Why the Nearmap (ASX:NEA) share price is surging 12% higher

The Nearmap Ltd (ASX:NEA) share price is surging higher following the release of a response to a short seller report and its half year update…

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The Nearmap Ltd (ASX: NEA) share price has returned from its trading halt and is surging higher this morning. This follows the release of its response to a short seller attack and its half year results.

At the time of writing, the aerial imagery technology and location data company’s shares are up 12% to $2.43.

How did Nearmap perform in the first half?

According to the release, contrary to what short sellers were saying, Nearmap revealed that a record performance in North America underpinned strong annual contract value (ACV) during the first half.

At the end of December, Nearmap’s total ACV stood at $112.2 million on a reported basis and $116.7 million on a constant currency basis. This represents a 16.1% and 21% increase, respectively, over the prior corresponding period. However, its reported ACV is up a more modest 5.4% since the end of FY 2020.

Thanks to operating leverage, Nearmap’s margins improved and underpinned strong operating earnings growth. The company reported a 322% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to $13.5 million.

On the bottom line, the company posted a statutory loss after tax of $9.4 million. This was an improvement from an $18.6 million loss a year earlier.

Despite this loss, Nearmap ended the period with a cash balance of $129.3 million. This was thanks largely to its $72.1 million capital raising in September.

The company’s Chief Financial Officer, Mr Andy Watt, commented: “1H21 has seen a strong performance across many of the metrics we benchmark our business against, reflecting the strength of our underlying business model.”

“Following the decision to raise capital in September, we have maintained a disciplined approach to managing costs within our business and we have continued to drive returns from investments previously made. This leaves Nearmap in a very strong position to selectively deploy capital into key business initiatives and accelerate our growth opportunities, driving increased returns across our ACV portfolio,” he added.

North America segment

The release explains that its North American ACV has grown 21.9% since the end of June to US$35.1 million. This means the segment has delivered more incremental ACV during the half than it did during the entirety of FY 2020.

Management advised that ACV growth from Roofing, Insurance, and Government was up 42% on the prior corresponding period and accompanied by a strong contribution from adjacent verticals.

Another positive was that its retention rate improved to 93.5%. This compares to 79.4% a year earlier following unforeseen churn events.

At the end of the period, the company had subscriptions of 2,029 in North America, up 24% from the same period last year. Its average revenue per subscription (ARPS) increased 13% to US$17,313.

ANZ segment

Nearmap’s ANZ ACV reached $66.6 million at the end of December. This was up 4.9% since the end of June and 9% on the prior corresponding period.

Management advised that it achieved strong ACV growth in its SME portfolio, which was partially offset by lower Enterprise sales. It notes that the overall opportunity continues to grow and a refined go-to-market strategy will be deployed to drive renewed growth.

Nearmap’s ANZ segment recorded a retention rate of 94% and had 8,756 subscriptions at the end of the half. The latter was up 4% since this time last year. Finally, its ARPS grew 5% to $7,604.

Outlook

The company’s CEO, Dr Rob Newman, appears positive on the future.

He said “Nearmap is well positioned to continue its strong growth in our core markets and progress further in developing the next generation of the world’s leading aerial camera system – HyperCamera3. Our focus for the remainder of FY21 and moving into FY22 will continue to be providing best-in-class service to our customers, through successful execution of our go-to-market strategy and continuing to develop our superior technology.”

“As we continue to innovate, we will roll-out tailored industry vertical solutions, to ensure we remain a trusted and increasingly valuable partner to our customers. I am confident in the outlook for our business and we remain focussed on becoming the global leader in subscription-based location intelligence,” he concluded.

Stay tuned for details on the company’s response to the aforementioned short seller attack. Judging by the Nearmap share price, investors appear happy with what management had to say on the matter.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Nearmap Ltd. 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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