EROAD Limited (ERD) Earnings Call Transcript & Summary

Today, we're holding the Annual Shareholders Meeting in conjunction with the Special Shareholders' Meeting to discuss in relation to the Coretex acquisition. So I'd also like to welcome to the meeting, Selwyn Pellett, who's sitting here in the front row. Selwyn is the CEO and driving force behind Coretex. And we appreciate that you're all taking the time to join us here today. So with that said I'm pleased to be able to confirm that we have a quorum represented here today, and therefore, I'll declare the 2021 Annual Shareholders Meeting and the Special Shareholders Meetings, both open. Upfront on the table sitting to my left today is CEO and Board member, Steven Newman, to his left Tony Gibson, to his left Susan Paterson and to her CFO, Alex Ball, and online in Pennsylvania, we have [indiscernible]. Also in the room today is our Company's Secretary and Secretary to the Board; and General Counsel, Mark Heine. And our CIO sitting next to Mark sandwiched between Mark and Selwyn on the front row to [indiscernible]. So welcome, [indiscernible], this is your first EROAD and shareholders meeting. So the acquisition of Coretex is expected to complete around October this year. And on completion, Selwyn will become a member of the EROAD Board as an Executive Director. You'd also be an adviser to Steven during the period of the integration. Selwyn has worked in the technology sector in New Zealand and overseas for over 20 years and his particular expertise in telematics and network security. We're also joined here today by a number of the EROAD's senior team and staff, many of whom are shareholders. On arriving today, you will be greeted by Star from Computershare, Sheer Webster. The compute team are here to support you with the formal aspects of the meeting. Also in the room today are KPMG, our company's auditor and Chairman [indiscernible]. The agenda for today's meeting will start with a short overview from myself followed by a more fulsome address from Steven. Alex will present the financial statements. And then we'll move to the formal part of the meeting where we have 6 resolutions to consider 3 for the Annual Shareholders Meeting; and 3, in relation to the special shareholders' meeting. For those of you that are in the room today, I'll encourage you to stay on after we've concluded the formal part of the meeting to have a drink investor and asking those questions that you're too side as during the meeting. The last financial year was an interesting one. As you're well aware, the impacts of COVID affected the business community and the EROAD was an exempt from that. It brought some interesting challenging macroeconomic conditions across all of our markets, most particularly in North America, but also here in New Zealand and Australia. The wildfire civil unrest and political unrest in the United States sort of compounded the COVID impacts, and you would have seen that our growth in the United States in terms of units, was significantly less than we've experienced in previous years. But despite this business model and our customer value proposition sort of ensure that we entered the storm relatively well. Revenue increased year-on-year by 13% up now to $91.6 million and earnings before interest, tax, depreciation and amortization or EBITDA, as its referred to, grew by 13% to $30.7 million. One of the key measures that we keep an eye on for the business is our annualized monthly recurring revenue, which provides a forward view of the sustainable revenue generated by the business. This increased from $84 million to $88.4 million during the year. Contracted units increased by 8% over the year, reflecting the quality of our service and our product offering. In a year that brought with it a certain -- a large amount of uncertainty for our customers, our asset retention rates stayed around that 95% mark, 94.9%, which was very pleasing. And it reflects the -- an ARPU sort of remained stable at $58.3 million -- $58.3. So $58.30, it would have been a little bit higher if the exchange rate hasn't moved against us in an unfavorable way. So we are growing our SaaS services to customers. But it was good in a year complicated by the COVID to be able to maintain ARPU, keep a high retention rate and still show strong growth in both revenue and EBITDA. Throughout the last year, 300 EROAD staff, the management and the Board all stepped up and navigate us through a new reality, working differently, increased focus on managing our cost base. A large amount of working from home. Rather than retrench in the face of the COVID threat, we recognized that this is a time to be bold, and we're prepared to take advantage of growth opportunities. For EROAD, this mean increasing and accelerating investment in our platform and in productivity. The ASX listing and the simultaneous $53 million capital raise in September 2020 ensured that we had upfront funding to be able to begin this acceleration. We are ensuring that EROAD was stronger than ever and ready to grow and to grow quickly. And you'll see evidence of that with what we're going to present to you today around the acquisition of Coretex. Coretex is a perfect complement for EROAD. We are both aligned behind the same purpose, both the EROAD and Coretex aspire to create safer and more sustainable and more productive society. Steven and I sat down with Selwyn and members of his Board before Christmas to discuss this. We entered those conversations talking about a merger and the tone of a merger has prevailed throughout the conversations. And even now as we're preparing planning around integration, the mindset is emerge. So even though technically, this is an acquisition by EROAD of Coretex, the mindset and the way that we've approached this as a merger. We have for a long time talked about how EROAD customer solutions not only help reduce speed, ensure vehicle is a safe, improve driver behavior, but also help our customers achieve greater fuel efficiency. They reduce compliance costs and increased fleet productivity. Coretex's specialist products complement EROAD's solutions. For example, Coretex's refrigerated transport solutions, optimize compliance, safety and fuel consumption and help reduce waste gen emissions. The construction solutions help reduce construction and industrial wastes and the waste and recycling solutions help reduce contamination. We've always stated that an acquisition would be part of our growth strategy. We have been clear that we would see complementary and proven technology to augment our product range. To accelerate growth, any acquisition needs to be able to deliver increased capability, improved customer experiences and access through additional industries. In Coretex, we have found a highly complementary partner that allows us to satisfy all of these criteria. The acquisition of Coretex is truly transformational and it significantly accelerates the key our key growth measures and it propels us 2 years into the future. The strategic rationale is clear. Coretex brings with it a proven technology solution refrigerated transport construction, less than truckload haulage and waste and recycling. Coretex brings with it enterprise solutions, increasing the ability of EROAD win large enterprise customers. We gained Coretex's next-generation platform, which means we can accelerate our technology and our product road maps. We also had over 64,000 units in our key markets significant list our position in both North America and Australia. Now while there are some cost synergies, this merger is not about cost synergies. It's all about revenue synergies. And there are a huge amount of those. We see growth acceleration and revenue synergies in North America and Australia, and we also see a large amount of synergies around the technology as well. You will hear about these some more when Steven to through the acquisition in more detail. So with that, I'll pass it across to you, Steven.

