Good afternoon for those joining in New Zealand, and those joining from overseas in the U.S. G ood morning for those investors and supporters in Australia as well. I'm Mark Heine. I'm EROAD's Chief Executive Officer , sorry, accompanied by Margaret Warrington, our Chief Financial Officer today as well. If I just go quickly through the agenda for today. We'll start off with Margaret and myself going through our financial results for FY23, including our financial performance. I'll then talk about our strategy for the year and conclude with our outlook and guidance. Just to start us off, I mean, it's fair to say that FY22 was a challenging year for EROAD. We had lost our way when it came to our cost base, to our customers, and to innovation. FY23 been a year where we've had to turn it around and change.
I just want to recognize that we have been deeply focused on changing and representing a rebuild and refocus for this year. To this year, we had to demonstrate our to shareholders our ability to execute. We have done this. We've delivered revenue and earnings to our guidance. This year, we also had to give our shareholders confidence that we could find a profitable pathway going forward. We have done this. Today we lay out a clear pathway to grow and to free cash flow positive by FY26. I'm actually proud of the results that we're presenting today to our shareholders. I'm proud of our ability to deliver on what we've promised.
I'm also proud of the fact that we are on our way to achieving free cash flow positive as a company, and that we've got the right dedicated team together to help support us on that journey. We turn to the key highlights for the business. Now, first and foremost, if we focus on normalized revenue for the company, it was ahead of where we had guided. We actually landed NZD 165.3 million for our normalized revenue for the year. Our reported revenue was NZD 174.9 million. We'll go through a bit later the changes around contingent consideration and its impact on why our NZD 165.3 million better represents our position for the year.
Our normalized EBIT, so once we've taken into account contingent consideration and normalizing for integration, was a loss of NZD 4.5 million. That was ahead of It was better than what we had thought we were gonna do, as we updated guidance around -NZD 6 million to -NZD 3 million earlier this year. We are focused on our cost-out campaign as well. We have realized NZD 10 million in annualized cost for FY23. We'll go through some of those cost-outs later on in this presentation. For FY24, we are focused on targeting an additional NZD 10 million in cost-out. We'll go through that as well. I'm happy to say that our future contracted income continues to increase. It rose by 16% during the course of FY23 to almost NZD 220 million.
We have also improved our asset retention rates with our customers. It improved from 93.4% in FY22 to 94.8% on a global basis in our current financial year. AMRR has also improved as well, up 14% to NZD 153.7 million for the year, but NZD 8.6 million of that represents FX gains through the year, but it is showing sort of progress there in terms of our customer base and getting recurring revenue into the business. We've also grown net units as well by 18,000 to take us to about 227,000 connections in the business for the year. Our free cash flow numbers have also improved from an outflow of NZD 45.1 million in FY22 to an outflow of almost NZD 30 million in FY23.
Importantly, we've got a handle on costs in the sense that, in the second half of the financial year, the cash burn was at NZD 1.8 million per month, down from about NZD 4.2 million during the first half of the year. As to our R&D costs, that was around NZD 37 million for the year. A bit heightened from what we had previously, but was within what we had guided the market to, and we do expect, revenue to go down, sorry, R&D to go down to NZD 30 million in the following, in this financial year. We look at our results overview. We focused on four main areas to ensure we delivered on this year's result to remain credible and capable to deliver on our future plan. Those four areas touch on our strategy.
For those who joined us for Investor Day, we did update our strategy in March to the market, and it's focused around two key areas. First is turning around the core, and for us that is right-size and cost base for us as a business to move us to generate positive free cash flow. Second is around realizing growth in North America, and we've put in place the right frameworks and fundamentals to enable that as well. We also indicated at the Investor Day that we're doing a strategic review at the moment with Goldman. That's really to look at what capability we can bring in the North American market, whether it's from a go-to-market technology or capital approach to help us accelerate our growth in North America.
That process is ongoing, and we'll update the market as to how we're getting on as any developments materialize. The second area that I'd like to focus on is our financial headroom. We do have the financial headroom to execute on our strategy. As I mentioned before, we realized NZD 10 million in cost out and focused on a further NZD 10 million for this year, and we brought our cash burn down to NZD 1.8 million a month in the second half of the year, and we're focusing on bringing that down further. We do have liquidity of NZD 27.5 million available via our credit facility, as well as important cash as well, and Margaret will go through that later on in the presentation around our debt profile. I'm also delighted to say that we've got the right executive team in place.
