Earnings Call: H2 2021

May 27, 2021

Good morning, Marina. It's my pleasure, along with Alex Paul, our Chief Financial Officer, to present the full year results for EROs for FY 'twenty one. We will work through the investor presentation. That will take us about 40 minutes, leaving questions for the remaining 15 minutes now. If we begin on Page 4, so we're very pleased that we were able to grow during a very positive impact of the year. We saw growth in each of our markets At a group level, revenue was increased by 13% to €91,600,000 That growth dropped to EBITDA as well. So we saw EBITDA increase 18 percent as well, and that's taking into account a significant increase in the provision of 1,500,000 due to the impact that our customer base felt. EBITDA margin improved slightly to 34% of revenue. One of the main focuses for us in FY 'twenty one was to weather the storm and come out of the year, some more competitive, but to retain the underlying metrics that we have historically enjoyed, which was strong monthly recurring revenue per subscriber and high retention rates. We've done a very good job in achieving that. The annualized monthly recurring revenue grew from $84,000,000 to $88,400,000 That number would have been higher, but there was a significant impact from the FX perspective with the New Zealand dollar strengthening significantly against the U. S. Dollar. You'll see on this slide, year on year, monthly recurring sets revenue was essentially the time the same of $58.30 Again, there was actually good growth in recurring monthly recurring revenue in North America, but when it translated into New Zealand dollars, that was reversed. Some of the big notable achievements during the year on the bottom line here was a capital raise of $52,000,000 and the listing on the ASX. Just to summarize, the purpose of that capital raise was to accelerate investment in our future focused platforms. 2 was to provide seed capital for inorganic growth and 3 was to strengthen our balance sheet. So we are well positioned with something like COVID was to continue. Vincia was a big win for us that happened at the end of the year and really is our first significant enterprise win across New Zealand and Australia. We'll talk a little bit more about that later on. And we had a significant new product delivery, which was our dashcam, which is forward facing and driver facing camera solution, and that was released early March, and we saw really strong initial sales. So this is a slide that we've shown every year. So our breakdown by market, you can see there was some growth in each market, but definitely not at the rate that we have enjoyed in the earlier years. The next slide gives you a breakdown by quarter. New Zealand was the least impacted market, achieving about 80% of what we typically expect as a sort of annual run rate. North America was significantly impacted. In addition to COVID, there was a change of government, which has a level of disruption around it, significant fires on the West Coast and a lot of civil unrest, all of which significantly impacted business confidence of our customer base. Australia was significantly impacted in the first half of it by 'twenty one, but started to recover in the second half and that allowed us to make progress with our enterprise pipeline and the winning event came to fruition, which had been in our pipeline for nearly 2 years. On the slide here, we made very good progress with re signing our customer base. So as you know, we operate on the 36 month supply contract. So during the course of the year, we did manage to re sign on extending 36 plus month service contracts, 640 customers, which is just under 14,000 contracted units. When you look at that, there's a number of vehicles per customer that works out to between 2 vehicles per fleet. So there is a lot of smaller customers continuing to sign up for the service. So really demonstrates the importance of the service that we've delivered to that customer base, both small to medium and enterprise. This next slide is a new slide, and I think it's very exciting and really shows the breadth of services that we are now providing to our customers. I'll quickly go through these ideas with Ashcan on the left hand side. Very important in North America to help our customers improve their insurance premiums by being able to provide acceleration when an accident occurs. We have e road go, which provides connection to logistics systems and the enhanced experience for the driver. We have electronic blind box in New Zealand, a new version of that was released in the first half of the year and very quickly over 6,400 subscribers. One thing to note, just over 500 log books are being used by customers that do not have e road telematics in their vehicles. So, this combined with another product that we have on there called E ROGEN SPECT is allowing us to win business from new customers that potentially have a competitive telematics solution in the vehicle. So when that those contracts come up, we have already established a relationship with that customer. So a new way of winning business. We have a road fleet maintenance, which is a big demand from our enterprise civil construction customers to manage the many bits of plants which they have. And then over on the right, we have E Ratewear, which is an IoT platform for small