EROAD’s price hikes boost cash flow, expects cash flow positivity

After grappling with significant losses, transportation technology services company EROAD (ASX: ERD) appears to be bouncing back. It has revealed its FY24 results, ending March 2024, as it enters FY25 with high hopes.

EROAD achieved a notable improvement in free cash flow, turning positive at $1.3 million, a significant rebound from the negative $29.9 million recorded in FY23. This turnaround is attributed to a combination of unit growth, price increases, and stringent cost control measures.

EROAD’s revenue for FY24 rose to $182 million, up from $174.9 million reported in FY23 and $165.3 million in normalised revenue for the same period. This marks a 10.1% increase against the prior year’s normalised figures. 

The previous year’s normalised revenue accounts for a one-off acquisition accounting adjustment of $9.6 million related to the Coretex merger. The revenue growth was consistent across all markets, driven by a $24.1 million (15.7%) increase in Annualised Monthly Recurring Revenue, reaching $177.8 million in FY24 from $153.7 million in FY23, supported by favourable foreign exchange rates.

Chair Susan Paterson said, “The FY24 financial and operational results demonstrate the company is on the right track and reinforces the Board’s conviction in its strategic direction. The FY24 result met or exceeded all of the guidance metrics set at the start of the year, demonstrating the discipline and progress made as EROAD moves the business to consistently generating cash in the latter part of calendar year 2024.”

EROAD, headquartered in Auckland, New Zealand, provides integrated technology, tolling, and services to customers in New Zealand, Australia, and North America.

The Company reported an EBIT of $0.8 million for FY24, compared to $1.7 million in FY23. However, when normalised, EBIT increased to $4.4 million in FY24, up from a negative $4.5 million in FY23. These adjustments account for 4G hardware upgrade costs of $3.6 million in FY24, and integration costs of $3.4 million and one-off acquisition revenue of $9.6 million in FY23.

Co-CEOs Mark Heine and David Kenneson commented, “Last year, we made a commitment that we would return the focus of EROAD to our customers, remove non-essential costs, and put the foundations in place to take advantage of growth opportunities, including in our largest market in North America. This has provided us with a robust operating platform and the leverage to expand, diversify and grow in coming years. With a renewed focus on customer, in FY24 we have achieved global revenue of $182m – ahead of guidance – with top line growth being delivered in all 3 markets.”

Looking ahead to FY25, EROAD plans to expand within key markets, deepen engagement with existing customers, and pursue strategic partnerships to meet evolving market needs. It has set a revenue guidance of $190 million to $195 million and EBIT guidance of $5 million to $10 million, normalised for the 4G hardware upgrade program. The Company also anticipates remaining free cash flow positive in FY25.