Margaret was appointed as a permanent Chief Financial Officer from December 1. Akinyemi Koye continues as our president in North America. Konrad Stempniak has joined us, stepped into the role as the EGM, sorry, of ANZ at the beginning of the year. Aaron Latimer has rejoined us as our Chief Operating Officer and very much focused on the procurement side and supply chain side of the business. We've got a new Chief People Officer in Shelley Prentice, who joined us in April. In North America, we have two key hires we brought on board. First is Steen Andersen, who has over 25 years' experience in SaaS businesses, and he joins us in North America as our Chief Transformation Officer to make sure we realize our strategy into the business.
We've got a new CTO also based in North America, who's gonna join us in Q1 of FY24, who's got deep experience in telematics as well. We're also focusing as part of our strategy on making sure that sustainability is at the forefront of our organization. Craig Marris steps into the role as our Chief Sustainability Officer, and given the need for our customers to get the right insight into the business, Dean Marris is our Chief Data Science Officer as well. Finally, we've been succeeding with our customers too. We won Sysco in North America, which is over 9,000 connections in that market. We also won this year Fonterra, which is a massive deal for our business in the sense that we're bringing on a marquee customer who's taking a full suite of our solutions.
Not only our in-cab telematics device and Ehubo in our camera solution, but also our rollover solution and our satellite tracker as well. Finally, we've renewed ABC in North America with a further 6,000 connections as well. If you look at the key metrics that we measure ourselves by, we set these at our Investor Day in, oops, March, sorry, I've just gotta get the screen sorted. Sorry. First year AMRR. We were NZD 134.6 million in FY22, and we hit NZD 153 million in FY23. That is the range that we set ourselves to a target of being between 11% and 13% for AMRR. I do note though that some of that does is made up by our FX hit of NZD 8.6 million, which improved that number.
We are focused on making sure we grow AMRR in the future. It's also pleasing to see that churn is within the number that we have set ourselves as well between that 5% and 7% band. R&D as % of revenue and our free cash flow margin will take more time to reflect organizational change that we've put into place, but they are heading in the right direction as a business. While our average lease duration has fallen slightly, as we bring on more enterprise customers with typically longer contract periods, we expect this to rise in the future. Here we dig into a bit more around our revenue and our EBIT. Noting in particular, the step change that bringing the Quartix companies into EROAD has had on us.
First, normalized revenue, once we've adjusted for a contingent consideration is NZD 165 million, a 45% increase from the prior year. In terms of operating costs, they have risen on the basis of the inclusion of Quartix, in particular, personnel expenses have. However, we are seeking to offset those going forward by focusing on our cost out program. Our normalized EBIT was - NZD 4.5 million for the year. Turning to the markets. First, just want to acknowledge New Zealand. It continues to execute very well here. We always set ourselves a target of having net new subscriptions of between 9,000 and 10,000 new subscriptions each year. We hit that. We've hit 9,500 during the course of the financial year.
We're really pleased to see how we continue to deliver on new units in that market. We also know that we can grow further, in particular in the light commercial vehicle segment. During the course of last year, we launched our new cameras products in terms of Clarity Gets and Clarity Locate. Those are specifically targeted towards the light commercial vehicle parts market, providing our customers the ability to track what the vehicles are doing, and then, if they wish, pay per view for any camera footage that they may want to add on. That provides them a bit of a tease around what our camera solution can provide them. Our customers continued during the financial year to add further subscriptions in terms of SaaS services.
We had over 1,500 customers add over 13,000 additional subscriptions to make sure that we can provide them with additional functionality into their business. Finally, we had a significant renewal profile of almost 30,000 renewals during the course of the financial year. Looking at Australia, while that's a much smaller part of our business, it is profitable and the key metrics do remain strong. We do have a strong asset retention rate in the Australian market, but I do note that during the course of the year, we did lose one of our enterprise customers, which we'll roll out during the course of FY24. We are really excited about the potential in the Australian market.
In particular, we see customers who do like to adopt both the EROAD hardware, legacy hardware for the Ehubo solution, as well as customers wanting to adopt the solutions that we brought in from the merger with Quartix too. It gives us the ability to target different fleets with the right solutions for them over time. We do see some really good opportunities presenting themselves in Australia over the course of the financial year coming up. We look forward to seeing how we can grow in this market. Finally, in North America, we grew by 8% in net new units during the course of the financial year, and we are seeing momentum build. I think it's really important to reflect on the success of winning Sysco in the market and what that actually means for a business like ours.
