EROAD Limited (ERD) Earnings Call Transcript & Summary

[Audio Gap] and joining us today. Welcome to EROAD's 2024 Annual Shareholder Meeting. I'm Susan Paterson, the Chair of EROAD's Board. Today's meeting is being held both in person here in Auckland and online through Computershare's online meeting platform. For those of you attending the meeting virtually, if you would like to submit a question, the Q&A is always open. So please feel free to submit questions throughout the meeting. These will be read out and addressed in the Q&A session at the end. Any questions that are not answered in time will receive an e-mail response after the meeting. Voting today will be conducted by way of poll on all items of business. I will shortly open the online voting for all resolutions. If you are eligible to vote at this meeting, you will be able to cast your vote under the Vote tab. Once the voting has opened, the resolutions will allow votes to be submitted. You can change your vote up until the time I declare voting closed. I now declare voting open on all items of business, and I will give you a warning before I move to close the voting. I would like to introduce the Board, Sara Gifford, Cameron Kinloch, David Green, Selwyn Pellett and Barry Einsig. You will hear more from David Green and Cameron Kinloch after the meeting. From EROAD's executive team, we have our Co-CEOs, David Kenneson, Mike Heine; and our CFO, Margaret Warrington. In terms of today's agenda, following my Chair's address, I will hand off to Mark, David and Margaret for an executive update. We will then move to the formalities of the meeting with three resolutions for today. And finally, an opportunity for any shareholders' questions before we close. This year being one of decisive action, disciplined delivery and a relentless focus on turning around the core of the business. As a result, the EROAD of today is in a much better position than it was 12 months ago with the team, capital and skills in place to capitalize on the future. Our product offering has grown stronger with targeted innovations that enhance efficiency, emissions reductions, fleet management, safety and compliance, core areas, which EROAD continues to lead and differentiate itself in the market. Our customer base, comprising key players in enterprise transport, refrigerated transport and construction center -- sectors has shown exceptional loyalty. This has maintained our high retention rates of 94.8%. This is a testament to the real value that EROAD provides an improving operational efficiencies, sustainability and compliance solutions for complex fleet operations. I will leave the financial results for David, Mark and Margaret. However, I would like to acknowledge the pleasing FY '24 financial and operational performance having met or exceeded all guidance metrics set at the start of the year. It is also pleasing to note that FY '25 has started well with the first quarter continuing the trajectory that we have been on. These results demonstrate that the company is on the right track and reinforces the Board's conviction in EROAD's strategic direction as it moves the business to being cash flow positive for FY '25. Under the thoughtful and dedicated leadership of Mark Heine, we have successfully turned around the core of our business and repositioned EROAD for growth. Mark's strategic focus, foresight and disciplined approach have been instrumental in navigating the company through a complex market landscape, resulting in a stronger, leaner and more competitive EROAD today. Building on this foundation and to capitalize on growth opportunities, in March, we appointed U.S.-based, David Kenneson, to a Co-CEO role alongside Mark. David is a highly experienced global executive with over 25 years, leadership roles in high-tech, manufacturing and professional services sectors, including the supply chain software company, Quintiq and E2open, and procurement optimization platform, Xeeva. His extensive international experience is complemented by a deep understanding of the U.S. market, a critical advantage as we expand our presence and seize growth opportunities in North America. David's global mindset and market-specific knowledge, alongside Mark's established leadership and success in turning around our core operations creates a powerful Co-CEO partnership, one with complementary skills and a shared vision for EROAD's future. EROAD's purpose is delivering intelligence you can trust for a better world tomorrow. This guiding purpose reflects our deep history as a provider of technology solutions for fleets, while also looking to the future as our solutions expand to meet the needs of a changing market. One such example is incorporating additional sustainability tooling to meet the increasing environmental scrutiny and costs that our customers face across emissions reduction and associate compliance and reporting. By supporting our customers with the right data through our existing platforms, EROAD is uniquely positioned to make a meaningful difference in the reduction of greenhouse gas emissions. Here in New Zealand, with a reported 70% of country's emissions attributed to transport, a key product for FY '24 was the Sustainability Module of MyEROAD. This was developed in partnership with EECA, the Energy Efficiency and Conservation Authority. By combining AI technology with the data formed from over 100,000 connected vehicles and assets, we can now give fleets the insights needed across fleet profile and usage patterns to understand and report on their fleet emissions. More importantly, this provides customer with the insights and recommendations to reduce their emissions and run a more sustainable fleet. EROAD customer, Matanga Projects, saw a month-on-month reduction of 28% of their greenhouse gas emissions since using EROAD. This is just one example of the steps toward achieving our overall mission, but we believe EROAD is well positioned to have a big impact on the sustainability journeys of fleets globally. As we continue to drive EROAD forward, we also acknowledge the contributions of those who have shaped our path. I extend our heartfelt thanks to Graham Stuart, who stepped down from the Board on the 31st of March 2024. During his tenure, including 5 years as Chair, Graham's contribution have fundamentally shaped the trajectory of EROAD. His leadership through the acquisition of Coretex marked a significant expansion of our capabilities and market presence. Graham's guidance was crucial during that strategic refresh that realigned our company's vision and operational focus to position us for future growth. His impact on EROAD is lasting, and his leadership qualities have been instrumental in setting the stage for the next phase of growth. We are deeply grateful for his dedication and leadership. In ensuring we have the Board for the future, the composition of skills, experience and geographic markets are all carefully considered. To that end, we are delighted to have Cameron Kinloch and David Green join the Board this year. David is based in Auckland, offers deep leadership experience from a vast career of executive roles in the banking and finance sector in companies such as ANZ in Deutsche Bank. Today, David is a professional director and investor and enhances our capabilities and financial oversight and risk management as Chair of our Finance Risk and Audit Committee. David also serves on the People and Culture Committee, supporting our focus on leadership and organizational development. Cameron, based in California, brings extensive governance and operations experience from roles as Chief Operating Officer and Chief Financial Officer of high-growth companies, where she drove strategic growth and guidance throughout M&A, capital raising and IPOs. Cameron is a CFO of the enterprise software company, Weights & Biases, and a Director of sustainably sourced coffee producer, Copper Cow Coffee. Dave and Cameron are the perfect complement to the rich skills and expertise of our existing directors. Barry Einsig chairs our Technology Committee and deepens our focus on integrating advanced transportation technologies, vital for growth in North America. Sara Gifford chairs our People and Culture Committee, enriching our organizational development with her extensive experience in global software and logistics. Selwyn Pellett brings decades of strategic insight to our finance, finance risk and audit and technology committees, enhancing our risk management and our innovation capabilities. Their combined expertise further strengthens our Board's ability to guide the strategic direction. As we look ahead to 2025, the company remains focused on fiscal and operational discipline that supports profitable, sustainable growth. We have solid foundations in place, a laser focus on delivering to the targets we have set and the growing confidence in our long-term potential. As a result, our FY '25 guidance is revenue of between $190 million and $195 million. I would like to take the moment to acknowledge and thank all of EROAD's people for their hard work and dedication. More than 25% of EROAD's staff have a tenure of between 5 and 20 years. This is a reflection of their commitment to the journey of EROAD and the depth of knowledge and experience in our company. We know people are fundamental to the success of the company, and we are grateful to everybody who chooses EROAD as their place of work. This is a purpose-driven company, delivering great value, not only to its customers on many fronts but to their employees through health and safety, to the countries in which we operate through safer roads and revenue collection in New Zealand, and overall to the planet through lower emissions. To you, our shareholders, thank you for your ongoing support as we drive to deliver our purpose while growing size and profitability of our business. I'll now hand over to David Kenneson, Mark Heine and Margaret Warrington for their CEO and CFO addresses.

