Nearmap Limited (ASX: NEA) is engaged in the provision of geospatial map technology for enterprises, businesses, and government customers. Nearmap is amongst the best-performing stocks in the small-cap category based on its performance in the last year. The stock has undergone a performance change of a staggering 200% throughout last 12 months. However, it declined a bit in the month of October’ 18 when there was a tech sell-off led by the US, but it recovered by the end of the year.
For the half year ending 31 December 2019, the company also reported a strong growth in the group’s annualized contract value which has grown by 42% year-on-year to $78.3 million that includes 23% growth in Australia and 107% growth in the US. The company continues to excite investors with the value of its imaging contracts for clients in utilities and telecommunications.
The company continues its technology leadership after a range of improvements in the technology and product including roof measurement tools, 3D content delivery and enhanced captured technology. The company is on track with a highly focussed marketing strategy and accelerated sales for the US and expansion into Canada in CY 2019.
For H1 FY19, the company’s balance sheet strengthened with cash balance closing at $81.3 million which includes $14.6 million of cash from business as usual operations excluding the capital raised and $66.7 million of cash after payment of costs with the initial deployment and capital raise. Excluding the capital raise, the company’s CEO reaffirms the guidance for FY19 to be cash-flow break-even as the sales would be exceeding the cost in 2018-2019.
The company’s US business is gaining noteworthy market traction, and the Australian business is continuing to build on its market leadership. With a rise in annualized contract value to $78.3 million, the company’s Australian business had a 23 percent increase to $53.3 million while the US division increased by 107% to $17.6 million. The growth in the annualized contract value for 1H FY19 has been A$ 11.3 million with the US business contributing A$ 4.8 million and AU business contributing A$ 4.5 million.
The company has released the important dates in the calendar year which may change depending upon the circumstances. The half-year results will be advised on Feb 20, 2019, and the full year results on Aug 21, 2019. The company’s annual general meeting is supposed to be held on November 14, 2019.
The company has a record group portfolio growth with a significant increase in the average subscription size as the company has a global market opportunity with US $4.5 billion by 2025 at a CAGR of 14.6%. The company has a SaaS business model with strong operational leverage. The company has enough cash resources to accelerate strategic objectives. With more than 50% free cash, the company has a gross margin maintained at 94%.
Nearmap has a leadership team which is growth-oriented and has deep experience in international expansion. It is increasing its richness of data with several million gigabytes of data. The subscriptions have increased to 8,863 subscriptions globally and the company has average revenue per subscription of $7,473. As compared to the corresponding prior period, the group’s annualized contract value growth is 41%. The two-year compounded annual growth is of 35% in the annualized contract value, the two-year compounded annual growth is of 11% in the subscription, and the two-year compounded annual growth in ARPS from US is 82%, and AU is 11%. The company has a diverse customer base in both AU and US which is an added advantage.
For the most recent Q1 FY19, the group portfolio exceeds $70 million at the end of Q1 FY19. The momentum in the Australian business continues. With increasing contribution from SME, the US penetration also continues in 2019. The company reported early sales in the New Zealand market as well.
With the strong position of the company, it is on track to expand its geographical presence and product leadership. Regarding stock price, the company has already achieved the average price target for 12 months of $2.06 by Bloomberg and is expected to go higher to $2.10. The company’s stock price is at its 52-week high and holds a market capitalization as on January 25, 2019 of $884.68 million. It seems like Nearmap can be a top-class imaging and mapping software provider of buildings and infrastructure if it continues to expand at the accelerated pace.
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