How EROAD’s ANZ Focus and eRUC Bet Could Reshape Its Future

Financial Performance and Market Dynamics

EROAD Limited, a leader in transportation technology services, released its H1 FY26 financial results showing a modest revenue growth of 3.3% to NZ$99.1 million. This growth was primarily driven by a 6.7% increase in the Australia and New Zealand (ANZ) region, offsetting a 1.5% decline in North America. Subscription revenue, a key recurring income stream, rose 5.4%, reflecting steady customer engagement and pricing adjustments.

Annualised Recurring Revenue (ARR), a critical metric for SaaS businesses, increased by 6.9% to NZ$178.1 million, underscoring the company’s ability to secure long-term contracts and expand its footprint in ANZ markets. Free cash flow to the firm improved markedly to NZ$6.2 million, or NZ$16.7 million when normalised for one-off 4G hardware upgrade costs, highlighting operational efficiency and disciplined cash management.

North American Challenges and Impairment

Despite these positives, EROAD faced significant headwinds in North America. The company recorded a non-cash impairment charge of NZ$134.7 million related to goodwill and other assets, triggered by the termination of a large legacy customer contract and challenging economic conditions in the region. This led to a reported EBIT loss of NZ$133.9 million and a net loss after tax of NZ$144.2 million for the half-year period.

The impairment reflects a strategic recalibration, with management prioritising growth capital allocation towards ANZ markets where policy momentum and customer conversion rates are stronger. The North American market remains important, but investment is being approached cautiously amid competitive pressures and slower economic growth.

ANZ Expansion and eRUC Opportunity

In ANZ, EROAD is capitalising on the significant opportunity presented by the transition to electronic Road User Charges (eRUC). New Zealand’s government plans to move all vehicles to a universal eRUC system by 2027, a shift that aligns closely with EROAD’s pioneering technology and regulatory expertise. The company collected approximately NZ$946 million in RUC fees for the New Zealand government in the year to September 2025, reinforcing its market leadership.

Australia is also signalling similar policy directions, and EROAD’s recent enterprise win with Cleanaway, Australia’s leading waste management company, adds over A$5 million in ARR from a 3,000+ heavy vehicle fleet. This deal exemplifies EROAD’s growing influence and product-market fit in the region.

Operational Highlights and Governance

Operationally, the company is nearing completion of its 4G hardware upgrade program in ANZ, with 87% of units 4G compatible as of September 2025. This upgrade is expected to free up cash flow in future periods and improve service reliability. Asset retention remains strong at 92%, indicating high customer loyalty.

Governance changes include the appointment of John Scott as Executive Chair, who is working closely with CEO Mark Heine to drive disciplined execution. The Board has also introduced a Directors’ Fixed Share Trading Plan to align management interests with shareholders, signaling confidence in the company’s long-term strategy.

Outlook and Strategic Focus

EROAD reaffirmed its FY26 guidance, targeting revenue between NZ$197 million and NZ$203 million, ARR of NZ$175 million to NZ$183 million, and a free cash flow margin of 5% to 8% normalised for the 4G upgrade program. The company plans to focus growth investment in ANZ markets, leveraging its established technology and regulatory position to capture the expanding eRUC opportunity.

While North America remains a key market, the company is adopting a cautious investment approach, focusing on customer retention and operational efficiency. The upcoming Investor Day in March 2026 is expected to provide further insights into product roadmaps and long-term financial targets.