Thank you, Graham. Welcome, everybody. I really enjoy this meeting in the year because we get to sort of share our report card, and we've definitely got some wonderful things to share with you today. So welcome, everybody, and welcome to our new shareholders that we now have in Australia as a result of the ASX listing. If we turn to the next slide. So this one here is a slide that is in every deck that we produce and shows the growth of the company sort of half year on half year. It's fair to say that COVID was a truck into the unknown. And we caught up at last year's ASX. We were very clear in terms of how we were going to face it. And as Graham said, we were going to do it boldly. And we have retained our staff. We got very busy and we've delivered some incredible new technology, which allows us to come out of this COVID period and a lot more competitive position. And in conjunction with the acquisition of Coretex really sets us up beautifully for the years to come. Next slide, please. So these are some of the products that we've been working on. I'll take a little bit of time to explain what each of them are. So over on the left-hand side, this is a dash cam. So it either faces the driver where it faces out of the window. The primary market to start with is North America, and it's about what happens in an accident. Most of the statistics, the statistics show that if there's accident between a car and a truck about 70% of the time, it's not the truck. And you would expect that because of professional drivers. But -- and variably the most and injured are the passengers and the light vehicle. So being able to show what happened really important and particularly for our customers. That's kind of where it starts, but it is a start. So cameras can also be used for health and safety, and that's really the business case from a New Zealand Australian perspective in terms of being able to provide additional coaching support for drivers. Really excited about cameras. Because the next step beyond that is using the camera as a sensor in terms of processing the images and giving additional information to help our customers. So we'll talk more about that in the future. Next product, the EROAD Go, and this is about providing a more enriched driver interface. So the driver can be told where to go, navigate there and whatever they're doing, if it's delivering a load or delivering a service next product is the log book. I think everyone knows about the paper log box that drivers have. This one here makes it really easy for them to comply with the rules and pretty well almost falls itself and so instead of it being an electronic paper a substitute for the log book, it actually helps the driver be compliant and that product has been well received in the New Zealand. And in less than 6 months, we have been able to deliver 6,500 drivers. So mostly go to 10,000 drivers using it during the course of this half -- next half of the year. This is a product that's an application. So you can use this as a driver without having EROAD in your vehicle and 500 drivers are using this just as an application. And that allows us, in conjunction with another application here in spec to start selling products to customers alongside competitors, which may have telematics on them. So this is a really new interesting way to get to win business from customers and it really supports the digital marketing approach. The next to the MyEROAD fleet maintenance in conjunction with inspect is really useful for making sure vehicles and assets fit for purpose. So at the beginning of the day, you have a pre vehicle inspection from the driver. Any defects, they can be recorded if their serious light breaks, then they'll be told not to use the vehicle. It's completely customized. So if you want to have specific things checked, you can have that program into that application. And then, of course, we've talked about EROAD Where, which is our sort of intro into the IoT side of things. So this is a product that costs around about $25 for the pizza hardware, and then we can track micro assets at around that $3 to $5 a month. So you can see quite a few products delivered in the 12 months, which is FY '21. And we're really pleased that we're in such a good position as markets start to open up. We go to the next slide. So we'll go through the markets quickly. So in New Zealand, which remains our home market and very important to us. We grew 9%, which was adding [ 7,500 ], which was below what we would have expected in an uncompacted world. But it was good growth in the market. And I think we did very well and achieving that. In addition to that, we also renewed 7,500 vehicles. So that's customers on a 36-month contracts, which were coming to the end of the contract. And I think that speaks an awful lot to the quality of our service and the importance to our customers that in the time of COVID, we really focused about. Are we going to get through this as a business making a 3-year commitment to EROAD. So we're very pleased with that. Our retention rates remained high at 95.8%. And we saw 11% growth in EBITDA. New Zealand is definitely a significant cash cow for driving the business forward. In America, as Graham mentioned, this was a really hard market for us last year. At one point, when I was talking to some of our staff virtually and Oregon, it's like what could go wrong every thing since have gone wrong. So at that point, they were right in Portland, there were fires that were out of control and then there was COVID. So we've seen a huge improvement in how that market is starting to come back. There's definitely the second wave or third way from the delta variance. But definitely, confidence is coming back into that market, and we were expecting a open a lot more than it currently is. Our retention rates the drop a bit. Some of that was smaller companies, unfortunately, going out of business. One of the things that we did manage to achieve with the re-signing of customers. We did increase our monthly ARPU [ $1 ] to $42.95 but with the unfavorable exchange rate moving even more than that, that didn't translate to an increase in New Zealand dollars. And we got the full annualized benefit of our North American customer base, which saw our EBITDA increase from $7.5 million to $10 million. And then on to Australia. So Australia was a pretty good year for us, adding 745 units to market that is a big focus for us in moving our marketing to Australia hiring a country manager and extending our people on the ground to support enterprise customers and increase further sales. So as a result of some of the good work that's been happening there and also in New Zealand, we want to compare [indiscernible] Ventia. So Ventia had been a customer in New Zealand, 600 vehicles for nearly 3 years. as a result of what we did well here. There was pilots done in Australia, and we got an order from the Australian sort of parent which was 1,500 units in New Zealand and 2,500 in Australia. So that was really one of the things we have been talking about in terms of the 300 Trans-Tasman customers that we have their operations in New Zealand being able to step across the Tasman and win their business in Australia. So we're really pleased with the preparation that happened in FY '21 in Australia, and we're definitely well placed going forward. I'm going to hand over to Alex to go through the financials.

