U.S. Markets close in 5 hrs 2 mins

Edited Transcript of NEA.AX earnings conference call or presentation 21-Aug-18 11:31pm GMT

Full Year 2018 Nearmap Ltd Earnings Call

Sep 26, 2018 (Thomson StreetEvents) -- Edited Transcript of Nearmap Ltd earnings conference call or presentation Tuesday, August 21, 2018 at 11:31:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Andrew Watt

Nearmap Ltd - CFO

* Robert Melville Newman

Nearmap Ltd - CEO, MD & Executive Director

================================================================================

Conference Call Participants

================================================================================

* James Bales

Morgan Stanley, Research Division - Equity Analyst

* Mark Fichera

Foster Stockbroking Pty Ltd., Research Division - Executive Director of Equities Research & Head of Research

* Mason Willoughby-Thomas

Ausbil Investment Management Limited - Portfolio Manager

* Owen Humphries

Canaccord Genuity Limited, Research Division - Senior Industrials Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for standing by and welcome to the Nearmap Limited FY '18 Full Year Results Investor Conference Call. (Operator Instructions) Please be advised that this conference is being recorded today, on Wednesday, the 22nd of August 2018.

I would now like to hand the conference over to your first speaker today, the Managing Director, Mr. Rob Newman. Thank you. Please go ahead.

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [2]

--------------------------------------------------------------------------------

Good morning, and welcome to the Nearmap's FY '18 results conference call. I have with me Andy Watt, our Chief Financial Officer.

As you'll see from the results released to the ASX this morning, FY '18 has been a strong year, delivering on expectations we set for Nearmap. We demonstrated record growth in our subscription portfolio, delivered a suite of new product features to aid our customers, saw increased -- sorry, saw increasing traction in the United States market and built the foundation for sustainable, long-term growth in our business.

Let me begin by outlining Nearmap's unique position at the end of fiscal '18. At its heart, Nearmap is a technology company founded on the principle that when we change the way people view the world, we can profoundly change the way they work.

Over the last 11 years, we have created and owned a rich continually expanding data set about the real world, providing high-value insight to a diverse range of businesses and government organizations. The market for aerial imagery data is significant, expanding and global in nature. And on that basis, we took our unique scalable business model to the United States 4 years ago. Our investment in capturing and bringing data to U.S. customers is now generating record growth in our subscription portfolio in excess of that from Australia, which itself experienced near-record portfolio growth in FY '18.

After laying the groundwork for 18 months, we also announced last week our formal expansion to the New Zealand market to access the significant growth opportunity which exists there. The aerial imagery market is also evolving in its sophistication, and Nearmap is focused on maintaining our position at the forefront of that evolution. Our investment in technology has resulted in the FY '18 rollout of subscription access Oblique imagery features to our U.S. and Australian customer base. Subscription access to Oblique imagery is the first in the U.S., and indeed, we were the first to provide commercially available Oblique imagery via subscription in Australia.

Aerial imagery is a key component of the global location intelligence market, a large and growing market impacting all parts of business life. The companies that will win will create and own deep location data and invest in the insights that can be derived from that data. Nearmap's combined data set now allows us to enter other value-added sectors, specifically 3D modeling and to derive analytics from our large data set. I will discuss these further later in the call when I take you through the outlook for FY '19.

I'll now hand over to Andy to take you through the highlights for the FY '18 financial year.

--------------------------------------------------------------------------------

Andrew Watt, Nearmap Ltd - CFO [3]

--------------------------------------------------------------------------------

Thanks, Rob, and good morning, everyone. In discussing our performance in FY '18, I will turn first to the metric which best demonstrates the value our customers place on our content. Our group ACV or the annualized contract value of our current subscription content.

As we pre-announced last month, FY '18 saw record growth with the portfolio growing by $19.2 million to $66.2 million. Analyzing this 41% on its organic growth in more detail, I have a number of important points which demonstrate the scalability of our business model and the effectiveness of our investments in FY '18.

Firstly, our ACV growth was generated by strong increases in both subscribers and their average subscription value as shown on Page 4 of the Investor Presentation. Growth from new subscribers to Nearmap was $12.4 million, a 39% increase on prior year, whilst net upsells to existing customers increased by 83% to $9.9 million. Even more importantly, group churn fell from 10.3% to 7.5%, and in absolute dollar terms, ACV churn was lower in FY '18 than last year.

