The Nearmap Ltd [ASX:NEA] posted solid FY21 results, with record North American performance driving ACV growth.
Despite this, NEA share price was trading largely flat, currently trading at $2.07 per share price, up only 0.5% for the day.
Over the course of 12 months, the NEA share price has taken some serious blows.
NEA shares are down 22.76% during this time as the company dealt with intellectual property infringement legal action from a rival.
Today, we’ll dissect all the important information from Nearmap’s results and discuss what the outlook could be for the company.
Nearmap FY21 performance highlights
Though NEA shares have underperformed the market this year, could today’s results show investors the company can rebound in 2022?
Let’s dig deeper into the results.
Nearmap reported Annual Contract Value (ACV) on 30 June 2021 of $128.2 million — or $133.8 million on a constant currency (CC) basis.
This number is up 26% on the year earlier.
NEA also recorded Incremental ACV growth of $21.8 million ($27.4 million on a CC basis). This was primarily driven by ‘record growth’ from the North American portfolio.
This contributed to statutory revenue of $113.4 million, which has increased 17% on the previous corresponding period (pcp).
Nearmap also managed to reduce its statutory loss after tax from $36.7 million in FY20 to $18.8 million in FY21.
The firm’s cash balance stood at $123.4 million on 30 June 2021.
Due to improvements in customer experience and retention, the subscription retention increased to 93.1% from 90.1% in FY20.
Sales Team Contribution Ratio (STCR) also showed strong results as it increased to 89% from 54% in FY20.
Dr Rob Newman, Chief Executive Officer and Managing Director, commented on NEA’s performance:
‘In an unprecedented year, Nearmap has delivered another record performance, with strong growth from new and existing customers demonstrating growth across all parts of our ACV portfolio.
‘This performance validates the decision to focus our strategy on several core industry verticals where customers derive the most value from our knowledge, expertise and leading product and content types.’
Breakdown of Nearmap’s FY21 operations
Nearmap did manage to outperform guidance and reported a Net Loss of $18.8 million.
This led to a rise in Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA), which stood at $24.3 million compared to $9.1 million in FY20.
The primary driver for these numbers were global subscriptions that increased 8% to 11,255.
Apart from this, $84.6 million or 66% of the company’s portfolio now relates to subscriptions incorporating premium content, a 47% increase on the pcp.
Let’s also break down NEA’s performance by segments.
North America (NA)
The NA segment recorded a 54% ACV portfolio expansion that was backed by a record year for the NA business.
Incremental ACV of US$15.6 million was equivalent to total incremental ACV in the previous two financial years combined (30 June 2019: US$9.8 million, 30 June 2020: US$6.1 million)
This expansion was supported by ACV growth from Roofing, Insurance & Government which stood at 48% on the pcp.
Furthermore, NA showed a STCR of 110%, while the retention increased from 83.1% in FY20 to 93.5%.
Australia and New Zealand (ANZ)
Due to market leadership, ANZ showed sustained growth.
ANZ’s ACV portfolio on 30 June 2021 stood at $69.1 million, representing 7% portfolio growth on the pcp and a further extension of Nearmap’s market leadership position.
Subscription retention decreased from 94.1% in FY20 to 92.3%, while the STCR decreased from 74% to 49%.
However, ANZ delivered another high pre-capitalisation gross margin of 92%, which is a 1% bump from the year earlier.
NEA share price outlook
Nearmap is investing heavily in its Artificial Intelligence capabilities, likely aware of the AI market’s strong upside.
CEO Dr Rob Newman also says:
‘FY21 also represents our first year of monetising commercially available wide-scale Artificial Intelligence content, with tens of millions of attributes now on subscription.
‘And as we announced last month, we have tested a prototype of our next generation of world leading aerial camera systems, HyperCamera3, representing a significant technological breakthrough and further extending our technology leadership.
‘Our Company has finished FY21 in a very strong position as we look forward to continuing to execute on our strategic objectives in FY22.’
Nearmap uses machine learning to optimise its customer insights and automate its location intelligence.
The machine learning and artificial intelligence (AI) market is growing as companies expand the business cases and applications of AI.
The global AI market is also expected to grow at a compound annual growth rate of 40.2% from 2021 to 2028 and could reach US$997 billion by 2028.
Although NEA has been under selling pressure of late, the growth and commercialisation of the AI megatrend could see the market reassess NEA shares.
Now, if you’re interested in other stocks on the ASX involved in AI, you may enjoy reading Money Morning’s free 2021 ASX AI stocks report.
It’s a good read.
For Money Morning
PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here