Thank you, Steven. Good afternoon, everybody. As a group revenue, I'm going to talk through the key metrics, financial metrics for the financial year '21 results and then I'll move talk briefly about the trading update that we provided for the first quarter of this financial year to 30th of June 2021 back to the discussions. So group revenue increased 13%, as we've said, $91.2 million to $91.6 million, reflecting the growth that Steven has just talked about in both those key markets of New Zealand and North America. New Zealand revenue increased by 12%, as we said, reflecting an additional 7,500 contracted units through both the continuing expansion into the customer fleets that we already have as well as winning new customers. And in North America, revenue increased $4.8 million reflecting the additional just over 1,400 units that we contracted during that financial year. Australian revenue increased slightly in a group sense from $0.7 million to $1.4 million, but obviously, that was a doubling of revenue from just the Australian business. Our operating expenditure increased by -- [ 113% ] by [ $6.8 ] million in terms of dollars, in line with the revenue, as I say, reflecting the acceleration of our R&D operating expenditure as well as some ongoing spend in company-wide initiatives, which is intended to deliver further long-term improvements in operating leverage. And so as a result, our EBITDA grew $3.6 million or 13% to $30.7 million. And finally, the profit before tax increased from $1.4 million in the prior year to $1.9 million. And this is really just reflecting that EBITDA growth offset partially by depreciation and amortization charges. We turn to the next slide and talk about some of our key metrics, which we've touched on briefly. As we've said, one of the main focuses for us in this financial year that's just gone as to weather the storm, obviously, we went through what was going on in our markets. internationally and domestically and not only come out of the year formal competitive but also retain all of the underlying metrics that we've historically enjoyed and the strength of those particularly focusing around strong monthly recurring revenue metrics and high retention rates, which really drive the enterprise value of this organization. And we believe it's done a very good job at achieving that. Our average revenue per connected unit per month of ARPU was essentially the same at $58.30 and as Steven has indicated earlier, that reflected underlying good growth within the metric in North America by at least that dollar. But unfortunately, after the exchange bank movement from U.S. dollars into New Zealand dollars that actually reversed that growth. If we move on to at a retention rate, as Graham mentioned, that's maintained itself at the 95% level. We operate 36-month customer contracts. So during the course of the year, we re-signed our new 36-month service contracts 640 customers, which represents about 14,000 connected units. And so when you look at that, there's a number of vehicles per customer, it works actually about 22 vehicles per fleet. So that's a lot of smaller customers continuing to sign up for our service, really demonstrating the the service to them as customers. And particularly in that small and medium-sized customer segment, which is a very important segment for us in each of our key markets. Annualized monthly recurring revenue, or AMRR, as we've talked about before, grew from $84 million at a group level to $88.4 million. And that figure would have been higher. But again, there was a significant impact on the foreign exchange rate with the New Zealand dollar strengthening significantly during the year against the U.S. dollar. One of the -- move to the next slide. If we move on to the quarterly operating update for this new financial year of FY '22. At the same time, we announced the acquisition of Coretex, which will be discussed further in the meeting. We also released our quarterly operating update for the first quarter in the 3 months ended 30th June 2021. EROAD had a good quarter and has sold 4,152 contracted units during the quarter, reflecting accelerating quarterly growth across all markets. unit growth in North America remains slower. However, there are our size of the economy is opening up, as we've said. We currently have 2 customer enterprise customer prospects in pilot for Ehubo delivered services as well as a solid mix of mid-market pilots as well. And we've got further pilots for Clarity Dashcam product sales into new and existing customers and back of the room today, we have a demonstration of the Clarity Dashcam product, which I do encourage you to take some time after the meeting if you have to look at that. EROAD continues to make good progress. We're selling additional services. So these are over and above Ehubo contracted services. So EROAD log book sales, we added 425 drive subscriptions in the quarter. We added 627 inspect subscriptions in the quarter and 1,580 tags, EROAD wear tags during that same 3-month period. On the 2nd of June, we announced that we've entered into a strategic partnership with Philips Connect, which is a leader -- a global leader in expandable and durable telematics solutions specifically focused on trailer and asset operations as well as safety and health. And since entering into the partnership, EROAD sold 322 of those Philips Connect solutions in that period between the 2nd of June and the 30th of June. So just to round out, we provided guidance in November last year at the time of our half year presentation for how we thought the -- this financial year of 31st of March 2022 was going to grow. And since then, our guidance has remained unchanged. We expect percentage revenue growth in this financial year to strengthen from what was off for the last financial year, which was 13%, but not be at the same level as that pre-COVID year FY '20, which was 32% growth. We do continue to expect that our R&D spend will be between 24% and 27% of revenue during FY '22 as we continue that acceleration for future [ Q2 ] growth. And given the expected one-off integration costs from the acquisition of Coretex, we do expect stand-alone EBITDA margin now to be between 28% and 31%. If you excluded these integration costs, EBITDA margin would be consistent with that FY '21, which is the [indiscernible]. So thank you. I'll hand you back to Steven for the rest of the presentation.

