26 Nov 2021

EROAD accelerates towards next phase of growth

Market Release 26 November 2021 EROAD accelerates towards next phase of growth Transportation technology services company EROAD (ASX/NZX: ERD), with its purpose of safer and more sustainable roads, today released its financial results for the first half of the 2022 financial year. All numbers are stated in New Zealand dollars (NZ$) and relate to the six months ended 30 September 2021 (H1 FY22). Comparisons relate to the six months ended 30 September 2020 (H1 FY21) unless stated otherwise. Key highlights: • Revenue increased $2.2m to $48.0m from H1 FY21 (which included non-recurring revenue of $1.6m) and delivered reported EBITDA of $12.6m which includes $2.0m of transaction and integration costs; • Contracted units increased by 6,500 despite COVID-19 and monthly ARPU was $57.64 reflecting additional products and services sold; • Asset retention rate remained high at 94.1% reflecting the quality of EROAD’s service and product offering; and • Continued acceleration of growth strategies by increasing R&D spend to 28% of Revenue, development of strategic partnerships and the undertaking of the transformational acquisition of Coretex. “EROAD’s financial result reflects both the continued investment in our growth strategies as well as the resilience of our business model in continued challenging macro-economic conditions. Sales momentum is expected to increase with the easing of COVID-19 impacts, the launch of the next generation platform and hardware, the release of Clarity Solo, and the Coretex acquisition.” said Steven Newman, Chief Executive Officer. EROAD Chair Graham Stuart says: “We have always been clear, that EROAD chooses to grow through organic growth, strategic partnerships and acquisitions. In H1 FY22, we have successfully delivered across all these fronts. We are positioned for the next phase of growth as we look to build our business in the North American and Australian telematics markets.” Revenue increased $2.2m to $48.0m reflecting growth in units, dashcams and additional add- on subscriptions sold to customers. This was partly offset by a reduction in other revenue from H1 FY21. This prior period included income from the forgiveness of a North American COVID-19 government support loan ($1.6m). Over the period, contracted units grew by 5% to 132,703 reflecting continued good growth in both New Zealand and Australia. This was partly offset by a fall in units in North America predominantly due the loss of an enterprise customer (1,751 units) which aligned its technology with that of its acquirer. EROAD also continued to see increased momentum selling add-on hardware or SaaS subscription products with over 296 customers adding a product or service to their existing plan, representing 7,341 Dashcam Clarity, Inspect, Logbook or Bookit subscriptions added. EROAD’s Asset Retention Rate remained high at 94.1%, reflecting the quality of EROAD’s service and product offering. In addition, 538 customers across all markets renewed their EROAD plan (representing some 16,481 contracted units). EROAD’s Annualised Monthly Recurring Revenue metric increased to $92.8m from $88.4m at 31 March 2021. EROAD also increased Future Contracted Income from $140.0m to $149.1m reflecting the considerable number of renewals that occurred during the period, including the continuing 3G to 4G roll- out programme in North America (nearly 80% of North American units now on 4G technology. Operating expenditure increased from $30.5m to $35.4m. This increase includes $2.0m of transaction and integration costs relating to the Coretex acquisition, increased employee costs related to additional employees hired and the increased competition for talent, as well as annual leave accruing over COVID-19 lock-downs. Accordingly, reported EBITDA reduced from $15.3m to $12.6m, representing an EBITDA margin of 26%. For H1 FY22, once transaction and integration costs are excluded, normalised EBITDA is $14.6m, an increase from normalised EBITDA for H1 FY21 of $13.7m once the one- off COVID-19 government support loan in North America of $1.6m is excluded. EROAD’s normalised EBITDA margin is 30%. As anticipated, research and development spend increased from $9.3m to $13.3m, representing 28% of revenue. As EROAD moves ahead with its growth strategies, research and development is focused on opening up our addressable market for Enterprise customers. Successful delivery of EROAD’s growth strategy EROAD is in a transitional period, as it moves into the next phase of growth. EROAD has continued to deliver on its growth strategy, with operating cashflow and two capital raises over the last 12 months allowing acceleration of investment for organic growth, the development of strategic partnerships and the undertaking of the transformational acquisition of Coretex. EROAD continues to extend its platform offering. Since March 2021, EROAD has released a series of enhancements and new products to enable growth, including EROAD Analyst, EROAD Bookit, EROAD Messaging and EROAD Where Mini Tags. In October 2021, EROAD expanded its video telematics offering with the launch of EROAD Clarity Solo Dashcam (with no in-cab requirement for a pre-installed EHUBO unit). Clarity Solo is an integrated dashcam and telematics device, as such it expands EROAD’s addressable market into a wider range of fleets (e.g. US Light Commercial Vehicles), without the need to also install an EHUBO, and it can also be installed alongside other telematics providers. With the low penetration of video telematics across North American transportation fleets, this significantly increases EROAD’s addressable market. EROAD entered into a strategic partnership with Philips Connect in June this year which provides customers a single view of all of their assets, including trailers and assets making deployment and management easier. EROAD sold 666 Philips Connect solutions in H1 FY22. EROAD has also entered into a partnership with Seeing Machines, an industry leader in vision- based monitoring technology, that enable machines to see, understand, and assist people. In July 2021, EROAD entered into a conditional agreement to acquire Coretex. The acquisition is expected to accelerate key growth metrics by two years enabling EROAD to capture significant growth opportunity in North America and Australia (particularly with respect to Coretex’s focus on the Enterprise customer segment, which has been less impacted by COVID- 19 challenges). It also accelerates growth by adding new strategic verticals and broadens EROAD’s product offering and customer base. The acquisition has now received 100% shareholder approval, and both Overseas Investment Office and NZ Commerce Commission approvals and is expected to complete with effect from 1 December 2021. It is anticipated that the two businesses will be largely integrated in approximately 12-18 months. The initial focus will be on North America and promoting the Coretex 360 platform and CoreHub hardware solution as EROAD’s next generation product within weeks of completion to enable sales momentum to increase in that market. FY22 Outlook As announced in EROAD’s Q2 operating update on 21 October 2021, with continued challenging macro-economic conditions (particularly in North America) and the Coretex acquisition expected to complete before the end of 2021, EROAD now expects stand-alone FY22 revenue growth to be between 10% and 13%, and continues to expect normalised EBITDA margin (prior to integration and transaction costs) to be at or around the levels delivered in FY21. While good growth is still being experienced in both Australia and New Zealand, some anticipated growth has been deferred to either later in FY22 or into early FY23 due to COVID- 19 lock-down restrictions delaying piloting activity, installation roll-outs and lengthening sales lead-times. North America continues to experience ongoing impacts of COVID-19 and its associated economic challenges, in particular significant driver shortages and supply chain issues impacting mid-market customers. As a result, growth to date has been below EROAD’s expectations. With the easing of COVID-19 restrictions and their impacts, the launch of EROAD’s next generation Android platform and hardware, the release of Clarity Solo in October, and the completion of the Coretex acquisition, EROAD expects increased sales momentum in FY23. The Coretex acquisition is expected to complete with effect from 1 December, therefore it is now appropriate for EROAD to withdraw its FY22 stand-alone guidance as it is no longer relevant for the combined entities. Ends Authorised for release to the NZX and ASX by EROAD’s Board of Directors. Conference Call details: EROAD’s Chief Executive Officer, Steven Newman, and Chief Financial Officer, Alex Ball, will give a presentation on the company's financial and operational performance via a teleconference commencing at 11.00am NZDT. Register in advance for this webinar: https://us02web.zoom.us/j/85265986688?pwd=d1F6YmxCYkYzRFUveXRTQ3hmcE1Wdz09 After registering, you will receive a confirmation email containing information about joining the webinar. A replay of this conference call will be available once it has been uploaded to the EROAD website under ‘presentations’ on https://www.eroadglobal.com/investors For Inve stor enquires please contact: Anna Bonney Investor Relations +64 21844155 a nna@merlinconsulting.co.nz For Media enquiries please contact: Courtney Ayre ANZ Marketing Director +61438763521 courtney.ayre@eroad.com Non-GAAP Measures EROAD has used non-GAAP measures when discussing financial performance in this document. The directors and management believe that these measures provide useful information as they are used internally to evaluate performance of business units, to establish operational goals and to allocate resources. Non-GAAP measures are not prepared in accordance with NZ IFRS (New Zealand International Financial Reporting Standards) and are not uniformly defined, therefore the non-GAAP measures reported in this document may not be comparable with those that other companies report and should not be viewed in isolation or considered as a substitute for measures reported by EROAD in accordance with NZ IFRS. The non-GAAP measures EROAD have used are Adjusted EBITDA, Annualised Monthly Recurring Revenue (AMRR), Costs to Acquire Customers (CAC), Costs to Service & Support (CTS), EBITDA, Normalised EBITDA, Normalised Revenue, EBITDA margin, Normalised EBITDA margin, Free Cash Flow and Future Contracted Income (FCI). The definitions of these can be found on pages 41 of the investor presentation. All numbers relate to the 6 months ended 30 September 2021 (H1 FY22) and comparisons relate to the 6 months ended 30 September 2020 (H1 FY21), unless stated otherwise. All dollar amounts are in NZD. About EROAD EROAD Limited (ASX: ERD; NZX: ERD) (“EROAD”) purpose is safer and more sustainable roads. EROAD develops and markets technology solutions to manage vehicle fleets, support regulatory compliance, improve driver safety and reduce the costs associated with operating a fleet of vehicles and inventory of assets. EROAD has a proven SaaS business model and is experiencing continuing growth in installed units and revenue. EROAD has operations in New Zealand, North America and Australia with customers ranging in size from small fleets through to large enterprise customers.? For more information visit https://www.eroadglobal.com/global/investors/ EROAD Safer and more sustainable roads EROAD (NZX: ERD ASX: ERD) FINANCIAL RESULTS FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2021 (H1 FY22) 26 NOVEMBER 2021 IMPORTANT INFORMATION The information in this presentation is of a general nature and does not constitute ?nancial product advice, investment advice or any recommendation. Nothing in this presentation constitutes legal, ?nancial, tax or other advice This presentation may contain projections or forward-looking statements regarding a variety of items. Such projections or forward-looking statements are based on current expectations, estimates and assumptions and are subject to a number of risks, uncertainties and assumptions. There is no assurance that results contemplated in any projections or forward-looking statements in this presentation will be realised. Actual results may di?er materially from those projected in this presentation. No person is under any obligation to update this presentation at any time after its release to you or to provide you with further information about EROAD. While reasonable care has been taken in compiling this presentation, none of EROAD nor its subsidiaries, directors, employees, agents or advisers (to the maximum extent permitted by law) gives any warranty or representation (express or implied) as to the accuracy, completeness or reliability of the information contained in it nor takes any responsibility for it. The information in this presentation has not been and will not be independently veri?ed or audited. NON-GAAP MEASURES EROAD has used non-GAAP measures when discussing ?nancial performance in this document. The directors and management believe that these measures provide useful information as they are used internally to evaluate performance of business units, to establish operational goals and to allocate resources. Non-GAAP measures are not prepared in accordance with NZ IFRS (New Zealand International Financial Reporting Standards) and are not uniformly de?ned, therefore the non-GAAP measures reported in this document may not be comparable with those that other companies report and should not be viewed in solation or considered as a substitute for measures reported by EROAD in accordance with NZ IFRS. The non-GAAP measures are not subject to audit or review. De?nitions can be found in the Glossary on page 41 of this presentation. 