EROAD Limited (ERD) Earnings Call Transcript & Summary

Welcome to the 2022 Annual Shareholders Meeting of EROAD Limited. My name is Graham Stuart. I'm the Chair of EROAD, and I'll be chairing your meeting today. Just by way of advice, Sara Gifford is traveling internationally today. So my colleagues on the stage are wearing masks when they're sitting on the stage, but we will be taking them off when we were at the [indiscernible]. And the notice of the annual meeting has been circulated to all shareholders. This sets the scope of what we are scheduled to discuss today and it also includes details of the 5 resolutions that we are due to consider. I'm pleased to confirm that there is a quorum present, and therefore, I declare the 2022 Annual Shareholders Meeting of EROAD open, and voting is now also open. As you're aware, this is a hybrid meeting. We have shareholders in attendance here in Auckland today and also through the Computershare online platform, which I'm sure many of you have become familiar with over the last few years. Please note why you can now submit questions through the online platform. I will not address them until the relevant time in the meeting. For online attendees, your questions will be collected and we will address them at the conclusion of the presentations by reading them through the meeting and then providing answers. Where we received several questions that are similar in nature, we will summarize these into one question. Now the order for today's meeting is as follows. We will start with me giving my address as chair. Following my address, I'll introduce Mark Heine to give you the CEO address. We will then invite questions on any matter relating to EROAD's annual report or to the presentations from Mark and myself. When we're concluded with the questions related to that, we will move to the formal business. There are 5 formal resolutions before the meeting today as set out in the notice of meeting. After voting is complete, we'll have an opportunity for general business, and I will invite you to ask any further questions you may have. We will then conclude the meeting. Those of you here at Eden Park with us today, I encourage you to stay after the meeting and have some light refreshments with us and also take advantage of the live examples of EROAD's products that are in the room next door. Now we have some formal meeting to transact at this business today. And as Chair, I will oversee the process to do this in a proper and orderly manner. But really, today, this is your meeting, and the opportunity for you to put to the Board and to management any questions that you have and to raise with us any concerns. Please take advantage of this opportunity. The Annual Shareholders' Meeting is one of the main vehicles for shareholders to exercise their rights and to express their satisfaction or otherwise with the company's actions. My role as Chairman of this meeting is to facilitate that process on your behalf. I will now introduce you to those that are attending the meeting today. I'll introduce you to the Board. With us today, Selwyn Pellett, Sara Gifford, Susan Paterson and Tony Gibson; Barry Einsig, has traveled to New Zealand to attend Board meetings in the last couple of days and was intended to be with us today, hello Barry, but he's now joining us remotely from his isolation hotel room. This is the world we're living in today. I would also like to welcome EROAD's new CEO, Mark Heine. Sitting on the stadium next to Mark today is Margaret Warrington, our acting CFO. Also in attendance are Aaron Woolsey, auditor from KPMG; and Rachel Dunne, our legal adviser from Chapman Tripp. And a large number of -- or not large number, there are a number of EROAD's staff and management, many of them are also shareholders. It's a privilege for me to deliver the address as Chairman of your Board. Your board and management have worked diligently as your agents through this past year and what an eventful year it has been. EROAD is a purpose led company that aspires to create safer and more sustainable roads. Sustainability is the core to our business, and we're at the beginning of a journey towards our Net Zero strategy. We are focusing our efforts not only on reducing our emissions, but also on developing solutions that will support our customers and their efforts to reduce their emissions. I encourage you to read our inaugural sustainability report. This demonstrates the work that we are doing in this space and it shows EROAD's commitment to continued improvement and advancement. Over the past year, EROAD's share price has fallen by 60% against the benchmark of technology stocks that have fallen generally around 30%. Notwithstanding the challenging macro environment, it's very clear that the company has not met shareholder expectations. Your Board has a sharp focus on improving the company's performance. While our New Zealand and Australian businesses had a good year, EROAD's performance in North America prior to the merger with Coretex fell well short of our expectations, as did some aspects of our corporate operations. Your Board has embarked on a course of positive changes to ensure that EROAD will perform more consistently and deliver on its growth strategies. The appointment of Mark Heine, as Chief Executive Officer, is a major step in this regard. Mark has a deep understanding of the business and the Board is confident that he's the right person with the right capabilities to lead EROAD through this next phase of growth. But more on that shortly. The Board has also commenced the process to appoint a new Chief Financial Officer. The merger with Coretex in the second half of the year triples the size of our American operations. But more importantly, from the merger, we were able to fill critical technology gaps with the CoreHub hardware and the Core360 SaaS platform. In addition, we acquired critical capabilities for winning and retaining large enterprises. Despite the challenges of the past year, there have been some notable achievements. Our New Zealand business delivered yet another year of solid growth, not only adding new customers, but also delivering greater value from the customers we have. We never take customer retention for granted, and it was pleasing that several of our key customers in New Zealand renewed their relationships with EROAD over the