Thanks, Alex. Lean about the acquisition that we're proposing. So on this slide here, you see where we are at the end of FY '21. And if we had been together and and the acquisition complete for the same period, you get to see what you wrote and Coretex together looks like I refer to this acquisition is absolutely transformational for the company. And you can see that reflected in the metrics, revenue going from $91.6 million to $138.2 million, EBITDA increasing 50% to $46 million and significant increase in the ongoing recurring revenues from $88.4 million to $132 million. When we look at it in terms of the units, and that's really one of the ways that telematics companies kind of report their size and importance. So we've talked about the [ 250,000 ] challenge before and what we aspire to become. This acquisition really accelerates us at least 2 years in achieving that. So we're going from [ 126,000 ] to [ 190,000 ]. By the time we complete this post com com commission clearance, which is September, October, that number will be close to [ 200,000 ]. The ARPU between the 2 businesses are very similar. The composition of that is quite different. I'll talk to that in a minute. A large part of Coretex as connections and North America trailers and many of those got parked up during COVID that reflected in the reduction in retention. We're confident that a number of those will come back as that market opens up again. Next slide, please. So at the beginning of this, I talked about the real importance of the New Zealand market in terms of funding growth with this transaction, we get a lot more diversity in our business and a bit more spread. So you can see we go from 70% New Zealand to 51% and North America goes from 28% to 43%. So that's a real balancing of revenues for the business. Then you see the Australian market goes from 2% to 6%. When we also look at enterprise mix, because of the services of what both companies do, we're destined to have more enterprise customers than small to medium type of customers. That doesn't mean we're turning our back on our SMB customers, not at all. They will get to enjoy the quality of an enterprise-grade solution. There will be more than they will ever need. So very important to us, but the mix tends to change. So from 40% enterprise we get to 53%. So I think as we progress over time, then it will get to more like [ 65 35 ]. And then the next slide talks about the strategic vehicles or the strategic market segments that we're in. So you can see by just looking at the pie chart, these more sections to the pie. We're very focused in that sort of construction and civil engineering space, particularly in New Zealand. That remains a very important segment for the merged company, but that drops down to 23% and that doesn't mean it's not a high-growth segment for us. It absolutely is but we get revenue coming from new segments from Coretex such as the refrigerated transportation waste and the construction but which they do, which is really makes concrete. Next slide, please. A bit more about this wonderful company, Coretex. So you've got the metrics over there on the side, just under 65,000 vehicles connected. Their entry into North America was around refrigerated transport trailers. So you can see in the middle here, when we break down the types of connections into [indiscernible], which is traitor trailers a high percentage of trailers. That's how they entered the U.S. market and then having got established, then got more into the trucks, particularly in the construction side of things. So I look at the 65% trailers, that's potentially an opportunity to get into the track all of those trailers are being owned by trucks. So that's potentially a good opportunity for us. When you look at where the unit side 74% is in North America, 14% in New Zealand and 12% in the Australia. This acquisition has been really focused on growth in North America and Australia. There is a small impact from a New Zealand perspective, but that really hasn't been the focus. When we look at other things on here, Coretex's entry into America was initially through their dealer network. So they use the carrier dealer network to sell refrigerated solutions. And then further on from that, they started going direct. And then they also have some good OEM relationships with telematics, trailer manufacturers. So there's some new channels for us to go to market as well. Next slide. So if you look in the information packs that were provided on ASX and NZX around this transaction, you'll get some case studies and a bit more explanation about market size, et cetera, for these 3 specialists verticles refrigerated transport, construction, waste and recycling. One that I'll talk a little bit more about is the construction side of things, and this is really to explain why Coretex and the rate is so complementary because they're so different. So for EROAD, our claim to fame has really been around regulatory telematics. So when you think about that, we talk talking about health