02 HIGHLIGHTS 4-5 OPERATING UPDATE 6-12 FINANCIAL UPDATE 13-25 GROWTH OPPORTUNITIES 26-34 FY22 OUTLOOK 35 AGENDA 03 Signi?cant progress accelerating growth strategies in continued challenging macro-economic conditions 04 up $2.2m from H1 FY21 (which included non-recurring revenue of $1.6m) REVENUE 48 .0 $ m added since FY21 despite COVID-19 CONTRACTED UNITS 6 ,500 includes $2.0m of transaction and integration costs REPORTED EBITDA 12 .6 $ m 57 .64 $ re?ecting a $0.66c improvement from FY21 from selling additional products and services, o?set by $1.23c FX impact MONTHLY SAAS ARPU strategic partnerships expanding addressable markets 92 .9 $ m compared to $88.4m at FY21 and FCI increased $7.2m from FY21 to $149.1m AMRR % 28 accelerating our technology roadmap REVENUE SPENT ON R&D PHILIPS CONNECT AND SEEING MACHINES TRANSFORMATIONAL ACQUISITION OF CORETEX to accelerate key growth metrics by two years % 94 .1 ASSET RETENTION RATE (H1 FY21: 95.3%) Focusing on what is important to our stakeholders 05 1 Published by EROAD Download here COVID-19 SUPPORTED CUSTOMERS during lock-downs in New Zealand and Australia ROAD TO SUSTAINABILITY TOITU CARBONREDUCE ?ndings help EROAD’s sustainability e?orts within the industry PROGRAMME OF WORK UNDERWAY to benchmark EROAD's GHG emissions. Led by our ESG Steering Group which meets regularly to discuss and advance EROAD's sustainability goals INDUSTRY LEADING UPTIME demonstrating the integrity and reliability of EROAD’s infrastructure 99 .9 % > REDUCTION IN SPEEDING FREQUENCY by 31% of vehicles once they installed Clarity Dashcam OVER 10 % CUSTOMERS RENEWED THEIR EROAD PLAN (representing 16,481 units) re?ecting the quality of EROAD’s product and service o?ering 538 INAUGURAL REPORT¹ CONTINUED PROGRESS AGAINST OUR MATERIALITY MATRIX MEASURES OPERATIONAL UPDATE Steven Newman Chief Executive O?cer 06 5% growth in H1 FY22 despite challenging macro-economic conditions • Contracted units continued to grow in New Zealand and Australia, despite lock-downs in both regions in Q2 • North America contracted units fell 1,445 units re?ecting: • 1,751 units representing the loss (as previously disclosed) of an enterprise customer who has aligned its technology with that of its acquirer • only 306 net additional units added (gross sales: 1,993) in H1 FY22 which was below expectations given the high level of returns due to lagging COVID-19 related impacts • Delayed conversion of pipelines into FY23 in North America and Australia as customers wait for the platform and products available through the Coretex acquisition 2 North America units for FY19 are restated for data cleansing adjustments identi?ed as part of the new business systems implementation 3 As disclosed in the Q1 Quarterly Operational Update, a recently acquired North American enterprise customer has aligned its in-cab technology away from EROAD to that of its parent. This has resulted in the return of 1,751 units. FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 H1 FY22 9,973 14,332 19,864 26,031 31,298 36,953 43,430 48,041 59,538 77,600 86,240 96,106 108,414? - 30,000 60,000 90,000 120,000 150,000 9,973 14,332 19,264 24,041 28,140 32,452 38,129 41,939 49,802 59,843 65,285 71,446 75,674 1,513 600 1,990 3,158 4,501 5,301 6,102 9,736 17,757 20,955 24,660 31,227 116,488 80,366 2,120 34,002 122,193 84,526 2,373 35,294 126,203 132,703 87,892 2,874 35,437 93,639 5,072 33,992? TOTAL CONTRACTED UNITS 07 Australia North America New Zealand ANZ Growth through Retention and Account Upgrades despite uncertainty for our customers 538 5 CUSTOMERS RENEWED THEIR EROAD PLAN (16,481 contracted units) 472 6 CUSTOMERS UPGRADED THEIR EROAD PLAN (4,944 units) 296 7 CUSTOMERS ADDED ADDITIONAL PRODUCTS AND SERVICES TO THEIR PLAN (7,341 subscriptions) 08 % 94 .1 4 ASSET RETENTION RATE m $ 149 .1 FUTURE CONTRACTED INCOME (up from $141.9m at FY21 re?ecting a high level of renewals) 4 95.5% excluding the loss of a North America Enterprise customer (1,751 units) 5 de?ned as a customer who re-signed a new contract, contracted unit numbers as at end of old contract 6 Upgraded from Ehubo1 to Ehubo2, or upgraded type of plan (connected, advance, safedriver, starter and premium) 7 Existing EROAD customers that added a dashcam, logbook or bookit subscription to their plan Growth through account expansion EROAD CLARITY DASHCAM EROAD CLARITY SOLO PHILLIPS CONNECT EROAD DAY LOGBOOK EROAD INSPECT EROAD WHERE Dual facing dashcam. Integration of dashcam with Ehubo data and other key driver and vehicle statistics supports advanced driver coaching and accident exoneration in MyEROAD Replay Stand alone dashcam with telematics included. It can be installed as its own unit or alongside telematics from another provider. Advanced trailer and asset monitoring Simpli?es fatigue management by enabling drivers to capture work and rest hours via a smart phone or tablet Makes vehicle inspections easy, capturing defects with your mobile device, and providing transparent and traceable inspection information A?ordable asset tracking 3,087 ADDED ( 26 WHICH WERE NEW EROAD CUSTOMERS) H1 FY22: 4,141; FY21: 1,054 Oct 2021 LAUNCHED 666 SOLUTIONS SOLD SINCE ENTERED PARTNERSHIP IN JUNE 2021 966 DRIVERS SUBSCRIPTIONS ADDED ( 71 WHICH ARE STANDALONE) H1 FY22: 7,621; FY21: 6,655 1,665 DRIVERS SUBSCRIPTIONS ADDED OVER 27 CUSTOMERS H1 FY22: 12,155; FY21: 10,490 2,650 ADDITIONAL TAGS SOLD TO OVER 83 CUSTOMERS H1 FY22: 9,100; FY21: 6,450 09 Increases addressable market Improved ARPU Retention tool New Zealand market North America market Australia market CHALLENGING MACRO-ECONOMIC ENVIROMENT • COVID-19 lock-down restrictions in Q2 pushed some sales into H2 and caused some supply chain issues CONTINUED EXECUTION OF STRATEGY • Grew contracted units by 5,747 to 93,639 re?ecting the roll-out of the Ventia contract (941 units) and growth with both existing customers and new customers • 329 customers upgraded their EROAD plan (1,740 units) and 180 customers added products and services to their plan (4,876 subscriptions) GROWTH OPPORTUNITY • Expect EROAD growth similar levels to prior FY21 (added 9,000+ connected vehicles p.a) • Coretex will add 7,6288 contracted units in New Zealand New Zealand remains a signi?cant growth opportunity GROWTH IN UNITS 7 % (H1 FY22: 93,639 H2 FY21: 87,892) ASSET RETENTION RATE 97.3 % (H1 FY21: 95.7%) NZ MONTHLY SAAS ARPU (H2 FY21: $56.18 H1 FY21: $55.36) 56 .78 $ EBITDA (H2 FY21: $20.3m H1 FY21: 18.5m) 22 .0 m $ 10 CUSTOMERS RENEWED THEIR PLAN 360 (12,068 units) CUSTOMERS ADDED PRODUCTS AND SERVICES TO THEIR PLAN 180 (4,876 subscriptions) 8 As at 30 September 2021 North America increasing the addressable market 9 As disclosed in the Q1 Operating Update, after its acquisition a North America customer aligned its in-cab technology to that of its parent 10 In NZ$ ARPU fell from NZ$67.30 in H1 FY21 to NZ$62.77 11 As at 30 September 2021 11 UNITS 33 ,992 ? (H2 FY21: 35,437) ASSET RETENTION RATE 86.5 % (H1 FY21: 94.3%) MONTHLY SAAS ARPU 10 (H1 FY21: US$43.07) 44 .42 US$ EBITDA (H1 FY21: $5.9m) 2 .9 m $ 172 (4,231 units) 86 (1,873 subscriptions) CHALLENGING MACRO-ECONOMIC ENVIROMENT • Lagging COVID-19 related impacts of driver shortages, loss of underlying contracts and broader macro-economic concerns CONTINUED EXECUTION OF STRATEGY • 306 net additional units added (gross sales: 1,993) was below expectations re?ecting returns from mid-market customers seen thought the high level of renewals through the period due to the 3G upgrade programme (nearly 80% of units now on 4G technology) • Loss of 1,751 units (as previously disclosed) of an enterprise customer who has aligned its technology with that of its acquirer GROWTH OPPORTUNITY • Some delay with two enterprise prospects in pilot and the solid mix of mid-market pilots launched or beginning as customers wait to pilot next generation platform • Expected to promote Coretex 360 platform and Corehub hardware solution in North America as EROAD’s next generation platform/product within weeks • Successfully increased addressable market through Philips connect partnership and the launch of dashcam Clarity and Clarity Solo • Coretex will add 50,946 units 11 and an advanced short-to-medium term Enterprise pipeline CUSTOMERS RENEWED THEIR PLAN CUSTOMERS ADDED PRODUCTS AND SERVICES TO THEIR PLAN Building the brand in Australia UNITS ADDED IN H1 FY22 2 ,198 (H1 FY22: 5,072 H2 FY21: 2,874) EBITDA (H1 FY21: $(0.4)m) ( 0.6 ) $ m MONTHLY SAAS ARPU 12 (FY20: AU$35.86) 29 .86 AU$ 12 In NZ$ ARPU fell from NZ$35.12in H1 FY21 to NZ$31.72 in H1 FY22 re?ecting the mix of solutions sold 13 As at 30 September 2021 12 OF VENTIA ROLL-OUT COMPLETE 13 60 % CHALLENGING MACRO-ECONOMIC ENVIROMENT • COVID-19 lock-down restrictions in Q2 caused delay in installations due to access to worksites and supply chain issues CONTINUED EXECUTION OF STRATEGY • Largest Australian Enterprise customer the Ventia AU roll-out was almost 60% completed In H1 (1,129 AU units 13 already rolled out) and is expected to complete in Q4 FY22 • Excluding Ventia, continued momentum in winning small-to-medium customers in Australia adding 1,069 units (H2 FY21: added 501 units, H1 FY21: added 253 units) • National Sales Manager and Product marketing manager added to leadership team to support Enterprise and market development activities • Increased brand marketing spend with a focused approach on digital marketing, targeting funnels and remarketing GROWTH OPPORTUNITY • Some delay in crystallisation of short-medium term enterprise pipeline of some 15-20k with longer sales lead-times given COVID-19 restrictions and customers waiting for Coretex platform and products • Coretex will add 7,879 units 13 improving EROAD’s market position. Coretex’s sales momentum is expected to increase with the launch of Electronic Work Diary (EWD) and a new construction product currently in trail with an Enterprise customer H1 FY22 FINANCIAL RESULTS Alex Ball Chief Financial O?cer 13 - (2.0) 2.0 20.0 - 40.0 60.0 H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 $ 38.5 m $ 42.7 m $ 45.8 m $ 45.8 m $ 48.0 m H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 $ 11.9 m $ 15.2 m $ 15.3 m $ 15.4 m $ 12.6 m H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 $ ( 0.1 ) m $ ( 1.6 ) m $ 1.5 m $ 1.2 m $ 0.7 m H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 $ ( 8.6 ) m $ ( 15.8 ) m $ ( 4.2 ) m $ 0.6 m $ 4.7 m - 15.0 20.0 10.0 5.0 - (5.0) 5.0 (10.0) (15.0) (20.0) H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 $ 11.9 m $ 15.2 m $ 13.7 m $ 15.4 m $ 14.6 m - 15.0 20.0 10.0 5.0 20.0 - 40.0 60.0 H1 FY20 H2 FY20 H1 FY21 H2 FY21 H1 FY22 $ 38.5 m $ 42.7 m $ 44.2 m $ 45.8 m $ 48.0 m Solid ?nancial performance re?ecting acceleration of growth strategies +5% -18% +9% +7% - $ 2.8 m - $ 20.4 m REVENUE EBITDA PROFIT/ ( LOSS ) BEFORE TAX FREE CASH FLOWS 14 Reported Revenue up $2.2m from H1 FY21 Normalised Revenue Normalised for a one-o? ($1.6m) COVID-19 grant in H1 FY21 Reported EBITDA margin of 26% Normalised EBITDA Normalised for one-o? ($1.6m) COVID-19 grant in H1 FY21 and ($2.0m) transaction and integration costs in H1 FY22 Normalised EBITDA margin of 30% Free Cash Flow down $20.4m re?ecting additional money spend on R&D, assets to support growth such as hardware and transaction and integration costs together totaling $23.3m 14 Please refer to the glossary on page 41 for de?nition REPORTED REPORTED NORMALISED 14 NORMALISED 14 YEAR ENDED H1 FY22 H2 FY21 H1 FY21 Movement H1 FY22 vs H1 FY21 Revenue 48.0 45.8 45.8 2.2 Expenses (35.4) (30.4) (30.5) (4.9) Earnings before interest, taxation, depreciation and amortisation 12.6 15.4 15.3 (2.7) Depreciation of Property, Plant & Equipment (5.0) (5.0) (4.6) (0.4) Amortisation of Intangible Assets (4.8) (5.1) (4.8) 0.0 Amortisation of Contract and Customer Acquisition Assets (3.3) (3.3) (3.5) 0.2 Earnings before interest and taxation (0.5) 2.0 2.4 (2.9) Net Financing Costs (1.1) (1.3) (1.2) 0.1 Pro?t/(loss) before tax (1.6) 0.7 1.2 (2.8) Income tax (expense) bene?t (1.3) 0.3 (0.2) (1.1) Pro?t/(loss) after tax for the year attributable to the shareholders (2.9) 1.0 1.0 (3.9) Other comprehensive income 0.4 0.2 (0.7) 1.1 Total comprehensive income/(loss) for the year (2.5) 1.2 0.3 (2.8) Statement of Income ( NZ$m ) • Revenue increased 5% to $48.0m, re?ecting growth in contracted units o?set by the reduction in other revenue. H1 FY21 bene?ted from the forgiveness of a COVID-19 government support loan in North America of $1.6m, normalised for this revenue grew 9% • Operating expenditure increased 16% re?ecting $2.0m integration and transaction costs and increased R&D. EROAD is also experiencing some cost pressures in remuneration and recruitment given the competitive labour market. • Some timing related costs associated with annual leave expected to reduce as markets open up from lock downs • EBIT reduced from $2.4m to a loss of $0.5m re?ecting increased spending related to the Coretex acquisition 15 ($m) H1 FY22 H2 FY21 H1 FY21 Movement H1 FY22 vs H1 FY21 New Zealand 22.0 20.3 18.5 3.5 Australia (0.6) (0.5) (0.4) (0.2) North America 2.9 4.1 5.9 (3.0) Corporate & Development (11.9) (8.6) (8.9) (3.0) Elimination of inter-segment EBITDA 0.2 0.3 0.2 - Reported EBITDA 12.6 15.4 15.3 (2.7) Reported EBITDA Margin 26% 34% 33% -7% Normalised EBITDA 15 14.6 13.7 Normalised EBITDA Margin 15 30% 30% EBITDA down re?ecting integration and transaction costs for Coretex acquisition NEW ZEALAND Continued growth into existing customer ?eets, attracting new customers and continued high asset retention resulted in a 19% increase in EBITDA to $22.0m NORTH AMERICA North American EBITDA fell $3.0m re?ecting the one o? COVID loan forgiveness in H1 FY21 ($1.6m) and increased sta? costs related to the 3G upgrade programme. It also re?ects lower travel and marketing in H1 FY21 due to COVID-19 ($0.5m) and the strengthening of the NZD against USD ($0.3m) AUSTRALIA Continuing SaaS revenue growth (up 55% from H1 FY22) o?set by increased investment in sta? to support growth resulted in EBITDA of $(0.6)m CORPORATE Corporate EBITDA fell $3.0m re?ecting integration and transaction costs ($2.0m) and employment costs including labour market pressures and timing of annual leave 16 15 $1.6m one o? grant revenue bene?ting H1 FY21 and $2.0m of integration and transaction costs impacting H1 FY22 - 50.0 100.0 150.0 - 20.0 40.0 60.0 80.0 100.0 200.0 75.8 84.0 84.8 88.4 92.9 H1 FY20 H1 FY21 H2 FY20 H2 FY21 H1 FY22 130.9 134.4 140.0 141.9 149.1 H1 FY20 H1 FY21 H2 FY20 H2 FY21 H1 FY22 H1 FY20 H1 FY21 H2 FY20 H2 FY21 H1 FY22 20 21 17 13 14 11 11 22 28 8 23 9 9 6 7 - 10 20 30 R&D Expensed R&D Capitalised Total R&D AMRR increase re?ects growth in recurring revenues from new units and SaaS ARPU, supported by a positive FX impact of $0.4m in H1 FY22 FCI increased re?ecting a considerable number of renewals that occurred during the period including the continuing 3G to 4G roll-out in North America R&D as % of Revenue of 28% with R&D spend focused on opening up the addressable market for Enterprise customers Monitoring Performance LEADING GROWTH INDICATORS ANNUALISED MONTHLY RECURRING REVENUE ( $m ) FUTURE CONTRACTED INCOME ( $m ) RESEARCH AND DEVELOPMENT AS % OF REVENUE 17 Monitoring Performance ENTERPRISE VALUE FROM EXISTING CUSTOMER BASE Monthly SaaS ARPU down from FY21 re?ecting $0.66 improvement from selling additional products and services, o?set by a $1.23 FX impact. Asset Retention Rate has remained relatively stable over time. Signi?cant renewal programmes, in particular North America with the 3G upgrade programme which saw signi?cant ?eet reduction due to lagging COVID-19 impacts. - 60 50 40 30 20 10 $ 57.60 $ 58.38 H1 FY20 H1 FY21 H2 FY20 H2 FY21 H1 FY22 $ 58.80 $ 58.30 $ 57.64 - 20 40 60 80 100 94.9 % 94.9 % 94.1 %?? 