Sysco is the world's largest food services company with over 650,000 customers globally, a large majority of which are based in North America. We're helping Sysco with a range of parts of their business. Not only are we going to help them manage their compliance risks as a company, but we are providing new mapping and routing solutions to them to help their drivers be more effective and efficient on the road. We're also deeply integrating our data into the back end of Sysco too, to help them get more real-time information of what's going on with their vehicles on the road, so they can better service their customers around timing of delivery as well. It's a great partnership that we're developing with Sysco.
In addition to that, Cisco is going on the journey with EVs as well, and EROAD's partnering with them on that too. Not only are we helping them with their ELD compliance with EVs, which is a challenge they've had, and that we're gonna help support them on when they move away from internal combustion engine vehicles. Also we're helping them understand what is the right help to optimize what are the right vehicles for them to use from an EV perspective as well. We're working closely with them too. It does help us on that sustainability journey and focusing enterprise customers. It does present opportunities for us as well there. I might hand over to Margaret on the operational efficiency metric.
Hey, everyone. It's really pleasing that given the focus on cost control, we're pleased to report that our CAC or cost to acquire as a percentage of revenues remained relatively flat year-on-year. You'll see that CAC on a per unit basis has increased. That largely reflects that we're targeting enterprise customers, where the costs often are incurred in a different period to where the unit growth is occurs. These metrics are like could have a bit of variability as EROAD grows and scales. Our enterprise customers do help us drive better revenue and as the unit increases. That's reflecting the fact that you see the stagnation and the cost to acquire as a % of revenue, you see growth in the one in the per unit basis. It'll move around over time.
Our cost to serve has reduced, that reflects the cost out program, the synergies with the Coretex merger and the benefits of achieving scale. It's also reflecting that our strategy where we're working to make sure we align our service model with our customer segmentation. In terms of operating costs, this year, operating costs include a full 12 months of the combined EROAD Coretex group. The prior period only had four months. As we've signaled over the past few months, management have been focused on driving out cost and enabling the business to become free cash flow neutral by FY25 while continuing to grow. The graph on the left demonstrates that in most OpEx areas, we held costs as a percentage of revenue flat. The 3 notable exceptions to this were cost of goods sold, SaaS and personnel.
In terms of cost of goods sold, it will mirror revenue for outright hardware sales, which has grown this year from NZD 2.5 million to NZD 6.9 million. SaaS cost growth is due to the mix of customers. While our large enterprise customers are profitable, the mix of customers drive different costs into our cost base than our SMB customers do. One of the examples of that is the SaaS costs, where we sometimes set up a separate instance for our platform to support the bespoke solutions we provide those customers. The initial impact of the FY23 savings target of NZD 10 million is seen in these results, with the full impact of these savings continuing into FY24. The largest of our operating costs is personnel.
We've split that out as an example in the graph on the right to detail the impact of the cost out programming. Personnel costs grew in FY23 due to the additional eight months of Coretex and the impacts of inflation. As part of the realignment of our cost base, EROAD has had an overall reduction in permanent FTE of more than 100 since 2022. I should actually say positions rather than FTE, 'cause we've managed and controlled each position as vacancies occur. This equates to an annualized saving of NZD 9.6 million, of which actual personnel costs have a benefit of NZD 3.5 million in FY23. Ultimately, this cost out work has contributed to an improved outlook for operating costs in FY24, and it's also enabled us to realign our business requirements to our new strategy.
This will allow EROAD to hold operating costs flat as we grow in FY24, even with revenue growth. The NZD 10 million of annualized cost we have already identified compensates for the expected increases in areas such as SaaS and inflationary pressures as we grow. Normalized for the Coretex acquisition, our free cash flow to the firm for the year is -NZD 29.9 million. It's an improvement on FY22 of NZD 15.2 million. A result of our success in reducing the cost base and improving the operating structure of the business, free cash flow has consistently improved over the last 18 months. The key reasons for the improved cash flow are growth in our EBITDA, both revenue growth along with cost management.
There's been collection of some of our debtor growth we experienced in FY22 and improved inventory risk as global supply chains ease. This has been offset by increased R&D with the work on integration. In the graph on the left, you can see the trajectory we are tracking on. The second half of the year, free cash flow is a significant improvement on the first half year. This provides further credibility to our FY24-FY26 targets that we've set for free cash flow neutrality by FY25 and then positive beyond that. In terms of our debt, our monthly cash burn, as Mark mentioned earlier, fell to NZD 1.8 million in the second half, down from NZD 4.2 million in the first half. That's given the ongoing improvements to our business as we execute future cash burns reduce. Sorry.