and safety, we're talking about road user challenge and we're talking about driver [indiscernible]. And that applies to all transportation vehicles. Coretex has to do that for some of their customers, but their primary DNA is really around helping the customers get work done. So in this area of construction and particularly making concrete, there's a whole lot of things you need to be really good at one of those is you want to make sure that, that concrete has made the best it can. When you talk about making concrete, you've got your dry ingredients and then you add water to if. If you add too much water, then the strength and integrity of the concrete is compromised if you don't mix it up enough likewise. So they have sensors on the drum of the rotating ground of the concrete trucks, which can count the number of solutions. They have made senses to measure the amount of water that's in there, very perishable goods. So as soon as you make that water in that needs to come out of that concrete barrel and to a hole, hopefully, under a customer wants, but it can't stay in that truck for more than 3 hours. So when you think about that and you think about a large industrial concrete sort of construction site, it's typically continuous pause. So it's not about getting on track there. It's about getting a whole lot of convoy of trucks there typically sort of 15 minutes apart, so you can get your continuous pool happening when the barrel rolls, it's actually impacting the maneuverability of the trucks. So if you drive and correctly the or fall on its side. So there's a lot of specialist things that Coretex stayed for this particular vehicle. Based on the product and the effort that we've put in the last 3 years to really understand that, reduce the installation times and the quality of the solution means they've got something that's incredibly competitive. And the analysis that we did join DD, we can see that they've got a very clear path to get to a #2 position in the North American market. So these are the 3 verticals I can talk about these all day long and so you can say, but if there is so many exciting additional things that's happening when we talk about refrigerated transport one of the things that happened in COVID was a lot of people bought their groceries online. So being able to deliver food that you can say how it was locked after all the way through to/a customer's home super important. So that's a growing market. So there's so many things that once we can get together that we can expand out what we could go after. And many of the customers that we will be able to attract will be global in nature. So in that construction side, there is one concrete customer that we will have in all 3 markets that we operate in. So yes, there's a lot of exciting leverage points off us and also back into the civil engineering side. So when we look at what we had said in terms of why our strategic initiatives for this year were, and that wasn't too long ago. We had set ourselves these tasks in North America during FY '22. We wanted to get to 50,000 enacted vehicles. This acquisition gets us as at the 31st of March. FY '21 gets us to about 86,000. So over this 18-month period, we'll be north of [ 100,000 ]. When we start looking the technology that Coretex brings it accelerates what we were planning to do in terms of introducing new technology into the U.S. So that significantly improves our product market, which makes us far more competitive. Coretex has been in North America since 2007. And has built up a lot of expertise, particularly dealing with the enterprise. So there's good opportunities for us to go and win together. Next slide, please. So in Australia, when we joined the 2 companies together. We achieved the first objective by having 12,000 connected vehicles in Australia. And then on top of that, you have the rollout of being here. In terms of the construction vertical, that's very close to civil engineering and there are target customers, which operate in both areas. The team that and capability we bought into Australia can immediately provide additional support for existing customers as well as accelerate our growth in that market by selling the Coretex products here. So I think you can see what the benefit of the acquisition is in these 2 markets. Next slide, please. So we've come all the way up to the top, which is what's happening globally in telematics. We've previously talked about high annual cumulative growth rates. COVID actually brought that market back about 8% from the research that we recently purchased. In terms of the go forward, the next 5 years looks like there is a CAGR, which is around. For us as a company, it's about scaling up and maximizing that high growth rate because you can't grow at 19% every year at some point, you do saturate the market. So this acquisition greatly accelerates our ability to get the biggest share of what is essentially a land grab in the markets that we're operating in. Next slide. So with that, I'll hand back to Graham.