In addition, the key measures of the productivity of our sales and marketing, the group Sales Team Contribution Ratio, increased to 114% in FY '18 from 90% in FY '17. This means that for every dollar invested in our direct sales and marketing efforts in FY '18, we generated an incremental $1.14 in annual subscription value from our customers with an average customer life of over 10 years.

Looking at a portfolio book in each territory, our U.S. portfolio growth exceeded the guidance provided at the time of our H1 results, growing by a record 143% in a year to USD 12.9 million. This was achieved through a 43% new business ACV to USD 4.9 million as well as percentage churn more than halving to 8.8%, similar to the levels in Australia.

In Australia, ACV growth of $8.8 million also exceeded guidance. Our new business ACV grew by 33% to $6 million, and enhanced focus on our customer base saw net upsell increase 27% to $5.7 million. Percentage churn fell to 7.3%, and in absolute dollar terms fell $0.5 million to $2.9 million.

The growth also reflects a number of other factors which demonstrate the quality of our portfolio and the investments Nearmap has made. With subscriptions globally increasing 13% to over 8,800, our customer base is diversified across a range of industries and use cases as shown in Page 7.

Nearmap's business model is to provide annual subscriptions to our customers, and highlighting the value of our content, over 1/3 of our portfolio subscribe to us on a multiyear basis. As Rob mentioned, our technology investment enabled the launch of Oblique and Panorama product features in FY '18.

As at 30th of June 2018, $9 million of ACV or over 1/7 of the total group portfolio are accessing these features. This launch, which represents the first significant enhancement to the Nearmap product suite in several years, has significantly aided in customer retention and renewal.

As a result of the strong ACV growth, our group sales revenues grew 32% to $53.5 million. And as you can see in Page 8, U.S. revenues in our fifth year of capture, of $10.6 million, exceeded the Australian revenues generated in new scripts. And based on our posting U.S. ACV portfolio are on track to achieve Australia's revenues from the seventh year of capture in FY '19.

The portfolio growth, combining with the reduction in churn, continued high gross margins in Australia and a doubling of the gross margin in the U.S., has seen the lifetime value of our subscription portfolio grow by 84% to $715 million at the end of the financial year. We've spoken previously about the investments we should be making to capitalize on our unique position in the aerial imagery market. And FY '18 saw us execute to plan on those investments.

Our Oblique capture program is in place, and due to favorable conditions in many areas of our footprint, we have already commenced aerial captures of our planned FY '19 program. We also expanded our footprint to areas of urban development and customer interest. I mentioned earlier the return on our investment in sales and marketing through our Sales Team Contribution Ratio, and we also increased our indirect investments in key areas such as technical sales, support and training.

With the bulk of our next-generation HyperCamera 2 systems constructed in FY '17, product and technology investments focused on development of our products and software. In addition to the Oblique and Panorama product features, we upgraded our MapBrowser to make it mobile-enabled and invested in 3D modeling, which has been the next evolution of our dataset.

As shown in the cash waterfall on Page 10, Australian cash flows of $26.7 million continue to self-fund the U.S. operations, which experienced cash outflows of $22.7 million.

And important milestones achieved during FY '18, namely: that our U.S. ACV portfolio now exceeds our annual capture cost in that market. This now means that incremental expenditure in that market drives further growth in our ACV portfolio with a constant growth in the portfolio lifetime value.

As a result, our net operating cash flows were $0.6 million in H2 of FY '18 compared to $3.3 million outflow in H1 as the business in the U.S. scales.

Overall, net cash outflows declined from $7.7 million in H1 to $3.2 million in H2 and we closed the year with a cash balance of $17.5 million.

Turning to our key income statement numbers on Page 11, whilst we increased the investment in our standard capture program, we were able to maintain group gross margin above 80%. Australian gross margins of 94% remain consistent with FY '17, while the U.S. gross margin more than doubled to 27%. This result demonstrates the scale inherent in our business model and the leverage of our increasing portfolio through our capture program expenditure.

Group expenses increased by 38% and records an EBITDA of $4.8 million. It's important to note that these 2 metrics affect the investment program already outlined. Expenses are now at a level consistent with what was communicated at the time of the capital raise, and our focus is very much on driving investment return.

In response to feedback from our investor community, in the Appendix on Page 17, we've included a reconciliation from our reported revenues to the movement in cash, providing the key cost categories which drive the results of the business. This also demonstrates the key areas of investment which were made during the year, namely, sales and marketing, the capture program and product and technology.

