Implementing a strategy upgrade after two fiscal years of negative free cash flow, fleet management company EROAD (ASX: ERD) is joining the artificial intelligence bandwagon. As of the first half of FY24, i.e. six months ending September 30, 2023, the Company has partnered with tech giant Microsoft to develop a Generative AI product aimed at elevating customer experience and value. 

An example of its generative AI venture is the AI Digital Advisor—a ChatGPT-like service for fleet managers. The advisor will help out with fleet operations, use smart tech to analyse data, improve asset usage and boost driver efficiency. Going beyond basic suggestions, it will show interactive graphics as visual aids to improve insights. With this service, fleet managers can spot patterns and stay ahead of maintenance concerns associated with their fleets.

At the same time, EROAD—a New Zealand-based tech company focused on tolling and other road services—has embarked on a strategic partnership with Trane Technologies to explore new avenues within the Cold-Chain market, leveraging the capabilities of ThermoKing Refrigerated Trailer Units.

These updates come as the Company reports a mixed H1 FY24. EROAD revealed a decrease in EBIT, recording a profit decline of over $550k from $920k in H1 FY23 to $369.3k in H1 FY24. Still, the Company reported a 13% increase in revenue, reaching $82.08 million. This growth was attributed to price hikes it implemented across North America (3%) and Australia/New Zealand (6%). 

Overall, it recorded a loss of $3.97 million, up from a loss of $2.5 million.

Chief Executive Officer, Mark Heine, commented, “In March this year, I outlined our focus was on repositioning EROAD’s business model to simultaneously reduce cost, drive growth and generate cash. Six months on, we are seeing delivery. We expect EROAD to start yielding positive free cash flow on a consistent basis in the latter part of calendar year 2024.”

EROAD also highlighted collaborations with key clients, such as Programmed in Australia, Boral, Kinetic (owner of NZ Bus), and expanded operations with US Foods in North America. Impressively, 59% of new enterprise units were expansions from existing customers.

The Company has been seeing some upticks on the cash front, too. It saw its free cash flow to the firm improve to an outflow of $184.6k in H1 FY24 from an outflow of $20 million in H1 FY23. This was thanks to EROAD’s unit growth, price hikes and more cost-saving measures. Plus, its recently raised capital ($46.1 million) combined with available liquidity and bank facility headroom takes its cash to $54.8 million.

EROAD Chair Susan Paterson said, “The half-year financial results show that EROAD is heading in the right direction. This progress is founded on a solid platform of an established, profitable New Zealand business segment balanced by a high-growth North America opportunity, a well-resourced balance sheet following our recent capital raise, a sound long-term strategy, and excellent positioning to the strong growth in business sustainability requirements. We have laid the foundations for continued growth in New Zealand and Australia, and to target high-growth opportunities in North America.”

The company reaffirmed its FY24 guidance, anticipating revenue growth between 6% and 9% ($161.5 million – $166.2 million). Additionally, EROAD aims to continue implementing its cost-out program, with a normalised EBIT range of $0 – $4.6 million, factoring in the 4G hardware upgrade program. The Company plans on spending up to $27.7 million on R&D, with targeted overall savings of $9.2 million for FY24.

EROAD has its sights set on growth at its home base in New Zealand, capitalising on potential government policies for eRUC (road user charges). The Company will also build on the momentum it has gained in Australia and launch an expanded product suite beyond existing customers, positioning itself for further success in the dynamic global market.