assets, so they can be tracked very cost effectively. So you'll see this picture develop over time as we add more and more services for existing customers as they take on these new products and services, we will see an increase in capital. I'm now going to hand over to Alex that will take us through a market by market breakdown. Thanks, Stephen. Good morning, everybody. Our whole market of New Zealand remains an important one for us from a growth point of view and remains a significant growth opportunity. And then financial year 'twenty one, we continue to grow with 9% growth in contracted units, up to 87,892 units at the end of the year. And that represented the growth of just over 7,500 units. And that's really quite important for us because over 30% of that was from new customers, not just existing customers increasing growth. And that was during, as Stephen said, a COVID impacted year, albeit New Zealand was least impacted of the 3 markets that we operate in. And within the same market, over 7,500 units, we're also renewed and we'll continue that retention work in this important market into financial year 'twenty two, where we've got some significant renewals to take place. Our overall retention rate remains stable at just under 96%. And pleasingly, our ARPU increased slightly as we rolled out additional SaaS subscription services, and which Stephen has just been talking to, with our e road day log book being a very strong performing product, with over 6,400 subscriptions sold in the year. And this has contributed to an EBITDA result of $38,800,000 which is up 11% on the prior year figure. And as I've said in terms of growth, we expect similar growth to take place going forward. We've talked about a run rate of 9,000 plus connected vehicles per annum being the runway that we've seen in prior to COVID impacted times being the sort of average over the last 3 or 4 years, and we would anticipate that going forward into FY 'twenty two, and that's consistent with the previous statements we've made around the New Zealand market. We turn to the U. S. Market. The U. S. Market was the most challenging of the markets that we operate in from a macroeconomic conditions point of view, as Stephen outlined earlier. The pandemic and the lockdowns that resulted from that as well as civil unrest and political backdrop would make sales particularly challenging in the second half of the year. But with that in mind, we continue to focus on growth and focus on both growth in contracted unit levels as well as ARPU. And we're pleased to see that ARPU in U. S. Dollar terms increased by $1 year on year to $42.95 despite those challenging conditions, and we achieved a 4% growth in units to 35,437 contracted units. Our retention rates lowered slightly in the year by a couple of percent to just under 93%. And we have experienced an increase in aged debtors due to the COVID impact and the lockdowns. And we've therefore increased our doubtful debt provisioning at the end of the year as a result of that in this space. However, we are seeing signs of the economy opening up bolstered by the U. S. Government support packages that have been passed recently. And as Stephen has outlined, in March, when we launched and shipped into the market, our dashcam product, we saw over 1,000 dashcam sold in that 1 month. And we're continuing to see a strong demand for that dashcam product into this furniture year in the States. In the enterprise segment, we're in pilots for just over 1500 units, and we are curating the pipeline for both eHubo and Dashcam sales into that enterprise pipeline. And as a reminder, we are targeting about 2,620,000 vehicles that sit in that several 100 to several 1000 vehicle fleet category, which we determined to be the enterprise segment that we're targeting. And so as we previously stated, we do have some confidence that the emerging market will open back up and it's really a matter of the pace at which it does that, which will be sitting very long this year. We're very positive about our product market share and we're also very positive about the future roadmap into that market. Finally, just on this slide, we're also very positive about the fact that we continue to grow our earnings in North America and as a result, our EBITDA increased despite those increases in that progress to $10,000,000 from $7,500,000 in the prior year. We turn to our 3rd market now. Our business continues to build in Australia. And during the year, we added another 7 45 units in our small and medium sized customer segment. And as Steven outlined earlier, we signed our largest enterprise customer over there being Pentia. And as we've already signaled to the market, this will double our connected vehicle subscriber base in Australia. And while our ARPU reduced in the year due to the nature of some of the SaaS bundles that we are selling into some of that growth, we do anticipate that ARPU will improve in FY 'twenty two as both the VENTIA and the new growth comes back online. We're still seeing most of our growth coming from the enterprise 79 Australian market. And our short to medium pipeline of between 15,000 to 20,000 vehicles gives us confidence that the business can and will grow to a sustaining level within 1 to 2 years. I'll turn now to the summary of the financial results. Stephen's given a little bit of synopsis of