As we continue with the ongoing improvements to our business, we expect future cash burn to reduce. I'll get it out eventually. For our growth to be managed within our current facilities. We have sufficient headroom in the NZD 90 million facility, and we are remain compliant with all our debt covenants. Our debt largely funds our property, plant, and equipment, which is mainly the hardware used by our customers. Our current PPE net book value is NZD 61.7 million, while our net debt is NZD 62.5 million. As mentioned on the Investor Day, our leasing model does mean that EROAD pays for the hardware upfront. The hardware and the cost to acquire is repaid within approximately 21 months.
As we pivot to enterprise customers and longer lease terms, we'll see the back half of that lease contribute to cash, given our hardware has a useful life of about six years. Our goal is to achieve scale that enables our operating cash flows to be sufficient to fund the hardware outflow and the R&D. This will be achieved through both revenue growth and margin management. While R&D increased in total NZD terms, largely that's due to the inclusion of Coretex and the related integration spend. As a percentage of revenue, R&D is declining, and we've reiterated our expectation that our strategic discipline and targeted roadmap for R&D spend will see that metric improve further in the coming years. This will further improve our cash generation.
We signaled that we expected to spend NZD 38 million on R&D, and our actual spend is coming in just below that at NZD 37.2 million. Of this, about NZD 8 million was related to integration activities. Next year, we're expecting to spend a total of NZD 30 million, and we'll continue on our trajectory of the longer-term target of 13%-15% of revenue for R&D. At the recent Investor Day, we discussed the 3G replacement program for ANZ with the impending shutdown of the 3G networks. We knew the shutdowns were coming, and although the dates were only confirmed maybe in the last 6-12 months, we've been working towards a replacement plan for some time.
COVID and the subsequent global supply chain issues, as well as continued strong unit growth, have limited the access we had to 4G compatible units for this program, meaning we couldn't accelerate it as fast as we wanted to. Without the cost impact of this replacement program in ANZ, EROAD would have been free cash flow positive. It's worth remembering, we've already gone through a similar program in North America, and while the volumes were lesser scale, it was still successful. Although this is being necessitated by our networks, it does create an opportunity for us to upgrade services and engage with our customers. Across ANZ, almost 1/3 of the units are already 4G compatible, with our Australian units more than 70% complete. We have a new head unit product.
It costs us less, which is great, and more importantly, it simplifies the upgrade process for the majority of our devices. It means that a large percentage of our devices can be swapped out by the customers and within 15 minutes. As mentioned at the Investor Day, this program is a significant one for us. It has been necessitated by the telecommunication network shutdown. It's our view and the information available to the market that this will not reoccur within the next 10 years. Our product remains current and useful within that timeframe. We can complete the program within existing debt facilities, and the cost impact has been factored into our plans. Even with this program, we are confident we are on target to deliver free cash flow neutral FY25 and positive in FY26.
Lastly, the integration progress with Coretex. While Coretex has been mostly integrated within the 18-month window we expected, we made decisions to pause some work, and there are some areas that will require further progress to be made. The businesses are now fully integrated for our day-to-day operations. Our sales and customer support teams and platforms are combined. The new integration platform that sits between 360 and MyEROAD has been built. Further work will continue, we did elect to slow progress to enable better cost management. Ongoing work is planned so that we can share our products between the platforms, but this is driven by EROAD rather than our customers. It hasn't slowed down sales, and customers are continuing to use each of the platform and the different products.
It's us that wants to be able to give our customers access to new features and, over time, a single user experience. I'll pass back to Mark.
Thanks, Margaret. Now I'll cover off our strategy updates. Some of this may be familiar for those who joined us as part of our Investor Day in Sydney. It's really important to remember that at the heart of our strategy is cash generation and appropriate revenue growth for the business, and we're deeply committed to enable that. It has two limbs, our strategy. The first is around turning around the core, and the second is growth in North America. What that means for us is reflecting on EROAD, who we are today. As we've merged entities together, we have multiple solutions for our customers, and what we want to do is to enable them so we can consolidate, so it's more simple.