Most importantly, these investments are now firmly in place. Whilst we would tactically review our level of investment during FY '19 as we continue to demonstrate the scale of our business and drive continued organic portfolio growth in our market, we have the cash resources to enable us to organically fund the next phase in our growth.

I'll now hand it back to Rob for our priorities and outlook for the upcoming financial year.

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [4]

--------------------------------------------------------------------------------

Thanks, Andy. In looking forward to the priorities and outlook in FY '19, let me reiterate something I said at the start of the call. Aerial imagery is a key component of the global location intelligence market, which in itself is a large and growing market impacting many parts of business life. The companies that will win will create and own deep location data and invest in the insight that can be derived from that data. Nearmap has already demonstrated that we have been able to deliver sustainable, long-term growth in this market. Our market-expanding business model continues to open up aerial imagery to new customers and new use cases.

Our investment in sales and marketing has enabled us to deliver record growth in our portfolio in FY '18. With record growth in the United States, our portfolio there now exceeds our cost to capture, and the scale of our business model that we have demonstrated in Australia is becoming evident in that much larger U.S. market. And we have recently launched New Zealand using a capital-light approach. This also demonstrates that our internal systems have the potential to scale to multiple geographies around the world.

Most importantly, the investments we have made in our products and our technology means our rich dataset of 2D and Oblique imagery is now being enhanced. The ability to create 3D information and the opportunity to apply machine learning to our data not only opened up additional larger components of the global location intelligence market, they enable Nearmap to provide further insight and solutions to our customers rather than just data and content.

As Andy mentioned, we have now completed the first part of our Oblique capture footprint in both Australia and the United States. From that data, we can now derive 3D content in a number of formats processed using our high-performance 3D pipeline.

During FY '18, we have had a proven success in a range of industries adopting wide-area 3D, including real estate, public safety, government and energy customers. Our initial pricing with these trial customers has been on the basis of an area of interest model. This is typically priced in a per square kilometer basis, pricing which users of the more traditionally generated 3D content are familiar with. We will work on enabling our 3D content through the Nearmap platform in FY '19 and explore different pricing models as well.

Nearmap's 3D opportunity is in the early stages of development with a number of pilot and commercial sales in the second half of FY '18. Our sales focus in both Australia and the U.S. will target growth 3D industries such as telco wallet planning, public safety, property management and construction and engineering. We will continue to invest in 3D content standard to support a greater range of customer applications.

As important as our expanded location content offering is to our customers, providing them with rapid insights in that data is the next step in our evolution. We have been doing some early stage R&D with a small group of internal data scientists to determine how such technology can bring greater value to our content and to our customers, partners and prospects, literally moving us from data to insight.

Our sales and marketing efforts in FY '19 will include commercializing our new content. We will further enhance the productivity of our sales and marketing teams to continue our portfolio growth. In Australia, we will deepen and broaden our customer experience, whilst in the United States, we will build on the capability in our small to medium enterprise customer focus while maintaining our success at penetrating enterprise markets.

We will establish our New Zealand presence following the launch there last week and more strategically explore the potential for national and multinational partnerships. The diversity of the location intelligence ecosystem provides a range of opportunities for Nearmap to expand the channels for the delivery of its content for geographic expansion and integrate our rich dataset into providing insight to business and government customers.

Finally, after several years of investment in our U.S. operations, in our products, our technology and our capture program, FY '19 will mark a turning point for Nearmap. Our business model will continue to scale, generating returns on the investments in the form of continued portfolio growth, and we expect FY '19 to be cash flow breakeven.

I will now open up the call for questions from the conference call participants.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Your first question comes from the line of Owen Humphries from Canaccord.

--------------------------------------------------------------------------------

Owen Humphries, Canaccord Genuity Limited, Research Division - Senior Industrials Analyst [2]

--------------------------------------------------------------------------------

Just on Slide 14, just that second point around international and partnerships. Can you maybe just talk more broadly or maybe just explain or provide more color about how you expect to expand into new geographies? Are you talking about into Europe or Asia or we talking more broadly? Just explain the strategy there, if that's possible.

