The Aerometrex (ASX: AMX) share price bounced 27% higher on Friday, taking the Nearmap Ltd (ASX: NEA) share price up 17% with it. This was a more than welcome reprieve for Aerometrex shareholders, who have seen AMX shares being sold down in 2022 despite reasonably positive business news.
NEA share price bounces back to life
Aerometrex is a South Australian geospatial imaging and data analytics business. In other words, it captures super-high quality images in photo, 3D and LiDAR format then sells access to the data via a subscription on its MetroMap platform. Aerometrex is often seen as the smaller but higher quality cousin of Nearmap.
Aerometrex jumps on Government deal
Aerometrex started Friday’s session in a trading halt, suggesting it was preparing to release a contract update to the market. Trading halts often result in negative share price reactions — given they’re usually done before a capital raising or acquisition — but the announcement appeared to be extremely positive for shareholders given that Aerometrex shares jumped 28%.
Here’s the before and after shot of the company’s FY22 results expectations (using mid-points of the guidance range):
| Measure | Before | After |
|---|---|---|
| Revenue | $22 million | $24.5 million |
| EBITDA | $5 million | $6.75 million |
| MetroMap ARR | $6.75 million | $6.75 million |
Peculiarly, Aerometrex released updated financial guidance for FY22 only 3 days earlier, so either the $2.5 million Government deal wasn’t expected to settle until the next financial year or the deal caught management by surprise. Government budgets can be like that.
What did Aerometrex report?
Aerometrex reported a $2.5 million deal to supply datasets to an Australian Federal Government agency. The deal is ‘off-the-shelf’, meaning Aerometrex did not need to go out, fly planes and recapture any images for the client. Capturing news images is the costly part of Nearmap and Aerometrex’s business models.
Because the deal is off-the-shelf, it adds $2.5 million of high-margin revenue (falling straight from revenue to EBITDA, see above). Perhaps more importantly, the large deal may somewhat validate management’s focus to no longer provide contracted project-based work for individual clients. Therefore this is an important milestone for Aerometrex for two reasons.
Firstly, management made a tough decision to stop taking project-related capture deals, which accounted for a big part of its revenue, in favour of owning its own database. It can do this by conducting its own capture work when it worked for the MetroMap platform (this effectively forces everyone into ongoing subscription deals on MetroMap).
Second, management has repeatedly invested in their technology, people and platform to create a stronger, better offering to clients. While we don’t know the specifics of this deal, the fact that Aerometrex was chosen by this Government “agency” could speak to its quality, security and reliability.
Is the Aerometrex share price cheap?
With shares down heavily in recent months, investors will now be closely reviewing this announcement and the next round of financials due out of Aerometrex. Shares are well down and yet the company could emerge from this challenging transition period in better shape, at a higher revenue run rate. Translation: it could be time that Aerometrex lands a spot on your watchlist.
Please note: an updated and more in-depth version of this update first appeared inside Rask Rockets Beyond.
