FY23 Results are out.

While it looks okay at a glance, I have a few issues with it.

• 6-9% revenue guidance for FY24 is too slow. Has been a distinct shift from the 10-30% growth talk from just a couple of years back
• Cashflow neutral in FY25 and then positive in FY26. That's pretty far off for a company that burned $11m in 2H ($36m for the year) with about $27m of combined debt and cash headroom.
• 3G is being shutdown in NZ and Aus, and the company needs to replace 80k units in a bit over a year (or revert to 2G). Awful headwind.

I'm glass half empty on this one.

EROAD's response to the NZ Commerce Commission issues over the EROAD/Coretex merger can be found here: https://comcom.govt.nz/__data/assets/pdf_file/0024/269601/EROAD-Submission-on-the-Statement-of-Issues-1-November-2021.pdf

It's a good read just to get a deeper understanding of the telematics landscape in NZ

A quick recap - the Commerce Commission's key concern is the lessening of competition in eRUC systems in NZ

From an outside perspective, it appears that EROAD has a very strong rebuttal. It's key point is that eRUC should be not classified as its own market, as it's just one feature of the wider Telematics market. Customers choose a telematics solution based on a broad set of features, and eRUC is not a be-all and end-all.

In particular, points 16-19 highlight how they've lost RFPs and had customers churn to competitors without an eRUC feature. This highlights that "electronically-assisted RUC", which is a prevalent feature among the competition, is a viable substitute.

I'm not sure if the NZ Commerce Commission considers broader implications or whether they focus solely on immediate domestic issues. Blocking this merger would likely be against its long term interests in maintaining vibrant competition in New Zealand. The merger will establish a strong NZ headquartered company with scale and strength to compete on the global stage, and with significant skin-in-the-game to serve the local market. Consolidation will happen sooner to later, and if ERD and Coretex are picked off by larger competitors over time, the NZ market will likely become de-emphasised due to its small TAM.

A decision is due by 23 November. Link to the case can be found here: https://comcom.govt.nz/case-register/case-register-entries/eroad-limited-coretex-limited

Astute investors may have noticed that this quarter is the first time the company has started reporting unit sales of their new Clarity Dashcam product. This is an important product for a few reasons.

• This is a big product for North America. Insurance premiums are reduced when a vehicle includes a dashcam to monitor accidents. The investment payback is very high for potential customers.
• Management has previously hinted at a cost of around NZ$30-40/month for a North American customer. The addition of 1000 dashcam units, roughly translates to an ARR increase of NZ$400k. Nothing to be sneezed at.
• The value proposition for customers in Aus/NZ is not as strong. It's a more health and safety feature in these markets - example, to understand reasons for the harsh braking from a driver.
• Longer term, management sees the dashcam as a central component of their platform, not just an accessory. Vision when combined with increased compute on the device, algorithms and the existing GPS/accelerometer data - will open up the possibilities of processing and collecting a range of new data insights.