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Nearmap Ltd Annualised Contract Value Exceeds $102 Million And Launch Of Nearmap AI

Timothy Anderson

Timothy Anderson is a contributor with the Australian Stock Report and is currently in his final year of studying a Bachelor of Applied Economics and a Bachelor of International Relations and Politics at the University of Canberra. Tim has a genuine passion for economics, specifically in macroeconomic analysis including how certain macroeconomic policies and indicators affect financial markets and the economy, as well as how these factors affect personal investment strategies. Tim currently holds RG146 Tier 1 Generic Knowledge qualifications.

Nearmap Ltd (ASX: NEA) is a technological company that specialises in high resolution aerial imagery, city-scale 3D datasets, and integrated geospatial tools. Nearmap has a market capitalisation of A$869 million.

 

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What was the impact of COVID-19 on Nearmap?

COVID-19 has had minimal impacts on Nearmap’s operations. In response to the pandemic, Nearmap management deployed prudent cost management to preserve cash, maintain a strong balance sheet and maximise flexibility for the future. The cost management initiatives include reduction of board and chief executive officer compensation of 25%, reduction of all other employee remuneration of 20% and deferral of FY20 short-term inventive bonus schemes and reductions in permanent headcount equivalent to 10% of the company’s cost base.

What has Nearmap announced (28 May 2020)?

Nearmap announced that Annualised Contract Value (AVC) now exceeds $102 million (using an AUD/USD constant currency FX rate of $0.70), and guidance has been narrowed to $103-107 million. Nearmap AI will be launched and will be commercially available in Australia and the United States on 1 June 2020.

The Launch of Nearmap AI is particularly interesting for investors. This technology provides a freshly processed set of AI dataset packages. Initial focus will be on insurance, utility and local government as these segments are observing high demand for this product.

Another positive point from this report is that Nearmap is on track to be cash flow break-even by end of FY20. This is mainly attributed to the operational savings implemented as explained above.

What is the outlook for Nearmap?

The outlook for Nearmap is positive as Nearmap could become the global leader within the market of location intelligence. Further, as Nearmap’s HY20 results show, revenue and subscriptions are increasing strongly. Nearmap also has a solid balance sheet with no debt and a closing cash balance closing of FY20 of A$32-35 million.

Nearmap’s North American business is performing strongly, with a 41% increase in Annualised Contract Value (ACV). The North American core business delivered a strong and improved performance in its second quarter, validating the sales and marketing investment and giving further confidence in the scalability of the North American business. The Australian and New Zealand ACV increased by 14%, which again is showing signs of growth within the business. These sales increases could underpin future growth in the company.

Nearmap’s Group ACV portfolio is in the range of $102–110 million. As mentioned previously, this guidance remained unchanged.

Nearmap’s Chief Financial Officer mentioned that Nearmap retains the core of the company’s business, continues to invest in areas that offer the potential for strong returns and remains confident in the long-term growth aspirations of the business. 

What is the market reaction?

The market reaction to Nearmap’s announcement was very positive. Nearmap’s share price was up 16% (28 May 2020) and is currently trading at A$2.22.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

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