95.2 % 95.3 % H1 FY20 H1 FY21 H2 FY20 H2 FY21 H1 FY22 ARPU ASSET RETENTION RATE 18 16 Asset Retention Rate of 95.5% excluding the loss of large Enterprise customer - 5 10 15 20 25 - 1 2 3 4 5 6 CTS 13 13 22 17 17 10 14 5 16 H1 FY22 excluding loss of enterprise customer 4.9 4.4 4.4 4.7 5.6 11 13 2 3 3 3 CAC Expensed CAC Capitalised Total CAC H1 FY20 H1 FY21 H2 FY20 H2 FY21 H1 FY22 H1 FY20 H1 FY21 H2 FY20 H2 FY21 H1 FY22 $0 $250 $500 $750 $1,000 $1,250 $1,500 $1,750 $1,0 26 $1, 536 H2 FY21 H1 FY21 $9 47 $1,202 H1 FY22 Monitoring Performance PROFITABILITY CAC would be expected to trend downwards over time as revenue grows, reductions will be partly o?set by investment in development markets ahead of revenues. COST TO ACQUIRE CUSTOMERS (CAC) AS % OF REVENUE COST TO ACQUIRE PER UNIT COST TO SERVICE AND SUPPORT (CTS) AS % OF REVENUE 19 CTS has increased, re?ecting investment in billing improvements and automated customer support. CTS will improve over time as scale and leverage increases. The cost to acquire per unit has increased re?ecting the loss of a North America enterprise customer (1,751 units). When adjusted for this, cost to acquire fell due to the strong sales in New Zealand and Australia. Operating Expenses $10.0m $5.0m $15.0m $25.0m $20.0m $35.0m $40.0m $30.0m - SCALE CAPABILITY EXPANSION STRATEGIC INITIATIVES LEGAL COSTS Increased Decreased Total 30.5 H1 FY21 35.4 H1 FY22 2.4 Personnel Integration and Transaction 2.0 Other (0.6) 0.0 Other Employment 0.0 Sub-Contractors Other Professional Fees 0.0 Sales and Marketing 0.2 Software and Systems 0.4 (0.1) Legal 0.6 SaaS Platform 20 Operating expenses were impacted by $2.0m transaction and integration costs, a higher number of employees with increased pressure on employment costs given competition for talent and a build up of annual leave balances, likely to reverse in H2. PROPERTY PLANT & EQUIPMENT • PPE spend up $7.7m due to hardware purchases to support a combination of new units, release of dashcam hardware and increased inventory levels in response to global supply chain shortages INTANGIBLE ASSETS • Total intangible additions for both development and software were $11.8m • Total R&D spend of $13.3m has increased $4.0m representing 28% of revenue. • Higher levels of investment in R&D includes increased development, the use of outsourced support, along with some labour pressures given skill shortages and border closures. • Of the total R&D spend, $10.5m was capitalised as development ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT ADDITIONS TO INTANGIBLE ASSETS 1.7 9.4 10.00 8.00 2.00 4.00 6.00 - Total PPE Additions* ($m) 1.5 8.9 Hardware Asset Additions ($m) 1.8 4.0 H1 FY21 H1 FY22 H1 FY21 H1 FY22 H1 FY21 H1 FY22 *Excluding Additions to Right of Use Assets Hardware Asset Additions excluding Inventory Management ($m) 5.6 11.8 5.1 10.5 0.5 1.3 H1 FY21 H1 FY22 H1 FY21 H1 FY22 H1 FY21 H1 FY22 Total Intangible Asset Additions ($m) Development Asset Additions ($m) Software Asset Additions ($m) 21 Increased investment in R&D TO SUPPORT NEW PRODUCT DELIVERY IN FY23 AND FY24 RESEARCH AND DEVELOPMENT ( $m ) MOVEMENT IN INTANGIBLES ( $m ) 22 R&D Expensed R&D Capitalised - 15 10 5 H1 FY20 H1 FY21 H2 FY20 H2 FY21 H1 FY22 5.0 5.1 8.0 3.2 8.2 4.6 2.8 2.8 4.2 4.0 7.4 9.3 12.0 10.5 13.3 Increase Decrease Total Additions Amortisation - 60 40 20 FY21 H1 FY22 45.3 11.8 (4.7) 52.4 22.0 2.9 (2.1) (0.9) (1.4) (0.7) - - (0.6) (0.3) (0.7) (0.1) (0.4) 20.0 15.0 25.0 10.0 5.0 - (5.0) (10.0) (15.0) (20.0) CDE EBITDA Development Assets Software Assets Interest Paid Group Free Cash Flows H1 FY22 (2.0) 0.1 NEW ZEALAND $17.1m (H1 FY21: $15.4m) NORTH AMERICA $0.5m (H1 FY21: $5.0m) AUSTRALIA ($1.8m) (H1 FY21: ($0.3m)) CORPORATE & DEVELOPMENT ($31.6m) (H1 FY21: ($15.4m)) Other Operating Cash Flows‡ EBITDA Other PPE CA Assets H&A Assets CF Assets EBITDA Other PPE CA Assets H&A CF Assets EBITDA Other PPE CA Assets H&A CF Assets H&A under Construction Operating Companies FCF H1 FY22 (11.9) (15.8) (4.9) Other PPE (0.5) (10.5) (1.3) (1.3) 10.9 (1.2) Free Cash Flow Analysis by Segment H&A Assets - Hardware & Accessory Assets • CA Assets - Customer Acquisition Assets • CF Assets - Contract Ful?lment Assets • CDE EBITDA - Corporate, Development and Elimination EBITDA • H&A under Construction - Hardware & Accessories under Construction 23 $13.8m investing for growth and scalability Cash ?ow statement ( NZ$m ) • Operating cash ?ows have reduced by $4.5m re?ecting the increased spending related to the Coretex acquisition along with an increase in receivables and prepayments • Investing cash out ?ows grew from $9.7m (H1 FY21) to $25.6m re?ecting the increased investment in intangibles (research and development) and growth in units along with inventory levels (in response to global supply chain pressures) • Financing cash ?ows were $78.0m for the period as a result of the issue of equity of $84.7m in July (placement and share purchase plan) Year ended H1 FY22 H2 FY21 H1 FY21 Movement H1 FY22 vs H1 FY21 Cash ?ows from operating activities Other operating cash ?ows 11.0 15.3 15.3 (4.3) Net interest paid (1.2) (1.5) (1.0) (0.2) Net cash in?ow from operating activities 9.8 13.8 14.3 (4.5) Cash ?ows from investing activities Property, Plant and Equipment (including hardware assets) (9.5) (3.0) (1.7) (7.8) Intangible Assets (11.8) (7.4) (5.7) (6.1) Contract ful?llment and Customer Acquisition Assets (4.3) (2.7) (2.3) (2.0) Net cash out?ow from investing activities (25.6) (13.1) (9.7) (15.9) Cash ?ows from ?nancing activities Bank loans (2.4) (2.6) 1.8 (4.2) Issue of Equity 84.7 10.9 42.0 42.7 Cost of raising capital (3.5) (0.1) (2.0) (1.5) Other ?nancings cash ?ows (0.8) (0.8) (0.8) 0.0 Net cash in?ow/(out?ow) from ?nancing activities 78.0 7.4 41.0 37.0 Net increase/(decrease) in cash held 62.2 8.1 45.6 16.6 Cash at beginning of the ?nancial period 57.1 49.0 3.4 53.7 Closing cash and cash equivalents 119.3 57.1 49.0 70.3 24 AS AT PERIOD END H1 FY22 FY21 Movement Cash 119.3 57.1 62.2 Restricted Bank Account 13.5 10.5 3.0 Costs to Acquire and Contract Ful?lment Costs 5.3 5.5 (0.2) Other 12.7 8.2 4.5 Total Current Assets 150.8 81.3 69.5 Property, Plant and Equipment 40.2 34.7 5.5 Intangible Assets 52.4 45.3 7.1 Costs to Acquire and Contract Ful?lment Costs 4.7 3.4 1.3 Other 6.1 7.3 (1.2) Total Non-Current Assets 103.4 90.7 12.7 TOTAL ASSETS 254.2 172.0 82.2 Payables to Transport Agencies 13.4 10.5 2.9 Contract Liabilities 7.1 6.6 0.5 Borrowings 32.7 35.0 (2.3) Other Liabilities 18.4 15.3 3.1 Total Liabilities 71.6 67.4 4.2 NET ASSETS 182.6 104.6 78.0 Balance sheet ( NZ$m ) • Cash has increased by $62.2m as a result of the capital raise during July • PPE has increased primarily as a result of investment in inventory given the current global supply chain pressures and delays • The increase in other assets within current assets category is as a result of the combination of an increase in our receivables balance and prepayments • Contract Ful?lment and Customer Acquisition Assets increased by $1.1m re?ecting growth and a strong period of renewals • Intangibles increase relates to the ongoing capitalisation of R&D development • Borrowings from long term bank loans have reduced due to scheduled repayments 25 GROWTH OPPORTUNITY AND OUTLOOK Steven Newman Chief Executive O?cer 26 27 We choose to grow and have signi?cantly accelerated our growth strategy 27 ORGANIC GROWTH ACQUISITION Executed 11 launches of new products or enhancements in H1 FY22 • launched Clarity Solo in October increasing the addressable market • Integration of Philips Connect and Seeing Machines increasing the addressable market • launched EROAD Analyst, EROAD Messaging and EROAD Where mini-tags as well as a number of other enhancements improving the customer value proposition Acceleration of R&D spend focused on winning Enterprise customers. The Coretex acquisition allows EROAD to stop developing its own next generation platform and accelerate other aspects of its technology and product roadmap Focused workstreams on managing risk around the global supply chains Increased solution-based selling focused on winning Enterprise customers in all markets. Coretex’s enterprise grade solutions will increase ability to win enterprise customers Coretex acquisition expected to complete 1 December 2021 accelerates growth metrics by 2 years Focus on integration over next 12 to 18 months, although will continue to look for further inorganic opportunities in a consolidating industry STRATEGIC PARTNERSHIPS Entering into partnerships with quality partners enables EROAD to ?ll product gaps more e?ectively Entered strategic partnership with Philips Connect in June 2021 and with Seeing Machines in August 2021 Expanding EROAD’s Video telematics portfolio 4,141 CLARITY DASHCAM UNITS SOLD since sales begun in March 2021 28 It would have appeared as a harsh braking incident, but with the dashcam you see a second jolt – it’s clear that there was another point of impact. Frews Transport (Beta testing Clarity Solo) “ OVER 10 % REDUCTION IN SPEEDING FREQUENCY by 31% of vehicles once they installed Clarity Dashcam • With low video telematics penetration across all markets, focus on expanding and improving video telematics portfolio • Only c30% penetration of North America Class 8 vehicle market (4.4m vehicles and growing at 15% p.a) • Sold some 4,141 Clarity dashcam units since sales begun in March 2021 increasing ARPU with a number of pilots underway • Launched Clarity Solo new stand-alone dashcam product (with no in-cab requirement for a pre- installed Ehubo) late October • Expands addressable market to ?eets with a competitors telematics solution and reach beyond class 8 into light duty • Improved functionality with technology that associates all video and telematics to a speci?c driver and a more agile search system • The Coretex Corevision camera is an entry-level dual dashcam which widens EROAD’s video telematics portfolio servicing di?erent market needs Strategic partnership with Seeing Machines increases addressable market SEEING MACHINES IS INDUSTRY LEADER IN VISION- BASED MONITORING TECHNOLOGY THAT ENABLE MACHINES TO SEE, UNDERSTAND AND ASSIST PEOPLE 29 OVER 90 % REDUCTION IN FATIGUE RELATED DRIVING EVENTS with in-cab alerts reducing fatigue by >60% and 24/7 monitoring centre analysis and intervention decreasing the occurrence of fatigue by an additional 30% • Entered strategic partnership with Seeing Machines in August 2021 • Guardian technology utilises face and eye tracking algorithms to detect fatigue and distraction, allowing proactive intervention before a risky driving incident occurs • Integrated their technology into MyEROAD, to provide customers with a single interface for managing video telematics • Enables EROAD to target dashcam sales to ?eets that have biometric requirements for all or a portion of their ?eet. For example Hazemat or long-haul driving with dangerous loads • Initial focus on New Zealand and Australia markets. In one month sold approximately 170 17 Clarity Dashcams and a number of pilots underway in response to partnership 17 As at 30 September 2021. Strategic partnership with Philips Connect increasing North America addressable market PHILIPS CONNECT DEVICES, SENSORS AND REPORTING BRINGS ADVANCED TRAILER AND ASSET MONITORING TO EROAD’S CUSTOMERS A SOLUTION FOR EVERY ASSET Trailers Gain total awareness into your trailer with data, insights and analysis of trailer health in real-time. Chassis Comprehensive monitoring of chassis sensors. Receive status updates and noti?cations about issues before they happen. Container Monitor location and status of containers and cargo with real-time alerts from a single hub. Other Monitor the location and status of small vehicles and heavy equipment with our high-performance tracking systems. 30 • Entered Philips Connect strategic partnership in June 2021 and have added 666 Philips Connect Solutions in H1 FY22 • Phillips Connect solutions help customers locate assets, maximize productivity, and give their own customers a live view into their trailers, containers, and chassis • Integration of Philips Connect into MyEROAD provides customers a single view of all of their assets including trailers and assets making deployment and management easier • Increases addressable market by meeting the needs of North American medium and enterprise ?eets and provides up-sell opportunities once a Philips Connect solution is sold • Current focus on North America market, will look at moving into New Zealand and Australia over time The Transformational Acquisition of Coretex Increased ability to win Enterprise accounts Accelerates technology and product roadmaps Lifting market position adding 66,453 18 units in North America, Australia and New Zealand Increased growth velocity towards 250,000 units Increased Addressable Market Refrigerated transport Construction Less than a truckload (LTL) Waste & Recycling 31 18 As at 30 September 2021 Building a safer, greener and more productive world Products that optimise safety and fuel consumption, reduce wastage and contamination COMPLETION IN EFFECT ON 1 DECEMBER 2021 32 EROAD’s broadly adopted regulatory telematics solutions combined with Coretex’s extensive vertical telematics expertise and products creates an advanced market ?t Easy to use, install and maintain Custom Driver Forms & Checklists Data Insights platform Enterprise API for integrations IN-VEHICLE HARDWARE SOLUTIONS ALL VEHICLES ALL ASSETS ONE PLATFORM for end to end visibility Coretex brings with it next generation hardware Signi?cantly enhanced Back O?ce Capability Driver’s tablet Driver’s logbook Ehubo2 Camera options IOT sensors and tag IOT Hub (Corehub) Coretex’s operating update for H1 FY22 • Contracted units grew by 4% re?ecting growth in North America • increased units in North America by 3,321 with an additional 4,144 of closed sales not yet shipped • stable units in Australia with growth anticipated with the launch of Electronic Work Diary (EWD) and new construction product being piloted • Following approval from shareholders, Overseas Investment Authority and the Commence Commission Completion acquisition will complete 1 December 2021 30 September 2021 31 March 2021 Total Contracted Units 66,453 64,177 New Zealand 7,628 8,676 North America 50,946 47,625 Australia 7,879 7,876 Group Asset Retention Rate 85.1% 19 85.7% 20 19 Excluding ?eet reduction H1 FY22 asset retention rate of 93.8% 20 Excluding ?eet reduction FY21 Asset Retention Rate would have been 94.7% 33 Successful integration of Coretex key to maximising synergies Stabilise & Minimise Risk Strategy Refresh Quick Wins Enterprise Customer Focus Platform Consolidation Uni?cation of Systems, Structures & Brand Organise, Stabilise, Motivate, Excite Leadership Development Align T’s & C’s Culture, Ways of Working, Acceleration Optimise Structures and Teams to Accelerate Interface existing systems Stabilise & Secure Environment Analyse & Choose Internal Systems & Processes for scale Consolidate