A catch up with…Emily Rees

“Driving towards a green future“

Emily Rees, CFO, Quartix Holdings Ltd

2021 was a significant year for Quartix. Not only did it celebrate its 20th birthday as a company, but the co-founder, Managing Director and CEO, Andy Walters stepped-down to be replaced by new CEO, Richard Lilwall. Emily Rees joined as the new CFO six months before him, bringing two fresh heads to the leadership of the business. Together they are navigating the company around road blocks caused by global supply chain difficulties, Brexit and the drive towards a zero carbon future. Emily explains how these challenges are creating the next opportunities.

Quartix is a SaaS business (software-as-a-service) in the technology sector. Its main focus is telematics within fleet management – helping fleet managers to track and monitor their cars, vans, coaches, and lorries 24/7. “The technology has been around for a number of years,” explains Emily. “What we’re really addressing with our product is helping fleets improve productivity and reduce costs. As a fleet manager with say, twenty company vehicles, it’s very hard to have visibility on what they are doing, where they are going, and what jobs they’re on.

“There may be waste in terms of fuel efficiency,” she points out. “Are drivers following the work plan you’ve given them and completing jobs on time? A lot of smaller companies will have fleet vehicles that should only be used on company time,” Emily says. “How do you ensure that cars aren’t being used for non-business purposes – fraudulently – which can also create an insurance risk? Then there’s risk of false claims made against your company,” she adds. “A member of the public might claim their car was damaged by a fleet vehicle. Without tracking technology you wouldn’t have any proof with which to refute that claim, or any way of understanding what really happened in that situation,” Emily explains.

Quartix is more than just a GPS location tracker. “We have a lot of software within the product that provides driver behaviour information,” says Emily. “It will flag to a fleet manager if a driver is accelerating, or breaking very quickly. It provides a rating on each driver so that fleet managers can minimise high risk behaviour, which will reduce the risk of accidents and consequently, insurance costs,” she adds.

According to Emily, it’s all about good vehicle utilisation: “It ensures fleet managers are maximising the productivity of their current fleets. No-one wants to buy more vehicles than they have to,” she explains. There’s an environmental impact, too. “There’s a lot of focus on ESG at the moment,” says Emily. “Driving a fleet in the most efficient manner possible ensures that you minimise carbon emissions. It enhances your green credentials, and we are proud to be part of the first wave of AIM companies that are driving growth in the green economy” she adds. Quartix received the LSE’s green economy mark at the beginning of 2022 because more than 50 percent of its revenues derives from green incentives.

“There are lots of changes that have been tried in the industry over the years, for example, people have tried using mobile phones, but they can be turned-off. The product is very commoditised and the innovation comes not from the technology but how you present information, the user experience, the interface, the accessibility and how you want to use the data. That’s how we differentiate ourselves,” she explains.

While the business classes itself as a SaaS business, it does have hardware. “It’s almost ‘hardware as a service’!” says Emily. “We put a unit into a vehicle – it can either be professionally installed, or we now have versions which can be self-installed, and we provide customers with a cloud platform which essentially gives them 100 per cent visibility on a vehicle and where it’s travelled, to improve efficiency,” she explains.

Customers that use the product will typically reduce their fuel usage by around a 25 percent, and improve the productivity of their workforce by approximately 15 percent. “Overall, our customers drive ten percent fewer miles and idle time – time spent just sitting around – is reduced by up to 25 percent, which also reduces overtime,” states Emily.

The company’s customer base has evolved over the last twenty years. “When we initially started, Quartix focused on smaller customers that had circa three-to-five light commercial vehicles. But over time, we’ve broadened the scope of the type of customers we work with. For example, we have a large amount of Councils which need to report on many of the metrics that we provide,” explains Emily.

In a commoditised market, service is key. “There are a lot of competitors in this market. We’ve always positioned the product, as an off-the-shelf, value product, what you see is what you get,” she says. “There are lots of changes that have been tried in the industry over the years, for example, people have tried using mobile phones, but they can be turned off. The product is very commoditised and the innovation comes not from the technology but how you present information, the user experience, the interface, the accessibility and how you want to use the data. That’s how we differentiate ourselves,” she explains. “We provide a great service which is well above the standard for our industry. Companies choose to stay with Quartix even if they have the choice to go elsewhere for a similar price and product functionality.

“There are other providers who do specialised bespoke software for very large fleets of 500 units plus, but what we have seen over the last couple of years, perhaps because of cost pressures, is some of these larger customers realising they were only utilising twenty percent of what that specialised product offers. They like that Quartix provides a reliable product, has good customer service, and they pay less,” Emily explains.

