EROAD Resets for Growth as ANZ Momentum Offsets North America Weakness

About Eroad Ltd

Eroad Ltd (ASX: ERD) is a hardware-enabled SaaS company providing safety, compliance, sustainability and efficiency solutions for complex vehicle fleets. Its connected platform helps commercial and government fleet operators manage vehicles, assets and drivers with greater visibility and control. The company operates across New Zealand, Australia and North America, supporting highly regulated fleets in sectors such as food, concrete, aggregates and transport. EROAD also has a strong regulatory technology heritage, having delivered New Zealand’s first GPS-based road user charging system.

FY26 reflected a business in reset mode

The headline result was clearly shaped by legacy issues rather than simple trading weakness. Revenue increased only slightly to NZ$195.2 million, while ARR slipped 0.5 per cent to NZ$174.3 million. The modest group result masked very different regional trends, with New Zealand steady, Australia growing strongly and North America declining because of previously disclosed customer non-renewals and freight market softness.

Reported earnings were weak, with EBIT at negative NZ$155.9 million and Net Loss After Tax at negative NZ$161.1 million. The largest item was the NZ$134.7 million non-cash impairment of North American goodwill, intangible and other assets, which had already been reported in October 2025. Normalised EBIT was NZ$2.9 million after excluding the impairment, accounting estimate changes and one-off costs related to the 4G hardware upgrade, patent litigation and transformation activity.

This means the statutory loss was severe, but not entirely reflective of the underlying operating base. The more important issue for investors is whether the transformation program can lift service quality, product stability, customer retention and cash generation over FY27 and FY28.

New Zealand remains the cash engine

New Zealand remains EROAD’s most strategically important and cash-generative market. Revenue increased 1.1 per cent to NZ$102.0 million, while ARR rose 5 per cent to NZ$93.5 million. Asset retention was strong at 91.9 per cent, and monthly SaaS ARPU increased 3 per cent to NZ$61.71.

The completion of the 4G hardware upgrade is a major positive. EROAD replaced 73,000 units in New Zealand over three years, achieving an approximately 88 per cent renewal rate across the life of the program. With that upgrade now complete, cash, sales and customer service capacity can be redirected towards higher-value solutions and better service outcomes.

New Zealand also provides the clearest structural growth opportunity through electronic road user charging. EROAD remains the largest electronic RUC provider in New Zealand, processing more than 80 per cent of electronic RUC transactions. As the country progresses towards broader road user charging across more vehicle types, EROAD is positioned to benefit from its established platform, regulatory knowledge and customer relationships.

Australia delivered the strongest growth

Australia was the standout growth region. Revenue increased 40.3 per cent to NZ$18.8 million, while ARR rose 73 per cent to NZ$21.9 million. Asset retention was 95.8 per cent, and monthly SaaS ARPU increased 20 per cent to NZ$57.63, supported by enterprise expansion and higher-value product adoption.

The Cleanaway rollout is central to the Australian growth story. Deployment progressed through FY26 and remains on track for completion in November 2026. Once fully deployed, the contract is expected to add A$5 million of ARR. The rollout covers more than 3,000 heavy vehicles and shows EROAD’s ability to win and implement major enterprise contracts in Australia.

Australia is still a smaller part of group revenue, but its contribution is growing quickly. The region now accounts for around 10 per cent of group revenue, compared with 7 per cent in FY25. As scale improves, Australia should provide stronger operating leverage and become a more meaningful contributor to group earnings.

North America remains the key challenge

North America continued to weigh on group performance. Revenue declined 7.1 per cent to NZ$74.4 million, while ARR fell 20 per cent to NZ$58.9 million. Asset retention was 80.1 per cent. The region was affected by previously disclosed customer non-renewals and broader softness across the US freight market.

The business is now being repositioned around a more focused operating model. The priority is to protect the existing revenue base, improve customer outcomes and lift service capability, rather than chase growth at any cost. New regional leadership is reviewing customer execution, service performance and go-to-market strategy.

This is a sensible shift. North America still generated substantial revenue, but the impairment shows that previous expectations for the region were too high. The aim from here is to stabilise the business, reduce cost-to-serve and move towards a more disciplined, cash-focused position.

Transformation priorities are clear

EROAD’s transformation plan is built around five priorities: operational excellence, product excellence, customer intimacy, becoming AI native and winning the eRUC opportunity. The focus areas include platform stability, order-to-cash improvements, customer onboarding, support performance, dashboard enhancements, AI-assisted workflows and expanded road user charging capability.

The company is also modernising its platform and using AI to improve internal workflows, reduce manual processes and support better customer service. This matters because EROAD’s products operate in complex fleet environments where hardware, compliance, integrations and real-world workflows make reliability essential.

Cash flow and liquidity remain important supports

Free cash flow to the firm was only NZ$0.1 million, reflecting the temporary impact of the 4G upgrade program. Normalised for that program, free cash flow was NZ$14.4 million, representing a 7.4 per cent margin. Liquidity remained solid at NZ$49 million, supported by a NZ$65 million credit facility limit and NZ$16 million of net debt.

This gives EROAD room to fund transformation activity and support large enterprise deployments without requiring immediate additional capital.

Outlook

EROAD enters FY27 with a clearer but demanding agenda. New Zealand should provide stable cash generation and eRUC optionality, while Australia offers the strongest growth pathway through enterprise wins and platform adoption. North America remains the main risk and will need disciplined execution to protect revenue and improve customer outcomes.

The next six months are expected to remain challenging, but the business now has a more focused regional model, defined transformation priorities and stronger ANZ momentum. Overall, EROAD is still in repair mode, but the foundations for a more sustainable recovery are becoming clearer.