--------------------------------------------------------------------------------

Andrew Watt, Nearmap Ltd - CFO [3]

--------------------------------------------------------------------------------

Thanks, Owen, and thanks to the feedback on the result. Yes, in terms of our international expansion, as you recall back in April, we announced that Patrick Quigley had taken on our international partnership and expansion activities. And what we're doing there is working with very large companies who have an interest in our type of content more than just Australia, New Zealand and the U.S., so I'm looking to those partners, I guess, to really be a basis for -- pre-funding, I guess, is one way to think about it, but certainly a prepurchase, I guess, of content to geographies beyond those 3 that we're already in. So it kind of gives us a starting point into those geographies without necessarily the large capital spend that we've had in the U.S. Look, it's early days. Patrick is working those opportunities as we speak and -- but we expect to see some of that come out -- come to fruition through FY '19.

--------------------------------------------------------------------------------

Owen Humphries, Canaccord Genuity Limited, Research Division - Senior Industrials Analyst [4]

--------------------------------------------------------------------------------

Okay, great. And obviously, your sales contribution actually both in Australia and the U.S. is now running well above your target ratio of around that 100%. Can we just say, in that half, was there anything in particular, particularly in Australia with that customer growth, was there any large one-offs? And is that 100% still relevant going forward into FY '19 and beyond?

--------------------------------------------------------------------------------

Andrew Watt, Nearmap Ltd - CFO [5]

--------------------------------------------------------------------------------

Yes. Thanks, Owen. That's right, we're pleased with the Sales Team Contribution Ratio, really validating the increased investment we put into the sales and marketing last year. As you'll see, we also increased direct sales and marketing investment by $5 million. The additional incremental AC (sic) [ACV] of $9 million was very pleasing. So we're really seeing good returns there. Look, I think going forward, we've always said that 100% is a good number for us. It shows payback in periods, and given the lifetime value that we see from our customers, we're pleased with that result. So very much still tracking towards that number. But in terms of the activities in H2, they were fairly standard. There is the usual mix of transactional deals supplemented by some larger deals as well. But nothing out of the ordinary, so a good trend going forward.

--------------------------------------------------------------------------------

Owen Humphries, Canaccord Genuity Limited, Research Division - Senior Industrials Analyst [6]

--------------------------------------------------------------------------------

Okay, great. And maybe, obviously that second half for FY '18 at Panorama, you had Obliques, you had -- getting 3D ready, MapBrowser, your platforms be then end mobile ready. In FY '19, can you maybe just provide a bit more color apart from just what commercial, I think, 3D, just around the product innovation you're bringing to market over the next 12 months?

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [7]

--------------------------------------------------------------------------------

Yes, we'll continue to invest, as you know, in our technology leadership. I guess that's across all aspects of our technology. So in terms of the capture and processing, we're continuing to make that more productive, so that's really the core that drives the -- drives that business model. So flying higher and faster, increasing the processing productivity and then how we deliver that to our customers. And in terms of new product that our customers will see, it's a combination of the easy-to-use tools within our MapBrowser, particularly in that mobile-enabled environment. And with the new content types, as we go into 3D, there are many formats for 3D and many use cases and many APIs. Thus, supporting that broad range of use cases for 3Ds will be a big focus for us throughout the year, and in general, just making it easy for our customers to adopt and for us to retain those customers in FY '19 and beyond.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

Your next question comes from the line of Mark Fichera from Foster Stockbroking.

--------------------------------------------------------------------------------

Mark Fichera, Foster Stockbroking Pty Ltd., Research Division - Executive Director of Equities Research & Head of Research [9]

--------------------------------------------------------------------------------

Just a question on the -- or a couple of questions. Firstly, on the churn. Any specific initiatives there that caused the churn to reduce?

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [10]

--------------------------------------------------------------------------------

Yes, so let me comment on that first. I think -- yes, sorry, Mark. If you look at what we've been doing -- there's a bit of feedback, Mark. Maybe you can just go mute for a sec. So in terms of what we've been doing, we've been focusing on our customer retention. We have a dedicated account management team in both Australia and the U.S. We contact our customers on a regular basis. So that provides really good support for those customers. I think also the new content that we've been providing, as you see, $9 million worth of our portfolio has adopted the new content. So adding value to our customers, the long history that we have, all of those things are helping us with improving our retention in both the U.S. and Australian markets.

