Ann: GENERAL: ERD: EROAD Market Update

• Release Date: 29/01/16 08:30
• Summary: GENERAL: ERD: EROAD Market Update
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					ERD
29/01/2016 08:30
GENERAL
PRICE SENSITIVE
REL: 0830 HRS EROAD Limited

GENERAL: ERD: EROAD Market Update

EROAD Market Update

29 January 2016 Steven Newman, EROAD CEO, has now been based in Oregon since
October 2015 and, as was signaled on 25 November 2015 at the time of
releasing our half year results, we are in a position to provide an update to
the market on progress to-date, including in particular:
o the publication of the U.S. Department of Transportation's Electronic
Logging Devices (ELD) rule;
o the entry into the new states of Washington and Idaho, and our progress in
Oregon; and
o the implementation of the North American indirect sales strategy.
"EROAD continues to deliver unit growth of over 58% year on year, and the New
Zealand and North American markets present sizable and ongoing growth
opportunities for the business," said Steven Newman.  We set out below an
update on our progress in these markets.

North American Market
The steady expansion into the North American market continues. Our sales team
has expanded beyond Oregon, into Washington and Idaho, and the indirect sales
channel now has a number of partner evaluation pilots underway.  Achieving
strong partner channels is viewed as an essential element in moving more
quickly to cover the broader North American market opportunity, and will be a
key focus for this year.  As at 28 January 2016 EROAD had grown Total
Contract Units (TCU) in the North American market to 4,100.

US Department of Transportation rule requiring electronic logging devices
(ELD)
The most significant development in North America since 1 October 2015 has
been the US Department of Transportation's introduction of its long-awaited
rule requiring the use of ELDs for commercial vehicle drivers to record their
hours of service (HOS).  With the rule now finalised we have seen a
significant increase in the level of engagement from customers around both
electronic logbooks and fleet telematics.
It is estimated that more than three million drivers and vehicles are now
required to comply with the new ELD rule by December 2017.  This represents a
significant opportunity for EROAD to provide customers across North America
with a comprehensive electronic tax (International Fuel Tax Agreement (IFTA)
and Oregon Weight Mile Tax (WMT)) and compliance solution on its secure
technology platform.  We currently expect EROAD to be the only ELD provider
able to offer customers both ELD services and Oregon WMT services.
The U.S. Department of Transportation's Federal Motor Carrier Safety
Administration published its final rule requiring the use of ELDs on 11
December 2015. The rule was consistent with EROAD's expectations, in
particular:
o The ELD must enable the driver to securely record and display their HOS.
o The ELD must automatically and securely record vehicle information
including driving time, engine hours, power status, motion status and
location.
o All drivers and vehicles must adopt a compliant ELD solution within 2 years
- by December 2017.
EROAD built its Ehubo2 in-vehicle hardware, driver electronic logbook and
Depot cloud based platform with the goal of becoming a global leader in road
user charging and compliance services to the heavy transport sector.
Further, we designed our solution in anticipation of the proposed ELD rule.

Our R&D team has put in place our ELD development program building on our
recently launched compliant Electronic Logbook (see below).  We expect the
development and testing of our full ELD solution to be completed during 2016.

Launch of our Electronic Logbook in North America
EROAD launched its Electronic Logbook in North America in December, providing
transport operators with an innovative electronic HOS solution to help
improve compliance and reduce paperwork. The Electronic Logbook has added to
EROAD's service offering in North America.  Our Electronic Logbook is the
first step towards offering a compliant ELD solution that meets the recently
published ELD rule.
"We can report that EROAD, through its business strategy and current
technology platform, is very well placed to service the ELD opportunity in
North America," said Mr Newman.