past year. In April last year, we announced that essential services supply Ventia had become a customer to both to EROAD in both New Zealand and in Australia. During the year, our Australian business passed through the important milestone of breaking even at the EBITDA level. In June, we announced the partnership with Phillips Connect, and in August, we announced the partnership with Seeing Machines. In October, we launched EROAD Clarity Solo Dashcam. And in March this year, we announced the refinancing of our debt facilities. But by far, the most significant activity of the year was the merger with Coretex. The merger was announced in July and followed by a successful equity placement of $64.4 million with our large and institutional shareholders. And our share purchase plan of $16.1 million issued to our retail shareholders. Although we've got off to a late start, the merger occurred at a time when we experienced unprecedented supply chain and labor market disruptions. But the integration with the Coretex is now back on track and is progressing well. The Coretex merger is a game changer for EROAD. It represents a doubling down on our North American growth strategy, and it's critical that we follow this up by sharpening our focus on this market and by capitalizing on the value that we have acquired. Your Board is coming to the end of a 3-year phase of renewal. In December, Selwyn Pellett joined the Board as an Executive Director to support EROAD for 12 months through its integration with Coretex. Selwyn makes a valuable contribution to the Board and with Steven Newman's resignation from the Board and subject to Selwyn being elected by shareholders today, we will seek to extend this term beyond the ) original 12 months. At the end of March this year, the Board spent a week visiting EROAD's North American operations. During that visit, we were able to welcome Sara Gifford to the Board. Sara is our second North American Resident Director, and she is well versed in logistics, transportation, product implementation and sales. The Board is conscious of a need to balance institutional knowledge and continuity with fresh ideas and new perspectives. And we will continue to ensure that we have the right mix of skills and experience around the table to govern this business and to serve shareholders' interest. It is often said that the appointment of the CEO is the most consequential decision that a Board can make. As such, this has been a key focus for your Board during this past year. The Board worked hard to ensure that the process was rigorous and robust. We commenced the formal search process in late 2021 with the appointment of international recruitment firm -- [indiscernible] and partners. The search was well progressed by the time Steven Newman's earlier-than-expected resignation in April. When Steven announced his resignation, the Board had no hesitation in appointing Mark Heine as the acting Chief Executive Officer. It's fair to say, with Steven resigning from both the CEO and the Board positions, the Board felt the need to reexamine the skill set required of an incoming CEO. At the same time, the Board had been seeing firsthand the impact that Mark's leadership was having on the business. We were impressed by Mark's leadership and commercial skills. He has breathed fresh air into EROAD. In late May, the Board made the decision to invite Mark to join the CEO search process. Mark took time to consider this invitation, and then after accepting, he completed a formal assessment and interview process in the same manner as external candidates have been subjected to. Following that process, the Board selected Mark ahead of the other candidates for this role. I would like to take this opportunity to acknowledge Steven and a very significant contribution that he has made to EROAD. Looking ahead to financial year '23, we expect growth momentum to build through the year with the successful conversion of our North American enterprise pipeline opportunities and continuing growth in New Zealand and Australia. The enterprise pipeline remains robust with a total of 18 enterprise clients in the pilot stage across all of our markets. These represent almost 30,700 in-cabin trailer units. The Board has provided revenue guidance for financial year '23 in the range of $150 million to $170 million. The width that this range reflects the uncertain timing of achieving larger enterprise sales. We have forecast group revenue of at least $250 million by the 2025 fiscal year, and that we believe with the expanded product range, we have the capabilities to achieve this. Quite simply, financial year '23 is a year of delivery. The goals for this year are straightforward, and the Board has 6 priorities. First, we must complete the integration of Coretex's business and maximize the synergies from this merger. On the back of this integration, we must build momentum in our North American market without taking a backward step in New Zealand and Australia. Naturally, the customers that we already have are the most valuable. Retaining NIM is not something we can afford to be complacent about. We have several large customers who will be renewing their contracts with EROAD this year and retaining their business is a key priority. We're conscious that EROAD is undergoing significant changes on many fronts, and it's vitally important that we have retained the engagement and the passion of our talented staff. EROAD 2.0 is an initiative that reviews every aspect of our employee value proposition to ensure that we capitalize on the best parts of EROAD and the best parts of Coretex, and we build a business that is fit for purpose for what's in front of us. The Board and management are acutely conscious that top line growth without returning improved profits is not sustainable or conducive to building shareholder value. In fiscal year '23, we will complete building the platform and the business model that will deliver improved EBIT margins and will sharpen -- and we will also sharpen our focus on the management of costs. While the focus is strongly on delivery of our short- and medium-term priorities, we also need to have an eye on what lies beyond this. And as the year progresses, we'll be working with Mark and his team to refresh EROAD's longer-term strategy. Now let me hand you across to Mark for his presentation.

