Will NearMap Retain Its High Level?

  • Feb 23, 2019 AEDT
  • Team Kalkine
Will NearMap Retain Its High Level?

Nearmap Ltd (ASX: NEA) is a company engaged in the provision of geospatial map technology for business, enterprises and government customers. In the last six months, the company’s stock has generated a positive return of 61.64%. The stock closed the trading session on 21 February at A$2.440, down by 5.058% with a market capitalization of A$1.14 billion with approximately 444.56 million outstanding shares. However, the stock has demonstrated impressive performance this year, offering positive YTD return of 67.97%. Market analysts are closely eyeing if Nearmap can retain its high level in the near future.

The company recently announced its half-yearly results for six months to 31 December 2018.The half-yearly results reported strong growth in 1H FY2019. During the period, the Group portfolio lifetime value exceeded $1 billion. The annualized contract value increased by 44% on the prior corresponding period to $78.3 million. There was an increase in the revenue by 45% as compared to the previous corresponding period, to $35.5 million. The gross margin increased by 2%. The group sales team contribution ratio increased by 20% on pcp. The group’s subscription churn rate reduced by 6%.

In the first half of FY2019, the company launched a range of new products which included offline 3D subscription availability, roof measurement tool as well as enhanced integration and scalability for enterprise customers. The team from the data science is researching the extensive Nearmap data set, deriving insights for future growth. The company is also scaling for global opportunities such as international expansion, sales and marketing as well as product and technology development. For this, the company has strengthened its balance sheet after raising the capital. The company still have projects in progress.

In two years, there has been a six-fold growth in the US ACV (actual cash value). There was a growth in the New Business ACV by 37% on pcp, majorly driven by strong growth in the US with traction in the long tail and momentum in the international and partnership division. The net upsell ACV increased by 42% as compared to the prior corresponding period. The churn rate of the group reduced from 50% to 6%. 36% of the portfolio of the company is based on a multi-year subscription.

The new business ACV in 1H FY2019 was US$3.6 million, up by 113% with a significant contribution by the sales team. There was new 293 new subscriptions in 1H FY2019 which demonstrated traction in the long tail. In the US ACV, the churn rate reduced from 15.9% to 8.4% on pcp. There was also significant growth in the small and medium business to large enterprise. The company received a substantial contribution from the newly formed International and partnership division of the company.

In ANZ as well, continued growth in the ANZ ACV portfolio was driven by market leadership with sales team contribution of 101%. The net operating cash flow scaled up through the SaaS business model. The growth in the EBITDA was driven by disciplined investment and increased US margins.

For the implementation of the growth in the initiatives undertaken, the company had raised over $15 million capital. Around $5 million will be invested over 12 months for the targeted US sales and marketing for deep penetration into specified US vertical and geography. For this, the campaign will be launched in Q4 of FY2019, $5 million to be invested over 18 months for the expansion in Canada and another $5 million to be invested over 18 months for expanded products and content.

In H2 FY2019, the company will be stepping towards the sales efficiency, product enhancement, its cutting-edge 3D content followed by reaffirming the cash flow break even for FY2019.

However, by the end of the half-yearly results as on 31 December 2018, the company made a net loss of $1.974 million. There was a substantial increase in the net asset of the company as a result of a sharp rise in the total current asset.

The total shareholders’ equity was worth $97.509 million. By the end of the period, NEA had net cash and cash equivalent of $81.333 million.


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