the US.
The Geotab partnership should help if Eroad does take a stab at smaller firms as RUCs become more widespread (Heine also sees it as a route to the light commercial market regardless).
For now, the possible push into light commercial RUCs is still at the whiteboard stage.
But Heine said on the conference call that Eroad had responded to a Government RFI (request for information).
“It’s a significant expansion of our addressable market,” he said.
New AI products
Earlier this year at Mystery Creek, Eroad unveiled its new Clarity Edge Dashcam, which provides views of both the road ahead and the drive behind the wheel. New AI tools – billed as safety features rather than Big Brother monitoring – watch for signs of driver fatigue like yawning or eye closure for more than two seconds.
The AI’s realtime “voice coaching” discourages risky behaviours like sharp cornering, tailgating or reaching for a cellphone while driving.
Video with risky behaviour is automatically tagged, and the technology can be set to enforce NZTA rules about breaks.
Kenneson said the Clarity Edge was now in customer trials.
Two machine-learning products have also been added under the bonnet: CoreTemp and Predictive Maintenance.
“CoreTemp simulates a reefer [refrigerated trailer] unit’s load and, rather just looking at the temperature the air intake and outtake, it actually simulates, based on the product you’re carrying, the optimum way to cool the load,” Kenneson told the Herald.
“Predictive Maintenance anticipates when a reefer unit could potentially break down to avoid that from happening, which is very costly. We also have another product in the market called AI Assistant that we’re using in a construction space right now, and we have a pilot going on with a couple of our customers.”
The Trump effect
The US is Eroad’s second-largest market, and it’s biggest in terms of growth potential. For the six months to September 30, Eroad saw $48.8 million revenue from its NZ customers (an 11.4% rise), $39.6m from the US (a 2.6% rise) and $6.5m from Australia (a 16.1% jump, albeit off a smaller base).
“We have not been manufacturing in China,” Heine told the conference call after being asked about the potential impact of Trump administration tariffs.
He said it was possible Eroad’s software-as-a-service products would not be hit by tariffs, but there were few details so far.
Earlier, Heine told the Herald, “The trend will be closely tied to general economic environment. But Trump should help grow the US economy. We hope to see an increase in sales North America and, equally in New Zealand, OCR cutting should hopefully mean that we can get strong results next year on the back of our Kiwi customers as the economy starts improving.”
‘No intention of a capital raise’
In September 2023 – against the background of a low-ball bid from Toronto-listed Constellation Software Eroad raised $50m in a discounted share offer in September 2023 – with the proceeds used in part to pay down debt. The firm closed the half with $11.3m in cash and equivalents from the year-ago $16.8m.
Net debt was $25.5.4m, an increase from the year-ago $22.1m.
“There’s no intention for ant capital raise,” Heine said on the conference call.
Eroad had total liquidity of $54.6m, including $43.3m headroom on a new $80m facility secured in October last year as Kiwibank joined existing lenders ANZ and BNZ.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