We also, as we bring customers on right now, particularly enterprise customers, there may be custom builds to help enable them to join our solution. We've also seen that our development of our software and hardware has had a longer time to market than what we'd like, sometimes in excess of a year or more. Reflecting on our strategy, turning around the core is focused on how do we, one, decrease inefficiencies in the business through our personnel corporate costs. We'll go through the next couple of slides that outline exactly where we've focused on removing those costs in our business. The second is streamlining our R&D function and refocusing spend.
What we're doing is, rather than having money spent on R&D projects, which may take longer time to materialize the return on investment, we're focusing our investment on what we have right now in front of us for our customers to enable us to get a quicker return on investment from them. Finally, we're looking to tailor our service levels to drive performance. We know from our customers that they have different needs across the size of their fleets. With a number of our larger customers are needing more bespoke support, whereas the smaller customers can be accommodated by our customer self-service solution. We are focusing on how do we segment the customer base to be better targeting around their needs and what we can accommodate.
When it comes to North America, we're targeting the transportation vertical with whole fleet solutions.
What that means is those customers that we know we can win with, including ODFL, that focuses on less than a truckload solutions, we can actually focus on them better, provide solutions to them. We know that other LTL providers or other long-haul trucking companies out there that we can focus on to win new units from them. We're also looking to complete a scalable competitive product offering for the enterprise fleets in the U.S. That's focusing on our platform, making sure that it's the right fit for purpose platform for our customers. Also then looking at where do we have a competitive advantage for our customers. We know we're really good at integrating our solution to the back end of our large customers and helping our data realize efficiencies within their business.
We see it as a point of differentiation for us, and we're gonna be focusing on that. Equally, we know that sustainability is a point of difference in the market that we can bring to enterprise customers, so we're focusing there as well. Finally, we are scaling up our North American sales team. By bringing more people on board, we know we can increase the pipeline opportunities in North American market. During the course of this financial year, we're looking for the right talent to help build up the right sales team we need in North America to focus on enterprise pipelines. If you look at the timeframe and the horizon that we're targeting, June FY23 was a busy year, very much focused on our current corporate cost base that we had.
We reduced our overheads from a corporate perspective, and as Margaret mentioned before, largely driven by headcount reduction, as well, as well as other overheads we could reduce. For example, our property portfolio and elsewhere. For FY24, we're targeting our customer segment. As I mentioned before, that is the key area that we think we can do better on for our customer needs. Particularly as those over 85% of revenue comes from our top 1,800 customers. Our smaller 7,600 customers account for about 13% of revenue. Getting this right will mean that we can hopefully focus from a spend point of view on our investment here in the right area. Margaret also outlined the focus on FY24 and further on our accelerated 3G replacement program. We're also looking at our product stabilization and simplifying our platform.
As we have these two platforms, EROAD and Quartix, simplifying them into one common platform going forward. A key focus for us will be the rollout of Sysco into this financial year. There's only a small number of units we rolled out during FY23. The large majority as well as integration targeted to be completed during the first half of FY24. Finally, there's ongoing cost out, which I'll outline a bit further on the next slide. Lastly, the longer-term horizons around growth in North America, and that's very much predicated on growth in the large enterprise customer base where we know we can win, capitalizing on sales and product improvements that we've been making across the business.
As we grow and scale, we ought to rationalize the cost base and produce greater economies of scale and development in other areas of the business.
Coming in focus here really on the right-hand side around FY24 and what we're targeting for further reduction in our spend. One is around product simplification. We know we can do better around consolidating our product suite and eliminating duplication in what we're doing. There's been a large program of work in our R&D function to make sure that we go to market with the best solution for our customers, rather than having two or three out there as we've been merging the company together. Another area is corporate efficiency. We are focused very much on streamlining our processes and systems, and that's across the board, whether it's in R&D, bringing a product to market to make sure we can do that faster and have fewer folks working on it.
There is in the corporate function as well around having fewer people enabling our back end so that we can realize better cost out of the business. In terms of supplier renegotiations, our greater scale now means we are able to get better terms from our suppliers, and we are focused on doing that, particularly on the contract manufacturing side as we're simplifying our hardware product suite. Finally, we're still focused on expense rationalization, making sure that we are very disciplined on our travel costs and our costs around other discretionary activity we have in the business. Looking at the year ahead, as I mentioned earlier, we are committed to having a sustainable and profitable growth profile going forward.
If you look at our strategic review in North America, we have commenced that and we are identifying potential opportunities up there, mainly focused around from a go-to-market or technology perspective, but also potentially from a capital perspective as well as to how we can de-risk and accelerate our North American plans. That review is ongoing, and we hope to update our investors further at our ASM in July. When it comes to guidance, we are providing guidance to the market this year. On a revenue side, we're targeting our revenue to be between NZD 175 million and NZD 180 million, which is a growth of between 6% and 9% in revenue. For EBIT, we're targeting normalized EBIT of between NZD 0 and NZD 5 million.