Thank you, Steven. Yes, this is an opportunity for general questions. So there will be an opportunity when we address the more formal part of the media have the resolutions which manage into the resolutions. But now any questions online or from the floor relating to anything that's been discussed or [Audio Gap]

Congratulations. I just had a quick lot online as well on Coretex. So I didn't know much about it. But apparently, they're using company and operating in similar countries as you are looks to be very good from what I can see, what you've shown me. Just in Coretex's logic to be taken over. Who was the bigger company by capitalization?

EROAD by factor of about 2.3x, 2.4x.

Okay. Now [ 96 million ] to buy shares. Do you see an impact on the sales of shares?

Yes. So 16 million shares will be offered as partial consideration. And there is [ century ] shareholders of Coretex will be able to sell those in 3 tranches staged over 6, 12 and 18 months. So 1/3 of them coming onto the market at each stage across that time frame.

And you've talked about 60-odd million units, 64 million units that Coretex has sold in the 3 markets, the units. What was the attraction to them? Do they like some of your products and wanted to move some of your products into their customer base?

Yes. So 64,000 units as at the 31st of March will go backwards, both of us are growing. So that number has increased in Coretex not only had 64,000 units, but they've got a pretty healthy pipeline in front of them. So Coretex has a high proportion of its sales made to enterprise customers and typical enterprise customer is going to be somewhere between 9 and 2 years -- 9 months and 2 years. in the pipeline as you work through their procurement processes. So they have customers in that pipeline, which will invested money in getting them to that stage that reads to pop out in the next 12 to 18 months. So the 64,000 sort of the backward-looking number. But if you look forward, it's a healthier number in there. Yes, there is a potential for us to be putting our technologies and Steven sort of gave you the example. 2/3 of the fleet are traders, 1/3 the tractor unit. And so there's those tractor units that we have the opportunity to put our technologies into as well. It takes us into different verticals we jointly stronger around construction takes us into the whole food safety or refrigeration vertical where we have the opportunity to sell our compliance products. and they have their products which are more related around managing the food safety through that process.

Michael [indiscernible]. This is probably a list of season. But do you store your data in the cloud? And what plans that you got to deal with [indiscernible] hedging?

We are cloud-based. And definitely, cyber security is very important to us. It is an internal capability that we do have. In terms of the sort of things we have in place, things are very petitioned and locked down in terms of access to our systems. We have software that is running on our systems on every machine that we have to make sure that there is nothing spurious coming in. And if that happens, then we will lock down to a single computer. So a lot more of the things that we do to predict our systems. Of course, we don't want to publicly share for obvious reasons. But there's a focus A company like ours becomes quite interesting to look at. So we do need to make sure that while we have the appropriate securities in there. Certainly having enterprise accounts that some language they very much expect we have well under control. Does that answer your question? I think most companies are getting cyber attacks all the time. So it is a case of what mechanism you put. Some of them are just [indiscernible]. But for a company, just to say they haven't had to go at would be not really genuine.

I'm Bruce [indiscernible] Shareholders Association. Questions around direct and also liability insurance. You got the habit. What are the complexities having operations in Australia, in the States on here. And we have a few of what cost the company where our shareholders for that insurance fees?

Good question, Bruce, and thanks for the up that you're going to ask that question before the meeting. in time to think of that. The -- so the most recent if you look back across the last few years, typically, year-on-year increases in the rates of insurance from the small number of reinsurers that offered D&O insurance has been about 30% per annum. So it's -- you're close to hyperinflation. The big incremental risk we've had on the, yes, having an operation in the U.S. creates risk in the beginning, listed on the Australian Stock Exchange. Also add it to the premium because the more likely prevalence of the class actions by shareholders in Australia. Last thing we want to activist shareholders drivers. So that's sort of -- I don't have the number exactly in my mind, but the order of magnitude is it's about $800,000 a year in premium for D&O insurance, which is this year, about 30% higher than it was last year.

My name is Peter Mooseberger. I'm guest investor and interested to hear what you have done today. I'm interested in what the situation is in the EU, in Britain, china and South America, should you being able to research similar companies in those areas of [indiscernible]?

