Vishal Teckchandani (VT) - Welcome. My name is Vishal Teckchandani. Today, I'm speaking to Rob Newman, the CEO of aerial imaging technology company, Nearmap. Rob, welcome to the series, how are you?
Rob Newman (RB) - Thanks, Vishal. Yeah, no, very good, thank you.
VT - Let's start with the basics first, can you help explain to our audience, what is Nearmap's core product?
RN - The core product, most people would be familiar with seeing like, a satellite view on their phone. But, we actually do it using planes and that gives us a couple of benefits, we capture the truth on the ground but we're much closer to the ground, so it's much higher resolution, much clearer and we do it very frequently. So, in major cities around Australia, up to six times a year. What that means is businesses can rely on our imagery to do their jobs, they can actually say, I can see the construction that's going on, literally, behind us right now", or "I can plan a job from my desktop rather than having to drive on site."
VT - OK, and so, what kind of sectors and industries do you see using your product?
RN - Basically, anybody that has an outside asset or does work outside has a benefit. So, it's everything from sole traders who are solar panel installers or landscapers. So, everything from kind of a sole trader, right through to the largest utilities in the country, so, whether it's in the telco space, in the water space. So, anybody that has an outside asset will benefit from using Nearmap rather than driving on site.
VT - OK, and can you help outline what your revenue model is? How does Nearmap actually make money?
RN - Yeah, we're a subscription business. So, some of your customers may have heard of SaaS, so, Software as a Service. All of our imagery and all of our data is out in the cloud. So, and that's really what's differentiated Nearmap against every other company like us globally, is we're out there collecting this content continually, publishing it and putting in the cloud, very up-to-date and so anybody who subscribes to Nearmap can then go and look at whatever data that we have of Australia. So, it's a subscription-based business model, it's very scalable that way and addresses a very large number of customers.
VT - OK, and just so customers, you know, are thinking about the growth opportunity here have a better idea, is that multi-year subscription contracts or is it…
RN - Yeah, look, the typical contract is an annual contract, our larger customers prefer multi-year, because they don't want to have to come back each year and renew, just renew. What we find is most customers, they start out quite small with us, they say, "oh, look, we think we've just got a small number of jobs to do" and as they realise the benefit, actually, they significantly upsell themselves. So, they just consume more and more of our data because they see the benefit of it. So, yeah, but it's an annual contract. Again, very low cost to get in for a sole trader. Some of our larger customers are spending well over a million dollars a year with this.
VT - Now, let's talk about the exciting bit, your growth strategy. So, talk to us about R&D and talk to us about how many more customers do you think could potentially use your product.
RN - Look, we're in a multi-billion dollar market globally and it's a highly fragmented market. So, already today, we're probably in the top three globally, in terms of this, but we're less than 1% penetrated globally. So, that gives you an idea of how fragmented the market is, and, again, because of our subscription business model, we can scale much faster than any other company. So, we're about 1% penetrated into the US market, we are reasonably doing well here in Australia. We're also in Canada and New Zealand.
So, to your question about growth, what are our growth opportunities? It's continuing to cover the whole globe, so going to Europe and Asia, continuing our penetration into the US, because again, I said we're only 1% penetrated into that market, and then, adding value to our product. And we've just recently announced that, that's kind of a second dimension of how we are growing our business where most people think of us is just providing imagery that you can see from straight down. We've now released a 3D product, so you can do a virtual fly-through and we have released at beta, an analytics product which we derive using artificial intelligence. So, very sophisticated products there.
VT - OK, so, geographic expansion and better technical depth of your product, as well.
RN - Yes, higher value for our customers, yes,
VT - OK, and so which countries would you be targeting for growth and for adding customers?
RN - Look, again, the US represents the best opportunity for growth for us in the short term, given we're so shallowly penetrated into that market, but, certainly the European and Asian markets are also evolving and growing and wherever there's change, that's where people need the frequent update that we do. So, those are some, those are markets that we're investigating now with potential penetration into those in the next year or so.
VT - Nice, mapping out your vision. OK, so, let's turn to risks. What are the some of the risks that investors should be cognizant of, relevant to your company, in particular? And let's talk about Google as well, free maps capability, what's to stop them from developing their product to have the same technical capability as yours?
RN - I believe a lot of - and the next two or three years is in our control. So, it's all about execution. If we continue to execute in the way we have, we'll continue to grow our company very successfully. So, in terms of external risks, those are probably less of a focus for us, it's more our ability to execute. When you talk about a company like a Google or an Apple that would have these free services, you know, there's no motivation for them to do a more frequent update, you know, basically, if you're using mapping on a free service, you really just want directions to the local coffee shop or you want, you know, to kind of confirm where you think something approximately is. Having that frequent update has no benefit to consumers and that's really what differentiates us.
Also, I think what you're finding as many of those larger companies are starting to think of mapping as a strategic asset. The things like autonomous vehicles or driverless cars will require a high-resolution base map that's frequently updated and it's highly unlikely that those larger companies will sell it because they see it as their way of controlling an autonomous vehicle, right? So, again that plays into our favour because we will have that data and be able to sell it to businesses.
VT - OK, and if I may ask there, as well you know, a lot of investors, they're trying to think about your company as a growth company, how are you deploying your capital? It sounds like a lot of your capital is going to be redeployed into R&D, so investors should keep thinking if it is a growth company, it's not planning to pay dividends any time soon.
RN - Certainly, we're a growth company, right, and again, as I talked about the two vectors of growth, geographic growth, and then adding value to our product. So, continuing to invest in our technology is an important part of being a technology company and expanding our geographic footprint and just further sales and penetration into our existing markets. Those are really where we're investing. We've got a very strong balance sheet, we raised $70 million last year, that really strengthened our balance sheet. So, we have the capital resources to continue to grow our company. So, in this situation, yeah, it's very much a growth company. And, look, you know, I mean dividends, you never say never but at this point in time, the best thing we can do for our shareholders is continue to add value to our company.
VT - Great, Rob, I wish you all the best for the future, sounds like a very, very exciting proposition to take globally.
RN - Great, thanks, Vishal.
VT - No worries. I hope you found this video informative. Now, please remember what we talked about today isn't investment advice. If you're thinking about transacting in shares of Nearmap, it's really important that you do your research and please consider getting financial advice. My name is Vishal Teckchandani and I'll see you next time.