this, but just briefly, our revenue increased 13% year on year to $1,600,000 to $81,200,000 that translated equally into a 13% increase in EBITDA of $3,700,000 from $27,100,000 And our EBITDA margin improved slightly to 34% from 33% as a result of that result. If we look at the profit before tax, for the 2nd year in a row, we reported a profit before tax at $1,900,000 that's a 36% increase on the prior year. And we were free cash flow positive in FY 2021 to the tune of $5,300,000 which is a significant turnaround from the prior year of $18,100,000 Some of that is in reference to the lower levels of sales that we achieved given our business model, but equally we were very focused on our cash flows during this most challenging year. Let's turn to the more detailed income statement, just to highlight 1 or 2 things we didn't hear rather than go through the whole detail. Within the revenue line, we did have the benefit of $1,500,000 worth of a forgiven U. S. Government support loan that we received during the COVID lockdowns. Our operating expenditure increased by 12%, which was in line with revenue, but also reflected the increases in the R and D spend levels that Steven has outlined, some spend to save projects that we're undergoing at the moment as well as those increases in the doubtful debt provisions due to the pandemic. And there was further note, there was one off adjustment for U. S. Superannuation costs to the tune of $1,100,000 all in that totaled $60,900,000 of operating expenditure. So if I turn to our summary of our EBITDA by segment, we've talked to some of the results here, but as I've indicated earlier, all markets improve their EBITDA year on year, despite operating conditions being more challenging. But of course, the North American market was the most challenging for us, and we see that in the half year on half year results there set out in terms of the reduction in EBITDA in the second half of FY 'twenty one, and that was really driven by that increase in doubtful debt provisions, but also the challenges around the second half sales. And in Australia, as we built out the completion of our sales and marketing framework and team, we accelerated the spend there, and that's the reason for the half on half movement in Australia in EBITDA terms. Now moving through to how we track ourselves in terms of growth indicators. Our annualized monthly recurring revenue figure, as we said, increased to $88,400,000 maybe $4,000,000 and that's despite a negative FX impact of $4,500,000 in the year. And similarly for our future contracted income, which is unearned but yet contracted income going forward, That increased from $134,400,000 in FY 2020 to $141,900,000 at the end of FY 2021, again, despite an exchange rate negative impact of $9,300,000 And finally, on this slide, in terms of another growth indicator for the future, our spend in R and D as a percentage of revenue, we've previously signaled the capital raise and at the half year that that was going to increase because we are accelerating our growth strategies for future growth and it did increase. It increased to 23% and we anticipate it being in the range of 24% to 27% as a percentage of revenue for FY 'twenty two. Over to Page 2, the value that we drive from our existing customer base, which is really represented by the asset retention rates and our RB figures, which we've talked to before, but I'll just recap. They are static or fairly static at $58,300,000 $58,300,000 sorry, for ARPU and for the asset retention rate at 94.9%, just shy of 95%. And we're pleased that those both have remained stable whilst we worked through some of the challenges of this year. Noting on the ARPU side of things, the stronger U. S. Dollar to New Zealand dollar exchange rate again had a negative impact of $0.65 year on year. Finally, from a metrics point of view, our profitability metrics, we look at our cost to acquire and the product cost to serve. Our cost to acquire customers as a percentage of revenue has dropped and not surprisingly, as we've had an increase in revenue. And of course, we've had a slight slowdown in terms of our growth. And you can see that really in this additional indicator that we put into this slide around the cost to acquire per unit. That increased in FY 2021 from FY 2020 really is a function of the lower levels of growth that we were able to drive out from 'twenty one this year due to the pandemic, and that will be a focus going forward for us to reduce. On the right hand side, across the service and support as a percentage of revenue, it's again relatively static around 4.5%, 4.7% in the end for FY 'twenty one. We look to keep it within at the moment the 4% to 5% of revenue range as we grow, and we will look over time to improve as we scale and leverage a number of those processes. Turning over to Page 2, the operating expenses bridge. As I said, operating expenses has moved from $54,100,000 to $60,900,000 in the year, driven predominantly by our acceleration of our growth strategies, our continued build in the R and D space, and a lot of that is the reasons for the increases in personnel expenses, other employment and subcontractor costs, and those are the predominant drivers of cost increases this year. So turning to the additions to PPE and intangibles. Again, this year, we had a much lower level spend on PPE due to 2 things. 