Thank you, Susan. Hello, everyone. For those who hasn't met me previously, I'm Margaret Warrington. I'm the CFO of EROAD. Our FY '24 results reflect the focus, discipline and financial rigor we have instilled in the company over the last 2 years. For the second year in a row, we've achieved results on or above guidance. We remain focused on consistently delivering on our promises, committed to achieving results that demonstrate sustainable and profitable growth. For FY '24, we have grown revenue to $182 million, representing an increase of 10% from the prior year. This is in line with the growth of our connected units, which reached the milestone of 250,000 units globally, up 10% year-on-year. The sustainability of this growth is evident in our improvements to the free cash flow from a negative $29.9 million in FY '23 to positive $1.3 million in FY '24. We are proud of this achievement. It's important to note that this result also contains $8 million to $10 million of one-off cash impacts that are attributed to our 3G upgrade program. Importantly, we expect to be free cash flow positive in FY '25, 1 year ahead of previous projections. This has been achieved through a series of cost-out measures, removing $20 million of annualized costs from the business, $10 million per year in both FY '23 and FY '24. Approximately half of these savings were achieved through supply negotiations where our increased scale provided the ability to negotiate services for reduced cost. The largest single contributor to the savings was through reduction in headcount across employees, contractors and consultants, which we were able to achieve while still maintaining our high quality of customer delivery and growth. Looking forward, our cost focus remains with specific attention on ensuring that fixed costs are managed and continually looking for efficiencies that help fund the investment required as we scale further. We remain committed to continuing on a path toward profitability with a firm grasp on spend and fiscal management. Our financial position today is strong, and we are well positioned to fuel our growth objectives. I'll now hand over to Mark to talk about those.

