EROAD's cash conversion fell to 72.5% while capex cuts flattered free cash flow

The gap was driven by working capital building $15.2m to $40.5m, with trade debtors rising to $32.0m from $25.3m and receivable days lengthening to 60.1 from 50.7. This matters because EBITDA growth is not converting into cash at the same rate, which raises questions about collections timing and near-term liquidity.

Revenue rose 6.8% to $194.4m and profit before tax swung to $0.2m from a $7.0m loss (+102.9%), a cleaner operating read than the NPAT swing to $1.4m (+566.7%), which was distorted by an effective tax rate of -600.0% versus 95.7% in FY24. Note the FY24 comparative reflects prior-period acquisition accounting effects, tempering a clean like-for-like read.

By segment, New Zealand strengthened (revenue up to $103.9m, result up to $70.0m) while North America's result fell to $17.7m from $22.0m despite modest revenue growth, shifting group mix toward the domestic business.

: the $15.2m increase in working capital and slower receivable turnover mean reported EBITDA growth overstates the cash the business is actually generating this year, a point management would need to address on collections discipline.

Tax swing distorts the profit growth headline: NPAT's 566.7% increase is a function of the effective tax rate moving from 95.7% to -600.0%, not underlying operating improvement; PBT growth of 102.9% is the more reliable measure of the turnaround from a $7.0m loss to breakeven.

Free cash flow gain is capex-driven, not cash-generation-driven: FCF rose to $16.0m from $1.3m, but capex fell 58.4% to $13.4m (6.9% of revenue) as the 4G upgrade program wound down, while operating cash flow itself fell to $43.2m from $52.9m. Gross borrowings also fell 30.1% to $25.6m, improving balance-sheet flexibility, but this reflects lower investment spend rather than stronger trading cash flow.

Without a disclosed numeric guidance figure to test against, the result supports a narrative of sequential improvement but does not allow verification of whether the improvement rate is sufficient against management's own internal targets, particularly once the temporary capex relief from the completed 4G program unwinds.

However, the headline free cash flow improvement to $16.0m is substantially a function of the capex step-down as the 4G upgrade program completed, not a durable lift in cash generation, since operating cash flow itself declined 18.3% to $43.2m.

The working capital build and lengthening receivable days suggest some of the reported earnings growth is sitting in receivables rather than cash, a pattern that would need to reverse for cash conversion to normalise. The tax-rate swing further means investors should anchor to PBT rather than NPAT when assessing the year's operating trajectory.

This briefing cannot assess forward guidance quantitatively, since no stated numeric target was supplied for comparison against the FY25 result.