Zoom In On nearmap
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There is still plenty of risk attached to nearmap, as it begins its program for global expansion, but it is a company that has made excellent progress and looks poised for bigger and better things.
One of my most pleasant occasional pastimes is Google Earth tourism: choosing a place I’ve never been and ‘flying’ around it, zooming in and alighting ‘into’ Street View, and feeling as if I am there. So I am certainly attuned to the business model of nearmap Limited (NEA), the Australian web-based aerial imagery company.
But you don’t do ‘nearmap tourism’ – although you could: perhaps that will be the company’s next expansion. Nearmap provides geo-spatial map technology for business and government customers, giving them access to frequently updated, high-resolution aerial imagery of most of Australia’s major cities and surrounding areas. The company’s customers use its images to make better-informed business decisions.
Usually, high-resolution aerial imagery has to be captured by a low-flying aircraft, then the data is manually processed and stitched together digitally to create a “photomap,” a process that can take months to complete. nearmap’s operation is built around its proprietary PhotoMaps aerial imagery technology: the camera equipment is mounted in a ‘HyperPod', which is attached to a chartered aircraft, which flies at a high altitude, enabling entire cities to be captured in a day or two.
Once the imagery is captured, it is processed through super computers that run software known as ‘HyperVision,’ which automatically processes and stitches together the many individual photographs captured into one virtually seamless PhotoMap, which is made available to nearmap’s subscribers on its internet front-end, within hours. A regular flying program keeps images updated, at least monthly.
The applications are numerous. Western Australian electricity network operator Western Power, for example, uses nearmap to check for vegetation encroachment around its infrastructure. Architects and engineers use nearmap to plan and design using detailed and up-to-date site imagery to measure lengths and areas accurately, without having to visit the site. Insurance companies use nearmap to remotely assess and survey properties, to understand the features of the surrounding area and assess whether the property is in a risk zone. Real Estate firms (and investors) use nearmap to obtain accurate property imagery, information and measurements, and views of seasonal shadowing. Builders and roofers can measure sites and properties and make the quoting process more timely. Local and municipal governments, infrastructure operators, utilities, the building & construction and defence and utility industries are also major users.
In February, nearmap launched its first industry-specific product, nearmap Rail, a service to provide the ports, mining and rail industries with a unique set of tools and ultra-high resolution aerial imagery to monitor existing rail corridors, as well as plan new ones. nearmap customers in the port, mining and rail industries can inspect areas after extreme weather events, check the conditions of assets, plan new infrastructure, and make decisions based on timely, browser-based visual analytics.
The nearmap Rail service combines the imagery with measurement tools, information overlays, and elevation profiles, effectively bringing the site to a customer’s desktop. The company says it is a world-first service.
nearmap Rail was followed in April with the launch of nearmap Solar, offering Australia’s solar industry the ability to combine the PhotoMaps technology platform and measurement tools to allow ‘virtual’ solar panels to be placed on a recently-captured, high-resolution image of the customer’s roof, to quote for or plan an installation.
The new application features a library of more than 1,000 Clean Energy Council (CEC) approved solar panel templates and the ability to add and define additional custom panels, and also features a location-specific solar power calculation report that demonstrates accurate power output and cost savings data – again, all from the customer’s desk.
The company says similar specialised product launches across other key “verticals” in its market are in the pipeline, including nearmap Construction, nearmap Real Estate, nearmap Insurance and nearmap Roofing.
Overseas expansion is also a priority. In March, nearmap announced that the United States Patent and Trademark Office had granted the company a new patent for its aerial camera system. In May, this was followed by the commencement of test flights of the aerial camera system in the United States, as part of the process of applying for Federal Aviation Administration (FAA) approval for operating the aerial camera system in the US.
The solid progress in 2014 follows a breakthrough financial report for the half-year ended December 2013, in which nearmap recorded a maiden net profit, of $800,000, a significant turnaround from the 1H13 loss of $2.6 million. The achievement of profitability came on the back of a 96% increase in revenue, to $7.9 million. At the time of the half-year report, nearmap had cash on the balance sheet of $17.5 million, and no debt.
For the financial year ended June 2013, nearmap lifted revenue by 93% to $11 million, and improved its net loss to $1.4 million, compared to $10.4 million in FY12. At June 30 2013, the cash balance was $13.4 million. FY13 saw the introduction of the company’s subscription model, having previously used IP “white-listing” to allow customers access to nearmap.
As it happens, nearmap has a commercial licence agreement with Google Maps, by which Google Maps is incorporated into nearmap’s products, giving its customers access to national satellite imagery, so they can use nearmap outside the company’s current high-resolution coverage area (which covers higher-population areas, holding 85% of Australia’s population); as well as highly accurate street maps that can be combined with integrated street view. The partnership also adds significantly enhanced and upgraded measurement tools and capabilities to nearmap.
The competitive advantage of nearmap is the high resolution of its aerial images, which offer its customers the ability to zoom-in to great detail, and the fact that the images are updated monthly, meaning changing site conditions and development in the area can be monitored over time, with instant reference to an archive of previous images. nearmap wants to be seen as a data company, not an aerial mapping company: this implies that its future lies in incorporating more data into its imagery capability. The main game for it now is to bed down its international patent portfolio and start cracking the global market, beginning with North America.
Capitalised at $150 million, nearmap has been a strong performer for investors in recent years, up 87% over the last 12 month, and generating 79% a year over the last three years and 47% a year over the last five years. That’s OK: investors who take the plunge before a company has become profitable take greater risk, so they deserve the rewards. There is still plenty of risk attached to nearmap, as it begins its program for global expansion, but it is a company that has made excellent progress and looks poised for bigger and better things.
James was founding editor of Shares magazine, and oversaw one of the most successful magazine launches in Australia. He has also written for BRW, Personal Investor, The Age and Management Today, and was subsequently personal investment editor at The Australian and editor of financial website, investorweb.com.au