The Eroad Ltd (ASX: ERD) share price has continued its downhill descent after announcing its third-quarter update.
Currently, the EROAD share price is down 3.64% to $4.24.
ERD share price
Coretex boosts Q3
Key highlights from the third quarter ending 31 December include:
- Total contracted unit growth of 53.3% to 203,439
- 66,157 units from the Coretex acquisition
- 3,837 united added from EROAD
- Completion of the Coretex acquisition on November 30
The headline growth number of 53% doesn’t paint the full picture.
In November EROAD included the recent Coretex acquisition in its consolidated results, providing a one-off bump to contracted units.
“Integration is on track with initial focus on building sales in the North America market”
Removing the effect of Coretex, EROAD increased contracted units by just 2.8%.
New Zealand
Of the three geographic regions, New Zealand continues to be the standout accounting for 81% of new contracted units.
Management noted several enterprise fleet wins in addition to small and medium-size customer growth.
Australia
The more nascent Australian region contributed 854 more units off a lower base in addition to 7,892 units from Coretex.
“Operating conditions have become more challenging since December with the Omicron COVID-19 wave impacting EROAD staff and customers”
North America
Historically the problem division, North American sales went backwards for the second straight quarter.
EROAD lost an enterprise customer with 650 units after both parties couldn’t agree on renewal terms.
Management continues to cite ongoing driver shortages, macro-economic and fleet reduction as headwinds.
However blue sky may be the horizon. The Coretex acquisition will significantly improve EROAD’s North American market position and growth potential by adding over 50,000 units.
Additionally, Coretex added 671 units for the month of December. A further 2,000 will be deployed in the fourth quarter.
EROAD also has five customers in its pipeline relating to 23,000 new potential units.
My take
Like many local companies that have ventured abroad, EROAD is finding it difficult to gain a foothold in the lucrative North American market.
If it can win one of the five customers currently in the pipeline, that could go a long way to demonstrating its back on track.
But until then it’s difficult to see the business gaining meaningful traction in the near term.
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