Thank you, Graham. Good afternoon, everyone. I met many of you before at previous shareholder meetings, I'm honored to be here, speaking, as then here today as EROAD's, Chief Executive Officer. My 3 months as acting CEO has reinforced my view that EROAD is extremely well positioned with the merger of Coretex providing an excellent platform for our growth. I'm delighted I accepted the role as CEO and to lead EROAD at a pivotal point in its history. Let me start by first thanking Steven and the EROAD team for their support for me transitioning into this role. I know the EROAD team and the strategy well, which has made my transition into this role a seamless one. Our people are crucial to EROAD success. So I'm excited to be working with such a talented and motivated bunch of people. Together, I firmly believe that we can deliver on our strategy and drive this business forward. Before I discuss the year that was, and the priorities of FY '23, just re-pausing for a moment to reflect on why EROAD remains a compelling investment proposition. We are passionate about and dedicated to creating safer and more sustainable roads. We provide regulatory and specialized telematic services together and bundle typically with hardware. We describe ourselves as a hardware-enabled SaaS business. We have over 8,000 customers in New Zealand, Australia and North America, who between them have over 200,000 connected vehicles. We have an attractive business model. We are growing recurring revenue. We've grown for both new customers and, of course, increasing revenue as a result of products and services being sold to our existing customers. We maintain over 90% of our customers on contractual renewals, and with this model, we expect to grow to at least $250 million by the end of March of 2025. EROAD employs talented and capable teams in New Zealand, Australia and North America. Last year, we invested significantly in building capability to research development and in the case of inventory to ensure the continuity of service in light of the global supply chain disruption we're seeing. We also merged with Coretex in FY '22. And this leaves us well positioned to be a leading player in Australia, New Zealand and North American telematics markets. With our hardware and software solutions, EROAD always has been and continues to solve our customer problems. Our customers have a range of problems that they seek to solve. Productivity is getting more difficult to improve and our customers are struggling to find drivers and vehicles. This means they need to utilize the assets more and more effectively and efficiently for longer periods of time. EROAD can provide customers with deep insight on how to maximize the use of the assets. We still help our customers meet their regulatory compliance obligations. As the customers are driving more and they need to use the assets further, and it's really important to operate safely within the work time roles and comply with the road user charging obligations. With more vehicles on the road, road safety gets greater attention that has led us to develop camera solutions and other products, which enable our customers to get insight on their drivers' activity. These insights help our customers monitor driver behavior and can be used to train drivers in order to improve the safety outcomes on the road. With the merger of Coretex, we've also unlocked the ability to solve customer problems around food safety. Refrigerated products as well as other products which need cooling such as vaccines require constant temperature monitoring. Our products enable customers to monitor and record how these products are being transported and their core temperatures to ensure there's assurance to run the safety of those products when they reach their destinations. Proof of service has become utmost important to our customers as well. Our customers in the civil maintenance and construction and their customers want to have a verifiable record of service, proven delivery of service and the timing of the delivery. Our customers want to certify the quality of products that they're delivering with our solutions. Our technology is helping solve customer problems across the 4 verticals that we operate in. We continue to invest in these verticals because we believe these are key areas of growth going forward to enable us to reach our growth targets. So as we continue to grow, we'll continue to invest in these verticals by providing solutions for them. If you look more deeply into our verticals, there are 4 main ones that we are targeting. EROAD has historically been strong in the In Cab professional transportation vertical. EROAD's regulatory telematic are confluent, the more advanced technology state that Coretex brings to the table. So we're quite excited about getting deeper and broader into professional trucking. In terms of refrigeration transportation, we see a real opportunity for growth in North America, and we are investing more here. The CoreHub solution unlocks and enables that market as well as Core Temp monitoring product that we have launched. EROAD has historically been strong in construction, particularly in New Zealand. Teaming up with Coretex has helped us get stronger in North American market with a range of products we now offer up there, including the introduction of the waste and recycling product suite that we have too. With the merger of Coretex, we obtained access to the CoreHub in next generation telematics product. This is a graphic that shows our CoreHub interacts with the various solutions that we have. It acts as the heart of the [ cave ]. The CoreHub is a next-generation IoT device with Edge computing power, which enables more to be done in the vehicle and quicker visualization and realization of information to the driver. Our driver uses the driver device screen to manage the regulatory obligation. With us around work time with our electronic locking solution or by ensuring that the vehicle is fit for purpose with a driver vehicle inspection report. The device also helps drivers understand routing and navigation to ensure that they're efficient and effective during the workday. That IoT hub [indiscernible] solutions, whether it's our entry-level CoreVision or the more advanced Clarity Dashcam, which help our customers better understand the risk to the drivers on the road. We've also added IoT tags and sensors to the product set. And that enables us to reach into different verticals with the CoreHub. For example, in the civil construction vertical, we can help customers understand the quality of concrete that's being poured by helping them understand the rotations that are happening in the vehicle. In the refrigeration vertical, our sensors can monitor core temperatures in vehicles to ensure the maintenance of appropriate temperatures for goods. All of that can be visualized at the home base via the Core 360 software platform. The Coretex merger unlocks a huge range of solutions for our customers, which deal with customer problems that we've talked about earlier. Now let's look at the financial performance last year in FY '22 across the range of markets we operate in. New Zealand had an exceptional year. Contracted units grew by 22%. EBITDA alone grew organically to be over 100,000 units. 70% of this growth was generated from our current customer segment adding additional products and services, such as Clarity Dashcam, the logbook or the BookIt products. 30% of the growth was from new customers. This demonstrates the continued opportunities we see in New Zealand as we evolve with our customers. When it comes to asset retention, we're still maintaining strong asset retention rates. Indeed, we increased them over the course of the year. That includes our continued partnership with Downer in New Zealand, which we're particularly happy about, as well as other enterprise opportunities that we realized during the year. And customers are also adding on additional subscriptions such as our logbook and our inspection products. Turning to North America. It's fair to say that North America was challenging, and that was driven by COVID-19 and the uncertainty that caused a small and medium customers. When it came to renewals, some of our smaller and medium customers reducing their fleet sizes also had a consequential impact on our churn. These renewal discussions were driven by our 3G to 4G upgrade program, which we are coming to the end of. With Coretex as part of the team now, and their greater focus on enterprise accounts, we're actually seeing high asset retention rates. This is helping us regain momentum. Not only by the fact that Coretex was more established in the enterprise space, but the products and market fit has also helped us grow and execute on our sales strategy. Not only by the fact -- so going forward, we're looking to the customers about the next-generation offering that's opened up new opportunities for us. We currently have 8 enterprise customer pipeline opportunities in the pilot stage in North America relating to potential opportunities of circa 26,000 units in that market. And finally, Australia. With Australia, we're satisfied with performance during the course of the year. Signing up Ventia was a highlight. We have completed the rollout with them now. Also with the merger of Coretex, we brought on further enterprise fleets. This has enabled us to start establishing credibility with customers in the enterprise side of the business. As we continue to develop and integrate our product solution between EROAD and Coretex during the course of the year, we start seeing those solutions flow down from North America into our Australian market. This will open up further opportunities in the -- particularly in the construction vertical. In the meantime, we are focused very much on continuing to talk to our customers around our Clarity Dashcam and products and health and safety benefits that it provides as well as asset tracking solutions being our EROAD wear and EROAD MicroTag products. Looking at our financial performance. Revenue grew during the year [indiscernible] quarter has been there for 4 months and EROAD for the 12, but is also underpinned by the strong