--------------------------------------------------------------------------------

Mark Fichera, Foster Stockbroking Pty Ltd., Research Division - Executive Director of Equities Research & Head of Research [11]

--------------------------------------------------------------------------------

Well, right, okay. And in terms of the -- you mentioned about tactically reviewing your investment for FY '19. If I may ring that you'll be looking to see how the market is in terms of tweaking your investment in terms of if you're seeing good demand or you're seeing opportunities where you might get a quick return on ACV, is that how you're approaching your, say, sales and marketing?

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [12]

--------------------------------------------------------------------------------

Yes, I think that's the way to think about it. As you know, well, our Sales Team Contribution Ratio is above 100%. We're not going to do wholesale significant changes in our investment in sales and marketing, but we continue to kind of where we see opportunity to -- for example, in Australia, the mid-market was a big focus for us over the past 6 months and that paid off well for us. That focus in the U.S. around the small and medium enterprise, continuing to invest there and grow that. So as we see success, we'll continue to scale up our investment in marketing and sales. So that's really what we mean.

--------------------------------------------------------------------------------

Operator [13]

--------------------------------------------------------------------------------

Your next question comes from the line of James Bales from Morgan Stanley.

--------------------------------------------------------------------------------

James Bales, Morgan Stanley, Research Division - Equity Analyst [14]

--------------------------------------------------------------------------------

Firstly, I just wanted to follow up on some of those questions on sales efficiency. There have been big step changes. Can you talk us through exactly what's going on there and how scalable those benefits are if you do decide to reinvest?

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [15]

--------------------------------------------------------------------------------

Yes. I think -- good question, James. So if you look at what we're doing, we've been -- we've got a very repeatable process in both Australia and the U.S. So we understand the investments that we make in marketing and in the campaigns that we drive. We understand what kind of leads those generate. We also then understand how those convert in to close one business. And I think by having strong metrics at all levels of that chain from generating leads and awareness in Nearmap through to closed one, it's allowed us to kind of optimize all of those pieces of the process. Also by being a little more granular in understanding the different parts of the market, the enterprise sale, the mid-market as well as the small -- small enterprises. And having separate teams focusing on each of those parts of the market is also -- we can optimize the performance of each of the teams. And then, obviously, the improved retention is a contributor to the Sales Team Contribution Ratio because really, if you're churning a larger number of customers or a larger amount of our ACV, that's more you've got to make back to make your ACV grow. So look, it's really just better metrics, better understanding of that business, structuring our teams to match our -- the opportunity that's out there. Does that make sense?

--------------------------------------------------------------------------------

James Bales, Morgan Stanley, Research Division - Equity Analyst [16]

--------------------------------------------------------------------------------

Yes. So I guess just coming back to the question on how scalable and sustainable that is, is this a one-off benefit that's great that you've got it but you can't double your sales force and expect that efficiency to stay there? Or is this something that you're seeing great returns on and want to hire more people as fast as you can?

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [17]

--------------------------------------------------------------------------------

Look, I don't think it's kind of -- let's just suddenly double the sales force. With all of these things, it allows us to say, "Okay, this part of the market is working or this segment of the market is working well for us. Let's ratchet it up by a certain amount. If we get commensurate or corresponding increase in our sales performance and we are impacting significantly our sales and contribution ratio, then great. We continue to scale it up. If not, if we're getting diminishing returns, then we're at the right level." So I think as you see and how we manage our business, we're not making those kind of step changes. It's more a considered growth in our investment in sales and marketing.

--------------------------------------------------------------------------------

James Bales, Morgan Stanley, Research Division - Equity Analyst [18]

--------------------------------------------------------------------------------

Great. And then I wanted to ask as well about the R&D that's factored into your target of breakeven in FY '19.

--------------------------------------------------------------------------------

Andrew Watt, Nearmap Ltd - CFO [19]

--------------------------------------------------------------------------------

Yes, so as you have seen, James, we spent $10 million last year on some development and investment CapEx, similar number to FY '17. And as we move forward into FY '19, we'll continue to invest in our -- the development of our products, continue to obviously look at our camera systems and the investment there. So we're always investing in R&D. But that dollar value is roughly consistent, as I say, going backwards, and we see that the same for FY '19 as well.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

Your next question comes from the line of [Daniel Passos], as a private investor.

--------------------------------------------------------------------------------

Unidentified Shareholder, [21]

--------------------------------------------------------------------------------

One question I have is how Nearmap will maintain its leadership in the market in the face of some smaller competitors on similar product offerings that are starting up in Australia and elsewhere? And also where large tech companies like Google, for instance, might look at a similar market to Nearmap? How can Nearmap maintain that leadership and maintain its primacy in this sector?