internal systems and processes for scale 1 December Settlement June 2021 September 2021 December 2021 March 2022 June 2022 September 2022 Integration Planning North American Focus via Coretex Platform Early Integration Options NA /AU Acceleration Options - Partnerships Multiple Verticals Architecture Alignment Major Theme Product, Development and Engineering People Systems & Processes 34 35 On 21 October EROAD announced it expects stand-alone FY22 revenue growth of 10-13% and Normalised EBITDA margin (prior to integration and transaction costs) to be at or around the levels of FY21 Good growth in both Australia and New Zealand, with some anticipated growth deferred to either later in FY22 or into early FY23 due to COVID-19 lock-down restrictions delaying piloting activity, installation roll-outs and lengthening sales lead-times North America continues to experience ongoing impacts of COVID-19 and its associated economic challenges The Coretex acquisition is expected to complete with e?ect from 1 December, therefore it is now appropriate for EROAD to withdraw its FY22 stand-alone guidance as it is no longer relevant for the combined entities FY22 outlook EROAD STAND-ALONE GUIDANCE QUESTIONS & ANSWERS 36 APPENDIX 37 YEAR ENDED H1 FY22 H1 FY21 Pro?t/(Loss) after tax for the year attributable to the shareholders (2.9) 1.0 Add/(less) non-cash items Tax asset recognised 1.2 (0.3) Depreciation and amortisation 13.1 12.9 Other non-cash expenses/(income) (0.8) (0.5) Add/(less) movements in other working capital items: Decrease/(increase) in trade and other receivables (4.5) 1.6 Increase/(decrease) in current tax receivables - - Increase/(decrease) in current tax payables - 0.4 Increase/(decrease) in contract liabilities 0.5 (1.0) Increase /(decrease) in trade payables, interest payable and accruals 3.2 0.2 Net Cash from operating activities 9.8 14.3 Reconciliation of Pro?t to movement in cash 38 NZ$ Local$ H1 FY22 H1 FY21 H1 FY22 H1 FY21 New Zealand ARPU NZ$56.78 NZ$55.36 NZ$56.78 NZ$55.36 North America ARPU NZ$62.77 NZ$67.30 US$44.42 US$43.07 Australian ARPU NZ$31.72 NZ$35.12 AU$29.86 AU$32.79 ARPU reconciliation of local currency to NZ$ 39 R&D Investment 48 % New to EROAD 16 % Quality/Bugs 6 % New to World 72 % 3 % Learning/Future 9 % Reliability, Availability, Serviceability and Scalability 16 % Planned Enhancements 2 % Unplanned Enhancements CUSTOMER FACING R&D INVESTMENT PROFILE?? 21 For the six months ended 30 September 2021. Analysis excludes internal system development and individual customisation • R&D is critical in developing new products and services to retain customers, open up the addressable market, grow connected vehicles and grow average SaaS monthly revenue per unit • Target ~60% of R&D spend on customer facing elements • Executed 11 key launches or enhancements over H1 FY22 as a result of previous R&D investment • In recent years spent 18-22% of revenue on R&D. Spent 23% in FY21. For FY22 and FY23 expect to spend 24-27% as continue to accelerate investment for growth • Focused on product development that opens up the addressable market for enterprise customers 40 Glossary • ANNUALISED MONTHLY RECURRING REVENUE (AMRR) is a non-GAAP measure representing monthly Recurring Revenue for the last month of the period, multiplied by 12. It provides a 12 month forward view of revenue, assuming unit numbers, pricing and foreign exchange remain unchanged during the year. • ASSET RETENTION RATE The number of Total Contracted Units at the beginning of the 12 month period and retained as Total Contracted Units at the end of the 12 month period, as a percentage of Total Contracted Units at the beginning of the 12 month period. • COSTS TO ACQUIRE CUSTOMERS (CAC) is a non-GAAP measure of costs to acquire customers. Total CAC represents all sales & marketing related costs. CAC capitalised includes incremental sales commissions for new sales, upgrades and renewals which are capitalised and amortised over the life of the contract. All other CAC related costs are expensed when incurred and included within CAC expensed. • COSTS TO SERVICE & SUPPORT (CTS) Is a non-GAAP measure of costs to support and service customers. Total CTS represents all customer success and product support costs. These costs are included in Administrative and other Operating Expenses reported in Note 4 Expenses of the H1 FY22 Financial Statements. • EBITDA is a non-GAAP measure representing Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA). Refer Consolidated Statement of Comprehensive Income in Financial Statements. • EBITDA MARGIN is a non-GAAP measure representing EBITDA divided by Revenue. • EHUBO, EHUBO2 and EHUBO 2.2 EROAD’s ?rst and second generation electronic distance recorder which replaces mechanical hubo-dometers. Ehubo is a trade mark registered in New Zealand, Australia and the United States. • ELECTRONIC LOGGING DEVICE (ELD) An electronic solution that synchronises with a vehicle engine to automatically record driving time and hours of service records. • ENTERPRISE means a ?eet of more than 500 vehicles in North America and more than 150 vehicles in Australia or New Zealand. • FREE CASH FLOW is a non-GAAP measure representing operating cash ?ow and investing cash ?ow reported in the Statement of Cash Flows. • FUTURE CONTRACTED INCOME (FCI) A non-GAAP measure which represents contracted Software as a Service (SaaS) income to be recognised as revenue in future periods. Refer Revenue Note 3 of the FY21 Financial Statements. • FY Financial year ended 31 March. • H1 For the six months ended 30 September • H2 For the six months ended 31 March • MONTHLY SAAS AVERAGE REVENUE PER UNIT (ARPU) is a non-GAAP measure that is calculated by dividing the total SaaS revenue for the year reported in Note 2 of the H1 FY22 Financial Statements, by the TCU balance at the end of each month during the year • NORMALISED EBITDA excludes one-o? items including the COVID-19 grant in H1 FY21 ($1.6m) and the transaction and integration costs in H1 FY22 ($2.0m). • NORMALISED EBITDA MARGIN excludes one-o? items including the COVID-19 grant in H1 FY21 ($1.6m) from Revenue and EBITDA and the transaction and integration costs in H1 FY22 ($2.0m) from EBITDA. • NORMALISED REVENUE excludes the one-o? COVID-19 grant in H1 FY21 • ROAD USER CHARGES (RUC) In New Zealand, RUC is applicable to Heavy Vehicles and all vehicles powered by a fuel not taxed at source. The charges are paid into a fund called the National Land Transport Fund, which is controlled by NZTA, and go towards the cost of repairing the roads. • SAAS Software as a Service, a method of software delivery in which software is accessed online via a subscription rather than bought and installed on individual computers. • SAAS REVENUE Software as a service (SaaS) revenue represents revenue earned from customer contracts for the sale or rental of hardware, installation services and provision of software services. • TOTAL CONTRACTED UNITS represents total units subject to a customer contract and includes both Units on Depot and Units pending instalment. • UNIT is a communication device ?tted in-cab or on a trailer. Where there is more than one unit ?tted in-cab or on a trailer, it is counted as one unit. 41 GLOBAL HEAD OFFICE AND ANZ HEADQUARTERS 260 Oteha Valley Road, Albany Auckland, New Zealand www.eroad.co.nz NORTH AMERICAN HEAD OFFICE 7618 SW Mohawk Street Tualatin, OR 97062, USA www.eroad.com AUSTRALIA Level 36, Tower 2, Collins Square 727 Collins Street, Docklands VIC 3008, Australia www.eroad.com.au ASX & NZX: ERD • investors@eroad.com • eroadglobal.com/investors For further information please contact: Alex Ball, Chief Financial O?cer alex.ball@eroad.com 2022 INTERIM REPORT EROAD Safer and more sustainable roads HIGHLIGHTS EROAD 2022 INTERIM REPORT Signi?cant progress accelerating growth strategies in continued challenging macro-economic conditions Focusing on what is important to our stakeholders COVID-19 SUPPORTED CUSTOMERS during lock-downs in New Zealand and Australia PROGRAMME OF WORK UNDERWAY to benchmark EROAD’s GHG emissions. Led by our ESG Steering Group which meets regularly to discuss and advance EROAD’s sustainability goals TOITU CARBONREDUCE INDUSTRY LEADING UPTIME demonstrating the integrity and reliability of EROAD’s infrastructure 99 .9 % > CUSTOMERS RENEWED THEIR EROAD PLAN (representing 16,481 units) re?ecting the quality of EROAD’s product and service o?ering 538 ROAD TO SUSTAINABILITY ?ndings help EROAD’s sustainability e?orts within the industry INAUGURAL REPORT REDUCTION IN SPEEDING FREQUENCY by 31% of vehicles once they installed Clarity Dashcam OVER 10 % up $2.2m from H1 FY21 (which included non-recurring revenue of $1.6m) REVENUE 48 .0 $ m added since FY21 despite COVID-19 CONTRACTED UNITS 6 ,500 includes $2.0m of transaction and integration costs REPORTED EBITDA 12 .6 $ m 57 .64 $ re?ecting a $0.66c improvement from FY21 from selling additional products and services, o?set by $1.23c FX impact MONTHLY SAAS ARPU 92 .9 $ m compared to $88.4m at FY21 and FCI increased $7.2m from FY21 to $149.1m AMRR % 28 accelerating our technology roadmap REVENUE SPENT ON R&D strategic partnerships expanding addressable markets PHILIPS CONNECT AND SEEING MACHINES TRANSFORMATIONAL ACQUISITION OF CORETEX to accelerate key growth metrics by two years % 94 .1 ASSET RETENTION RATE (H1 FY21: 95.3%) CONTINUED PROGRESS AGAINST OUR MATERIALITY MATRIX MEASURES < P. 2 P. 3 > Letter from the Chair and CEO We are pleased to present our report for the half year to 30 September 2021. As we have outlined previously, EROAD is focused on building its business in North America and Australia, and is transitioning to the next phase of growth. Our operating cash ?ow and two capital raises over the last 12 months have allowed us to accelerate investment for organic growth, develop strategic partnerships and undertake the transformational acquisition of Coretex. Our ?nancial results for the six months ended 30 September 2021 (H1 FY22) re?ect both the continued investment in our growth strategies as well as the resilience of our business in continuing challenging macro-economic conditions. LETTER FROM THE CHAIR AND CEO EROAD 2022 INTERIM REPORT P. 5 > < P. 4 Financial result re?ects both continued investment in our growth strategies as well as the resilience of our business model in continued challenging macro-economic conditions Revenue increased $2.2m to $48.0m re?ecting growth in units, dashcams and additional add-onsubscriptions sold to our customers. This was partly o?set by a reduction in other revenue from H1 FY21. The prior period included income from the forgiveness of a North American COVID-19 government support loan ($1.6m). Over the period, contracted units grew by 5% re?ecting continued good growth in both New Zealand and Australia. This is partly o?set by a reduction in units in North America due the loss of an enterprise customer (1,751 units) which aligned its technology with that of its acquirer. We also continued to see increased momentum selling add-on hardware or SaaS subscription products with over 296 customers adding a product or service to their existing plan, representing 7,341 Dashcam Clarity, Inspect, Logbook or Book- it subscriptions added. Our Asset Retention Rate remained high at 94.1%, re?ecting the quality of EROAD’s service and product o?ering. In addition,538 customers renewed their EROAD plan (representing some 16,481 contracted units). Our Annualised Monthly Recurring Revenue metric, which provides a forward view of sustainable revenue, increased to $92.9m from $88.4m at 31 March 2021. We also saw an increase in Future Contracted Income from $140.0m to $149.1 re?ecting a considerable number of renewals that occurred during the period including the continuing 3G to 4G roll-out in North America (nearly 80% of North America units now on 4G technology). Operating expenditure increased from $30.5m in the prior comparable period to $35.4m. This is due to $2.0m of transaction and integration costs relating to the Coretex acquisition, increased employee costs related to new hires and the increased competition for talent, as well as an increased level of annual leave accrued due to the COVID-19 lock-downs in the period. Accordingly, reported EBITDA reduced from $15.3m to $12.6m, representing an EBITDA margin of 26%. For H1 FY22, once transaction and integration costs are excluded, normalised EBITDA is $14.6m, an increase from normalised EBITDA for H1 FY21 of $13.7m once the one-o? COVID-19 government support loan in North America of $1.6m is excluded. EROAD’s normalised EBITDA margin is 30%. As anticipated, research and development spend increased from $9.3m to $13.3m, representing 28% of revenue. As we move ahead with our growth strategies, research and development is focused on opening up our addressable market for Enterprise customers. Read more about our ?nancial results in our investor presentation EROAD 2022 INTERIM REPORT LETTER FROM THE CHAIR AND CEO P. 7 > < P. 6 Successful delivery of our growth strategy, as we build towards becoming a bigger player in North America and Australia We are in a transitional period, as we move into the next phase of growth and become a bigger player in North America and Australia. To prepare to take advantage of these increasing growth opportunities we are accelerating investment in our platforms and products. We have previously stated our choice to grow through organic growth, strategic partnerships and acquisitions and we have successfully delivered on this growth strategy in H1 FY22. EROAD continues to extend its platform and launch new products to enable it to organically grow its contracted units, Average Revenue per Unit (ARPU) and retain customers. Since the end of March 2021, we have launched 11 new products or enhancements to do just that. With low video telematics penetration across all our markets, we are focused on expanding and improving our video telematics portfolio. In October 2021, we expanded our video telematics o?ering with the launch of EROAD Clarity Solo Dashcam. Solo dashcam is an integrated dashcam and telematics device as such it expands our addressable market into a wider range of ?eets (e.g. US LCVs), without the need to also install an EHUBO, and it can also be installed alongside another telematics providers. Accordingly, EROAD expects this launch to accelerate sales of dashcams. Since 31 March 2021, we have released a series of enhancements and new products including EROAD Analyst, EROAD Book-it, EROAD Messaging and EROAD Where Mini Tags, further increasing the range of products and services we o?er our customers. Accessing additional product solutions through strategic partnerships with quality technology providers enables EROAD to ?ll product gaps concurrently with its continuing organic investment. Our strategic partnership with Philips Connect, that