The Nearmap Ltd (ASX: NEA) share price climbed 5% to 63 cents this morning after the company reported its financial results for the six-month period ending December 31 2016. Below is a summary of the results.
- Annualised contract value stands at $41.2 million, up 35% on prior corresponding period (pcp)
- EBITDA (operating income) of $2.4 million, versus a $2.1 million loss in pcp
- Net loss after tax of $3 million
- 38% growth in H1 2017 revenue, compared to pcp
- Full year EBITDA guidance of between $4.5 million to $6.5 million
- No debt and cash balance of $28.4 million after recent capital raising
Overall this looks another solid half of growth for the aerial mapping business that has profitable and growing Australian operations alongside a beachhead in the giant U.S. market.
Growth in the first half for the U.S. market was moderate given the heavy investment in this business, although the management team deserve some credit for not using the U.S. election as an excuse for this.
In the U.S. the group now has $3.1 million in active subscription contracts in effect at December 31 2016, which is around US$2.4 million. The company says it now has the "infrastrucuture" and sales teams in place for future growth so the 12 months ahead will be critical on delivering on this promise.
The core Australian business is continuing to grow nicely with annualised contract value (ACV) up 25% over the pcp to $37 million and earnings before interest and tax up to $10.2 million. This goes to show how Nearmap's subscription business model helps it generate high gross margins once it can achieve stability in the cost of sales.
Outlook
At 62 cents the market is currently ascribing the company a market value of $233 million, which looks reasonable to me and I would rate the stock a speculative buy at these levels.
The Australian business continues to print cash and if the U.S. business continues to grow over the next 12 to 18 months the stock price and company's market value is likely to enjoy a substantial re-rating upwards.
Still significant risks remain around ASX tech stocks being long on promise, but short on delivery and if Nearmap fails to deliver investors can expect to see its share price imitate the big falls of those delivered by underperforming tech companies including 3P Learning Ltd (ASX: 3PL), GBST Holdings Limited (ASX: GBT) and Prophecy International Holdings Limited (ASX: PRO).