Hello, everyone, and thank you to Susan and Margaret. As you can see, we've had a very strong FY '24, and we're incredibly proud of our achievements. Our achievements at the back of the disciplined execution and unwavering belief in our strategy. We continue to achieve annual growth targets globally, and we continued to deliver growth in all regions while increasing our proportion of revenue share from higher total addressable markets of North America and Australia. This shift has occurred alongside necessary internal changes to build a team and mindset that can capitalize on the investments we've made and achieve the growth in a sustainable and profitable way. Today, we are leaner, faster and more focused than we ever have been with absolute clarity around our direction and our continued ability to deliver on our goals. Now to understand the business we are today, it's important to look at the journey we've been on to get here, from our roots on building the first electronic nationwide tolling system here in New Zealand to provide a whole fleet offering of compliance, efficiency, safety and sustainability tools for some of the largest fleets in the world. It has been nearly 3 years since we've announced our intent to acquire Coretex to accelerate growth, enhance the skills and capabilities of our team, increase our product offering and expand our position in North America. Through realization of the value of the merger, the company that we are today is vastly different. Our connected units have almost doubled from 126,000 to 251,000, helping us to achieve the credibility, scale and operating leverage needed to increase our competitive position in the markets. Prior to a merger, our team of approximately 495 EROADers and contractors were delivering revenue of around $91 million. Our combined team size increased to approximately 640 at the completion of the merger with our first full year combined revenue of $165 million. When looking at today's revenue of $182 million, we've achieved off a leaner team of around 530. At twice the premerger revenue, we've seen an efficiency gain of 85%. We've also seen benefits from our size and scale with our suppliers and partner contract negotiations. One recent example in North America received just this month will reduce our unit connectivity fees with a crucial OEM partner by up to 80%. These savings offer increased margins without the need to increase the pricing for our customers. We've remained resolute in our conviction that we'll emerge as a high-performing business that customers, employees and shareholders can be excited by. Their investment in Coretex would deliver our medium and long-term objectives by transforming our company to one that has the experience, reputation and scale to meet the changing needs of the market. Change on this scale is never easy. And I want to thank our incredible team of EROADers who have displayed so much dedication and resilience through this time. They've shown that our culture of innovation that stands beyond our products and applied the same thing into cost savings developing new and efficient ways of working without compromising on quality, delivery or speeds. Importantly, alongside the changes, EROAD has continued to deliver new products and innovations, win new customers while retaining and spend the ones we have with high levels of service and product. And as we focus more on the larger enterprise accounts and specialty verticals of construction and refrigerated transportation, some notable success with last year do include: first, our long-standing Kiwi customers are Fulton Hogan, Hato Hone St. John, [Kinetic and Tranzit, ] all signed new contracts this year, reflecting a combined unit count of over 10,000 connections. We had a 25% unit growth in Australia with wins like construction giant -- materials giant Boral and facility maintenance provider Programmed. In refrigerated transportation for North America, we saw U.S. Foods expand by over 1,200 units and our channel partners, SkyBitz, increased orders for additional 1,500 new units. And of course, Sysco. This year, we subsequently rolled out over 9,000 units and have seen the orders increased by an additional 1,400 over the original contract. We also announced a partnership with refrigerated trader OEM manufacturer Thermo King, enabling customers to connect our software directly to their trailers without the need to purchase additional hardware. And we've formalized the technology collaboration with Microsoft, accelerating our adoption of generative AI for product development. We've also -- for product development, sorry. We've also had a very strong start to this financial year. Today, we are pleased to announce we've signed a new contract with an existing New Zealand enterprise customer for an additional 5,000 units in Australia. This contract also includes a renewal of 6,000 units and for the New Zealand fleets. Combined, this expansion elevates this customer into our top three globally in terms of overall unit count. This contract is a material milestone for EROAD. It accounts for over 4% of EROAD's total global base and represents a 25% increase in our Australian unit base. Australia is a key growth market for EROAD, and this contract significantly boosts our footprint in this region. Renewals and expansion at this are testament to our products and services that we deliver to our customers. It is further evidence of our attractiveness to enterprise fleets and our successful Trans-Tasman expansion. We know where we've been going and have built the foundations and team to get us there. One key element of this is our new co-CEO, David Kenneson, who will now talk to you about some of our plans going forward.

Good afternoon, everyone. It's a privilege to stand here before you today at this pivotal moment in EROAD's journey. Over the past few months, I've had the honor of meeting our customers, our partners, our investors and our dedicated team of EROADers around the globe. Three questions constantly arise, and I'm excited to address them today. Number one, what are our plans for the future? Number two, what drew me to EROAD? And number three, and most importantly, what are the groundbreaking developments that I have witnessed since being here? At EROAD, we understand that true growth stems from our ability to identify and seize opportunities, whether it's forging strategic partnerships, expanding into new markets, developing cutting-edge technologies. I'm passionate about uncovering hidden gems that with the right team and strategy can deliver exceptional value. Our plan is not just to continue this approach but to accelerate it. Leveraging our strengths and embracing the transformative power of AI to revolutionize the transportation industry. So what drew me to EROAD? Well, the answer lies in the immense potential I see here. The company is a powerhouse of talent, innovation and technological prowess. We're not just creating products. We're delivering sophisticated solutions that address critical challenges for some of the world's most iconic brands. The untapped potential here is staggering, and I'm thrilled to help lead EROAD into its next phase of growth and innovation. I'm acutely aware of the privileged position I hold, stepping into a company that has not only stabilized its core operations but has positioned itself at the forefront of technological innovation in the transportation industry. Arriving at this critical juncture allows me to view our potential with fresh eyes, and I can assure you the future of EROAD is not just exciting. It's revolutionary. One, we're not just envisioning the future of transportation, but we're creating it. Globally, EROAD has established itself as a go-to solution for customers with complex operations that demand more than off-the-shelf fleet management solutions. Our strength lies in serving large enterprises, construction companies and refrigerated transportation sectors, sectors where precision, efficiency and reliability are paramount. While the scale of these contracts is attractive, there's a lot more to these customers worth mentioning. In today's complex logistics landscape, moving products from point A to point B is a multifaceted challenge. At the enterprise level, this complexity increases exponentially. Larger fleets, extensive workforces, intricate systems and significant reputational stakes. EROAD has demonstrated unparalleled expertise in operating at this scale. We're trusted by some of the world's largest fleets to support the very core of their operations, leveraging our advanced technology to optimize every aspect of their business. They trust that the concrete slab for your home will be a strong foundation because EROAD insured it was delivered with the right mix and delivered on time. They trust that their fleets are compliant because our intelligence systems automate road user charges, tax lodgements and driver hour management. Their drivers trust that their employees care about them because EROAD Solutions simplified vehicle maintenance, promote good driver behavior and use predictive data to minimize incidents through smart alerting and suggestions. And you can count that the breakfast that you picked up this morning with your coffee is safe to eat because it was transported with our CoreTemp technology, ensuring temperature control throughout its journey. The deep-rooted trust fosters a unique collaborative relationship with our customers. We're not just serving our providers with solutions. We're actually partnering with them. Many of our current products, including our latest AI innovations, were born from these partnerships. As we speak, we're piloting next-generation solutions across all our customer fleets, pushing the boundaries of what is possible in transportation technology. Our customers' high expectations drive our relentless pursuit of excellence. We understand the future is built on our reputation for delivering cutting-edge solutions and service that consistently exceed these expectations. Innovation is our cornerstone of our competitive edge. We are strategically focused in leveraging AI to deliver superior products that not only boost our core capabilities but also enrich our software ecosystem. For specialized add-ons, we collaborate with partners, ensuring we deliver a comprehensive, best-in-class solution to all of our customers. Now I'm excited to introduce you to our latest innovation, our advanced AI-powered camera system technology. This technology represents a significant leap forward in fleet management and road safety. At its core, our AI camera system acts as an intelligent system for every vehicle in our customers' fleet. Using sophisticated machine language -- machine learning algorithms, it continually analysizes road conditions, driver behavior and potential hazards in real time. When it detects risks such as lane departures, tailgating or signs of driver fatigue, the system provides immediate audio alerts to drivers, enhancing safety proactively. The AI camera system represents a significant leap forward in our mission to provide intelligent data-driven solutions for the transportation industry. Turning to our refrigerated transport business. We're addressing a unique set of challenges. Beyond the usual transport hurdle, these customers must maintain precise temperature controls to ensure food safety and quality. Equipment malfunctions due to improper maintenance have long been a critical issue in this sector. Unlike dry goods that can wait roadside for replacement vehicle, a refrigerated trailer breakdown often means a complete loss of load, a costly and wasteful outcome. Recognizing this industry-wide challenge, an AI-powered predictive maintenance tool for our cold-chain solution has been developed. This innovative system analyzes each trailer's alert history to predict potential malfunctions before they occur. By assigning only healthy trailers to critical jobs, we're safeguarding our customers' bottom line. We're reducing loss loads. We're helping to decrease greenhouse gas emissions associated with waste. The response from our pilot customers has been overwhelmingly positive, and we're thrilled to announce that this game-changing solution will soon be available for general release in the markets, marking just another milestone in EROAD's commitment to driving innovation in the transportation history. Now in the construction sector, where time is money, our AI solutions are revolutionizing operations. Construction companies operate on tight schedules, aiming to maximize concrete pour while daylight last with only 90 minutes between truck loading and potential cement rejection every minute counts. EROAD's advanced AI assistant is transforming how dispatchers manage workflows, dramatically reducing wait times and minimizing loss loads. By analyzing complex web of historical and real-time data, including job requests and traffic patterns, our AI provides accurate site wait time estimates. This allows customers to optimize their deliveries, redirecting loads to less congested sites and significantly boosting overall efficiency. This is just a glimpse of the transformative power of our leading-edge solutions that we're bringing to the construction industry. EROAD's path is clear. With our continued investment in cutting-edge innovation, combined with our unwavering commitment to solving real-world problems, we're poised to redefine the standards of efficiency, reliability and sustainability in the global transportation sector. Thank you.