So as a company, we're really focused on the 3 markets of New Zealand, Australia and the U.S. We have people in the business, which look at what's happening globally. The hurdle rate for us to actually consider something a new market would have to be quite considerable for us to look anywhere else. But if there was something that highly leveraged all the R&D assets that we have, and we had potentially a good partner in those markets that would do all the stuff that needs to be done on the ground around the sales acquisition and support, we might look at it. But there is so much opportunity in the markets that we're currently on. So we've just really focused on those. But in terms of the global trends and the digitalization of transportation companies and the need for telematics solutions there that is a pretty global need. Does that answer your question?

Do you think you could be at for takeover?

I think are public company is the potential target. I mean, we really don't. I think potentially that becomes of interestingly this transaction and our U.S. market presence potentially makes us more interesting than we were before, but certainly we're very focused on running our own plan at the moment. But if there was an offer to be made, of course, the Board would add responsibly and how it would consider that. But certainly, that's not our primary plan is to be attractive and sold off to somewhere else. There's an awful lot of value that we can bring to this organization, executing well. Any other questions? What about online?

Well, thank you, ladies and gentlemen. There being no further questions. I'll now move to the formal part of the meeting and the resolutions. So if you don't have a pin or a open paper and you'd like one, and you're in the room, please raise your hand and one of the Computershare team will provide one to you. At this time, I can ask if there are any questions regarding the financial statements and the auditor's report. So at this stage in the meeting bearing in mind the nature of the next resolution. I'll pass the tier across to Tony Gibson, who has your appointment on remuneration committee. And let him propose the resolution.

Thank you, Graham, and on yes. Thank you. Good afternoon, shareholders. So it's my pleasure to put to you the first resolution of the day, which is that Graham Stuart who was eligible for election be elected as a director of the company. The Board recommends Graham to you as a Director of the EROAD Limited and unanimously supports his reelection. I now invite Graham to address the meeting.

Thank you, Tony. I've been a member of the EROAD Board for 3.5 years. I was first appointed in January 2018, and have been in the chair for just over 2.5 years. I'm proud of what the company has achieved during this time and the work that we as a Board have done. We're in the process now of revitalizing the board, but both Susan and Barry have been joined in the last 2 years or so. And in that same time, we've had the retirement of 3 directors. At not being for COVID, we would most likely at another appointment by now. We were looking to appoint a second U.S. Resident Director. And unfortunately, with the end of venture our board being a little traditional in our view, we sort of want to be able to see that people in the flesh. So we decided not to present it with an appointment of an online or virtual space. This Board is very engaged with the business, and we worked diligently to provide EROAD governance. We challenged Steve and the management team in a constructive way to drive performance, and we also engage through positive Steven and the management team to set the strategy for the business. I feel that the stage is now set for EROAD to drive to a new level of growth and performance. And I feel that we have the skills and the expertise around the Board table to contribute towards achieving this. I'm excited at the prospects of being able to play a part in that, and hopefully I'll win you support to do that. Thank you.

Thank you, Graham. Is there any discussion on this resolution both from the floor and online? There appears to be no further discussion. I now put to the vote the ordinary resolution at Graham Stuart, who is eligible for election, be elected as a director of the company. So please take a moment to mark your voting form in relation to Resolution 1. Thank you. And I'll now hand the meeting back to you, Graham.

Thank you, Tony. Well, a great job we did of curing that piece in the name. Now moving to Resolution 2, an increase in the Non-Executive Director remuneration pool. It's proposed that the total amount of the fee pool be increased from $500,000 to $850,000, which represents an increase of $350,000 or 70%. This is to allow sufficient funds to increase the number of nonexecutive directors on the Board. The Board currently comprises 5 directors, of whom 4 are nonexecutive that's proposed that in the next 12 to 18 months, the number of nonexecutive directors has increased to 5 or 6 as we continue to build the expertise of the Board and to allow ongoing rotation of nonexecutive directors. This also proposed that fees for the nonexecutive directors and the chairs the Chair of the Board and the Remuneration Talent and Nomination Committee be increased. In accordance with Listing Rules 6.3.1, no non-executive director or any of their associated persons as defined under the NZX listing rules can vote in favor of this resolution. And this casting votes under an express proxy of a person who is not a call [indiscernible] voting. Is there any discussion of this resolution? [Audio Gap]