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [22]

--------------------------------------------------------------------------------

Yes. Thanks, Daniel. Nice to meet you and good question. So I think there are several factors -- let me answer the first part of your question because it's quite different to the second part of your question. Yes, there are competitors entering the market. We believe we have a multiyear advantage over those competitors. If you look at what Nearmap provides, the value-added products that we've released in FY '18, the Oblique, Panorama products and those 3D products, those we're unique in providing and doing that via subscription service. We've been capturing that content now, that advanced content now for well over a year. So that gives us a significant advantage there. Our customers really rely on our history. They know we're easy to use. They know that we have regular updates and we deliver on those. So we're kind of a trusted partner to many of our customers. We're integrated into their workflow. And those -- we're obviously putting a lot of attention on, again, customer retention and our customer experience and that's identified, or at least you can see that in the improved retention that we've had through FY '18 versus prior years. The second part of your question is in regard to Google. Interesting that Google entered the mapping market for business several years ago, and then about 3 or 4 years ago exited this particular market. The reason is Google is a consumer company. And they collect imagery content from satellites, from planes, et cetera. They do that for consumers, and the consumer demands are very different than business demands. Businesses expect regular updates, high-quality imagery, easy to access. And look, there are a number of opportunities -- or sorry, customers that we have who were previously using Google who have now actually moved to Nearmap because we are a trusted business partner to them. So look, we will continue to invest in our technology, continue to work on providing features to our customers to deliver the value. It's a competitive environment, it has been for many years and will continue to be. But our technology, leadership and our unique business model, we believe, we have a multiyear advantage over all of our competitors.

--------------------------------------------------------------------------------

Unidentified Shareholder, [23]

--------------------------------------------------------------------------------

Cool. I guess in terms of technology advancement, where is Nearmap right now in terms of its resolution? I can't remember if it's 5 centimeters or greater. And where do you see that going in the next 1 or 2 years in terms of tech advancement for Nearmap?

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [24]

--------------------------------------------------------------------------------

Yes. I think as I talked about, the resolution we have now, there's a number of the industries that we serve that kind of 5-centimeter resolution. So going to significantly higher resolutions doesn't necessarily open up many more use cases for our technology. So we think that's about right. We are making investments in the productivity of our capture program. We are making investments in extracting more value from the content that we are generating. We have an incredible library of content, that history -- never underestimate the value of that history in terms of determining change, identifying the objects that are on the underground, et cetera. So those are where the investments will be, improving the productivity, delivering more value to our customers. That's where we see the bigger opportunity going forward.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

Your next question comes from the line of [Panjo Yanu], as a private investor.

--------------------------------------------------------------------------------

Unidentified Shareholder, [26]

--------------------------------------------------------------------------------

I've been -- as an investor since 2014, I've been absolutely very pleased with the company's performance and its strategic direction and obvious share growth as well. So all good. I've just got a couple of questions. Shall I read them out one at a time or just give you the lot?

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [27]

--------------------------------------------------------------------------------

You can give them all if you like and I can respond to them. Thanks.

--------------------------------------------------------------------------------

Unidentified Shareholder, [28]

--------------------------------------------------------------------------------

Okay. So in no particular order. You mentioned in the presentation about other pricing models. I was just wondering if you could just elaborate a little bit on that? And broadly, if you could talk about main risk to the business. You did discuss potential other players just a few moments ago, but I was just wondering if there's any others that are on the horizon. And as an Australian, I'm just curious, what sort of assistance the federal government has given to Nearmap that you're driving the business international?

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [29]

--------------------------------------------------------------------------------

All right. Look, thanks for those questions. Let me answer them in order. So the other pricing models, that was specifically in reference to our 3D products. So we're comfortable with the pricing model that we have for our standard 2D products, Oblique and Panorama. We may look to kind of provide some options for our customers over time in regard to pricing. But yes, it's -- the 3D is a new market opportunity for us. We are selling today on the basis of a square kilometer pricing, which the early users are comfortable with. But we'll look at other ways of pricing that data and -- in terms of matching it up to the use cases. Early days yet, so nothing specific there. But it is specific to our 3D content. On your second question in terms of risks. I think we are in a very large global market, and we have a unique business model and a significant technology product advantage. So it's an opportunity, really, is kind of the thing -- is really, if you want to think of it as risk, is how rapidly can we grow. We've got a great opportunity here to be a multinational player. We've shown -- we're showing success in the U.S. We've expanded to New Zealand. We've got great success here in Australia. So I think we should be proud of the opportunity that's ahead of us, but we've got a lot of work to go be a key player in that global location intelligence market. So that's what we focus on as an executive team. In terms of your third question, the federal government. Look, I probably have to say not a lot. We, as a business, have relied on our own resources, our own capabilities to expand overseas. And I think we're proud to be private enterprise and succeed on our own basis.