Thank you, David. Now of course, knowing where we're going means knowing where we've been and come from and building on those foundations. With the New Zealand government signaling a switch to universal route reduce charging, it opens up an opportunity for over 3.6 million vehicles currently operating under the [indiscernible] duty model. EROAD currently collects over 85% of all eRUC in New Zealand and 40% of the total government RUC take. And in addition to the government's shift to put all EV plug-in hybrids under RUC system, EROAD enabled our platform and hardware to support these vehicles to transition seamlessly to RUC from 1 April of this year. We continue to work closely with the government and other key stakeholders on the ecosystem that will be needed to enable time of use charging to unlock congestion. This would deliver significant productivity benefits to businesses and NZ Inc. While this work is relatively nascent, EROAD has the skills, technology and experience to play a significant role in this emerging market. We are proud of our journey and results of FY '24. We're excited about the path forward as we continue to execute to plan with focused, disciplined, renewed energy and speed. I will now hand back to Susan for the resolutions.

Thank you, Mark. I'll now move to the resolutions. You'll have a chance to ask questions on each resolution. And then after following -- moving those resolutions in the vote, we'll move on to general business and any questions that anybody from the floor has. So the first resolution is the election of David Green as a member of our Board. And I'll ask David to come and speak to you briefly.

Thank you, Susan, and good afternoon, everyone. It's been a privilege to serve you as a director of EROAD since August last year. As you've been hearing, it's an exciting time to be part of the company with its growth opportunities in Australia, New Zealand and North America, using its track record for innovation, applying smart technology and data and increasingly AI to help our customers be efficient, safer and more sustainable. As an EROAD director, I bring my years of business management leadership and governance experience along with a track record of delivering for customers and a strong perspective of what shareholders and other stakeholders want. I've spent most of my year working in the constantly changing banking industry as a business leader and an adviser and banker to large international companies. In my roles, I've worked with Boards of industries -- Boards and management of many large companies across a range of industries in Asia, Australia and New Zealand. And through the privileged access that banks have through their customers, I've experienced the development of the strategies and the execution of those strategies, gaining insights into what has worked and what hasn't and how they've dealt with the challenges they faced. I've led large teams across multiple countries and successfully built market leadership positions through having a clear strategy, being focused on developing capability and points of difference, choosing customers carefully and understanding their needs and delivering to them with end-to-end excellence. As a business leader, I've developed a track record and delivering large change programs to align businesses to their strategic advantages and to deliver improved returns. And I've been involved in critical technology investments, driving consolidation of systems, modernization of capability, better use of data and automation of processes. And my qualifications as a Chartered Accountant have given me a strong framework for analyzing, advising and managing businesses, making investment decisions and meeting reporting obligations. So all of my experiences, skills and insights I've gained throughout my career and through membership of other Boards and are invaluable to me as a director of EROAD and Chair of EROAD's Board's Finance Risk and Audit Committee. I'm very proud of what the EROAD team is achieving and excited by the many opportunities the company has. So I'm looking forward to continuing as a director with your support today.

Thank you, David. Are there any questions for David or any questions that you would like me to answer on behalf of the Board? If there are no questions, I put the resolution to you that David Green, having been appointed by the Board and only holding office until the ASM, be elected as a Non-Executive Director of EROAD. Could you please fill in your forms or cast your vote online? [Voting]

The second resolution is the election of Cameron Kinloch. And Cameron, I'd like you to come and address everybody.