1 is lower unit volumes, but also a tighter level of inventory management that we undertook during the course of the lockdowns. Fair to say, we are taking a slightly different tack now with the supply chain challenges in FY 'twenty two, and we are making sure we are looking to hold the level of inventory that we will need. In terms of our intangible assets, our R and D spend has increased to $21,300,000 from the prior year figure, and that's an increase of $5,700,000 and is effectively 23% of revenue, as we've said. And a lot of that was capitalized into development and software assets. There's a decrease in the level of software asset additions year on year and that is really because prior year in the prior year, we were rolling out our new generation of business systems. And so the spend that we've made in that space this year has only really been to embed those systems further from the rollover that we did in FY 'twenty. So move on again onto that movement in R and D. Briefly, just to summarize, dollars 21,300,000 spent in the year, dollars 13,100,000 of which was capitalized and $8,200,000 of which was expensed. And you can see that movement in the intangible assets as a result, up to 45.3 percent from 0.2 percent.1 percent with the net of that capitalization less the amortization of previously capitalized costs. And now if we turn to the operating cash flow bridge, sorry, free cash flow bridge, clearly, we are now continuing to build the level of operating cash flows that come into from our markets. And whilst we're increasing the level of spend, so we have $17,500,000 of spend in that corporate space, which is where our R and D teams sit. We also additionally spent in terms of some development asset spend, but there were lesser amounts spent, as I said, on software and other PPE. And as a result, we had a net cash flow positive result for free cash flow at $5,300,000 I've talked to the cash flows here. The only other thing to note outside of operating and investing cash flows was obviously the growth in financing cash flows, which is as a result of the capital raise that we undertook this year, which is replacement and the further $11,000,000 raised through the SPP. And if we move to the balance sheet, the balance sheet, obviously, therefore, has seen a much stronger level of cash held on the balance sheet as a result of that, and we talked to how we are looking to use that cash through the increased levels of R and D spend and the seed capital for inorganic activity growth activity. And of course, we've talked also about PPE reducing as those high doses come down as we've sold more than we've got capitalized back in. The only other thing to note at the bottom is that borrowings from our long term bank loans have reduced and those are due to scheduled payments that we made in September 2020 March 2021. I'm just going to turn it back to Stephen for a summary of the growth drivers going forward and then we'll come back on the outlook at the end of this session. Thank you, Alex. This slide has been updated since September. Much of it is the same. Telematics solutions rely on two things, being able to get access to vehicles, the hardware in them. And secondarily, being able to train people, particularly in the back office and in the vehicle to use the system. So really very difficult to make progress when you're in a lockdown situation. With COVID lifting, we would expect the high growth opportunities that we have enjoyed for FY 'twenty one to rebound. In addition to the digital transformation that we have been seeing with customers requiring more and more services to help them better manage their businesses in terms of health and safety compliance outcomes, but also efficiency. They want those actionable insights and predictive analytics to gain further benefits. As the cost to track comes down, which is really where that e road wear product is, customers will want to track more than what they have traditionally been trucks, trailers and cars. So micro assets all the way down to hand tools. And customers are requiring higher levels of integration into their back office, their logistics systems, HR, ERPs. Those things are also important to unlock actionable insights and productions. We've seen further effort going into looking at alternate ways to fund the roads. The governments are becoming acutely aware that with TVs, electric vehicles making up more of the fleet that their revenues from fuel taxes are going to significantly reduce. In New Zealand, there is signaling that a move to some kind of road user charge for all road vehicles. And we look forward to working with the New Zealand government in terms of how reform could happen in that space. In North America, we're about to enter the 4th year of road user charge pilots. Each year, the extent and scope has widened. So, we'll see a larger number of states and important stakeholders within transportation being involved in that. It was expected to be a national ready to charge pilot start early FY 'twenty two. That has been delayed potentially 6 months, but we would expect that to kick off during the course of this year. Health and safety remains a focus and is a key driver in New Zealand, and we see that becoming an increasing thing in that North American market. Electronic logbooks are being more adopted in the New