commenced in June 2021, has resulted in sales of 666 Philips Connect solutions in H1 FY22. These Philips Connect solutions help customers locate assets, give their own customers a live view into their trailers, containers, and chassis as well as increase customers’ productivity. This solution also increases the addressable market of North American medium and enterprise ?eets and provides up-sell opportunities to EROAD once a Philips Connect solution is sold. We entered into a second strategic partnership with Seeing Machines in August 2021, an industry leader in vision-based monitoring technology. By integrating this technology into the EROAD platform, we are able to target our dashcam sales to mixed ?eets that have biometric requirements (e.g. Hazemat). EROAD CLARITY DASHCAM EROAD CLARITY SOLO PHILLIPS CONNECT EROAD DAY LOGBOOK EROAD INSPECT EROAD WHERE 3,087 UNITS ADDED Oct 2021 PRODUCT LAUNCHED 666 SOLUTIONS SOLD 966 DRIVERS SUBSCRIPTIONS ADDED 1,665 DRIVERS SUBSCRIPTIONS ADDED 2,650 TAGS SOLD EROAD 2022 INTERIM REPORT LETTER FROM THE CHAIR AND CEO P. 9 > < P. 8 In July 2021, we entered into a conditional agreement to acquire Coretex, a telematics vertical specialist provider delivering enterprise grade solutions. The acquisition is transformational for EROAD and we expect it to accelerate our key growth metrics by two years, enabling us to capture signi?cant growth opportunity in North America and Australia (particularly with respect to Coretex’s focus on the Enterprise customer base). The acquisition also accelerates growth by adding new strategic customer verticals, broadening our product o?ering and customer base and positions EROAD to become a bigger player in the North America and Australian markets. Combining EROAD’s expertise in broadly adopted regulatory telematics solutions with Coretex’s extensive vertical telematic expertise, products, and customer base is a great ?t. Coretex has a strong focus on working through the needs of enterprise customers within the frame of the supply chain. Whether it is temperature control, service veri?cation, contamination detection, location or fuel performance, Coretex takes an end to end approach by industry vertical. INTEGRATING CORETEX SUCCESSFULLY TO MAXIMISE THE DEAL BENEFITS The Coretex acquisition substantially increases our scale in North America and Australia and provides the ability to improve our competitive advantage, drive revenue synergies and accelerate growth. A well planned and executed integration is critical to maximising the synergies for any major acquisition and both companies have been busy over the last few months putting together a detailed plan to do just that. The acquisition received 100% shareholder approval in July, Overseas Investment O?ce approval in October and NZ Commerce Commission approval on 17 November and is expected to complete with e?ect from 1 December 2021. It is anticipated that the two businesses will be largely integrated in approximately 12-18 months. Our initial focus will be on North America and promotion of Coretex 360 platform and CoreHub hardware solution as EROAD’s next generation product within weeks of completion to enable sales momentum to begin back in that market. EROAD expects the majority of investment to occur this and next ?nancial year, with revenue bene?ts commencing from FY23. < P. 10 MENU STRENGTHENING EROAD FURTHER WITH CORETEX’S CAPABILITY Selwyn Pellett, CEO of Coretex, will join EROAD’s Board as an Executive Director and be an advisor during the integration period. Selwyn has worked in the technology sector in New Zealand for over 20 years and brings a wealth of experience in particular telematics and network security. The Board intend to appoint an additional director from North America by the end of FY22 with a particular focus on digital product marketing and SaaS technology. Akinyemi Koyi (“AK”) will join the Executive Team in a new role as Chief Innovation O?cer. He has been at the helm of Coretex’s technology development for over seven years as their CTO & COO and brings a strong blend of strategic planning, technical skill and industry knowledge. This role enables EROAD to continue accelerating strategic development of the business. AK will lead cross functional teams focussed on keeping EROAD at the forefront of delivering technological innovation to solve business problems for our customers. Tracey Herman, Coretex’s CFO, will move into a senior commercial and ?nance role in the combined business. Both the EROAD and Coretex teams are excited about two New Zealand based technology companies coming together. Together we will have a wider set of talent and solutions that will deliver bene?ts to our customers quicker instead of working in silo of each other. Our products and services complement one another and so provide better solutions for existing and prospective customers. Accordingly, it made sense to unite them. P. 11 > EROAD 2022 INTERIM REPORT LETTER FROM THE CHAIR AND CEO LETTER FROM THE CHAIR AND CEO EROAD 2022 INTERIM REPORT The transformational acquisition of Coretex < P. 10 P. 11 > P. 13 > Improving sustainability for us and our customers EROAD has always aspired to create safer and more sustainable roads. We believe the use of our products and services leads to positive outcomes for our customers and the wider community. The signi?cant progress we have made towards our growth strategy increases our ability to make a positive di?erence. In October, we released Road to Sustainability, our inaugural sustainability sentiment survey for New Zealand and Australia. This gave us the opportunity to identify where we can best help our customers adapt to new government regulations and also help drive further change within the transportation industry. We intend to use this report as a launchpad to bring sustainability to the forefront of the conversation when discussing transport carbon footprint emissions. This will help us further our sustainability e?orts within the transport industry. REDUCTION IN SPEEDING FREQUENCY by 31% of vehicles once they installed Clarity Dashcam OVER 10 % Read our Road to Sustainability Report EROAD Sustainability Report ROAD TO SUSTAINABILITY REPORT October 2021 Coretex products LOOK TO OPTIMISE SAFETY AND FUEL CONSUMPTION, REDUCE WASTAGE AND CONTAMINATION REDUCTION IN FATIGUE RELATED DRIVING EVENTS with in-cab alerts by Seeing Machines OVER 90 % EROAD also recently announced that it has partnered with FUSO in New Zealand’s ?rst zero emissions truck trial. The 100% electric FUSO eCanter vehicles will be trialled over the next year by Mainfreight, Bidfood, Toll Global Express, Owens Transport and Vector OnGas as part of the Auckland Inner City Zero Emissions Area trial. The ?eet of FUSO eCanters have EROAD’s Ehubo 2.0 installed, with full access to the MyEROAD platform. Providing the ?eet managers with real-time GPS tracking, driver behaviour alerts and performance reporting. In addition to the impact our products and services have and will continue to have, EROAD is keen to do its bit. In our last annual report we made good progress moving towards reporting against the GRI Standards sustainability reporting framework and completed a materiality assessment. Over the next twelve months, EROAD is looking to use this initial work to build a base and, once the Coretex integration is well in motion, set measurable objectives to measure, report and drive improvements in our sustainability e?orts. EROAD’s ESG Steering Group meets regularly to discuss and advance our sustainability goals. The ESG Steering Group considers environmental matters (such as reducing our carbon emissions), social factors (including diversity and inclusion goals), and governance matters (such as new legislative requirements including the TCFD and the Global Reporting Initiative standards). EROAD’s Global Market Development team continues to build its strength in ESG, including the appointment of a Regulatory Development Manager in Australia. The team plays a critical role in continuing to build our strengths in ESG, including by being a member of, actively working with, the International Road Federation on a Taskforce for Climate Impact Mitigation. In New Zealand, we are working with Toitu to complete the carbon reduce programme. In line with this, our product team is considering what further support our products and services can o?er EV ?eets, and how we can better support our customers through their own sustainability initiatives. This includes supporting the New Zealand Government’s goal of the public sector becoming carbon neutral by 2025. LETTER FROM THE CHAIR AND CEO EROAD 2022 INTERIM REPORT < P. 12 P. 13 > As previously announced in EROAD’s Q2 operating update on 21 October 2021, with continued challenging macro-economic conditions (particularly in North America) and the Coretex acquisition expected to complete 1 December 2021, we now expect stand-alone FY22 revenue growth to be between 10% and 13% and continue to expect normalised EBITDA margin (prior to integration and transaction costs) to be at or around the levels delivered in FY21. While good growth is still being experienced in both Australia and New Zealand, some anticipated growth has been deferred to either later in FY22 or into early FY23 due to COVID-19 lock- down restrictions delaying piloting activity, installation roll-outs and lengthening sales lead-times. North America continues to experience ongoing impacts of COVID-19 and its associated economic challenges, in particular signi?cant driver shortages and supply chain issues impacting mid-market customers. As a result, growth to date has been below EROAD’s expectations. With the easing of COVID-19 restrictions and their impacts, the launch of EROAD’s next generation Android platform and hardware, the release of Clarity Solo in October, and the completion of the Coretex acquisition, we do expect increased sales momentum in FY23. The Coretex acquisition is expected to complete with e?ect from 1 December, therefore it is now appropriate for EROAD to withdraw its FY22 stand-alone guidance as it is no longer relevant for the combined entities. FY22 outlook LETTER FROM THE CHAIR AND CEO EROAD 2022 INTERIM REPORT Thank you for your continued support of EROAD. We look forward to updating you at the FY22 ?nancial results as we continue expand our capability, improve customer experience, and expand our reach into new customer verticals. Graham Stuart Chairman Steven Newman Chief Executive O?cer NON-GAAP MEASURES EROAD has used non-GAAP measures when discussing ?nancial performance in this document. The directors and management believe that these measures provide useful information as they are used internally to evaluate performance of business units, to establish operational goals and to allocate resources. Non-GAAP measures are not prepared in accordance with NZ IFRS (New Zealand International Financial Reporting Standards) and are not uniformly de?ned, therefore the non-GAAP measures reported in this document may not be comparable with those that other companies report and should not be viewed in isolation or considered as a substitute for measures reported by EROAD in accordance with NZ IFRS. The non-GAAP measures EROAD have used are Adjusted EBITDA, Annualised Monthly Recurring Revenue (AMRR), Costs to Acquire Customers (CAC), Costs to Service & Support (CTS), EBITDA, Normalised EBITDA, Normalised Revenue, EBITDA margin, Normalised EBITDA margin, Free Cash Flow and Future Contracted Income (FCI) The de?nitions of these can be found on pages 41 of the investor presentation. All numbers relate to the 6 months ended 30 September 2021 (H1 FY22) and comparisons relate to the 6 months ended 30 September 2020 (H1 FY21), unless stated otherwise. All dollar amounts are in NZD. This report covers the six months ended 30 September 2021 and is dated 26 November 2021. This report has been approved by the Board and is signed on behalf of EROAD Limited by Graham Stuart, Chairman and Steven Newman, Manging Director and Chief Executive O?cer. < P. 14 P. 15 > EROAD 2022 INTERIM REPORT SECTION TITLE P. 17 > < P. 16 MENU FINANCIAL STATEMENTS EROAD 2022 INTERIM REPORT Financial Statements CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021 GROUP 30 SEPTEMBER 2021 30 SEPTEMBER 2020 Notes Unaudited $M's Unaudited $M’s Revenue 2 48.0 45.8 Operating Expenses 3 (35.4) (30.5) Earnings before interest, taxation, depreciation and amortisation 12.6 15.3 Depreciation of Property, Plant and Equipment 8 (5.0) (4.6) Amortisation of Intangible Assets 9 (4.8) (4.8) Amortisation of Contract and Customer Acquisition Assets (3.3) (3.5) Earnings before interest and taxation (0.5) 2.4 Finance income 0.4 0.2 Finance expense (1.5) (1.4) Net ?nancing costs (1.1) (1.2) (Loss)/Pro?t before tax (1.6) 1.2 Income tax expense 11 (1.3) (0.2) (Loss)/Pro?t from continuing operations (2.9) 1.0 (Loss)/Pro?t after tax for the period attributable to the shareholders (2.9) 1.0 Items that are or may be reclassi?ed subsequently to pro?t or loss Other comprehensive income/(loss) 0.4 (0.7) Total comprehensive (loss)/pro?t for the period (2.5) 0.3 (Loss)/Earnings per share - Basic (cents) (3.34) 1.49 (Loss)/Earnings per share - Diluted (cents) (3.34) 1.49 The above Condensed Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. P. 17 > < P. 16 EROAD 2022 INTERIM REPORT SECTION TITLE P. 19 > < P. 18 MENU FINANCIAL STATEMENTS EROAD 2022 INTERIM REPORT CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2021 GROUP 30 SEPTEMBER 2021 31 MARCH 2021 Notes Unaudited $M's Audited $M’s CURRENT ASSETS Cash and cash equivalents 7 119.3 57.1 Restricted bank accounts 7 13.5 10.5 Trade and other receivables 12.7 8.2 Contract ful?lment costs 3.2 3.0 Costs to obtain contracts 2.1 2.5 Total Current Assets 150.8 81.3 NON-CURRENT ASSETS Property, plant and equipment 8 40.2 34.7 Intangible assets 9 52.4 45.3 Contract ful?lment costs 3.0 2.4 Costs to obtain contracts 1.7 1.0 Deferred tax assets 6.1 7.3 Total Non-Current Assets 103.4 90.7 TOTAL ASSETS 254.2 172.0 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued) AS AT 30 SEPTEMBER 2021 GROUP 30 SEPTEMBER 2021 31 MARCH 2021 Notes Unaudited $M's Audited $M’s CURRENT LIABILITIES Borrowings 12 6.6 6.4 Trade payables and accruals 10.4 7.8 Payables to transport agencies 7 13.4 10.5 Contract liabilities 10 4.0 3.9 Lease liabilities 1.1 1.0 Employee entitlements 3.0 2.3 Total Current Liabilities 38.5 31.9 NON-CURRENT LIABILITIES Borrowings 12 26.1 28.6 Contract liabilities 10 3.1 2.7 Lease liabilities 3.8 4.2 Interest rate swap 0.1 - Total Non-Current Liabilities 33.1 35.5 TOTAL LIABILITIES 71.6 67.4 NET ASSETS 182.6 104.6 EQUITY Share capital 6 212.8 131.7 Translation reserve (3.0) (3.4) Retained Earnings (27.2) (23.7) TOTAL SHAREHOLDERS' EQUITY 182.6 104.6 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. Chair of the