The Nearmap Ltd (ASX: NEA) share price will be on watch this morning following the release of the aerial imagery company's first-half earnings for FY20. At the time of writing, Nearmap shares are down 5.57% to be trading at $1.78.
What did Nearmap announce?
For the half-year ended 31 December 2019, Nearmap recorded revenue of $46.3 million, up 31% on prior corresponding period (pcp) revenue of $35.5 million.
Total subscription revenue grew by 31%, up to $46.2 million from $35.1 million. Nearmap commented that this increase reflected continuing strong growth in both Australia and New Zealand, and North America.
Group Annualised Contract Value (ACV) at 31 December came in at $96.6 million compared to $90.2 million in June 2019, with incremental ACV of $6.4 million. Portfolio growth was 23% on the pcp.
Nearmap's net loss after tax for the half-year ended 31 December 2019 was $18.6 million, a massive 843% increase on the prior half-year loss after tax of $1.97 million. Nearmap commented that this increased loss was caused by a 61% increase in operating cost base, in line with the investment strategy outlined in its 2018 capital raise, and the acceleration of capture cost amortisation. The company further commented that in the next half, those losses will reduce as it gets the returns from those investments.
Nearmap reported a strong balance sheet, with no debt on its books and a closing cash balance at 31 December 2019 of $49.6 million. This compared with closing cash balance of $75.9 million on 30 June 2019.
North America a massive opportunity for Nearmap
I spoke with Nearmap CEO Rob Newman this morning, just after the earnings release, and he commented that investments in sales and marketing in North America are delivering results in the scalable and repeatable part of its business.
He sees North America as still a massive opportunity for Nearmap, believing it will drive a lot of the growth over the next few years. In saying that, Australia remains a solid part of its business, and Newman commented there is still a long-term growth runway here as well. Additionally, Nearmap will look to other geographies, possibly next year, but its current focus will remain on North America.
The new artificial intelligence (AI) product that Nearmap is bringing out is gaining traction in the market. North America is already the largest part of Nearmap's growth, representing 37% of its overall portfolio today and growing rapidly.
Mr Newman further commented that Nearmap's recent acquisition of Pushpin in 1H20 provides technology that taps into semi-automation of roof geometry, and has significant market potential in the US. The company estimates this addressable market to be somewhere between US$100 million and US$200 million. Nearmap already has two partners that are accessing that content today, illustrating the quick start to this new product.
Newman went on to add that no company globally has been able to replicate Nearmap's subscription-based business model. While there are other providers in the industry, the company doesn't see any of those players scaling anywhere as effectively as Nearmap does.
Strong growth potential moving forward
Mr Newman commented that Nearmap anticipates it will continue to grow its business moving forward, somewhere between 20% to 40% ACV growth, year on year.
As per the revised guidance announced in January, Nearmap expects to deliver FY20 group ACV portfolio between $102 million and $110 million.