--------------------------------------------------------------------------------

Operator [30]

--------------------------------------------------------------------------------

Your next question comes from the line of Mason Thomas from Ausbil.

--------------------------------------------------------------------------------

Mason Willoughby-Thomas, Ausbil Investment Management Limited - Portfolio Manager [31]

--------------------------------------------------------------------------------

Just a quick one, quick and painless one. Just on the U.S. segment, the new business half-on-half growth looked like it slowed down a little bit given sort of recent growth levels whereas the net upsell accelerated quite well. Just trying to get a little more insight into the half-on-half performance of the new business and why that slowed down a bit?

--------------------------------------------------------------------------------

Andrew Watt, Nearmap Ltd - CFO [32]

--------------------------------------------------------------------------------

Yes, look, I think -- Mason, thanks for your question. The -- looking at the figures, they were pleased with the performance across all of our segments in the U.S. New business growth continued -- new business continued to grow in the second half over the first half, so we are pleased to see it continuing growth. As you know, we have a number of strategies in play in the U.S. so we're looking to make sure that at all levels, at all parts of our portfolio, we're seeing that growth. So we still have a significant opportunity at the transactional level, which we're in the process of refining and enhancing, but we're pleased with growth, as we say, across all areas. So we don't see it as a negative there. We still see strong growth across all aspects. So yes, we're pleased.

--------------------------------------------------------------------------------

Mason Willoughby-Thomas, Ausbil Investment Management Limited - Portfolio Manager [33]

--------------------------------------------------------------------------------

All right, okay. Maybe just one more. Just on the U.S. ACV and the sort of the conversion to revenue. It was probably a little lower than I've been -- I'd estimated based on a sort of that assumption that it comes through evenly over the year. So were there some sort of larger deals done in sort of later in the period that might sort of explain that?

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [34]

--------------------------------------------------------------------------------

Look, one of the characteristics of the U.S. market is there's very much a quarterly behavior. It's kind of, I think, driven by the quarterly reporting requirements on Nasdaq and New York Stock Exchange. They do tend to find, both the buyers as well as our salespeople, tend to kind of drive on a quarterly cadence, so you'll see more sales in the third month of each quarter. And of course, that does have an impact in terms of modeling ACV conversion to revenue. So not necessarily just big deals, it's really across the board.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

Your next question comes from the line of [Yidaff Reneyd] as a private investor.

--------------------------------------------------------------------------------

Unidentified Participant, [36]

--------------------------------------------------------------------------------

You must have -- you might have answered the question earlier but I was asking the same question along the lines of what are the challenges or the pitfalls you see in achieving your results for FY '19 and maybe in the medium term?

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [37]

--------------------------------------------------------------------------------

Yes, thank you. Yes, look, as I mentioned, we're really a growth-focused company and driving that growth across now 3 geographies, Australia, New Zealand and the U.S. So keeping our focus on execution is really kind of where we see the challenge and the risk, right? It's a large market, we have the right product, we have the right team. So it's a focus on execution. Look, we did that in FY '18. We very much said this is what we're going to do in FY '18 and we delivered against that. So it's very much the same for FY '19. This market is a large market. We're in the lead in terms of subscription access to this kind of content. We'll be very aggressive in maintaining that lead.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

There are no further questions at this time. I would now like to hand the conference back to your speakers. Please continue.

--------------------------------------------------------------------------------

Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [39]

--------------------------------------------------------------------------------

Well, thank you. As you can tell, this is -- FY '18 was a strong year for Nearmap. And as I said, we delivered on our investment strategies for the year with a great result in terms of our growth. As we look to FY '19, the company is in a stronger position as it's ever been, and I believe that we're looking forward to a strong year ahead of us again. So thank you for your support, and good morning.

--------------------------------------------------------------------------------

Operator [40]

--------------------------------------------------------------------------------

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.