R&D, as we noted at the Investor Day, we're keeping that level of NZD 30 million for next financial year and going forward too. We do believe that provides us with sufficient R&D investment to continue to innovate in the market and grow, but also making sure that we drive the right efficiencies in the R&D part of the business. We do continue to target NZD 10 million of cost out in this financial year. We are resolute that we want to be free cash flow neutral by FY25 and positive by FY26. Our results this year do demonstrate our commitment to achieving that. There is still work to be done, but we do have the right team, the strategy, and we are well prepared to tackle the opportunities that are ahead of us as a company.
We do have a clear pathway going forward. I look forward to advancing that over the course of this year and the years ahead. What we might do now is we might turn over to Q&A. Might see if I can stop sharing the screen and see participants. We can do this in two ways. One, you can raise your hand, and we can take you off mute, and you can ask your question. Secondly, you can please feel welcome to ask the question in our Q&A chat as well. Bear with us. The technology is a bit ropey today, but please put up your hand and we can answer. Guy, I see you've got your hand up. Oops. I'll take you off mute. Can you ask the question, Guy?
Yeah. Morning, team. Hey, maybe just the first one for me. Just in terms of the North America review.
Sorry, Guy. I can't hear you.
How about now? Can you hear me?
Sorry, Guy. I think my computer was on mute. Sorry about that.
Yes. Sorry. Can you guys hear me now?
Can hear you now. Apologies.
All good. Just my first question is just around the North America review. Maybe firstly, just whether or not any options have been taken off the table. Then secondly, can you maybe explain how a partnership might look? Like, can you actually differentiate the tech stack that you have between the markets in terms of... I don't know, is there any risk of giving away additional IP, or is the partnership that you might look at based more around, say, a reseller agreement?
Sure. mind just repeating the first part of question, Guy?
Just whether or not. Yeah. If anything's.
As Graham noted, back in March. Look, there are no options off the table. Outside of we're not looking to divest North American business, so that's off the table. Outside that, there are a range of opportunities we've been considering, albeit at very early days at the moment. They go from SaaS partnerships to hardware, technology advancement, to look at it from a cloud perspective and so forth. There are opportunities we're considering. That really then links into that second part of the question. As a company, we're looking at focusing our R&D investment better on where we have a competitive differentiation, which historically has been around compliance, and we're now targeting around sustainability and fleet efficiency. The partners may help us in terms of going to market quicker.
A good example of that is that camera partnership that we've had historically when we brought clarity to the market. We work closely with contract manufacturer on that camera, as they're the experts and invested into the right platform from a camera perspective. We brought our secret sauce in terms of compliance and telematics to that journey, so we could further accelerate and bring to market quicker a camera than if we'd done it ourselves. That's one sort of historical example here where a partnership like this could help accelerate us. We do also look at where from a partner perspective it can help open up further customer base that we may not be targeting right now. In North America, we do have a mix of direct and indirect go-to-market channels.
If there are further ones that we can utilize to have a broader customer base we can target, we'll be really open to that as well. Those are the kind of areas that we are focusing on. As I said, the conversations are in fairly preliminary stages, but as they become more significant, we'll certainly be updating the market.
Yeah. On the segmented customer servicing or prioritization of service across the customer base, I mean, how far. Is that fully implemented and, like, what has been the response from customers so far to that?
We've been rolling out our customer self-service platform, which has been in beta for a while, but it's now going to production with our customers. That's been rolled out at the moment. There's a transition with some customers as you sort of take them from perhaps they've been using their phones to more of a online resolution of concerns. We are going through each market that we're in, a plan to help take the customers on that journey. It's relatively early days on that. There's been good visibility of tickets and invoice and so forth that customers can access in this, and they do like the fact that they can get them immediately. We do hope that adoption will drive up as we implement those transition plans through the course of this year.
Great. Thank you. I guess just the last one, can you give us any additional color just around those customers that we're churning off, in North America?
In North America, we churned one customer of about 900 connections. That was in relation to they've been bought by a larger customer as part of consolidation in the industry. I believe they rolled off our solution for that.