Zealand market and that potentially to both New Zealand and Australia could become a mandatory product within the next 5 years. If we move over to the right hand side, which is our post COVID-nineteen trends, there were a bunch of things that we would have called trends, which have kind of disappeared. Conversation around autonomous vehicles has really dropped off. As an example, some of the things that have intensified has been some of the struggles that COVID has shown, a real lack of visibility and transparency within supply chains that will drive the demand and also reducing human contact with removing our paper and making everything as contactless as possible, particularly the drivers. We're also seeing bigger demand from our enterprise accounts around ESG reporting, so they can report on their improvements around sustainability as transport unfortunately is seen as a significant polluter as well as also the highest increase year on year in pollutants. But definitely quite a change, particularly in New Zealand towards adoption of electronic vehicles, particularly within government plans. This slide I won't talk to because I'll cover it when I talk about where our key sort of strategic focuses are by market. So this is a snapshot of where E Rate is today to see the total contracted units by market. Underneath that, what percentage are in terms. So we've got 45% in New Zealand and every year that creeps up 30% in America. And over on the right, 32%, but as we deliver BNTN that will quickly get past 50% this year I'm expecting. Down below that, we've tried to do a breakdown of those sort of key transportation verticals that we are in. I'd say that civil construction a particularly strong theme along with freight and rail transportation. So in terms of where our focus is in the different markets, From a New Zealand perspective, it's still a significant growth opportunity for us. If we look at the percentage market share we have in terms of commercial vehicles, light and heavy in New Zealand, there is still a long way to go. We believe there is some pent up demand from FY 'twenty one, which will realize itself in FY 'twenty two. The team has set themselves a magic number to hit over the next 18 months, which is 100,000 contracted vehicles. In terms of product development focus, we want to extend our product offerings in the area of civil engineering, government fleets, health and safety, electric vehicles and helping our customers reduce their carbon footprint and improve the ASP reporting. We expect to see good improvements in ARPU as we sell additional services, both SaaS and mobile to existing customers. We will see our range of telematics solutions widen beyond trucks and light commercial vehicles into those smaller assets. And because of the leadership position we do enjoy in this market, there is opportunities to work with others in the transportation ecosystem to realize their own sustainability initiatives over the coming years. In North America, the magic number that we're shooting for over the next 18 months is 50,000 connected vehicles. In terms of extending the product offering, that is primarily focused around low transportation fleets and increasing focus on health and safety products, many of which we've already matured in the New Zealand and Australian markets. We look to expand our telematics solutions beyond trucks into trailers and associated light duty vehicles in larger assets. So similar story in terms of shape compared to New Zealand in that respect. We have a pipeline of enterprise opportunities, which we will aggressively procure, pursue and at the same time continue to build our month on month sort to medium fleet run rate. And of course, there is the national pilot happening in the U. S, which we continue to support as the only provider in the heavy vehicle for a charging space. In Australia, we're aiming to get to 10,000 connected units over the next 18 months. Similar focus in terms of product offering from a New Zealand perspective, but more in that driver fatigue space. We have starting about 6 months ago started building out a leadership team based in Australia to support enterprise accounts and to aggressively grow that market. Likewise, a good pipeline of enterprise opportunities to progress and also build out that small to medium monthly run rate. Definitely, we've focused to increase our brand awareness and start using digital marketing activities to be the target opportunities. And if there is the opportunity with the national pilot happening there, we aim to be a key participant in that. Outside of that, our product and engineering teams continue to extend and build out our new platforms and look to partner with best in class providers in order to bring products to market quicker and not have to build everything. And finally, big focus this year is around inorganic growth. We've talked about this before. Now is the time to really put a lot more resource and focus into this area, and that really has been the case for the last 6 months. We're forecasting to make at least one acquisition in the next 12 months and look forward to sharing that as we go through that process. This slide here really breaks down what that R and D investment looks like. So I won't go through it in detail. But certainly, extending our platforms, so they are enterprise