Hi, everyone. I'm Cameron Kinloch, and I'm pleased to be up for election as a Non-Executive Director of EROAD. I bring to this role over 20 years of experience in finance, having started my career on Wall Street, where I spent over 10 years at Morgan Stanley and Goldman Sachs, both in New York and in Hong Kong. For the past 12 years, I've helped lead, grow and scale various companies in Silicon Valley through various stages of their life cycle, anywhere from $20 million in revenue all the way up to $500 million plus. Throughout that journey, I have developed deep experience in both enterprise software and in hardware businesses, having taken both of those types of companies through the IPO process in the U.S. I also bring experience on the corporate governance side, having served on three Boards previously. In addition, given my experience in the banking sector, I bring deep relationships in the banking community as well as a keen understanding of both Investor Relations and what drives shareholder value. I look forward to bringing that experience to EROAD as well to continue to drive additional shareholder value to you all. Thank you.

Thank you, Cameron. Are there any questions for Cameron? We have one.

I'm [ Bruce Park ], shareholder. Cameron, you have excellent skills and background from America. Where do you look as part of your professional developments taking part in the New Zealand reg company's training modules on governance?

Yes. The short answer is yes. I am looking into it. So I'm only a few months into my journey here at EROAD. And so I'm working with the team here at EROAD to sign up for those training sessions, and we're looking at both virtual and/or in person. So hopefully, next year, when I see you, I will have completed them.

Thank you, Bruce. Are there any other questions for Cameron? If there are no further questions, I'll put the resolution to the meeting that Cameron Kinloch, having been appointed by the Board and only holding office until the Annual Shareholders' Meeting, be elected as a Non-Executive Director of EROAD. Could you please cast your votes either on paper or online? [Voting]

Thank you. The third resolution for the meeting is the appointment of the auditors, the resolution that the directors be authorized to fix the fees and expenses of KPMG, who are the auditor of EROAD. Are there any questions with regards to that resolution? Thank you.

Grant [indiscernible], Shareholders' Association. Just to give you a little background, we measure all the NZX companies across over 125 governance metrics to quantify the quality of governance. And I have to say that EROAD is up there amongst the very best but, and there's always a but, the only area that we'd ask for more clarification about in the annual report is the audit fees because we note that unlike most companies, EROAD pays quite a large percentage, 44% this year, of its fees to KPMG for nonfinancial audit work. [ NZSA ] believes that generally over 25% of non-audit work, particularly where it's related to tax, should be undertaken by another audit firm to make sure of complete independence notwithstanding the Chinese walls within audit firms. So knowing that most of those fees will be related to KPMG's audit around the RUCs and that it would be shall we say another challenge to get another audit firm briefed and up-to-date with dealing with that matter. Could we ask that next year in the annual report, you clarify the situation, break out the amount of work and just explain how KPMG separates the financial audit from the RUC audit?

Thank you very much. I might just let David add a bit more color to our reply on that. It is something that we look at very carefully as we make those decisions every year, and we'll continue to look at going forward. But David, perhaps I could let you address that as Chair of our RUC Committee.

Sure. Thank you for the question. So it is something that we're obviously mindful of, and we had a discussion about it as a Board for our disclosures in the financial statements. For this year, and we've added some explanation from what was there. Last year, just to help shareholders appreciate that some of the additional work that KPMG provides outside of their auditors assurance work they're providing on the NZTA accounts, which is important function in the logical party to perform for us given their knowledge of EROAD. We also do use them for tax compliance services, and that's been an important function over the recent years with the commission of two entities in multiple geographies and a lot of work to get through there. But like all things, we need to constantly review what is appropriate. We see a lot of benefits and kind of working with the team that knows us well and has helped us work through those issues over previous years. I agree we absolutely either address your question through any changes we make or additional disclosure in the year ahead. And I think we're -- it's something we've really got workingthe way on.

May I provide some color as well. I'm an ex-member of the Audit Standards Board when this came up. So I am aware what's happening and what's going to happen in the future. So the first thing I would say, it's all about the disclosure. So they should regulatory required disclosure is supported by the Audit Standards Board. Tax is the issue that's going to go west at some point in time because they're confident. So to quote myself, I've never seen a company go bankrupt but they haven't made it accounting standard. I have seen the companies go bankrupt when they haven't done the great thing on tax audit.

Thank you for that. Any other questions with regards to the resolution? So I'll put the resolution to the meeting that the directors be authorized to fix the fees and expenses of KPMG as the auditor of EROAD. Ladies and gentlemen, that concludes our discussion of the items of business, and I will close the voting very shortly. [Voting]

Thank you. Voting is now closed. The results of these votes will be released to the stock exchange later today. And Computershare will now collect all those voting forms from people in the room.

While we're just finishing those final collections, I will open up the floor to general business and any other questions that shareholders may have. You do have our full Board here. You'll notice we have 3 New Zealand directors and 3 North American directors, and that's a very strong signal of the future of our business. It is the first time that we've had all of us together. So it's been fantastic that we've been actually able to have a Board meeting completely in person instead of partly online. But obviously, online is the way the world going forward, and we will have a mixed meeting, some completely in person and some online as we go forward. But are there any questions from anybody, from any shareholders?

Yes, [ Michael Trough ], shareholder. I'm interested in how you arrived at the co-CEO arrangement. It's not one that I've seen before.

