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Nearmap share price on watch after guidance downgrade

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The Nearmap Ltd (ASX: NEA) share price could come under pressure on Thursday after it followed in the footsteps of Treasury Wine Estates Ltd (ASX: TWE) by downgrading its FY 2020 guidance.

What did Nearmap announce?

This morning the aerial imagery technology and location data company revealed that its annualised contract value (ACV) grew by 23% on the prior corresponding period to $96.6 million during the first half of FY 2020.

It also reported that its unaudited statutory revenue grew 31% over the prior corresponding period to $46.4 million.

Whilst this is solid growth, it has fallen short of management’s expectations. As a result, it has downgraded its full year ACV guidance to the range of $102 million to $110 million. This compares to its previous guidance of $116 million to $120 million.

Why has Nearmap downgraded its guidance?

The main catalysts for this downgrade were the loss of a large contract by a partner and two significant churn/downgrade events due to the slowdown in mapping for the autonomous vehicle industry.

The loss of the large contract was subject to a permanent court injunction and out of the company’s control.

And whilst management is disappointed with the significant churn/downgrade events, it notes that its exposure to the autonomous vehicle market is now minimal. It believes this means there is upside potential when the industry recovers.

Also impacting its first half performance was its inability to close an expected significant partnership deal due to the partner’s budget constraints.

How did Nearmap’s segments perform during the half?

Although it lost a big contract and experienced two major churn/downgrade events, the company’s North American segment continued its strong growth. North American ACV came in at US$24.9 million, up 41% on the prior corresponding period.

Back home in the ANZ market, Nearmap’s growth continued. It reported ANZ ACV growth of 23% to $61 million.

The company’s chief executive, Dr Rob Newman, appeared to be disappointed with the quarter, but optimistic on the future.

He said: “Nearmap has established a unique position in the location intelligence market and we will continue to build our leadership position through innovation and world-leading technology that addresses a diverse range of customer needs.”

“The fundamentals of our business model remain firmly intact and we are confident on the outlook for the medium to long-term, notwithstanding that performance in 1H20 showed that at our current scale, our performance can be impacted by a small number of larger customers. The potential for a small number of customers to impact our results will become less as we grow, continue to diversify our customer base and leverage opportunities to grow into new markets.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. and Treasury Wine Estates Limited. 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 Scott Phillips.

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