grade. We're on our 3rd generation of platforms. The 2 previous ones, we're really focused around small to medium customers. And while we enjoy significant large enterprise accounts, those platforms have scaled well, but with our 3rd generation, we need to make them scalable so we potentially can support up to 40,000 vehicles in the fleet and 6,000 drivers. With that, I'll hand back to Alex to provide an outlook for FY 'twenty two and then we'll look to answer any questions in that. Thank you, Stephen. Just regarding our outlook for financial year 'twenty two, we're really reiterating the FY 'twenty two guidance that we provided in November 'twenty after the half year. We do anticipate that the percentage of revenue growth in FY 'twenty two will strengthen from that delivered in the year that we're just reporting on, but not at the level of experience in FY 'twenty. And I think really the extent of that really does depend as we outlined on the momentum that builds in those reopening markets, particularly in the North American market as we work through that. In New Zealand, we do expect to have similar number of years that we've seen prior to financial year 2021, so about at least 9,000 units per annum, and we will complement those connected vehicle sales of those 9,000 with additional clarity dashcam sales. In North America, we do expect increased unit growth in 2022 as that economy opens, supported and probably at this stage led by clarity gas cam sales at the front end, and we will get back to pre COVID conditions over the course of FY 'twenty two. And in Australia, growth in the next few years, as we've said, will come predominantly from that enterprise pipeline of between 15,000 and 20,000 committed vehicles. But as we grow and as we continue to accelerate our product delivery for the years, the benefits in the years FY 'twenty three and 'twenty four, we therefore anticipate spending between 24% 27% of revenue on R and D during FY We do maintain that guidance that we anticipate that EBITDA margin will be maintained for FY 2022 through 2021, but we'll start to improve at the end of 2022 as some of that revenue growth fueled by that accelerated R and D work starts to come online. And with that, I will hand over to the call for questions and answers from participants. We're happy to unmute you and have you ask the question rather than come through the digital method. So, it's at your choice. I think we're going straight to the digital ones. From Josh. Good morning. Can you hear me? Yes, I can. Yes. Great. Thank you. Thanks for the detailed presentation. Just a few questions from me. Obviously, the implied guidance range for FY 'twenty two is very wide. Can you give us a sense of what needs to happen to deliver at the low end and what needs to happen to get to the high end? Yes. So I think that the low end would be where we see a sort of slower opening backup of particularly the North American market. And we would need some fairly fast opening backup of the North American market to get back up to those that top end, which is, as you say, the FY 2020 run rate. And I think that would be it has to be fairly consistent across the North American market. And I think from an Australian point of view, we would have to we talk about landing 1 to 2 enterprise accounts within that FY 'twenty two result. We'd have to land at least that, if not potentially more, to get back up to that top end of the runway. Point. Great. Thank you. And I suppose how does that sort of tie in with Slide 31 of your presentation where you state the goal of reaching 50,000 units in North America over the next 18 months, which is about 15 ks units higher than where you are now. Is that sort of ambitious? I don't believe we think it's that ambitious. As I said, the momentum will build. So I'm not sure it's necessarily something that we see as linear. But we have good anticipated growth in FY 'twenty two, and we certainly would anticipate seeing an acceleration of that growth as we move into the early part of FY 'twenty three, which is implied from the 'eighteen month time frame. So we're relatively comfortable with those figures that we put up in Slide 31. Okay, great. Thank you. And just moving to New Zealand, there's obviously been some chatter out there about introducing ELDs. Can you give us any color on what proportion of New Zealand fleet currently use ELDs as opposed to paper logs and what the uplift in ARPU might be if they were to become mandated? So ELDs, that's see U. S. Reference, we call them electronic log box. And that's really charged on a per driver basis as opposed to a per vehicle basis. And we've presented the number that 6,400 is the number of drivers using that product. We would in our system, we typically have around about 1 point 3, 1.4 drivers per vehicle. So it is definitely a really interesting space for us. It's exactly that's when NGS gave us introduced that. Certainly, one of the main associations, RTS is very active in trying to make that mandatory, just to improve safety on New Zealand grades. The log book, depending on whether it's standalone or bundled in, ranges typically from to the back side to our follow-up. And yes, it represents a pretty interesting market for us. And I think we've talked about the number of subscriptions that we've signed up this year and we've talked about a