The Nearmap Ltd (ASX: NEA) share price will be on watch today after the aerial imaging company delivered its full-year results. Here are the key points.
Nearmap’s FY20 report
Nearmap revealed that its group annualised contract value (ACV) rose by 18% to finish at $106.4 million at 30 June 2020. This means the company added $16.2 million of ACV during the financial year, down from $24 million added in FY19.
Customer churn, or the number of customers who didn’t renew their subscriptions, came in at 9.9%, up from 5.3% in FY19. As previously announced, the company was impacted by a small number of large enterprise subscription churns in North America in 1H20.
Normalised churn, excluding these events, was 5.4%, relatively flat on the prior year and a robust result given the current environment. Nearmap said this demonstrated returns from ongoing investment in customer retention initiatives.
In FY20, the company grew its top line by 25%, with statutory revenue coming in at $96.7 million.
It wasn’t as rosy on the bottom line, however, with Nearmap reporting a statutory loss after tax of $36.7 million, up from a loss of $14.9 million in FY19. This was due to increased expenses as the company continues to invest across all areas of the business to build foundations for scalable growth.
Nearmap’s gross margin also took a hit, falling from 71% in FY19 to 63% as the cost of revenue jumped 63%. The company said this reflected an expanded capture program and the impact of the January 2019 change to how it amortises capture costs.
Nearmap finished the financial year with a cash balance of $33.8 million, down from $75.9 million in FY19. This reflects the increased investment and also includes the $3.6 million acquisition of roof geometry company Pushpin.
In April 2020, the company implemented a range of cash management initiatives in response to COVID-19. This ensured the business was in a cash flow breakeven position as at 30 June 2020. Importantly, Nearmap has so far avoided the need to raise additional capital.
How did each region perform?
The North American business grew ACV by 27% over the prior corresponding period to US$28.8 million. The company recorded 30% subscription growth, taking the total to 1,856.
Rolling 12-month churn fell to 16.9% at the end of FY20, down from 20.6% in 1H20. However, this is notably higher than the 4.4% churn rate in FY19 due to the previously mentioned churn events, which you can read about here. Excluding these events, Nearmap said its underlying churn remained consistent.
Nearmap also noted it achieved net upsell of US$2.8 million, slightly higher than FY19 as existing customers increased adoption of new content types. However, the average revenue per subscriber (ARPS) edged lower by 3% to US$15,511.
Overall, the North American business contributed $36.5 million of revenue, representing 38% of group revenue.
Turning to the more mature Australia and New Zealand (ANZ) business, ACV grew by 11% to finish at $64.5 million at the end of FY20. The company said its focus on sales leadership improved ACV growth in the second half despite the backdrop of macroeconomic uncertainty.
The ANZ business recorded new business of $5.8 million, broadly consistent with FY19. The region now has 8,602 subscriptions, up 3% on the pcp, while ARPS increased by 8% to $7,497.
Importantly, rolling 12-month churn fell to 5.9% at the end of FY20, down from 7.2% in 1H20, with improved retention as businesses transitioned to working remotely.
Now what?
Commenting on the outlook for the business, chief executive and managing director Dr Rob Newman said the company remains focused on its customer and core growth verticals in FY21:
“We will increase the alignment of our Product, Sales & Marketing teams to our core growth verticals especially where there is strongest interest in our expanded higher value product suite. We will also continue to innovate, bringing new and value-adding tools and functionality to our growing customer base, further enhancing our market and technology leadership.”
On the whole, this was certainly an improved result compared to the shaky first half. However, it seems the market was expecting strong numbers as Nearmap shares have been climbing recently in the lead up to these results.
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