year that New Zealand had -- as I said before, New Zealand did have a stellar year. The revenue for that segment grew by $10 million. Our reported EBITDA is down 32%, in part that's to do with the one-off transaction and integration costs hence some one-off acquisition revenue. When we normalize for both those elements, the drop in EBITDA was around 5%. And that drop was due to our growth in operating costs, some of which relates to Coretex and some to the increased spending we have in areas of investment. We've looked at our key teams and lifted our marketing in preparation for our growth. Our annualized monthly recurring revenue, or AMRR, cast forward our 12-month view of where our recurring revenue sits. For the end of FY '22, that metric was over $134 million. This is a significant step-up. It reflects Coretex and EROAD recurring customer base for the full year. As to our free cash flows in FY '22, this was impacted by a combination of the merger of Coretex, EROAD's investment and growth in inventory as global supply chain challenges were addressed by the company. EROAD has recently renegotiated a new syndicated debt facility of $90 million to provide further capacity to grow. Our available liquidity of $72 million, which includes our bank facilities and cash on hand will support R&D and integration investment planned for FY '23 and fund hardware to enable EROAD to pursue enterprise opportunities. As to our KPIs, we have reached over 200,000 connected vehicles in FY '22 as we focus on building scale in our markets. Our growth was made up by 2 components: The merger with Coretex added on over 66,000 units in growth, predominantly in North America, more than doubling the size of our presence in that market. When it comes to organic growth, that was in terms of constant growth over 16,000 units, predominantly in New Zealand. We're really impressed by how our New Zealand business continues to grow organically and how it grew over 1,000 units in the course of the financial year. Looking at ARPU. ARPU has dropped slightly reflecting Coretex' historic selling model of outright hardware sales. We've also seen the mix of in-cab and trailers changed with the acquisition of Coretex. Ultimately, our underlying ARPU will grow with the introduction of our complementary products being our Solo and Clarity Dashcam products, our Phillips Connect trailer tracking solution and other add-on products that we are selling. Our asset retention rate remains over 90%. Looking at integration, we are making significant progress on our integration with the Coretex team. As mentioned before, a critical area we're working on is our supply chain. As we've seen globally, many companies, including EROAD, are impacted by supply chain challenges. When it comes to increase in different types of product sets that we have that does increase our exposure and our supply chain risk. We've invested in the team to make sure we're on top of these risks, and we're satisfied with the progress we've made. As to our sales activities, we are well integrated across the markets, too. There's been cross training over the sales team, and they're very much focused on the various verticals they're working on. We aim to have our key products and platforms fully integrated by the end of the year, and we're seeing good progress on that front. And our 3G to 4G upgrade program is almost complete. So the underlying churn we see from this should reduce as we finish our swap out program. For FY '23, EROAD has 3 priorities. The first is to build growth momentum in both North America and New Zealand. The merger of Coretex accelerated our growth strategy and in particular, in North America. As mentioned earlier, the strategy in North America is basically on the 4 verticals that we operate in, being professional trucking, refrigeration, construction and waste and recycling. We've recently launched a CoreHub Xtreme product in North America, which will support our customers in the Refrigeration vertical. This product utilizes Edge computing 4G technology, I spoke about earlier, and we're confident it can take on the incumbence in these spaces. We're also investing in our marketing engine in North America to capitalize on the opportunities that we have. Over the first half -- sorry, the first quarter of FY '23, EROAD's share of voice in the North American telematics market was 24%, far larger than the market share of our competitors. We're also leveraging the great enterprise sales capability we've brought on through the merger. This has strengthened our pipeline in North America and provided a greater span of industries and customer [ size ] to serve as reference accounts in this market. In New Zealand, we continue to see opportunities to capitalize on as we continue to target growth of 10% year-on-year. Our market-leading sales and customer support teams consistently unlock sales opportunities as we go about growing our market share. It was great to see almost [ 300 ] current and potential customers at EROAD's Fleet Day last week in Hamilton, an event where we focus on helping our customers have safer and more sustainable fleets. This event is now the same size as, if not larger, than other enterprise [indiscernible] events that are held in New Zealand. This reflects the scale and support that EROAD has in our New Zealand markets. The second priority is to build and maintain an engaged culture that's aligned to the vision of the merged company. We refer to this as EROAD version 2.0. We're doing this at a time when the competition for talent is as competitive as EROAD. However, I believe we largely have the team in place to deliver. The team is passionate about EROAD, has a purpose and our strategy. As CEO, I've been focused on [ pairing ] this team to ensure that they can deliver for our customers. This will be my removing silos in the business and realigning teams so resources can be better targeted to get new products out the doors or convert sales quicker. We've found in the dynamic telematics market that was moving quicker than EROAD. We have, therefore, taken steps to speed up by devolving decision-making and empowering our product managers and engineers we're introducing more scalable customer-base and agile development teams and reshaping our hardware team to deliver products to the market quicker. We've also been focused on stopping things that do not directly deliver on our growth and our business plan. We have been deliberately focused on our delivery, and we are shaping EROAD to this end. The third priority is to deliver on the key product and platform integration by the end of the calendar year. Capitalizing on the merger with Coretex, we expect to deliver key products and platform integration that will enable further growth. This is an important priority for the business. By having a web platform that can visualize [indiscernible] insight from both EROAD and Coretex hardware as well as third parties enables a more seamless customer experience. It also allows cross-selling and upselling opportunities to customers, including for our SaaS products. Finally, our FY '23 outlook. We expect that growth momentum will further build through the year with the successful conversion of North American and our New Zealand pipeline opportunities. Underpinning this expectation across all of our markets, we currently have 18 pilots with enterprise customers, which represent over 30,000 units MicroTags. However, as you would expect, revenue growth for FY '23 will reflect the lumpy nature of enterprise sales and phasing of them in hardware and software rollouts. In addition to growing revenue, there are a number of enterprise customers that renewed their contracts during the year. As Graham mentioned earlier, we expect our revenue will be between $150 million and $170 million for this financial year. This reflects the full year of Coretex' contribution, growth across all of the markets and the realization of the investment that we've made last year and we will continue to make through the course of this year. The last year has been a year of significant investment and our capability. This is in preparation for growth and this investment will continue into FY '23. As a result, we're targeting a normalized EBIT of a loss between $5 million and breakeven in the coming year. We expect in the final year, we will start to see the benefit of operating leverage and that the bottom line results will improve. As mentioned earlier, in the longer term, we're targeting to deliver strong growth in revenue to at least $250 million by March of 2025. We've set these goals knowing that in FY '23, we can do better than what we did in FY '22, but also being aware that we're operating in a more challenging market condition. The competition for talented staff [indiscernible] -- the tide has quickly turned in the capital markets. Inflation is at the highest level of the century and in each of the markets COVID-19 and it's after effects continue to disrupt our supply chain and suppress economic activity. EROAD's solution delivers bank returns on investment for our customers at a modest level of capital expenditure for them. This factor alone should ensure that we can navigate through the economic downturn without losing too much momentum. As fuel prices have increased and the demand for data and managing assets become greater, the case for installing EROAD becomes more compelling. This [ one ] investment made over the recent years and those that were completed during FY '23 will ensure that we have the people and the technologies to provide winning solutions to our customers and to deliver on a purpose of providing safer and more sustainable growth. We have made some significant investment in our capability and now is the time to deliver on this investment. We will sharpen our focus to ensure delivery on our North American strategy, while retaining focus on a successful New Zealand business and the growth that Australia provides in the medium term. We know we must execute on what's in front of us, and rebuild the credibility with our shareholders. We are confident we can deliver for you. I'll now hand back to Graham for the questions on the annual report.