Last year, Quartix won the BT Openreach fleet. “That was a big win for us and it’s testimony to the fact larger fleets have similar needs to smaller fleets,” says Emily. “We’re finding as our field sellers go to market that people want a product at the level that we’re offering, which is good, accurate software, and at a good price. Being in the market as it’s developed over the last 20 plus years, we know what the main drivers are for customers and we’re very focused on what is needed to manage a fleet most effectively and we deliver on that very well,” she adds.

Technology businesses have been particularly hard hit by a series of global macro-economic events in recent years, but according to Emily, Quartix has navigated the difficulties better than most.

We do well in a difficult economic environment such as this because we’re a lower cost product and the return on investment case becomes stronger when costs go up

“The talking point for the last 18 months has been component shortages,” explains Emily. “Like most businesses, we receive the majority of our components in China and we’ve certainly seen a lot of competitors struggling. The one benefit for Quartix is that we run a tight, lean ship in terms of how we operate, and that has helped us to navigate this current situation. We have a large network of contacts developed over 20 years in the industry, and so we’ve been agile enough to find components where we’ve needed and look at new suppliers,” she says. “We’ve also had to very quickly pivot to components which are available and use them within our product. That’s doesn’t always mean that it’s been at the cheapest price, but really we didn’t have any significant problems,” reassures Emily.

“We’ve also pivoted on how we operate,” Emily explains. “Our cost of sales includes the professional installation of units into vehicles, but we’ve seen a change with Covid. Whether that’s because of social distancing or another reason, many customers are taking another version of our product which can be plugged-in or self-installed. So, while we’ve had a slight increase in the components’ costs, that’s been offset by more and more customers moving to a self-installed solution which has a benefit for us in terms of operational costs. That flexibility and having that option has helped a lot.”

Despite global supply issues resulting in car delivery shortages, Quartix hasn’t seen an impact on growth. “Our growth has only increased,” says Emily. “When you’re in a market like the one we’re in currently: where inflation is increasing, petrol prices are going through the roof, there is a cost of living crisis, and increasing payroll costs for drivers; fleet managers are looking anywhere for something that will drive down costs where they can. We do well in a difficult economic environment such as this because we’re a lower cost product and the return on investment case becomes stronger when costs go up,” explains Emily. “We can reduce a fleet’s fuel usage by 25 percent,” she adds.

Quartix classes itself as a tech company and in AIM, as in other financial markets, there is downturn on tech stock. “The general decline in technology company share prices has also impacted Quartix,” says Emily. 

“That’s because we’re seeing more and more investors that just want to sit on their cash at the moment and ride this out. It’s general market sentiment and not necessarily about Quartix, but the impact on us has been less than on the overall market,” she claims.

“We’re a highly regarded company on AIM. We’ve always had quite a high price to earnings ratio driven due to our strong annualised recurring revenue (“ARR”). This forward looking, strong KPI measure is very cash generative and has really buffered us from the worst of the decline that we’ve seen in the market overall,” Emily adds.

Before joining Quartix, Emily worked in FMCG, for multi-site retailers and hospitality companies. “Tech is a very different direction for me,” Emily says. “Going through Covid in the retail industry was very difficult,” she explains. “A lot people came out of Covid re-thinking what they’re doing with their lives and careers. I had been wanting to move into something different for a while. Fortunately, a lot of finance skills are transferable to any industry. What I bring to the table, which is a benefit from my background in multi-site retailing, is a big focus on operational efficiency which can sometimes get lost in a SaaS business,” Emily says. “We, like a lot of SaaS businesses, consider ourselves a growth business which means you are continuously re-investing into marketing, and sales people to continue to drive that top line, and sometimes within that journey, your central costs or your overheads, don’t get enough attention,” she explains. “Retail runs a lean ship and we are a value product and therefore it’s important to keep your eyes on those overheads, on where you’re spending your cash and ensure you’re always maintaining the best return on investment. That focus has been drilled into me in my previous working environments and I’m applying that to Quartix on its growth journey.”

Quartix has grown very fast over the last 20 years led by its founder, Andy Walters, who retired in late 2021. “Having new leadership look at the business and its processes and implement new ways of working which match a company of our size now versus where we were ten years ago, has been a big focus of mine,” says Emily.

The new leadership isn’t just bringing internal changes, it’s brought a lot of innovation. “In the past, the success metric has always been the number of new customers or new telematic units sold. Now the company is also reviewing up-selling new products and services to its 23,000+ customers, while also focussing on digital transformation to ensure the business can scale as efficiently as possible” explains Emily.

“Towards the end of last year, we launched E-volve, which is for electric vehicle migration,” she says. “If you have a large or mixed vehicle fleet, and you want to migrate some of the vehicles to EV, where do you start in terms of making that decision? The fortunate thing for our customers is that with Quartix, we have all the data that you’ll need to make that decision. We know how far vehicles travel, where they stop overnight, the distance and time taken for a general trip. We’re able to consolidate that data together in the platform to advise which vehicles should migrate to EV without hampering your current operations, the type of charger to chose and where to locate it,” she says.

