Will Nearmap Retain Its Upward Momentum?

Nearmap Ltd (ASX: NEA) has shown an attractive upside momentum on the Australian Securities Exchange; the stock price is up by 274.73% over the past 12 months. There has been a positive price change of 74.87% in the last three months, demonstrating the favourable response of investors on 1H FY19 results.

The company reported largest half-yearly incremental annualised contract value (ACV) growth in United States’ sales and marketing segment, taking the Group’s annualised contract value (ACV) grew 42% to $78.3 million. The Group customer numbers increased to over 9,300 with group average revenue per subscription (ARPS) increasing to $8,410.

There has been substantial growth in the product portfolio of the company, through the continued expansion of the existing product, technology and content coupled with the launch of new product features, enhanced capture systems to fly higher and faster.

Total revenue increased to $35.5 million, up 45% on the previous corresponding period. This reflects the upgraded sales and marketing activities, undertaken by the company including the launch in New Zealand.

Chief Financial Officer of Nearmap, Mr Andy Watt stated that “2018 has been a landmark year with new products, and ongoing improvements in unit economic delivering strong ACV portfolio growth in Nearmap’s core markets. This H1 FY2019 performance follows a substantial H2 FY2018.”

On the segmental front, United States has achieved record half-year ACV growth, that underscores the ACV portfolio of USD$17.6 million, with 1H 2019 incremental ACV of USD$4.8 million compared to 1H FY2018’s USD$3.2 million. The ANZ market has continued its growth trajectory during the period, achieving an ACV portfolio of $53.3 million with H1 FY19 incremental ACV of $4.5 million. There has reportedly been strong unit economics and the Sales Team Contribution ratio increased to 117% compared to 101% in 1H FY2018.

Group portfolio lifetime value exceeded $1 billion, thereby demonstrating the effectiveness of the Nearmap business model. 1H FY19 EBITDA jumped to $8.1 million from $1.2 million in the previous corresponding period, due to the scale economies of investments put in place over the preceding 18 months.

The solid fundaments seem to lay the foundation of the company’s long-term success. The balance sheet has been strengthened, further via a capital raising of $70 million from institution offer in September 2018.

The cash balance stood at $81.3 million as at 31 December 2018 which included $14.5 million of cash inflow from business operations.

Mr Watt presented the positive outlook for the company on the back of recent capital raise that empowers Nearmap to accelerate its strategic objectives, in pursuit of the considerable global market opportunity. Moreover, the launch of products and features seem to add the substantial arm to the upside momentum in the company’s performance as it intends to launch further existing products in the second half including 3D content visualisation through MapBrowser.

The management believes that with its unique technology business model, which no other aerial imagery company has been able to replicate at scale, Nearmap continues to scale for a global opportunity and become the world’s leading provider of subscription-based location intelligence.

NEA’s stock last traded at A$3.270, down 4.11% as on 18 April 2019.

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