Thank you, Mark, and well done on your first presentation from the shareholders as a CEO. The annual report and financial statements for the year ending 31st of March 2022, have been circulated to all shareholders and are now formally tabled at this meeting. Now if there are any questions relating to EROAD or Mark or my presentations, this is the opportunity to ask them. Normally, we'd only have shareholders and proxy holders permitted to ask questions. But today, we have 2 members of the present -- of the press present -- and unless shareholders in the room think strongly otherwise, it's my intention to allow them to ask questions as well. That said, I'll throw the floor open for questions. There's a microphone -- coming to you now.

I'm [ Bruce Parks ]. I'm a shareholder and proxy from the shareholder association. I -- [indiscernible] sorry. First of all, do you use contractor engineers to boost engineering resources. If so, how do you view them with the company culture?

Bruce, I'll pass that question to Mark to answer.

Thank you, Bruce. It's a good question. So yes, we do -- where we have the capability needed not in the business and we need to sort of outsource it, we certainly do use contract engineers. They've been helping us as part of the integration work that we're working on now is that a piece of work that's happening right now, and we don't necessarily need them for the long term. But they are part of the EROAD team, they are invested in the team, they are made part of the group in engineering. It's very much part of the EROAD family that we have and they are brought on in their [indiscernible].

The second question, you've developed your decision making. How you keep control of those decision makers?

So we have a really talented senior leadership team in that business. So we meet regularly around talking about concerns that they have. and making sure everyone is working towards the business plan. We also have strong upside around the financials and performance of each of the areas. So we use that as a check on to see how people are going as well. But very much making sure that everyone is aligned to the business plan, and to understand what role they have to play as part of it and they keep on track that way.

Third question. You spoke about investing in your marketing engine in North America. It's obviously misfired in the past. What does that entail now?

So we brought an incredibly talented individual from Lytx, his name is James Neal, who has joined the team to lead up our marketing operation in that space. So he's been working on the opportunities up there for marketing lens and building out their marketing team. It's fair to say now with the better product market fit we have, with the CoreHub solution and the Coretex team put along, we said we've got the right sort of marketing team being built up with the right product fit to be there. So we actually successfully convert on those without potential in new customers.

You have a new debt facility, how is that hedged? Or is it hedged all?

I might pass it on to Margaret and she's done a bit of work on that front.

Partially hedged. So yes, we have an interest rate swap in place of $10 million, and the remainder isn't hedged at the moment. We do have an external advisory group that help us with our treasury policy and give us recommendations about how to address the market risk.

And one final question of the chair -- it's regarding the silence around the time by Mr. Newman's resignation. So it doesn't work as your [indiscernible] last weekend? You have to say something, do you have a disaster plan, doesn't have a communication [indiscernible] and have you reached that since that time.

There's a number of questions in there, [ Bruce ], yes. Look. [indiscernible] may be appropriate to use an analogy of [indiscernible] [ this morning ] [indiscernible], but I don't think that those 2 situations are comparable, yes. The Board become aware of Steven's resignation early in the morning of Friday, the 7th, or thereabouts. We had a plan in place as much as, by 8:30, we had appointed Mark to be the Acting CEO. We haven't -- we regularly revisit our disaster recovery plan as part of our management of risk in the business, but we -- I -- we haven't in that regular process revisited it since 7th of April. And I didn't -- don't think it will be appropriate to do so because I think that -- the way we handled that at the time. Now we had no greater insight than we gave to the market as to the reasons behind Steven's resignation, so we couldn't -- yes, it wasn't appropriate for us to opine on what they might be, so we just dealt with the facts as we had them in front of us. So in a factual way, we announced that Steven resigned from both of his roles. Steven is here today, by the way, and you may want to take that up with him after the meeting. And we indicated that Mark was acting in the role straightaway. And we've met with staff and been through that process in the proper way, so there is no dropping of the baton in that window. We also [ told the market ] that we're in a CEO succession process and we had -- we were down to a short list of candidates. So I think we dealt, from a communications point of view, as well with that as we could, bearing in mind we had limited information. And it was sort of -- and a major concern at that time, of course, was that the staff had leadership, yes, and were able to continue to the extent possible business as usual.

[ So I'll take the answer ]. I doubt -- the market didn't agree with you.

Yes, there's a lot of things happening at that time. I think we'd lost the CFO in February. We announced that -- this surprise, so I think it may not have been a singular event, but to the extent it occurred, I don't know that we could have glossed over it with words. I don't think there's anything we could do to placate the uncertainty that was in shareholders' minds. We've always been telling you we're trying hard and we're hoping for better, but yes, we -- this is one of those situations reactions matter, I think, so we worked as robustly and as in a timely way as we could to make a permanent appointment. We had the luxury of having Mark in the role, so we didn't have to panic on that. And I think we went through that process in a proper way and we've got a good outcome, so -- and you've seen today Mark's -- and you can make your own judgments on that, and you no doubt will over the coming 12 months.

My name is Ella and I'm from BusinessDesk. I had a few questions. Firstly, what -- did the Board try to do anything to convince Steven to stay on to make the transition of a new chief exec smoother?

Mark Heine was Acting General Counsel at the time that happened. And Mark reached out to Steven to confirm that, that was in fact his intention. He did confirm that, so we dealt with what we had in front of us.

Was it a surprise to EROAD how the market responded after EROAD announced Newman's exit?

Well, we knew that the market wouldn't like that, all right? So bear in mind the share price had been weak in the lead-up to that as well. We'd raise capital in July at $5.58. Going into that, we were sort of bouncing around between [ the $3 and $3.50 mark ]. Subsequent to the announcement, there was a small movement down maybe into the high 2s. I -- just [ I'm working my memory now ]. And then in more recent times, it sort of dropped all the way, as low as $1.40, $1.50. And it's I don't know where it is now. [ It's sitting at around $2.10 ]. So yes. And the market does what the market does. The Board doesn't try to second guess. What we do know is we can influence the share price by demonstrating performance and delivering on what we say we're going to deliver on. That's our role. It's not our role to sort of speculate around what the share price should or shouldn't do.