Guy, quite a variety of reasons. Mainly in the SMB base, which is a fairly competitive part of the North American market. In terms of a chunk of those customers, we don't hold the direct relationship. There's a channel partner between us, so it's a bit difficult to tell for some of them. In terms of the fleet resizes, which in effect add into that number, they can be seasonal in nature. Basically we've got customers who have taken part of their fleets off and parked them up at the moment, they're counted in that number. There's about 2,000, we disclosed it.
Yeah.
They haven't removed their whole fleet, and they still are being billed on across other units. Again, many of those are through a channel partner, so it's difficult to tell. It could just be seasonal fluctuation or them swapping units out 'cause some of those customers have been doing the 4G upgrade, albeit it's substantively complete, but some of them still need to swap them out in the trucks. A bit tricky to tell, but most of the stuff we can see is SMB and for a variety of reasons.
Great. Thanks. I'll pause there and let someone else ask some questions. Thank you.
Thank you, Guy. While we wait for other questions, we do have a couple in the chat. The first one relates to larger customers we lost in Australia and U.S. Do you know where they've moved to? In Australia, we did lose one customer during the year. They've gone, I believe, to a specialist provider in that vertical that they operate in. We were down to the last two, and we were attractive as part of the process, but they have gone down a certain road there, different to our solution. We do, we are still competitive in that field with those customers. In the U.S., as sort of Margaret mentioned, there's been a range of different customers that have sort of left us. We have some churn.
Some of that SME and SMB base are going to more low cost, low value and less specificity in terms of the solution provided. For the larger ones, it's a bit of a mix between there's some legacy players still out there who are competitive and also the likes of Samsara we see more and more as well. It is a bit of a mix of who we see customers churn to. The good news is we are definitely competitive, if not better than those out there in the market. Know, for example, Sysco churned from a legacy player in the telematics space to us, and we were up against Samsara as part of that, and we did beat them. Those are one of those markets where sometimes you do lose, unfortunately, to a competitor there.
Just to add to that, we're winning. Like, you know, if we take the SMB example, where we're losing some customers, we're also winning SMB customers at the same time. It goes to Mark Heine's point.
Absolutely.
We have some questions here that Josh has emailed in. Josh and Craig's emailed in. I'll just work through them and read them out. I think he's having a bit of trouble with the Zoom call at the moment. His first question was, what normalizations are you accounting for when guiding in the FY24 EBIT? It's to do with the 3G, the replacement program is what we're expected to normalize for. Quite tricky to anticipate what we're gonna end up seeing in either accelerated depreciation or scrap with units returning with a value because it'll depend on customer profile and how those units are swapped out. We are providing for it, but the mix of that will change over the life of the program.
We signaled at the Investor Day that the cost of goods sold and the program costs are expected to be between NZD 5 million and NZD 7 million, so that'll be the other area that feeds into those normalizations. Josh's second question was, you disposed of NZD 9 million of hardware assets during the year. Are these 3G ones? That he'll be referring to the PPE note in the financial statements. I've been told by my team I'm allowed to blame the accountants for, sorry, the auditors for this one. Basically, no, what we are required to do, as we've explained to you guys, the units flow back in. They come out, they come back from the customer, and they can be refitted and flow back out to a customer.
As they do that, as they come in from a customer and go into inventory, we actually have to record the returning value as a disposal, and then we push it back out as an addition. When you're looking at that and considering that, you should look at the additions and disposals together and almost net them off. It's just an idiosyncrasy of accounting that we're required to put them separately. We will have, as I've just mentioned, we will have either accelerated depreciation or some scrap likely as we do the 3G swap out, and we increased our provision this year to start to accommodate that. Next one you may have already answered, Mark-
Yeah.
I'll read it out. On the strategic review, I appreciate this is still going. Have you done any narrowing of possible options? Is anything off the table?
I think I answered that, Josh, as part of, you know, earlier going back to Guy. Look, we're very open to different approaches there, and this is still an ongoing process. Outside of the West and North America, no options are off the table. We do plan to obviously update shareholders as soon as we can where there's significant development on that front. The final one we have answered as well. Josh raised the 1,500 unit customer you use in Australia. When do those units get taken out? I believe it's largely in FY24.
We're expecting the units to start rolling off in the next three to six months, the integration process the customer's currently going through is a pretty complex one. We think estimate three to six months they'll start and probably take up to 12 months to roll off.