Everyone wants the best in class in terms of their employees and there needs to be a lot of focus on investing in your staff, remuneration and the benefits that you’re offering them in order to retain the staff.

“Another service we finalised at the end of last year was Quartix Check,” explains Emily. “It’s a Health & Safety compliance product which asks drivers to go around the vehicle and check everything’s operating correctly. Problems can then be escalated through the app to notify the fleet manager. So there’s new products and new upsell opportunities which will drive the ARR without any increase in costs because we’ve already invested in the software to do these tasks,” she adds.

“In the long term, when 100 percent of fleets are electric, our product will vastly change,” predicts Emily. “We’re already working on initial iterations of what that product will look like, for example instead of how much fuel people are using, it will measure the rate of charge.”

According to Emily, beyond the macro-geo-political risk inherent in supply chains involving China, and the global move to Net Zero carbon emissions, the biggest challenge to business is people. “Everyone wants the best in class in terms of their employees and there needs to be a lot of focus on investing in your staff, remuneration and the benefits that you’re offering them in order to retain the staff,” says Emily. “The hidden costs of a lot of employee churn can be quite significant. That’s a loss of productivity when you’re a fast growing tech company. Losing two or three people that are absolutely necessary to your business could really hamper your growth,” she explains. “In the tech sector, in particular, salaries are increasing significantly. Managing that in the best way with your employees is a challenge,” she adds.

Hybrid working creates a problem or an opportunity depending on whether you’re a pessimist or an optimist, according to Emily. “Our operational base is in Newtown in Mid-Wales. It’s a very tight-knit community and where we usually hire our people,” she explains. “But hybrid working means they might be able to travel further for a job which provides new opportunities and a higher salary, so that’s a pressure for us. But Quartix has also moved away from requiring staff to be in the office to work full-time. We realised that with the right levers in place to help people feel part of a team, we too can go further afield for the people we need.

I’m sure lots of telematics providers are nervous about EV, but we really see it as a fantastic opportunity. Not just over the five to ten years it will take to migrate all fleet vehicles to EV, but beyond that to being able to offer an EV product.

“For example, we operate in France, Spain, Italy and Germany and so we need language speakers,” Emily explains. “Post-Brexit and with Covid, a lot of people decided to go home, which could have left us exposed. But remote workers, set-up in the right way, have helped us hugely. We quickly brought in heads from allover the UK, but we bring everyone together, through our ways of working and managing staff that helps to make them even more sticky!” she says.

Quartix is planning continued growth in Europe and the US. “Europe has a low penetration rate in terms of the number of commercial vehicles that have tracking technology,” explains Emily. “There’s a large opportunity there. We want to expand into new countries in the most efficient way possible. We try to centralise all the back office operations in Newtown, but we need sales people on the ground, and as part of that operational scalability, you want to be able to drag and drop the same operational model into every new country that you go into,” she adds. “That’s easy to say but not always easy to implement. Across the EU there are set ways of working and individual country requirements that need to be kept track of in order to stay compliant.”

There’s a huge opportunity in the US, too, Emily explains: “Every company that I’ve worked for has tried to get a foothold in the US market, but it’s a very difficult market to get into. We’re working through the right way to expand into the US, whether that be by opening in key locations, going state by state, or some other way,” she reveals.

Quartix sees itself as a growth business, which means that the growth rate needs to continue. “The main measure for us externally is ARR, but internally it’s lifetime value over customer acquisition cost (“LTV/CAC”): essentially, how long a customer stays with us and the average value that customer brings over their lifetime with us and how much we’re spending on the sales and marketing,” Emily explains. “Like many other businesses, we’ve seen inflation affecting digital marketing costs which are going up across the board. We don’t want growth for the sake of growth, to the detriment of the LTV/CAC and the return you’re going to get from that customer. For us, it’s about pushing more money into what’s working, but also about finding new ways to generate business. Getting into that level of data and detail to be able to look at individual activities and measure their performance versus others help to make the right call,” she says.

“We have a great product,” Emily says. “It works in all economic environments. It works when the market is fast growing and people are buying more vehicles, and it also works in a more inflationary and recessionary environment where people are cost-cutting. We want to be able to provide the data our customers’ need in the most cost efficient way, while still delivering great service – that’s our mantra,” she says. “I’m sure lots of telematics providers are nervous about EV, but we really see it as a fantastic opportunity. Not just over the five to ten years it will take to migrate all fleet vehicles to EV, but beyond that to being able to offer an EV product. It’s an exciting opportunity and we want to take advantage of that. It’s all about finding those opportunities and going after them,” she concludes.