Perfect. You said in your speech, at the time of Newman's earlier-than-expected exit in April -- and the search for a new CEO was already well underway. Had the Board already decided that you wanted to ask Mark to fill that position once Steven left?

No, no. Steven's -- Newman, by the way. So in the process at that stage, we'd gone from a short list to a preferred candidate. A process with the preferred candidate was, for a number of reasons not all of our doing, drawn out, so it gave us time. And during that time, we reconsidered the requirements of the role because we had been planning on the basis of CEO coming in and Steven being on the Board. And without Steven being on the Board, then the dynamic changed. So we thought about that. So there were 3 factors that -- one was the change in circumstance and not having the continuity of Steven being on the Board. The second was, during the passage of that time, markets become a bit more bullish. And the external outlook required, I think, a wee bit more risk awareness on the part of the Board. And then the third element was, during the passage of that time, we got to see Mark in the role and how he's performing, so in late May, we invited Mark to the process. I had that conversation with Mark, and his jaw dropped. He hadn't been contemplating that. That was a surprise to him, so he went away. And he made consultation with the people that he already had to. And he came back to me 3 or 4 days later and said [indiscernible] the process [indiscernible] the process. The process involved psychometric testing and it involved -- and used by people external to the company. And it involved an interview and a presentation with the Board. That was the same set of hoops that we'd [ ask to ] external candidates, yes. So at that point in the process, we had 2 candidates, our previously preferred candidate and Mark. And the Board had a meeting and we said we'll go with Mark and made that announcement accordingly. So that's the blow-by-blow [indiscernible] version of what happened.

Perfect. I just had one last question and it was for Mark. Mark, how -- what has the scrutiny been like since you kind of stepped up into this role? And what has the last kind of 3 months been like for you?

[ You just made as the CEO ], that have a lot of scrutiny. We've got a lot of our shareholders here today that we want to do well for and perform strongly, so I'm going to keep conscious of the responsibility for me to do so. So for me it's been very much focusing on the plan that we have. We have a strategy in place that we do want to execute on. We are focused on delivering and on doing that, and I'm just working with the team really hard and we are driving ourselves really hard to make sure we can do so for our shareholders. So I've enjoyed it. I've really enjoyed the chance to step up and have this opportunity. And I have incredibly enjoyed working with a talented bunch of individuals we have in the business to actually deliver on it, so it's been a real joy.

Do we have a question? [indiscernible]. Sorry.

[indiscernible].

Yes. [ So Eleanor ] -- thank you, [indiscernible].

First question is from [ Gerard Malcolm ]. And he would like an explanation, please, of why Steven Newman has left his CEO and Board positions.

Yes. So I'm not going to do that. It's not for me to speak on Steven's behalf. I've already explained Steven made that decision and we respect his right to do that. He's made a tremendous contribution to the business, and it's not for us to opine why he may have made it or otherwise. So as a Board, you -- I've been, I think, quite transparent, when that decision was taken, how we responded. And that's about as much as I'm prepared to say about that matter.

The next question is from [ Gregory James ]. And he asks, "For a business going through a transition period and following the Coretex transaction, do you think no longer providing quarterly metrics or an update seems a good signal? Or may it leave a void?" And second part to the question is who on the Board has experience dealing with financial markets and advising how the company should be communicating with the market.

All right, so let's take those questions. First up, yes, we do think it's the right -- [ it seems ] quite obvious because we had to -- we have stopped giving quarterly market updates [ or ] the number of units being sold. The reason for that is quite simple, that the number of units being sold is no longer a good approximation for the revenue and the profitability of the business. So we've gone from largely selling [indiscernible] unit to selling a myriad now of hardware units, some of which have very small revenue consequences and some of which have quite significant consequences. So yes, we are very aware and alert to our continuous disclosure requirements. We've put guidance into the market, and I think it's very important that shareholders know that we've put guidance out there. We have an obligation, of course, if we believe that we're not going to fulfill that guidance, to amend that guidance. So we have ongoing disclosure requirement related to guidance and we have ongoing disclosure requirements related to NZX listing rules, so we will comply with those, but the reporting of the laundry list of different hardware devices and the quarterly sales of those wasn't any longer a good proxy for what our revenue or what our bottom line performance might be. So -- and [ Eleanor ], just remind me of the second leg of that question. Who on the Board has competence to deal with financial markets? Is that the question?

Yes.

Well -- so in our annual report, we have a skills matrix around the skills that we look for around Board representation. And capital markets is one of the key skills that we take into consideration when we're looking at the composition of the Board. I'll point to the Chairman of our Finance Risk and Audit Committee, who's been involved in capital markets and a lot of different capacities for a very long time. She's up for reelection today, so you'll hear from her soon. I've been involved as -- in capital markets in New Zealand for over 30 years. And internationally, [ I've been directors ] of listed companies for over a decade now, so I feel we are adequately represented in terms of capital markets exposure on the Board. And of course, we have -- yes, we have strong advisers that serve us well on those respects as well.

No more questions online at this time.

That's it, Eleanor? Is that...

Yes.

Good. Well, there being no further questions on Mark or my presentations or the annual financial statements...

[indiscernible].

There are. Sorry. There's a microphone coming. My apologies.

[ That's all right. That's fine ]. [indiscernible] want me to stand or -- I'm [ Grant Clark ]. I've been involved [ in a number of businesses ]. Susan knows. I've talked to her children. I've been involved in education and I've listened to dumb -- tons of dumb questions but not from her kids. And so I'm about to ask one dumb one myself, but look. I just look at you. You look like a pretty good bunch of people, but -- and I've only been involved in the share market in the last year. And I had no idea that EROAD's was doing so poorly compared to [indiscernible] -- as I say, in the last 12 months, I've bought about 30 domestic shares. And while you were doing your presentation, I looked at your percentage. And it's the worst performer. It's dropped 65%. Because I came in at the peak, which was a bit of a shame. And this guy, Steven Newman, we don't know that story, so I'll look up about that. And so from what I understand, Graham, he left around about, what...

7th of April.

7th of April. And you had no idea that this person was going to leave. Is that correct?

Yes -- steven is in the room with us today, so you don't have to talk about him in the third person, but no. We didn't -- [ it was a ] surprise to us...

Yes, okay, you were surprised. And you -- so he was totally being supportive and all that sort of stuff. He was -- he had your -- total support.