Correct. There's been some further questions in the chat. Do we need a capital raise or do you need a capital raise? Do you believe that you would get shareholder support for a raise, given the poor recent performance? As I first want to acknowledge this, we have in FY22, we certainly had poor performance in terms of our cost base and how we performed as a company, and I absolutely acknowledge that. When bringing together the plan for FY23 and FY24, we've been very focused on what are the capital constraints that we have and where we need to go as a business. We do not need a capital raise to execute on our strategy, that's before us. We do have sufficient liquidity in the business to enable that.
We do not plan a capital raise at this point in time. What management's really focused on, and acknowledging the point about poor performance, is we know we need to deliver for our shareholders. In FY23, we're very focused on making sure we did, you know, perform when it came to revenue and earnings and cost out. There's still work to be done on that front, but we need to be proud of the fact that we have achieved guidance and actually surpassed that as a business for our revenue when we normalized it. We are turning around the company and getting us to where we need to get to, but it does require further work. In relation to from a capital raise, no, we do not need a capital raise as a business.
Anything you want to add to that, Margaret, or?
No.
Okay. Next question is digging into a bit of the detail for Margaret. Could you please repeat the point you made on slide 14 about the changing P&L profile as you move to more enterprise customers and have a different depreciation profile?
I think, I'll give it a go again. Please ask another question if you don't think I do well enough the second time around. The point I was making on that particular slide was around SaaS costs. What we're seeing is with large enterprise customers, because of their bespoke solutions and integration, the SaaS cost, we have to set up separate instances. Our average SaaS cost on those particular deals can go up in some instances compared to the scenario where we're running our platforms for a large group of people, and they don't need a specific instance for them. That's what drives some changes in the SaaS cost. As we merge with Coretex, if you looked at the different profile of SaaS cost in two businesses, on average, EROAD's SaaS cost was smaller.
Coretex's was higher because of that bespoke instance. As we merge them, we've seen it.
Yeah.
Is the point I was making.
Hope that answers your question, please feel free to raise questions for clarification on that front. Next question relates to what are the contingent considerations still owing, how much? The way that the merger with Coretex operate was that, depending on achievement of certain metrics, a contingent consideration of up to about NZD 30.6 million could have been received by the Coretex shareholders. That was measured end of last year, and all consideration has been paid out, so it was about NZD 10.8 million in shares. I think it was about 1.8 million shares, which was valued, sorry, NZD 10.8 million, 'cause it was valued at NZD 6, I think it was. There's NZD 8.5 million in cash that was also paid out too.
There's no additional contingent consideration that's payable as part of the merger with Coretex. Given you are still expecting to burn cash in 2024 and probably 2025, how are the discussions with bankers? Is the CapEx figure a relatively fixed figure? There's sort of three questions there then. How much of this is not new customer driven? Why so much to upgrade for New Zealand 3G? I'll kick off and pass over to Margaret. Look, we do have good conversation with our bankers, and they, you know, we continually update them about how we operate as a business, and they're happy to see us deliver on the guidance that we've given to market. I might hand over to Margaret in terms of is the CapEx figure a relatively fixed figure?
Look, in terms of CapEx, clearly it's driven by either our decisions around 3G replacement or our growth profile. When you say is it fixed, it's clearly fixed per unit. Although we've just employed a new contract manufacturer that's saved about 25% on the cost of one type of our product. Ultimately, the CapEx will be driven by growth and the pace of the 3G replacement program from our perspective. We've signaled. I was just looking at the next part of the question, which says how much of this is not new customer driven. I think we've signaled that we had approximately 80,000 units to swap out over ANZ, and we're expecting to do that over the next two-three years.
Our units do fall back to 2G, so we can continue to operate in New Zealand. Our units will operate, and some do operate currently on 2G, and that network is not shutting down the same timeframe as the 3G network.
Yeah.
I think I've addressed the last part of that, too.
Correct. Let's go back to the point I made. Look, we do have a NZD 90 million facility in place with the bankers. It's sufficient for us to execute on our strategy. We do talk to our bankers and have support from them as a company. Are there further questions in the chat? No. Are there further questions people want to put their hands up, they may want to ask of us as well? We'll give everyone just a minute or so to ask any further questions. Okey-dokey. If there's nothing further, thank you for joining us today. Please feel free to reach out to Margaret and myself if you do have any follow-up questions. As a company, we are focused on the right track.
After challenging years behind us, FY23 was a year where we did achieve and deliver on what we set ourselves. In FY24, we are absolutely committed to continue to do so as well. We look forward to sharing our results as we continue into FY24. Thank you everyone, and appreciate your time.
Thank you.
Take care.