The co-CEO arrangement actually came from Mark Heine to us and suggesting that we might have a look at it. It's not a model that's completely unknown in the rest of the world. So SAP, when they moved from Germany into North America, for a while had a co-CEO model. Netflix has, in the past, had a co-CEO model. And the Board took it extremely seriously of -- this was a suggestion. We have been looking for a Chief Revenue Officer in North America, and David had been helping us out on a consultancy basis in North America. So when we looked at that, firstly, we did all the research around how would the model work, what would it look like, how would it operate going forward. And then we had David down to New Zealand and went through a full interview process, a very rigorous appointment process to say that David would be the right person could work well with Mark as a co-CEO, and then we have done work on splitting the accountabilities of each. But the pair of them are co-CEOs. They're not one is in charge of this part of the business and one is in charge of that. The remuneration is identical, allowing for -- after you've taken into account exchange rates, their KPIs are identical, and they work as hub but -- they work and so they joined at the hub. But what we see actually is by having two people, then instead of everything having to filter up to one CEO, you can have some parts of the business reporting into one, some reporting to the other. But they are completely aligned, and we actually believe it will improve the cadence and make things go faster. So so far, it's been working fantastically. I have a meeting with them every fortnight as co-CEOs. And we are very strongly aligned, but with everybody being able to rev up and move their parts of the business faster but also work very well together. So I know it's a little different in the New Zealand market, but we actually believe that it's giving us more and more strength. And we have not taken onboard a Chief Revenue Officer in the North American market. So our costs actually have worked out pretty much the same as to whether we had one CEO and a Chief Revenue Officer in North America or this co-CEO model. And we love what it's bringing to the organization. We've maintained all our people in the organization, and they've now got two great leaders that can work closely with them.

If I can address the question perhaps is not through you as Chair to David Kenneson really, it's about North America. As I recall, the Coretex acquisition several years ago was to do two major things. One is broaden the offering that EROAD had into North America; and two is to accelerate growth in North America across a number of verticals rather than the verticals that EROAD was previously targeting. If I step back and look at the forecast for next year in terms of revenue growth, 5% to 7% is the growth that you're forecasting, which is CPI in New Zealand and pretty much cost of funds. My question really to David is how can EROAD perhaps generate some further momentum in terms of growth in what is obviously going to be a very important market for EROAD over the next 5 to 10 years and get that growth back into double digits, frankly.

Thanks, Alex. David, would you like to address that first?

Yes. Thank you very much. Is this on?

Yes.

Perfect. So through the Coretex acquisition, we obviously acquired some very amazing technologies that are opening us into markets such as I spoke about construction, refrigeration. We also have, I've mentioned, iconic brand, Sysco is very core to our business there. And through those technologies that we've acquired through Coretex and the Sysco brand, we've been able to start building a significant pipeline across North America. Since I've been involved with the company last year and then sitting in the seat next to Mark, we've really focused on uplifting the sales team in the region. We're making several changes to our marketing engine, which we feel that is accelerating. And of course, even our large customers, and we have two of the largest -- two of the top largest five fleets in North America. We have over 10% of the top 50 fleets. We're growing with them as well. So I guess there's maybe a little bit worry to answer to your question. But what we're seeing right now, we're seeing momentum week-over-week in pipeline development. But as you know, with these large enterprise accounts, it's a bit lumpy, and it's a little hard to forecast. So we feel really confident about the numbers we have in front of us that Margaret shared and we've shared obviously with all of our investors. But we're obviously pushing forward, and we hope to see a continued increase in pipeline and shorten sales cycles with our new AI products coming to market.

Are there any other questions?

It's Brooke from Milford Asset Management. Just a couple of comments from me. Firstly, thank you to you, Susan, for overseeing the Board restructuring here. I think that's been a successful move. And I also wanted to congratulate the company on the changes that have taken place over the last couple of years. It's been a long journey, but you see a good platform and it should be on -- onwards and upwards from here. I wanted to ask a question around at the results in May, you had some guidance for next year. Are you doing anything with that guidance today? You announced a new contract win in Australia. So I just wanted to see what was actually happening with that -- with your guidance?

At this stage, Brooke, we are maintaining that guidance. I think as David mentioned, one thing about EROAD is that with our 94.8% retention rate, that means that customers are sticky, and so therefore, to -- while that's great for us that helps us maintain the customers, it does mean that it's quite hard to extract large customers from other competitors. So it will take time. At this stage, we're maintaining guidance is the pipeline fills up and we get greater confidence because obviously, we're measuring that quite carefully, having it weighted, et cetera. we will certainly update guidance, should anything change. But we feel at this stage, we see a great future, we see things coming. But let's just solidify it and see it turning into a bit of action, and I'm hopeful that we can upgrade guidance as we start delivering on all our strategies. Thank you. Anything else, Mark or David, you'd like to add to that?

I might just add, Susan, I think Brooke for the question. These deals have very long lead times, as we know. So we did factor into our guidance we provided that we wouldn't just deal, but also very long roll-up times as well. So obviously, we've got 5,000 new units. It doesn't happen overnight. So we're rolling out over time. As David mentioned before, we are working actively on the pipeline. There's new solutions coming to market. We've talked about AI camera today, there's some other things that leave as well that we're looking forward to provide to market. Debt focus on new products, combined with the new work [indiscernible] was put into North America for sales. We're hoping that by the back end of the year, we start bringing some deals forward and we start to fit solidification, hopefully, greater revenue off the back of that.

That's great. Can I have just one follow-up question, and this one might be for David. And it's around those AI cameras. And what is interested in was the go-to-market around those cameras. I mean are you -- are we going to be back selling those into current customers? Or do they have to be sold into new customers? Can we get a sense for if we've got -- if those customers have got -- 50% of customers have got cameras already. Will we be reselling or are they camera-less and will sort of give us an open field to sell into?

Yes, we're pretty excited about that. We're going to be selling these into net new customers as well as into our existing fleets, working with a very, very, very large company in North America right now. They have cameras in cap and you're looking to replace it, they're considering our camera. So it's not a one deal. But there -- we do see a shift with a lot of our larger enterprise customers looking to sort of single source and go with one vendor. So having the AI camera really gives us a robust holistic offering, which we think is going to make us even more competitive. -- our current customers, they love us, they want to stay with us, and I think it's going to help us get into new markets as well.