Yes, we believe so.

Cool, okay. And yet despite that, even though we know about Ukraine and all those other issues that has influenced all the shares, to be fair -- yet just looking at the track, just looking at the last 12 months, it was -- the EROAD share, [ fairly ] it was dropping at the peak around about mid-2021. And going through to about March '22, it was most certainly coming down quite a steep downwards gradient. What was the explanation for that?

Yes. So as someone who's been investing on the share market for sort of 30 years, trying to second guess why things go up and down is -- can be a frustrating process. So first up, we think stocks like ours in general, over the last 12 months, have gone down about 30%. And the reasons for that are reasonably well documented, I think, largely as, of course, interest rates have gone up. Cost of capital has gone up. Stocks like ours that offer cash returns in a long time in the future, the interest rate goes up, that value is worth less now. So that's what I'd call a long-dated revenue stock. So that's -- that explains 30% of it. The other 30% -- I mean this is only one answer, and that is we haven't met market expectations. That's -- so the question then becomes to what extent do we set market expectations. Clearly, yes, we haven't done a good job. And this was the earlier question, I think, around who on the Board has got experience in capital markets and investor relations, yes. We've got to take the learning out. We've got to front up and say, well, we can do better at this, right? We've got to make sure that we're setting expectations right. And most importantly, we've got to make sure, once we've set them...

Yes, that's correct. That's what I want to hear.

[indiscernible].

Thank you. All right, there being no further questions, I'd now like to move to the formal business of the meeting. I mean shareholders have 5 resolutions to vote on today. The vote will be conducted by a poll comprising proxies lodged in advance of the meeting and votes lodged via the Computershare platform. Details of the proxies received in advance of the meeting on these resolutions are now on screen. If I'm being appointed as a proxy to vote and I'm not directed on how to vote, I will vote in favor of these resolutions. Those attending online can now vote via the Computershare. Please click for, against or abstain. Those voting in person can now vote by marking their voting forms, and staff from Computershare are on hand to collect these after the resolutions have been put to the meeting. The first, yes, resolution is the election of director. The resolution is that Selwyn Pellett, having been appointed by the Board and only holding office until this Annual Shareholders' Meeting, be elected as an executive director of EROAD. Before we move to [ voting ], I would just like to clarify one point from the 2022 annual report. As an executive director, Selwyn is not a member of our Remuneration, Talent and Nominations Committee, but he was invited to participate in one Remuneration, Talent and Nominations Committee meeting during FY '22, so if there's been a miscommunication on that, we'd like to correct that now. The Board unanimously supports Selwyn's election. And I'll now ask Selwyn come to the lectern and speak to the meeting.

Hello, everyone. My name is Selwyn. And I'm pleased to be here and I'm very proud to be put forward as a potential director of EROAD. So here's 5 things you need to know about me: 3 decades. I've been a CEO for 3 decades. Now I've led product teams to deliver high-tech products [ taken around ] the world and in that time generated around $0.75 billion with high-tech exports. So that's one reason. Two, I've had experience in publicly listed companies. I was the CEO, Chair and Founder, not in that order, of Endace, listed on the AIM market. And therefore, I've got publicly listed experience. My beliefs align with EROAD's journey. My personal mission is to build a safer, greener and more productive society; and that dovetails very nicely into EROAD's safer and more sustainable roads. I have an entrepreneurial spirit. I bring that entrepreneurial can-do flavor to the Board. My fellow directors would probably say I'm a challenger and perhaps even a provocateur. I have institutional knowledge, which is possibly the most important reason I'm on the Board. I bring all of the Coretex knowledge of people, customers, products, markets to the Board which otherwise would take a long time to acquire. I will be serving on the new newly formed Technology Committee within the Board, with Sara and Barry, providing technical governance. In a similar way to FRAC, Finance Risk and Audit Committee, does in terms of finance, we will be doing that in terms of technology. Finally, I believe in the EROAD story and will do everything I can to materialize the value creation that flows from being successful in delivering that story. Thank you.

Thank you, Selwyn. Is there any discussion on this resolution? There appears to be no discussion. All right, we'll move to resolution 2. The second resolution also relates to the election of a director. This resolution is that Sara Gifford, having been appointed by the Board and only holding office until this Annual Shareholders' Meeting, be elected as a director of EROAD. The Board unanimously support Sara's election. And I'll now ask Sara to address the meeting.

Hey, good afternoon, everybody. My name is Sara Gifford. And I'm pleased to be with you today and, more importantly, very excited to be part of the EROAD journey. My education and experience and, more importantly, my passion is in technology in the way that can make the world safer and more efficient. That goes from the company to the courier or the driver, down to the consumer. I've spent a large part of my career optimizing the world's supply chain, with a very specific focus on transportation in the U.S. and abroad. I bring hands-on experience in setting up a growing U.S. operation within an international business and all of the challenges that come with that on both sides of the pond; specifically: growing a sales team, a high-growth-focused sales team, bringing a product to market in the U.S. and the changes that are needed; operating within a slightly different business environment and all the HR and cultural challenges that come with that type of international growth. While I am American born and bred, I've been to New Zealand nearly 2 dozen times, mostly during Boston frigid winters. And that makes me feel quite at home inside a New Zealand company. Thank you.

Thank you, Sara. Is there any discussion on this resolution? There appears to be no further discussion. The third resolution: This resolution relates to the reelection of a director. The resolution reads as follows: that Susan Paterson, having retired in accordance with the NZX listing rule 2.7.1, be reelected as a director of EROAD. Susan chairs EROAD's finance risk and audit Board subcommittee. And the Board -- I have trouble with that word, don't I? Unanimously support -- all of us support Susan's reelection. I will now ask Susan to address the meeting.

