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Nearmap Ltd reports: What you need to know

Nearmap Ltd (ASX: NEA) has reported a solid set of results for the first half of the 2016 financial year (FY16), and you can ignore the net loss of $3.3 million.

Surely a company with growing losses is a company in trouble?

It’s not always the case. What is important to realise about Nearmap is that firstly it has plenty of cash on its balance sheet ($14.4 million) and no debt. That means the photomapping company is unlikely to need to raise capital anytime soon to prop up its business.

And secondly, the company’s expansion into the US and expenses associated with that are the primary reason the company is currently reporting a loss. That’s unlikely to be for long, though.

Nearmap is a growth company in growth mode and is sacrificing short-term reported profit for long-term market share gains and US expansion.

Here’s a brief summary of the results…

  • Revenues of $13.8 million, up 21% over the previous corresponding half year (1H FY15)
  • Australian revenues $13.6 million, US revenues $0.2 million
  • Earnings before interest and tax (EBIT) of $7 million, compared to $5.8 million in 1H FY15
  • Loss after tax of $3.3 million, compared to a profit of $0.3 million in 1H FY15
  • Operating cash flow $0.3 million, against $1.4 million in 1H FY15

The good news is that Nearmap has already generated $1 million of annualised contract value (ACV) in the US, recording subscription revenue of $0.2 million in the US during the half. The company only switched on its paywall in November 2015 – having offered free and trial versions of its software prior to that. That was a game changer in Australia – and likely to produce a similar result in the US.

Additionally, Nearmap is gaining on its closest US competitor Pictometry, with 55% coverage of US population versus Pictometry’s ~80%, and arguably has a better value proposition, flying more frequently despite having 11 planes compared to Pictometry’s ~95, and offering a better software product.

Foolish takeaway

A solid but fairly unremarkable result from the aerial photomapping company. In summary, the company’s Australian business continues to grow nicely and its expansion into the US is on track as expected. Should the market react unkindly to the result, this could be a buying opportunity.

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Motley Fool writer/analyst Mike King owns shares in Nearmap. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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