certain number of customers and I think this is over 300 customers that have got that over 6,500 close to 6,500,000 web subscriptions. We have over 4,500 customers in New Zealand. So you can see where a lot of that growth is coming from. It will be from a lot of medium to large fleets. And as you say, Josh, if it's mandated, then you could see that happening, that sort of expansion happening across some of the smaller end. So that's probably where a lot of the growth would come from. And we would obviously be well positioned subject to how that's mandated. And you can understand why we put the investment into the electronic logbook when we did, anticipating potentially some reform in the space. Sure. Okay. Makes sense. And just to clarify, is the day log book, I guess, equivalent to an ELD in the sense that it ties in with, say, the ignition switch on the vehicle, etcetera? Or is it simply in that that the driver uses with low linkage to the vehicle? It is the latter. So when you look at these type of fatigue management products, the Americans had a very large job in terms of creating that linkage between the driver and the vehicle movements with ignition on etcetera. So this is both trying to understand what's happening to the vehicles because at this stage vehicles don't drive themselves and also what the drivers. The other approach is to take a very driver centric approach. And if you have drivers working for multiple companies, which is reasonably common in New Zealand, that logbook follows the driver. So there's good merits for that approach, but it doesn't do is you don't understand the mileage and the cross check around the vehicle. So inevitably, if there is an investigation, they do go and try and work out what was happening with the vehicles. But in New Zealand, electronic logbook is a driver only product that's all that's needed. So you will see that there are about 500 logbooks sold to customers that don't have telematics telematics in their vehicles. Thanks for the explanation. Just one last question from me on ARPU in New Zealand. Are the customers you expect to add going forward of the same ARPU value as your existing customer base, given it feels like there might be a bit of a shift away from road user charges in toward health and safety? It's a combination. So we do have light vehicle offerings and we have heavy vehicle offerings and we have rock only and then we bundle typically the health and safety in with that rock as well. So you generally don't have a health and safety only option. But it's about what the value driver is that's most important for the customer within that package of telematics services that we provide. The ARPU is different, as I say, for light and heavy vehicles. So we do monitor that mix of sales. And as you will probably appreciate, the drive of layering on additional SaaS services is there to ensure on a portfolio basis that we don't drop overall across our subscriber base in terms of ARPU that we continue to build, and that's the intention. Okay, great. Thanks very much guys. Hamish has his hand up. So we might just unmute him. Hi, guys. Hi. Just a couple of quick ones. The first one, just been interested in, I guess, the exit rates on that churn in North America. You did 93.4% for the year. I think at first half, it was reported at 94.3%. So it sort of assumes that I mean, it implies that the second half was down at about 93%. Have you guys seen an improvement in that? Because I mean, it would mean that your sort of gross additions are a lot higher than the net reported number we saw throughout that second half. And as things normalize, you guys should pick up some units just via virtue of less churn? Yes. So certainly, it's something we monitor very quickly. And I think we talked to this at the quarters, Q3, Q4. Q3 was certainly the toughest of the quarters that we had in North America because of those lockdowns really kicking in. And that was really driving some issues for a lot of customers and resulted in some churn from a lockdown impact. Competitive activity hasn't stopped during the year as well. There were, again, a number of things contributing to it in that second half. So it was the anniversary of the December 2017 sign ups for a lot of smaller customers in terms of the 3 year anniversary of the ELD mandate for them. And so we did lease some of our existing customers to competitors and that contributed to the churn. So we would look and are doing work to make to stabilize that churn. And I agree with you, Hamish, on the basis that the economy opens up and we can get our gross levels of sales up and work on churn and that result should be to be how our sales levels increase on a net basis. I think one of the other things was the government stimulus packages. So we're talking about the very small end of the fleet size where they were very dependent on those stimulus. From memory, the U. S. Stimulus kind of dropped off around that August timeframe. So that wasn't until Biden came in and then there's the stimulus package that happened. So there was a good 4 months with those smaller fleets, we're just totally exposed and a number of them did end up going into Czechoslovakia. A lot of that support is now tied into focused on being focused on organizations that really have suffered year on year, revenue decrease, whereas in this blanket