Thank you, Graham [indiscernible]. My background. I actually originally started as a pharmacist but very quickly ended up in management and then did an MBA at London and moved into consulting and the strategic use of inflation technology, before a number of management roles in New Zealand. I've always had a really strong interest in logistics, and that really started as we were consulting in the leading-up to the formation of the European Union. And you went from 12 countries, where you had a country manager as king in every single 1, to actually running that 300 million people as one market and working out how the logistics and supply chains worked through that. And we were using technology in those days very much to make that very efficient for the companies that were coming up to forming [ a ] European Union. I've also had stints in logistics being on the Board of Ports of Auckland. And during that time, we actually reduced the footprint of the -- Ports of Auckland that used to go right from Westhaven [ or long to ] where it currently is. And we did all that -- I was on the property committee that did all the planning for the Wynyard Quarter; and then sold off Princes Wharf, et cetera; and consolidated that footprint to be much more efficient and effective as a port in the city of Auckland. I've had 13.5 years on the Board of Goodman Property, which as any of you that understand that company or are investors in it -- will understand that it's very much around dealing with the logistics market and providing buildings for companies that are involved in logistics and the supply chain and especially in that last-mile delivery. So a lot of experience there. I've been on the audit committee on both Goodman Property. [ I chaired it at ] Ports of Auckland. I chaired the audit and risk committee of the reserve bank. And then I'm also on the Board of Steel & Tube. Again, if you know, that's been a real turnaround story, so I'm not afraid of coming onto companies which actually need a refresh, need some changing with the Board and need -- getting that management team right and being part of a turnaround of a company that's now doing particularly well. In my background, as far as the environment, I was on the Board of the Energy Efficiency and Conservation Authority, going back into the 1990s. I've always been very interested in that and chaired the New Zealand Ecolabelling Trust's. And I'm also really interested in developing the next cohort of female directors and have been mentoring for the IoD for many years. In this year, I've mentored [indiscernible] lady who's now up for some of the major awards in the women's and governance award (sic) [ Women in Governance Awards ]. So again, I do like to give back and help build that director community in New Zealand. So I'm very excited and would love to serve you further on the Board. I think EROAD is an iconic New Zealand company, very exciting, founded by a visionary leader [ but ] taking our technology to the world. So thank you. I appreciate your support.

Thank you, Susan. Is there any discussion on this resolution? There being no discussion, we'll move to the next resolution. The fourth resolution is the appointment of the auditors and the auditor's remuneration. The resolution reads as follows: that the directors be authorized to fix the fees and the expenses of KPMG as the auditor of EROAD. Is there any discussion of this resolution? There appears to be no discussion. We'll move to the next resolution. The Board is conscious of its obligations to provide transparency to stakeholders. And this year, we have elected to voluntarily comply with the Australian Corporations Act say-on-pay regime by publishing a comprehensive remuneration report as part of our annual report package and by putting a vote for the adoption of the report under this resolution. We trust that the remuneration report assists with your understanding of our remuneration strategy and objectives. Our underlying remuneration strategy is to attract and retain talented executives and employees who can deliver the company's vision and strategies in accordance with our values. Both the CEO and the CFO are paid a base salary that is subject to annual review. These employees are also considered for participation in any short-term incentive plans and any long-term incentive plans offered by the Board. In the financial year 2022, both the CEO and the CFO earned a short-term incentive payout for the first half of the year. Neither received short-term incentive payments in the second half of the year, as the financial and nonfinancial targets for the second half were not met. During the year, long-term incentive shares were granted to the CEO under the financial year 2018 and the financial year 2019 plans, and performance share rights were granted under the financial year 2020 long-term incentive plan. In the interest of transparency, the Board has also chosen to disclose Mark's remuneration at the time of Mark's appointment to the CEO role in the company. Our remuneration strategy for nonexecutive directors is to remunerate them appropriately for their time and their expertise and insight into strategic and governance issues and to ensure that we are able to attract and retain experienced qualified directors. So the fifth and final resolution is a nonbinding say-on-pay vote to consider and, if thought fit, to pass a special ordinary resolution that EROAD's remuneration report for the year ending the 31st of March 2022 and as set out in the FY 2022 annual report be adopted. Is there any discussion of this resolution? [ Bruce ], why did I anticipate you'd be asking a question?

[indiscernible] resolution [indiscernible].

Thank you. So that -- no question, [ Bruce ]. That's -- there's a question over here. Thank you.

[indiscernible] -- yes. [ Mr. Shoff ], shareholder. My question is, if the outcome of the vote is nonbinding, why are you even putting it up for consideration?

Well, first off, if the outcome of the vote is -- I mean the Board are going to be conscious of how shareholders feel, so the vote in that sense is a poll. And if a large number of shareholders vote against us, then the Board would be ridiculous to -- would be foolish to ignore that sentiment amongst shareholders. So it's a poll and it's a signal [ from second up in ] -- under the say-on-pay regime in Australia, which we'll adopt from next year onwards. If we get 2 years in a row where 25% or more of shareholders vote against this, then the Board will put themselves up for reelection. So that's the process how that works. We're not tone-deaf. Is there any further discussion of this resolution? All right, with no further discussion, we're at the end of the resolutions. We will now pause for a few minutes for voting to be completed. I'll give a reminder 15 seconds before I close voting. Once voting has closed, those voting online will not be able to amend their vote. So we will now just take time, 2 minutes, to allow voting to be completed. [Voting]

[indiscernible] voting in 15 seconds [ or thereabouts ]. Thank you, everyone. Votes will now be counted by Computershare staff, under the supervision of KPMG. And final tallies will be announced later this afternoon. That brings us to general business. Is there any general business that shareholders wish to raise? Yes. Microphone is just coming.

[indiscernible]. I'm a shareholder. I just want to know. This technology that you've developed, does it have a place in nonindustrial vehicles like my car or your car or somebody else's car?

So we have been building up more and more customers in the light commercial vehicle space. We do already, for companies, support them with our technology solution. Over time, there may be opportunities to go into passenger vehicles more generally, but at the moment, we're very much focused on corporate fleets. And we've been growing that segment, particularly in New Zealand, over the last few years.

I was just saying to my colleague the most frequently asked question I ever get about the company is, "When can I have an EROAD solution for my [ ute ]?" So I sympathize with that. Thank you. Any further questions or comments? Well, there being no further business, that brings us to an end of the meeting. The votes [ or the voting ] will be posted shortly. Those of you attending the meeting here in person today at Eden Park, please feel welcome to join with us and -- next door for some refreshments and to have a look at some of our technology. I thank you all for your attendance and your continuing interest and support of the company. And I now declare this meeting over. Thank you.