Direct sales channel
Tony Warwood, General Manager New Zealand, is currently acting VP Sales North
America.  Tony has overseen the expansion of the direct sales channel.
We have established a sales team in Washington, which has delivered
encouraging early sales since October, including one of our largest North
American clients to date, with 245 units.  The team is building a pipeline of
opportunities which should see them running at full productivity in 2016.
We are in the process of completing build out of our Idaho sales team and
expect this to be in place by March 2016.
Oregon remains our most important state and is progressing well.  With 3,000
units in Oregon we now estimate our Oregon based WMT market share is 3%.  In
New Zealand, after the same time period in the market, EROAD had 2,500 units.

Since the publication of the ELD mandate, we have seen more commitment from
the industry to adopting an electronic solution.  "The level of engagement
from potential customers is considerably higher as they begin to prepare to
meet the new rule's requirements," said Mr Newman.
"We are having sales success with customers who have not had telematics as
well as customers who have chosen to switch to EROAD from other telematics
providers.  Our tax based solutions, including WMT and IFTA, as well as our
Electronic Logbook capability, have both been drivers of this sales success,"
said Mr Newman.
The average monthly sales for the last three months for our direct sales
channel is 240 units per month and broadly in line with the forecast in our
28 September 2015 announcement.  Our pricing has also improved as our brand
has become more established and as customers understand the additional value
our solution provides in operational and health and safety areas.
"I am encouraged by the impact the new ELD rule has had on the market and
customer engagement.  With our unique technology, along with both our direct
and indirect sales channels, we are very well placed to service the three
million plus drivers and trucks required to comply with the new ELD rule, by
December 2017," Mr Newman said.

Indirect sales channel
Steven Newman is currently overseeing the newly established indirect sales
channel.  Indications from the market are that our indirect sales channel
will play a big part in accessing ELD customers across North America.  Sales
cycles are likely to be between six and nine months as we work with our
channel partners to develop our joint solutions and incorporate our new ELD
into the offering.  We expect to deliver a small number of initial sales in
FY16, in part driven by the desire to incorporate the new ELD rule in our
sales. As a consequence, FY16 TCU will be lower, by up to 1,000, than the
6,000 forecast in our 28 September 2015 announcement, with minimal revenue
impact on the FY16 full year result.

New Zealand/Australian Market
EROAD's New Zealand/Australia business has continued to achieve strong growth
since September 2015.  EROAD is now collecting 34% of total Heavy Vehicle
road user charges in New Zealand, up from 29% at April 2015.  As at 28
January 2016 EROAD had grown TCU in the New Zealand/Australia market to
31,300.

Health and safety continues to be a major concern for New Zealand businesses
and is driving EROAD's engagement with an increasingly diverse range of
customers including light vehicle fleets.  New Zealand's health and safety
reforms will come into effect in April 2016.  EROAD's ability to offer
services that support health and safety compliance while also improving
operational efficiency is helping the company to meet the needs of an of its
customers.

About EROAD
EROAD is a fully integrated technology, tolling and services provider. It was
the first company to implement a GNSS/cellular-based road charging solution
across an entire country. Its advanced technology provides road charging,
compliance and commercial services with the same platform to lower overall
client and delivery costs.
The EROAD system consists of a secure electronic distance recorder (Ehubo),
integrated with mobile applications, and an online bank-grade payment gateway
and services portal. It undertakes design and manufacture of our Ehubos, as
well as software development, from our headquarters in Auckland.
EROAD's successful New Zealand reference site provided it with the
opportunity to enter the international market. In 2014 EROAD commercially
launched in Oregon, becoming the first approved electronic WMT service
provider in North America.
EROAD's goal is to offer flexible and powerful solutions based on our
innovative technology to assist in the creation of a transport sector that is
responsive to the evolving needs of business, government and the wider
community.  For more information please visit www.eroad.com.
For a detailed description of EROAD's business, and terms including Total
Contracted Units (TCU), which are non GAAP measures used by EROAD to manage
the business, please refer to the investor section of the EROAD website.

Contact: Steven Newman CEO on +64 9 9274713.
End CA:00276944 For:ERD    Type:GENERAL    Time:2016-01-29 08:30:24