Other questions? Bruce.

Just more on the cameras. They seem to be audio fit for the U.S. department [indiscernible] Safety and Fitness Electronic Records Program. Can you comment?

David, I'll let you pick that up?

I'm happy to. Thanks, Bruce, for the question. We are seeing more and more, whether it's actual regulations requiring people to use cameras or just whether insurers are required or even just from a safety perspective, this is a big impetus now to put cameras in vehicles. It's part of the reason we've invested not just in camera technology a couple of years ago, and we were existing in camera market -- we're now investing to AI cable cameras as well. So it's a big part of any state operation, whether regulatory base or just due to insure other areas, but it does fit very well into it. We did actually -- we are sort of advancing alpha-testing cameras right now and we are getting some great results, one Kiwi customers gave it a 9 out of 10. He gave one of our competitors 2 over 10, which is great to see. So we're really looking forward to bringing to market and seeing customers now being delighted and buy the camera offered.

This year, it's cameras. Last year, it was your decarbonization tool. How has that developed? And are you taking market share?

So we launched that decarbonization tool September last year in collaboration with EECA. What we've seen over the course of the last 12 months has got over 1,000 of our customers in New Zealand who have accessed it. Over 37,000 vehicles have been using the technology, which is a great vindication of the investment we put in there. Off the back of next -- by September this year, we can start charging for it because part of the deal was we couldn't charge at the outset. But we do see a strong attraction to that solution. Our customers have a big carbon challenge before them, 70% of all carbon emissions come from transportation, and we've been a care neighborhood to help reduce that. There was a project management firm, I believe, in Palms North that have been using it recently. That's a 28% reduction in the carbon emissions on the back of used notes, which is really cool to see. So the product has been well used. And we are putting more investment in that space, partly around using care and technology to be more accurate. And we're also going to be launching that module in to North America and Australia sometime shortly, too.

Your [indiscernible] for Australia is far lower than North America and New Zealand. Why is that?

I can start and probably Margaret can add. I mean we do have a big weighting around enterprise customers in Australia,; has a greater weighting of enterprise to small to medium business. And to enterprise customers, in one level, they have strong negotiations, then get a final price. But at the same time, they've got a broader customer base as well. And what we've seen is we grow off the back of them, too. So get that sort of mix there. But Margaret, anything you want to add to that?

Just a couple of things. The Australian market is a much more fractured market. So it's much -- it's quite different to New Zealand in terms of the competitors. And so that means our pricing also has to reflect what's happening with those -- the competition in the market. So that impacts us as well and the mix of products. So it's also the market that has the most difference in mix. Basically, we put all our products into Australia. So we end up with the ARPU impacted by the mix and what we're doing around what we're selling ultimately.

One final question. In past years, we've had a resolution and nonbinding to approve the remuneration report. It's gone this year. Why is that?

We had a really -- I'll pass over to Sara to further elaborate, but we had a really good look at what were the requirements of the NZDX. And we decided that it was best to meet the requirements of the NZDX. They had a very good look at the say-on-pay voting from Australia and decided that it wasn't meeting any needs of shareholders. And so they made the recommendation to follow their guidelines, and we make sure we go right through those guidelines and follow the NZDX guidelines given this is our primary listing here in New Zealand. Sara, have you got anything else to add on it? No?

Susan, it's perfect.

Any other questions?

It's [ Michael Shroff ] again. I wonder if you could tell us about who are your competitors in the North American market.

Yes, sure. Well, clearly, one of the largest competitors we see in the market today is Samsara. They're fairly broad and wide in what they do. But the markets that we're playing in the large enterprise accounts, large fleets, the top 100 private fleets in North America, large instruction and refrigerated. There's a number of players that we see there. Samsara is typically playing more at the lower market, although they're the bigger telematics provider in North America. Depending on the industry, we could be running into potentially Navman or Geotab. But looking at somebody who's providing everything that we're providing from now the cameras to the CoreTemp AI solutions to our integrations with Thermo King and Carrier on the refrigerated side to the sensors that we provide in construction, the drum rotation sensors and the other AI technology we provide around that, I hate to say that there's not really a direct competitor that we see that's putting price pressure on us in those areas. And I think that's why we're winning the deals we're winning and we're kind of commanding the margins we are in those industries.

Thanks, David. Any other questions? I'll just get a microphone for you.

[ Linden Williams ], shareholder. A couple of years -- up to a couple of years ago, I was very conscious of the work that EROAD was doing, we're employed to do research on the I-95 Corridor and that would impact the government or in the various states, we're going to collect the EROAD, which is strongest. Could you give us an update on that project? Is it stopped? Is it successful or...

I might ask Barry, who's an expert in American transportation technology and development. It was certainly an area that we had a contract to participate in that trial, which has now finished. But Barry, has a good update for you on North America.

Sure. So as you can imagine, we're in America fairly far behind what New Zealand has done when it comes to road user charging. Most of what was done through the pilot program in the I-95 Corridor was to test out the technology, user acceptance, all the back-end systems. Now that that's completed, the states make these decisions on a state-by-state basis. So we won't have for a very long time a federal law on this, we have -- Hawaii has moved forward, Oregon has moved forward, California is in trials, Virginia has moved forward. So we'll move state by state now. And that's really -- that's the federal government's role, is to prove out the technology and then let the states adopt it.