level of support before. So that should help those customers. We will monitor the situation. Yes. And just to be clear, I mean, do you guys look at it at a run rate basis? Or is it too lumpy to look at it like that? So I mean, if we can We monitor it on a monthly basis. Has it been improving, I guess, is the main? We haven't seen any significant deterioration yet, but it's probably too early to say it's definitely sustainably turned a corner. But we'll keep monitoring and we'll talk to it at the quarter result. Perfect. And just a couple more, if I may. Just that cost to acquire per unit, you call out, it's increased quite significantly, which is in line with what you guys call out in terms of the lower net unit adds. But the question, just can you guys quantify, I guess, how much is that and just how much is investing ahead into your sales teams in the U. S. And Australia because that's been a focus as well? Yes. I think, to me, what that slide really means is that we made a conscious decision to retain our talent and keep the business whole, so we can respond best in the market. It takes time to get sales folks, I think, about selling our products because it's pretty quite complex. So we chose to take the hit and retain and time will tell. That was a good decision to make, which I believe it was. And that's only true of those 2 existing markets, Tamish. And the other thing I'd just underline is that in the Australian market, we also chose to further extend our sales team to build that enterprise delivery capability. So that is an investment for that future pipeline to be crystallized. So there's an element of that indefinitely, but most of it is down to retaining the existing team over the lower levels of growth. Yes. And just 2 more. This one's a bit granular on the P and L versus what's capitalized. But as you guys increase this R and D spend, do you expect that, I guess, your levels of expense in R and D versus capitalized in line with your accounting policies will stay at their normal? Will there be a skew towards one or the other given that it might? Yes. So we do monitor how it sits and it's fairly consistent around the sort of 60%, 65% capitalized level. Clearly, we challenge ourselves to make sure that we're spending the right amount of dollars on things which are contributing to growth and therefore are capitalizable. So we would not anticipate it dropping over time as we work through this acceleration of roadmap. And if we are seeing an increase in the levels of non capitalized R and D, we will be looking at what we're doing. But at this stage, we can continue as is. Yes. And just a bit of an extension just on the last question and this was a live question from me. But those 18 month targets, I mean, you provided some good color on it in discussing before. But I mean, as we think about them, I think you said they're not ambitious. But do we view them as just sort of a I mean, are they is it a range? Should we be thinking plus, minus, 10,000 or 5,000? Or how should we be thinking about it? Yes. I think we have put out numbers, which we think are achievable. And we have a great amount of uncertainty in front of us in terms of, as we said earlier, how the North American market momentum will build and in fact, how the Australian market will build. So what I'm signaling is there is probably greater levels of upside than there is downside to that. I mean we use these targets inside our business to motivate and drive. So that's why the office is worth sharing those numbers more widely. So we can get pretty focused on getting to what I think those 3 markets are quite critical milestones. The 10,000 in Australia and it's out on a represents a number where we financially start making sense. And it stops being a heavy investment market for the cash and negatively without the statement. Yes. Interesting on the just one more, if I may, the Australian market. In your sales efforts so far and the Ventia agreement and what you've learned so far, can you give us any more light on, I guess, the R and D pipeline you might need to do there, what the key focus would be to really accelerate those sales for enterprises in Australian market and differentiate? Yes. I mean, when you look at Australia as a country, there are some regulatory differences. So delivering products that are good size. Australia is very vast as a continent and cellular coverage is not universal. So having to have a satellite communications link for when you're out of satellite coverage would be another point. I think increasing the amount of Century stuff we can have on vehicles as well would be another key point. So a lot of it is focused around civil engineering requirements for customers. But because they're so large in terms of enterprise, we end up building an awful lot of other things for other enterprise prospects in our pipelines. Perfect. Thank you, guys. That's all for me. Thank you, Hamish. Unfortunately, we've come to time. So one last question. Okay. Thank you very much for attending the call. I apologize for the technical problem at the beginning. And we'll do better next time. So really pleased we've got through FY 'twenty one as well as we have. I think we leave the year much stronger than we've been into it. And we're looking forward to a really positive next 12 months. Thank you, everybody. Thank you.