Finance, Risk and Audit Committee, 26 November 2021 Chairman, 26 November 2021 P. 19 > < P. 18 EROAD 2022 INTERIM REPORT SECTION TITLE P. 21 > < P. 20 MENU EROAD 2022 INTERIM REPORT NOTES TO FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021 GROUP 30 SEPTEMBER 2021 30 SEPTEMBER 2020 Notes Unaudited $M’s Unaudited $M’s Cash ?ows from operating activities Cash received from customers 43.9 46.3 Payments to suppliers and employees (32.9) (31.0) Interest received 0.1 - Interest paid (1.3) (1.0) Net cash in?ow from operating activities 9.8 14.3 Cash ?ows from investing activities Payments for investment in property, plant & equipment (9.5) (1.7) Payments for investment in intangible assets (11.8) (5.7) Payments for investment in contract ful?lment assets (2.6) (1.6) Payments for investment in customer acquisition assets (1.7) (0.7) Net cash out?ow from investing activities (25.6) (9.7) Cash ?ows from ?nancing activities Receipts from bank loans 0.1 1.8 Repayments of bank loans (2.5) - Payment of lease liability (0.8) (0.8) Receipts from issue of equity 84.7 42.0 Payments for costs of raising equity (3.5) (2.0) Net cash in?ow from ?nancing activities 78.0 41.0 Net increase/(decrease) in cash held 62.2 45.6 Cash at beginning of the ?nancial period 57.1 3.4 Closing cash and cash equivalents 119.3 49.0 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021 GROUP Share Capital Retained Earnings "Translation Reserve" Total Notes $M's $M's $M's $M’s BALANCE AS AT 31 MARCH 2020 (AUDITED) 80.7 (26.5) (2.9) 51.3 Pro?t after tax for the period - 1.0 - 1.0 Other comprehensive income - - (0.7) (0.7) Total comprehensive loss for the period, net of tax - 1.0 (0.7) 0.3 Equity settled share-based payments - 0.2 - 0.2 Share capital issued 6 40 - - 40.0 Balance at 30 September 2020 (Unaudited) 120.7 (25.3) (3.6) 91.8 BALANCE AS AT 31 MARCH 2021 (AUDITED) 131.7 (23.7) (3.4) 104.6 Loss after tax for the period - (2.9) - (2.9) Other comprehensive income - - 0.4 0.4 Total comprehensive Loss for the period, net of tax - (2.9) 0.4 (2.5) Equity settled share-based payments 0.8 (0.6) - 0.2 Share capital issued 6 80.3 - - 80.3 Balance at 30 September 2021 (Unaudited) 212.8 (27.2) (3.0) 182.6 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. P. 21 > < P. 20 EROAD 2022 INTERIM REPORT SECTION TITLE P. 23 > < P. 22 MENU EROAD 2022 INTERIM REPORT NOTES TO FINANCIAL STATEMENTS RECONCILIATION OF OPERATING CASH FLOWS WITH REPORTED LOSS AFTER TAX FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021 GROUP 30 SEPTEMBER 2021 30 SEPTEMBER 2020 Notes Unaudited $M’s Unaudited $M’s (Loss)/Pro?t after tax for the six month period attributable to the shareholders (2.9) 1.0 Add/(less) non-cash items Tax asset recognised 1.2 (0.3) Depreciation and amortisation 13.1 12.9 Other non-cash expenses/(income) (0.8) (0.5) 13.5 12.1 Add/(less) movements in other working capital items: (Increase)/decrease in trade and other receivables (4.5) 1.6 Increase in current tax payables - 0.4 Increase/(decrease) in contract liabilities 0.5 (1.0) Increase in trade payables, interest payable and accruals 3.2 0.2 (0.8) 1.2 Net cash from operating activities 9.8 14.3 NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021 NOTE 1 SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES The consolidated interim ?nancial statements presented for the six months ended 30 September 2021 are for EROAD Limited (EROAD), and its subsidiaries (collectively referred to as the “Group”). The Group provides electronic on-board units and software as a service to the transport industry. EROAD Limited (the “Company”) is a company domiciled in New Zealand registered under the Companies Act 1993 and listed on the New Zealand Stock Exchange (NZX) Main Board and Australian Stock Exchange (ASX). The Company is a FMC reporting entity for the purposes of the Financial Markets Conduct Act 2013. The consolidated interim ?nancial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP). NZ GAAP in this instance being New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) as appropriate for pro?t-oriented entities. These consolidated interim ?nancial statements also comply with the New Zealand equivalent to International Accounting Standard 34: Interim Financial Reporting (NZ IAS 34), and International Accounting Standard 34: Interim Financial Reporting (IAS 34) and are prepared in accordance with the Financial Markets Conduct Act 2013 and the Financial Reporting Act 2013. The consolidated interim ?nancial statements for the six months ended 30 September 2021 are unaudited and have been the subject of review by the auditor, pursuant to NZ SRE 2410 (Revised): Review of Financial Statements Performed by the Independent Auditor of the Entity as issued by the External Reporting Board. These consolidated interim ?nancial statements have been prepared using the same accounting policies as, and should be read in conjunction with the Group’s last annual consolidated ?nancial statements as at and for the year ended 31 March 2021 (‘last annual ?nancial statements’). These consolidated interim ?nancial statements do not include all of the information required for a complete set of NZ IFRS ?nancial statements. However, selected explanatory notes are included to explain events and transactions that are signi?cant to an understanding of changes in the Group’s ?nancial position and performance since the last annual ?nancial statements. These ?nancial statements were authorised for issue by the directors on 26 November 2021. Basis of measurement The ?nancial statements are prepared on the historical cost basis, except for certain ?nancial instruments carried at fair value. Going concern The directors have considered the ability of the Group to continue to operate as a going concern for at least the next 12 months from the date the ?nancial statements are authorised for issue. It is the conclusion of the directors that the Group will continue to operate as a going concern and the ?nancial statements have been prepared on that basis. In reaching their conclusion the directors have considered the following factors: - Cash reserves at 30 September 2021 of $119.0 million and bank borrowing facility of $61.1 million of which $28.0 million was undrawn after including borrowing cost of $0.4 million. This provides su?cient headroom to help support the business for at least the next 12 months. - The future contracted income of $149.1 million provides certainty of future revenue; and - The directors have made due enquiry into the appropriateness of the assumptions underlying the budgetary forecasts. - The cash reserves are su?cient even after the completion of the planned acquisition of Cortex Limited. Refer to the Note 17 for further details. Presentation currency The ?nancial statements are presented in New Zealand dollars ($) which is the Group’s presentation currency, and all values are rounded to million dollars to one decimal place ($M’s) except where stated. Items included in the ?nancial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The functional currency of EROAD Limited is New Zealand dollars. Impact of COVID-19 On 11 March 2020 the World Health Organisation declared a global pandemic as a result of the outbreak and spread of COVID-19. Following this, in each of EROAD’s markets of New Zealand, the United States and Australia, lockdowns of varying severity were introduced. These lockdowns continued in these markets from late March and while some lockdown restrictions have eased in each of the markets, a range of preventive measures still remain such that each of the markets has yet to return to the level of economic trading conditions prevalent prior to the COVID-19 crisis. P. 23 > < P. 22 EROAD 2022 INTERIM REPORT SECTION TITLE P. 25 > < P. 24 MENU EROAD 2022 INTERIM REPORT NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED) Following the lockdowns being initiated in 2020, EROAD was designated an essential service in each of its three markets and remained operational under its communicable illness business continuity plan. EROAD continues to be considered an essential service in the current period. Despite this designation, EROAD still experienced a loss in customer demand for new or replacement units and services, aside from those customers who themselves were designated as essential services. Accordingly, each of EROAD’s markets were impacted di?erently due to the di?erences in lockdown conditions, as well as the di?ering proportion of essential services customers in its total customer base. A detailed assessment of the impact of COVID-19 on the EROAD statement of ?nancial position was set out in the annual report dated 31 March 2021 (?nancial statements note 2). Doubtful debts - COVID-19 Provisions To ensure EROAD has recorded su?cient credit loss provisions to account for the estimated ?nancial impact of any future defaults EROAD has performed an assessment of estimated credit losses not yet identi?ed but driven by the increase in credit default risk for its customers. The assessment considered the following aspects: • the risk level associated with the industry the customer is operating in, including whether this is an essential service; • historical loss rates for each risk category; and • macro economic conditions in the relevant market including COVID-19 responses and lock-down activity. The impact of the assessment is a $0.1m reduction in the doubtful debt provision since 31 March 2021. Government Grants - COVID-19 As at 30 September 2021 no Covid-19 related grants were received (31 March 2021 $1.6million). Adoption of new and revised accounting standards, interpretations and agenda decisions IFRIC - Con?guration or Customisation Costs in a Cloud Computing Arrangement The Group has capitalised as intangible assets the costs incurred in con?guring and customising certain suppliers’ application software in cloud computing arrangements. The Group considered that it would bene?t from the implementation costs incurred in relation to the cloud-based software over a number of years and has been amortising the capitalised costs over the years for which it believed the bene?t would be derived. In April 2021, the International Financial Reporting Interpretations Committee (“IFRIC”) issued an agenda decision in relation to the accounting treatment for con?guration and customisation costs in a cloud computing arrangement. The IFRIC concluded that costs incurred in con?guring or customising software in a cloud computing arrangement can be recognised as intangible assets only if the activities create an intangible asset that the entity controls and the intangible asset meets the recognition criteria. Costs that do not result in intangible assets are expensed as incurred unless they meet certain criteria where they can be treated as a prepayment and expensed over the term of the cloud computing arrangement. The Group has commenced a review of these capitalised costs to determine whether they may need to be expensed or reclassi?ed as prepayments in line with the agenda decision. At the time of ?nalising the 30 September 2021 interim ?nancial statements, the Group’s review was still in progress due to limited time available from the IFRIC agenda decision to the reporting date and the complexity of the various arrangements. The initial review of the Group’s cloud computing arrangements has identi?ed intangible assets requiring re-assessment with a total cost and net book value of approximately $16.0 million and $8.8 million, respectively. While the ?nal ?nancial impact of the revised accounting policy is still being quanti?ed, it may be material for ?nancial reporting purposes. The Group expects to implement the updated accounting policy in the second half of the year with the full impact of the change in accounting policy, including any retrospective restatement, re?ected in the consolidated ?nancial statements for the year ending 31 March 2022. The change in accounting policy may decrease intangible assets and its associated amortisation, increase operating expenses, and reclassify costs incurred from an investing to an operating cash ?ow. Prepayments may also be recognised as a result. NOTE 2 REVENUE GROUP 30 SEPTEMBER 2021 30 SEPTEMBER 2020 Unaudited $M’s Unaudited $M’s Revenue from contracts with customers Software as a Service (SaaS) revenue 45.2 42.1 Transaction fee revenue 1.4 1.3 Other revenue 0.7 0.3 Other income Grant revenue 0.7 2.1 Total Revenues 48.0 45.8 Set out above is the disaggregation of the Group’s revenue. The disaggregation re?ects the nature, amount, timing and uncertainty of revenue and cash ?ows are a?ected by economic factors. Speci?cally, software as a service (SaaS) revenue represents revenue earned from customer contracts for the sale or rental of hardware, installation services and provision of software services. Transaction fee revenue relates to the collection of Road User Charges (RUC) fees. Transaction price allocated to the remaining performance obligations The below table represents the revenue allocated to performance obligations that are unsatis?ed or partially unsatis?ed at the period end. The revenue amounts yet to be recognised under non-cancellable contract agreements at 30 September are expected to be recognised by EROAD based on the time bands disclosed below. GROUP 2022 2021 $M’s $M’s Software as a Service (SaaS) revenue Not later than one year 70.2 67.9 Later than one year not later than ?ve years 78.9 72.1 Total price allocated to remaining performance obligations 149.1 140.0 The Group reports the Non-GAAP measure, Future Contracted Income. The de?nition of Future Contracted Income has been amended to include all future hardware and SaaS cash in?ows relating to income under non-cancellable long-term agreements. The disclosure above aligns with the Future Contracted Income reported by the Group. Software as a service revenue The Group has determined EROAD’s customers do not have the right to direct the use of EROAD’s asset (Ehubo) as EROAD continues to have the right and ability to change how the asset operates during the customer’s contract period. These contracts are therefore accounted for as service contracts. The Group generates revenue through the sale of hardware assets, rental of hardware assets, installation of hardware assets and provision of software services as part of contracts with customers as part of a bundled package. These hardware units enable customers to access the software platform o?ered by the Group. The transaction involving hardware and accessories do not convey a distinct good or service. The sale does not transfer control to the customer as the Group provides a signi?cant service of integrating the software service to produce a combined output. The sale of the hardware, accessories and software service are referred to as Software as a Service (SaaS) revenue, which