We do see some exciting times in New Zealand with road user charges because naturally, as vehicles move away from petrol and you can't collect the fuel taxes, either to EVs to hydrogen. In New Zealand, we've had diesel road user charges for a long time. We do see a growing market. Obviously, on April EVs had to pay road user charges. And in the collection of those road user charges or tolls, often 30% of that goes in administration. You see last year, we collected over $800 million in road user charges for the government at no cost to them. And so it's a very attractive solution having the electronic road user charging solution that EROAD offers. But then on top of that, anybody can build the environmental things, the health and safety. And I'd really encourage everybody to go and have a sit down and look with the AI cameras afterwards. I mean it's amazing. They can pick up when somebody uses a cell phone and somebody's eyelashes start dropping, when they yawn, all that type of thing and the driver but then also monitor across a fleet of hundreds of drivers to say who is driving too close to the car in front, all those types of things which are likely to cause accidents and everybody wants their drivers to go home safely at night and not have accidents, et cetera, on the road. So built on the back of those road user charges, we're developing and have added a huge amount of functionality. But I think really in the world, it's great to see New Zealand having lead it probably by the farm lobby way back, who didn't want to pay road user charges on the diesel, but now using the vehicles on the farm. But we've been doing it for over 15 years, and we're really leading in that technology, as you can see by our market share.

So for the New Zealand opportunity with private cars, have we got all the existing hardware for that? Is it just -- is just rolling out more of the same? Or is there a new product required?

There are certainly a lot of options, which are way less expensive than having to put the full EROAD technology. And -- but Mark, why don't I let you talk to the details?

Thank you, Susan. I mean we have -- first and foremost, our technology can service eRUC for all vehicles in the country. We saw recently the transition for EVs and plug-in hybrid. We've been talking to government. They're quite keen to talk to us around what the technology can do because when you look at a commercial operator, they need the full sort of solution. Our passenger vehicle needs more of a cut-down version. We are looking at what technology can enable that, and we do have some good solutions there. So there's certainly a technology solution to the challenge. What we're working with the government really is around what do we want to do next. And so they're very much signal the fact they want to transition to eRUC for all vehicles. We provide some input into that, and we'll sort of keep working close with them and sort of see how this develops over time. It's not going to happen overnight. I'd say in the next 2 to 3 years will be quite interesting times, and we're certainly helping support the government on that journey.

Any other questions from anybody?

Can I ask you about your IT team and your engineers? They're based in Auckland. And the number of people expanding, are you getting good people to do all the research or the...

Technology is, again, one of Mark's areas. But he can talk to you in detail the majority of our engineers in New Zealand, but we do have them in North America as well.

Correct. No, we've always sort of invested in new Zealand, been proud to do so. So we do have a number of engineers. The teams run 180, 190 odd engineering product people in this country. For a while, it was a real challenge to get talent and as our boards were shut and there's been some highly competitive companies out there recruiting talent. We find we're getting more and more able now talent into the business. So we've been delighted by that. We've got a small offering of engineers in North America, too, to support the customers, deepen that market. But we're really impressed by the quality of talent that comes through. EROAD does run an intern program as well every year. So we usually recruit 10 to 12 new engineers out of universities. They're wonderful. We're delighted with that. We're about to run our intern program through shortly. And so there's no shortage of great talent in this country, and we're happy to keep hiring off the back of that.

You mentioned before about consultants. Are you still using consultants? Why would you need to use consultants?

When we initially integrate Coretex, we know it's a big initial R&D to sort of bring together the platforms and help sort of have a different type of integration layer. We spent about $10 million across FY '22 and FY '23 pretty much in integration spend, which is where we use the consultants. From time to time, we do use them, not in a huge amount. It's really for overflow work or specific technology requirements that we can't do ourselves. It's very much project by project based. That's far fewer than what we had in the past.

Yes. Sometimes it's not worth keeping all the technology expertise in your organization if you're just doing a project where you may only need those skills for 6 to 12 months. So it makes sense to bring in some real experts on a short-term project. And that's in, I think, across most technology stacks. There's areas which you need the core expertise, but there's others where it's worth using consultants to help with a project and then move them on after they've done that. We are trying to get more women in tech. So we're very proud that we actually have 3 women on the Board for a technology company. Unfortunately, the numbers in tech are still quite low. So if you can encourage your daughters, granddaughters, anybody else to take mathematics and STEM subjects at school and move into a tech degree. And as Mark said, we are taking on graduates because a lot of people do a tech degree and then don't go on and work in tech, which is a shame in New Zealand given that technology will be the future of the country. So we do need to encourage more companies to then take them on and help train them rather than just expect them to be trained by somebody else and hit the ground running or bringing people from overseas to fill the gaps. So we're doing our bet, but it's up to all of us to keep growing the technology skills in the country.

[indiscernible] New Zealand is growing that has been 2 or 3 -- 3 or 4. But now they're going to [indiscernible] export [indiscernible].

Yes, certainly. We were at the Hi-Tech Awards, which were actually founded by Selwyn going back many years. Selwyn, why don't you mention a bit about the Hi-Tech Awards and what they're doing, and certainly, Judith Collins, Minister for technology was very determined that she wanted to grow the sector. She spoke about a lot of things. But I've been trying to find the speech and follow up and make sure they get delivered.

If I go back in time, there was probably 300 people at the Hi-Tech Awards. There was 1,320 at the Hi-Tech Awards this year. The politicians line up one after the other to be there because of the audience and because we're now the #2 export sector, and we are obviously part of the economy with the highest margins. So it makes sense. So we're in good shape in the tech sector.

Are there any other questions? If not, can I please, please, please encourage you all to stay and have some refreshments? We have a lot of sandwiches over there, and we don't want them to go to waste. So make it your lunch, do join us, all of the Board and the management team. We have a lot of the management team. We have our auditors here from KPMG. We have Rachel and our lawyers here from Chapman Tripp. Feel free to come and speak to any of us. We'd love to chat with you. And do stay and have some refreshments. Sorry to people online. I can't offer you refreshments. But thank you for joining us, and I'll call the meeting to a close.