is recognised on a straight line basis over the contract period to re?ect the ful?lment of the performance obligations as they arise. There are no variable consideration terms within the contracts. A contract liability is recognised where consideration is received in advance of the completion of associated performance obligations. The contract liability is derecognised over time. As a result there is a ?nancing component which the Group recognise as a ?nance cost when consideration is received in advance. The Group o?ers installation services as part of a number of promises to transfer goods and services within each contract. Installation services do not convey a distinct good or service and therefore are not a separate performance obligation as the installation is a set-up activity that does not provide the customer a direct bene?t other than access to the software services. P. 25 > < P. 24 EROAD 2022 INTERIM REPORT SECTION TITLE P. 27 > < P. 26 MENU EROAD 2022 INTERIM REPORT NOTES TO FINANCIAL STATEMENTS As a result, the installation service is considered as part of the single performance obligation; referred to as Software as a Service (SaaS) revenue, which includes the software service and hardware sale or rental for which the customer simultaneously receives and consumes the bene?t of the service. Where installation revenue is received in advance of satisfying the performance obligation a contract liability is recognised. The contract liability is derecognised over time evenly over the period of the contract as the customer derives the bene?t evenly from the services provided over the contract period. The majority of contracts are for 3 years and can be for a term of up to 5 years. As a result there is a ?nancing component which the group recognises as a ?nance cost when consideration is received in advance. Transaction fees The Group acts as an agent for transport authorities in the market that is operates in. Where fees are collected on their behalf, the Group charges a commission. The revenue recognised is the net amount of the commission fee earned by the Group. Grant income Government grants are recognised at fair value in the statement of comprehensive income over the same periods as the costs for which the grants are intended to compensate. No unful?lled conditions or contingencies exist related to the government grants. NOTE 3 EXPENSES GROUP 30 SEPTEMBER 2021 30 SEPTEMBER 2020 Notes Unaudited $M’s Unaudited $M’s Personnel expenses - net of capitalised employee remuneration 5 17.7 15.3 Administrative and other operating expenses 11.7 9.8 SaaS platform costs 5.6 5.0 Directors fees 0.3 0.2 Auditor's remuneration - KPMG 0.0 0.0 Other assurance services - KPMG 0.0 0.1 Tax compliance and advisory services - KPMG 0.1 0.1 Total operating expenses 35.4 30.5 During the six months the costs expensed for Research and Development was $2.8m (30 September 2020: $4.2m). NOTE 4 SEGMENTAL NOTE Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise income tax. The Group has four segments as described below, which are the Group’s strategic divisions. The strategic divisions o?er di?erent services and are managed separately because they require di?erent technology, services and marketing strategies. For each strategic division, the Group’s CEO (the chief operating decision maker) reviews internal management reports. The following summary describes the operations in each of the Group’s segments. EROAD reports selected ?nancial information segmented by geographic location for operating companies and corporate and development costs. • Corporate & Development: Corporate head o?ce costs and R&D activities for development of new and existing products and services • North America: Operating companies serving customers in North America • Australia: Operating companies serving customers in Australia • New Zealand: Operating companies serving customers in New Zealand Inter-segment pricing is determined on an arm’s length basis. Reportable segment information Information related to each reportable segment is set out below. Segment result represents Earnings before Interest, Taxation, Depreciation & Amortisation (EBITDA), which is the measure reported to the chief operating decision maker. Corporate & Development North America New Zealand Australia 30 SEPT 2021 30 SEPT 2020 30 SEPT 2021 30 SEPT 2020 30 SEPT 2021 30 SEPT 2020 30 SEPT 2021 30 SEPT 2020 Unaudited $M’s Unaudited $M’s Unaudited $M’s Unaudited $M’s Unaudited $M’s Unaudited $M’s Unaudited $M’s Unaudited $M’s Revenue Software as a Service (SaaS) revenue 0.2 0.3 13.4 13.9 30.8 27.4 0.8 0.5 Transaction fee revenue - - - - 1.4 1.3 - - Other revenue 1 14.4 11.1 0.6 2.5 0.6 0.2 - 0.3 14.6 11.4 14.0 16.4 32.8 28.9 0.8 0.8 Earnings Before Interest, Taxation, Depreciation & Amortisation (11.9) (8.9) 2.9 5.9 22.0 18.5 (0.6) (0.4) Total assets 173.6 100.5 26.8 26.1 52.5 37.2 4.0 2.7 Depreciation of Property, Plant & Equipment (0.6) (0.6) (2.1) (2.2) (2.5) (2.4) (0.1) - Amortisation of Intangible Assets (4.8) (4.8) - - - - - - Amortisation of Contract and Customer Acquisition Assets - - (0.8) (1.0) (2.4) (2.4) (0.1) (0.1) 1 Revenue from Corporate & Development Markets includes R&D Grant Income of $0.7m (30 September 2020: $0.5m). NOTE 2 REVENUE (CONTINUED) P. 27 > < P. 26 EROAD 2022 INTERIM REPORT SECTION TITLE P. 29 > < P. 28 MENU EROAD 2022 INTERIM REPORT NOTES TO FINANCIAL STATEMENTS Reconciliation of information on reportable segments GROUP 30 SEPTEMBER 2021 30 SEPTEMBER 2020 Unaudited $M’s Unaudited $M’s Revenue Total revenue for reportable segments 62.2 57.5 Elimination of inter-segment revenue (14.2) (11.7) Consolidated Revenue 48.0 45.8 EBITDA Total EBITDA for reportable segments 12.4 15.1 Elimination of inter-segment EBITDA 0.2 0.2 Consolidated EBITDA 12.6 15.3 Depreciation Total depreciation for reportable segments (5.3) (5.2) Elimination of inter-segment pro?t 0.3 0.6 Consolidated Depreciation (5.0) (4.6) GROUP 30 SEPTEMBER 2021 31 MARCH 2021 Unaudited $M’s Audited $M’s Total assets Total assets for reportable segments 256.9 173.7 Elimination of inter-segment balances (2.7) (1.7) Consolidated Total Assets 254.2 172.0 Geographic information The geographic information below analyses the Group’s revenue and non-current assets by the Company’s country of domicile and other countries. In presenting the following information segment revenue has been based on the geographic location of customers and segment assets were based on the geographic location of the assets. GROUP 30 SEPTEMBER 2021 30 SEPTEMBER 2020 Unaudited $M’s Unaudited $M’s Revenue New Zealand 33.7 29.5 All foreign countries: USA 13.5 15.8 Australia 0.8 0.5 Total revenue 48.0 45.8 GROUP 30 SEPTEMBER 2021 31 MARCH 2021 Unaudited $M’s Audited $M’s Non-current assets New Zealand 83.4 70.9 All foreign countries: USA 12.2 12.5 Australia 1.7 1.0 Total non-current assets 97.3 84.4 Non-current assets exclude ?nancial instruments and deferred tax assets. NOTE 5 PERSONNEL EXPENSES GROUP 30 SEPTEMBER 2021 30 SEPTEMBER 2020 Unaudited $M’s Unaudited $M’s Salaries and wages - excluding capitalised commission costs 21.2 16.6 Annual leave 0.7 0.6 Performance bonus 0.6 0.5 Share-based payments 0.5 0.2 Salaries and wages capitalised to Development and Software Assets (5.3) (2.6) 17.7 15.3 NOTE 6 PAID UP CAPITAL All issued shares are fully paid up and have equal voting rights and share equally in dividends and surplus on winding up. GROUP Number of ordinary shares Issue price $ Issued Capital $ AT 31 MARCH 2021 (AUDITED) 81,896,340 131.7 Shares issued to employees - - 0.8 Shares issued in August 2021 equity placement 15,125,447 5.54 83.8 Costs of raising capital - - (3.5) AT 30 SEPTEMBER 2021 (UNAUDITED) 97,021,787 212.8 On 4 August 2021 EROAD issued addtional 15,125,447 shares at a price of $5.54 each. At 30 September 2021 there was 97,021,787 authorised and issued ordinary shares (31 March 2021: 81,896,340). 662,306 (31 March 2021: 732,741) shares are held in trust for employees in relation to the long-term incentive plan and are accounted for as treasury stock. NOTE 4 SEGMENTAL NOTE (CONTINUED) NOTE 4 SEGMENTAL NOTE (CONTINUED) P. 29 > < P. 28 EROAD 2022 INTERIM REPORT SECTION TITLE P. 31 > < P. 30 MENU EROAD 2022 INTERIM REPORT NOTES TO FINANCIAL STATEMENTS The calculation of both basic and diluted loss per share at 30 September 2021 was based on the (loss)/pro?t attributable to ordinary shareholders of ($2.9m) (30 September 2020: $1.0m). The weighted number of ordinary shares on 30 September 2021 was 85,835,006 (30 September 2020: 67,888,360) for basic earnings per share and also 85,835,006 for diluted earnings per share (30 September 2020: 68,158,834). Other components of equity include: • Translation reserve - comprises foreign currency translation di?erences arising from the translation of ?nancial statements of the Group’s foreign subsidiaries into New Zealand Dollars. • Retained earnings - includes all current and prior period retained pro?ts and share-based employee remuneration. NOTE 7 CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND PAYABLES TO TRANSPORT AGENCIES GROUP 30 SEPTEMBER 2021 31 MARCH 2021 Unaudited $M’s Audited $M’s Cash and cash equivalents 119.3 57.1 Restricted bank accounts 13.5 10.5 132.8 67.6 Cash and cash equivalents exclude restricted bank accounts. Restricted bank accounts are presented separately from cash and cash equivalents on the face of the Statement of Financial Position and movements in restricted bank accounts are excluded from the Statement of Cash Flows. The restricted bank accounts relate to Road Users tax collected from clients due for payment to the appropriate government agency. Payables to transport agencies (13.5) (10.5) NOTE 8 PROPERTY, PLANT AND EQUIPMENT GROUP Right of Use Assets Hardware Assets Plant and equipment Leasehold improvements Motor vehicles O?ce equipment Computers Total $M's $M's $M's $M's $M's $M's $M's $M's YEAR ENDED 31 MARCH 2021 (AUDITED) Opening net book amount 5.1 29.5 0.2 1.7 0.3 0.3 0.3 37.4 Additions - 4.4 - - 0.2 0.2 0.3 5.1 Disposals - - - - - - - - Depreciation charge (0.9) (7.8) - (0.4) (0.1) (0.2) (0.2) (9.6) Depreciation recovered - 2.1 - - - - - 2.1 E?ect of movement in exchange rates (0.1) (0.2) - - - - - (0.3) Closing net book amount 4.1 28.0 0.2 1.3 0.4 0.3 0.4 34.7 Cost 6.8 51.3 0.7 2.9 1.3 1.4 3.4 67.8 Accumulated depreciation (2.7) (23.3) (0.5) (1.6) (0.9) (1.1) (3.0) (33.1) Net book amount 4.1 28.0 0.2 1.3 0.4 0.3 0.4 34.7 GROUP Right of Use Assets Hardware Assets Plant and equipment Leasehold improvements Motor vehicles O?ce equipment Computers Total $M's $M's $M's $M's $M's $M's $M's $M's SIX MONTHS ENDED 30 SEPTEMBER 2021 (UNAUDITED) Opening net book amount 4.1 28.0 0.2 1.3 0.4 0.3 0.4 34.7 Additions 0.1 8.9 - - - 0.1 0.4 9.5 Disposals - - - - (0.1) - - (0.1) Depreciation charge (0.5) (4.0) - (0.1) (0.1) (0.1) (0.2) (5.0) Depreciation recovered - 1.5 - - 0.1 - - 1.6 E?ect of movement in exchange rates - (0.5) - - - - - (0.5) Closing net book amount 3.7 33.9 0.2 1.2 0.3 0.3 0.6 40.2 Cost 6.9 60.3 0.8 2.8 1.2 1.5 3.8 77.3 Accumulated depreciation (3.2) (26.4) (0.6) (1.6) (0.9) (1.2) (3.2) (37.1) Net book amount 3.7 33.9 0.2 1.2 0.3 0.3 0.6 40.2 Included in the Hardware Assets is equipment under construction of $11.3m (31 March 2021: $6.8m). Items of plant and equipment are stated at cost, less accumulated depreciation and impairment losses. Cost includes the purchase consideration, and those costs directly attributable to bringing the asset to the location and condition necessary for its intended use. Where an item of plant and equipment is disposed of, the gain or loss recognised in the statement of comprehensive income is calculated as the di?erence between the net sales price and the carrying amount of the asset. NOTE 6 PAID UP CAPITAL (CONTINUED) P. 31 > < P. 30 EROAD 2022 INTERIM REPORT SECTION TITLE P. 33 > < P. 32 MENU EROAD 2022 INTERIM REPORT NOTES TO FINANCIAL STATEMENTS The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to restore the underlying asset or the site on which it is located, less any lease incentives received. Subsequent costs The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic bene?ts embodied within the item will ?ow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the statement of comprehensive income as an expense in the period they are incurred. Depreciation Depreciation begins when the asset is in the location and condition necessary for it to be capable of operating in the manner intended by management. The following rates have been used on a straight line basis: Leasehold improvements 3 to 9 years Hardware assets 3 to 6 years Plant and equipment 3 to 11 years Computer/O?ce equipment 1 to 3 years Motor vehicles 3 to 5 years Right of use assets 3 to 9 years The above rates re?ect the estimated useful lives of the respected categories. Consideration was given to how long assets can be deployed and any expected network changes. Leasehold improvements are depreciated over the contracted lease term. NOTE 9 INTANGIBLE ASSETS GROUP Development Software Total $M's $M's $M's YEAR ENDED 31 MARCH 2021 (AUDITED) Opening net book amount 32.7 9.4 42.1 Additions 12.2 0.9 13.1 Disposals - - - Amortisation charge (8.0) (1.9) (9.9) Closing net book amount 36.9 8.4 45.3 Cost 68.2 14.7 82.9 Accumulated amortisation (31.3) (6.3) (37.6) Net book amount 36.9 8.4 45.3 GROUP Development Software Total $M's $M's $M's SIX MONTHS ENDED 30 SEPTEMBER 2021 (UNAUDITED) Opening net book amount 36.9 8.4 45.3 Additions 10.6 1.3 11.9 Disposals - - - Amortisation charge (3.9) (0.9) (4.8) Closing net book amount 43.6 8.8 52.4 Cost 78.8 16.0 94.8 Accumulated amortisation (35.2) (7.2) (42.4) Net book amount 43.6 8.8 52.4 NOTE 8 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) NOTE 9 INTANGIBLE ASSETS (CONTINUED) The useful lives of the Group’s Intangible Assets are assessed to be ?nite. Assets with ?nite lives are amortised over their useful lives and tested for impairment whenever there are indications that the assets may be impaired. Where an indicator of impairment exists the Group makes a formal assessment of the recoverable amount. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount is the greater of fair value less costs to dispose of the assets and its value in use. For the purposes of assessing impairment, assets are Grouped at the lowest levels for which there are separately identi?able cash ?ows (cash-generating units). Research and Development Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is recognised in the statement of comprehensive income when incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic bene?ts are probable, and the Group intends to and has su?cient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in the statement of comprehensive income when incurred. Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses. Other intangible assets Other intangibles assets that are acquired by the Group, which have ?nite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure Subsequent expenditure is only capitalised only when it increases the future economic bene?ts embodied in the speci?c asset to which is relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in the statement of comprehensive income when incurred. Amortisation Amortisation is recognised in the statement of comprehensive income on a straight line basis over the estimated useful life of intangible asset. The estimated useful lives for the current and comparative periods are as follows: Patents 10-20 years Development Hardware & Platform 7-15 years Development Products 5-10 years Software 5-7 years NOTE 10 CONTRACT LIABILITIES The Group enters into contracts with customers for the provision of software services over a contracted period. As stated in the accounting policies, this revenue is recognised over time as the customer simultaneously receives and consumes the bene?t of the service. The Group has determined that the bene?t of the services provided is consumed evenly over the period of the contract, and thus the performance obligations are satis?ed evenly over the period. Where the Group receives a portion of the transaction price of a contract in advance, this is recognised as a contract liability and released over the contract period as the Group satis?es its performance obligations. GROUP 30 SEPTEMBER 2021 31 MARCH 2021 Unaudited $M’s Audited $M’s Opening balance 6.6 8.2 Amounts deferred during the period 3.0 4.1 Amount recognised in the statement of comprehensive income (2.5) (5.7) 7.1 6.6 Current 4.0 3.9 Non-current 3.1 2.7 P. 33 > < P. 32 EROAD 2022 INTERIM REPORT SECTION TITLE P. 35 > < P. 34 MENU EROAD 2022 INTERIM REPORT NOTES TO FINANCIAL STATEMENTS NOTE 11 INCOME TAX EXPENSE GROUP 30 SEPTEMBER 2021 30 SEPTEMBER 2020 Unaudited $M’s Unaudited $M’s (a) Reconciliation of e?ective tax rate (Loss)/Pro?t before income tax (1.6) 1.2 Income tax using the Company's domestic tax rate of 28% (0.4) 0.3 Non-deductible expense/(non-assessable income) 0.8 (0.1) Losses and timing di?erences not recognised 0.7 - E?ect of di?erent tax rates 0.2 - Income tax expense/(bene?t) 1.2 0.2 (b) Current tax expense/(bene?t) Current year - 0.4 - 0.4 (c) Deferred tax expense Current year 1.2 (0.2) 1.2 (0.2) At 30 September 2021 there were no imputation credits available to shareholders (31 March 2021: Nil) Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in pro?t or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous periods. Current tax payable also includes any tax liability arising from the declaration of dividends. Deferred tax is recognised in respect of temporary di?erences between the carrying amounts of assets and liabilities for ?nancial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary di?erences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are o?set if there is a legally enforceable right to o?set current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on di?erent tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary di?erences, to the extent that it is probable that future taxable pro?ts will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax bene?t will be realised. NOTE 12 BORROWINGS GROUP 30 SEPTEMBER 2021 31 MARCH 2021 Unaudited $M’s Audited $M’s Current borrowings Term Loans 5.0 5.0 Capital Expenditure facility 2.0 2.0 Capitalised borrowing costs (0.4) (0.6) 6.6 6.4 Non-current borrowings Term Loans 26.1 28.6 26.1 28.6 Terms and debt repayment schedule GROUP 30 SEPT 2021 30 SEPT 2021 31 MARCH 2021 31 MARCH 2021 Nominal Interest Year of Maturity Unaudited Face Value $M’s Unaudited Carrying amount $M’s Audited Face Value $M’s Audited Carrying amount $M’s Term Loans 4.20% 2023 31.1 31.1 33.6 33.6 Capital Expenditure facility 3.90% 2023 2.0 2.0 2.0 2.0 Capitalised borrowing costs - 2023 - (0.4) - (0.6) 33.1 32.7 35.6 35.0 The Group has a syndicated debt facility with the Bank of New Zealand (BNZ), Kiwibank Limited and China Construction Bank (CCB). At 30 September 2021, EROAD had the following facilities in place: $13m (NZD) Term Loan Facility A – to re?nance existing debt. The Term Loan has a term of 36 months from the March 2020 re?nance date, with the facility having a maturity date in March 2023. The interest rate is variable with reference the to base rate (BKBM bid rate) for the selected interest period plus a margin of 3.5%. EROAD may select an interest period of 1,2,3 or 6 months. Principal payments of $1.25m are to be made quarterly commencing from December 2020 with the full outstanding balance payable on termination date. $18.1m (NZD) Term Loan Facility B – used to re?nance existing debt and general corporate purposes. The Term Loan has a term of 36 months from the March 2020 re?nance date, with the facility having a maturity date in March 2023. The interest rate is variable with reference the to base rate (BKBM bid rate) for the selected interest period plus a margin of 3.5%. EROAD may select an interest period of 1,2,3 or 6 months. This is an interest only term facility full repayment on the termination date. $25m Capital Expenditure Facility – to fund growth capital expenditure requirements. The Capital Expenditure Facility has a 36 month term from the March 2020 re?nance date, with the facility having a maturity date in March 2023. Drawings can be made on the facility in NZD or USD. The loan is a current liability as it has a roll over feature at the end of each interest period. The interest rate is variable with reference the to base rate (BKBM bid rate for NZD drawings and US LIBOR for USD drawings) for the selected interest period plus a margin of 3.5%. EROAD may select an interest period of 1,2,3 or 6 months. Interest payments are made on the last day of the determined interest period. In addition, a Commitment Fee of 45% of the per annum margin (1.58%) is payable on the undrawn balance of the facility quarterly in arrears. The full outstanding balance is payable on termination date. $5m Overdraft Facilities – for general working capital purposes. This is an on demand facility with the interest rate based on the Market Connect Overdraft Prime Rate plus a margin of 1.5%. EROAD’s operating covenants to support the above facilities include Debt Service Cover Ratio, Interest Cover Ratio, Leverage Ratio and Obligor Assets to Group Assets. EROAD was compliant with all covenants during the period and at 30 September 2021. P. 35 > < P. 34 EROAD 2022 INTERIM REPORT SECTION TITLE P. 37 > < P. 36 MENU EROAD 2022 INTERIM REPORT INDEPENDENT REVIEW REPORT The security package for the Multi-Option Credit Facility Agreement includes an all obligations cross-guarantee granted by EROAD Australia Pty Limited and EROAD Inc in favour of the BNZ (in its capacity of Security Trustee for the banking syndicate) in respect of the obligations of EROAD Limited, and a General Security Agreements granted by EROAD Limited, EROAD Inc and EROAD Australia Pty Limited in favour of the BNZ (in its capacity of Security Trustee for the banking syndicate). NOTE 13 RELATED PARTY TRANSACTIONS Related party transactions are consistent in nature with those reported at 31 March 2021. NOTE 14 CAPITAL COMMITMENTS As at 30 September 2021 the Group had con?rmed purchase orders open with its third party manufacturer of hardware units amounting to $6.8m (31 March 2021: $5.1m). NOTE 15 CONTINGENT LIABILITIES At 30 September 2021 there were no contingent liabilities (31 March 2021: nil). NOTE 16 NET TANGIBLE ASSETS PER SHARE GROUP 30 SEPTEMBER 2021 30 SEPTEMBER 2020 31 MARCH 2021 Unaudited $000’s Unaudited $000’s Audited $000’s Net assets (equity) 182.6 91.8 104.6 Less intangibles (52.4) (42.9) (45.3) Total net tangible assets 130.2 48.9 59.3 Net tangible assets per share ($) 1.34 0.62 0.72 The non-GAAP measure above is disclosed to comply with NZX Debt Market Listing Rule 2.3(f). NOTE 17 EVENTS SUBSEQUENT TO BALANCE DATE As announced on the NZX and ASX on 14 July 2021, the Group entered into a conditional agreement to acquire all of the shares of Coretex Limited. On 30 July 2021 the Group’s shareholders approved the transaction and the Group received approval from regulatory authorities to proceed with the acquisition on 17 November 2021. Management anticipates that the acquisition will be completed on 1 December 2021. NOTE 12 BORROWINGS (CONTINUED) © 2021 KPMG, a New Zealand Partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved Independent Review Report To the shareholders of EROAD Limited Report on the condensed consolidated interim financial statements Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements on pages 17 to 36 do not: i. present fairly in all material respects the Group’s financial position as at 30 September 2021 and its financial performance and cash flows for the 6 month period ended on that date; and ii. comply with NZ IAS 34 Interim Financial Reporting. We have completed a review of the accompanying condensed consolidated interim financial statements which comprise: — the condensed consolidated statement of financial position as at 30 September 2021; — the condensed consolidated statements of comprehensive income, changes in equity and cash flows for the 6 month period then ended; and — notes, including a summary of significant accounting policies and other explanatory information. Basis for conclusion A review of condensed consolidated interim financial statements in accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor of the Entity (“NZ SRE 2410”) is a limited assurance engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. As the auditor of EROAD Limited, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial statements. Our firm has also provided other services to the Group in relation to tax compliance, tax due diligence and tax advisory and other assurance services. Subject to certain restrictions, partners and employees of our firm may also deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group. These matters have not impaired our independence as reviewer of the Group. The firm has no other relationship with, or interest in, the Group. Use of this Independent Review Report This report is made solely to the shareholders as a body. Our review work has been undertaken so that we might state to the shareholders those matters we are required to state to them in the Independent Review Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the shareholders as a body for our review work, this report, or any of the opinions we have formed. P. 37 > < P. 36 EROAD 2022 INTERIM REPORT SECTION TITLE P. 39 > < P. 38 MENU EROAD 2022 INTERIM REPORT DIRECTORY REGISTERED OFFICE IN NEW ZEALAND Level 3 260 Oteha Valley Road, Albany, Auckland New Zealand INVESTOR RELATIONS AND SUSTAINABILITY ENQUIRES Address: EROAD Limited, PO Box 305 394 Triton Plaza North Shore, Auckland Email: investors@eroad.com Telephone: 0800 437 623 LEGAL ADVISORS Chapman Tripp Level 34 PWC Tower 15 Customs Street Auckland 1010 PO Box 2206, Auckland 1140 Telephone: +64 9 357 9000 REGISTERED OFFICE IN NORTH AMERICA 7618 SW Mohawk Street Tualatin, OR 97062 USA MANAGING YOUR SHAREHOLDING ONLINE Changes in address and investment portfolios can be viewed and updated online: www.computershare.co.nz/ investorcentre . You will need your CSN and FIN numbers to access this service. BANKERS Bank of New Zealand Kiwibank China Construction Bank National Australian Bank Wells Fargo REGISTERED OFFICE IN AUSTRALIA Level 36, Tower 2 Collins Square 727 Collins Street Docklands, VIC 3008 Australia SHARE REGISTER - NEW ZEALAND Computershare Investments Services Limited Private Bag 92119, Victoria Street West Auckland 1142, New Zealand Email: enquiry@computershare.co.nz Telephone: +64 9 488 8777 Website: www.computershare.co.nz/in- vestorcentre Directory 38 Responsibilities of the Directors for the condensed consolidated interim financial statements The Directors, on behalf of the Group, are responsible for: — the preparation and fair presentation of the condensed consolidated interim financial statements in accordance with NZ IAS 34 Interim Financial Reporting; — implementing necessary internal control to enable the preparation of condensed consolidated interim financial statements that is fairly presented and free from material misstatement, whether due to fraud or error; and — assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the review of the condensed consolidated interim financial statements Our responsibility is to express a conclusion on the condensed consolidated interim financial statements based on our review. We conducted our review in accordance with NZ SRE 2410. NZ SRE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the condensed consolidated interim financial statements are not prepared, in all material respects, in accordance with NZ IAS 34 Interim Financial Reporting. The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with International Standards on Auditing (New Zealand). Accordingly we do not express an audit opinion on these condensed consolidated interim financial statements. This description forms part of our Independent Review Report. KPMG Auckland 26 November 2021 P. 39 > < P. 38 EROAD 2022 INTERIM REPORT EROAD www.eroadglobal.com/investors < P. 40 26 November 2021 Results for announcement to the market Name of issuer EROAD Limited Reporting Period 6 months to 30 September 2021 Previous Reporting Period 6 months to 30 September 2020 Currency New Zealand Dollars Amount (000s) Percentage change Revenue from continuing operations $ 4 7,98 7 5% Total Revenue $4 7,98 7 5% Net profit/(loss) from continuing operations ($2 ,863) - 3 82 % Total net profit/(loss) ($2 ,863) ) - 3 82 % Interim/Final Dividend Amount per Quoted Equity Security No dividend declared Imputed amount per Quoted Equity Security Not Applicable Record Date Not Applicable Dividend Payment Date Not Applicable Current period Prior comparable period Net tangible assets per Quoted Equity Security $ 1.27933612 $0. 52 416240 (incl deferred tax as intangible) A brief explanation of any of the figures above necessary to enable the figures to be understood For commentary on the result, please refer to the Annual Report for the year ended 31 March 2021. Authority for this announcement Name of person authorised to make this announcement Alex Ball Contact person for this announcement Alex Ball Contact phone number +64 29 772 5631 Contact email address alex.ball@eroad.com Date of release through MAP 26 November 2021 Audited financial statements for the half year ended 30 September 2021 accompany this announcement. TEL +64 9 927 4700 PO Box 305 394 FAX +64 9 927 4701 Triton Plaza, North Shore 0757 Page 1 FREE 0800 4 EROAD Auckland, New Zealand eroad.co.nz

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