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Edited Transcript of NEA.AX earnings conference call or presentation 19-Feb-19 10:30pm GMT

Half Year 2019 Nearmap Ltd Earnings Call

Feb 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Nearmap Ltd earnings conference call or presentation Tuesday, February 19, 2019 at 10:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew Watt

Nearmap Ltd - CFO

* Robert Melville Newman

Nearmap Ltd - CEO, MD & Executive Director

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Conference Call Participants

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* Garry Sherriff

RBC Capital Markets, LLC, Research Division - Analyst

* James Bales

Morgan Stanley, Research Division - Equity Analyst

* Mark Fichera

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

* Owen Humphries

Canaccord Genuity Limited, Research Division - Senior Industrials Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Nearmap FY '19 Half Year Results Investor Conference Call. (Operator Instructions) I must advise you that this conference is being recorded today, Wednesday, the 20th of February 2019.

I would now like to hand the conference over to your first speaker today, Mr. Rob Newman, CEO of Nearmap Limited. Thank you, sir. Please go ahead.

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

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Good morning, and welcome to the Nearmap First Half FY '19 Results Conference Call. I have with me Andy Watt, our Chief Financial Officer. Before discussing the results, let me review our vision for the great company we are building. At Nearmap, we believe that we can change the way people view the world so they can profoundly change the way they work. That benefits our users, our employees, other stakeholders and the broader community.

Our leadership in the global location intelligence market is founded on our revolutionary technology, which we continue to enhance to bring new content and features to market. Our Reality as a Service business model has democratized access to aerial imagery, bringing the power of its insight to new customers and use cases.

Our content embeds in customer workflows addressing issues and improving their economic efficiency. We generate effective unit economics across our sales, our capture program, our customer retention and our customer lifetime value.

This all positions Nearmap as a market leader, delivering a broad range of imagery, data formats and insights to a growing list of businesses and geographies. We are uniquely positioned to be the market leader in providing Reality as a Service globally.

The strong first half FY '19 results we released to the ASX this morning reflect delivery on investments in our product, technology, content and the people capability, which have been underway for some time at Nearmap. The focus on our customers introducing them to Nearmap, providing the content and features which bring insight, and on retaining them, has seen continued growth in our portfolio.

We saw record growth in the United States business and our group lifetime portfolio value is now in excess of $1 billion, supporting the recent valuation milestone achieved by our company. Our Reality as a Service business model, when combined with continually improving efficiency of our technology and the capture program, generates scalable gross margins. Our continuing product and technology evolution saw us launch a range of new content types and product features in the half.

We have also continued our investment in machine learning. Our ever-expanding library of historical imagery provides the ideal data set for machine-derived insights, such as object identification and change detection.

As I've said before, the companies that will win in the global location intelligence market are those who create and own deep location data and invest in the insights that can be derived from that data. The market opportunity is so significant that during the half, we undertook a $70 million institutional placement. The proceeds enable us to accelerate our pursuit of our key strategic objectives as well as providing additional balance sheet flexibility. Our implementation of those projects is underway, and I'll provide an update on those shortly.

First, I'll hand over to Andy for the financial highlights of H1 FY '19 period. Thanks, Andy.

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Andrew Watt, Nearmap Ltd - CFO [3]

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Thanks, Rob, and good morning, everyone. The focus on our customers is evident in the metric which best demonstrate the value placed on our content, the annualized contract value of our current subscriptions.

As we preannounced in January, H1 FY '19 saw the group portfolio grow to $78.3 million, an $11.3 million increase in the half and 42% organic growth year-on-year, adjusting for the movement to the Australian-U. S. dollar exchange rate. This growth was generated by strong increases in both subscribers and their average subscription value.

$7.8 million was added from new subscribers to Nearmap, a 37% increase on prior comparative period, whilst net upsell to existing customers increased 42% to $5.1 million. Most importantly, given the impact it has on customer lifetime value, annualized group churn fell from 7.5% to 6% over the 6-month period. Not only did churn fall in real terms but in absolute dollar terms, H1 FY '19 ACV churn of $1.6 million is lower than in each of the previous 2 halves.

As important as the quantum of top line growth is the quality and the means by which we achieve this growth. A measure of the productivity of our sales and marketing efforts is the Group Sales Team Contribution Ratio, which increased to 117% in the half. This means that for every dollar invested in direct sales and marketing, we generated an incremental $1.17 in annual subscription value from our customers, and with an average customer life exceeding 16 years, this equates to a near 20:1 return on sales and marketing investment.

Looking at growth in each territory. The U.S. portfolio has increased sixfold in the last 2 years, growing by a record USD 4.7 million in the half to $17.6 million. This was driven by a $3.6 million increase in new business ACV, with growing traction from both the SME and the International and Partner divisions. Following a similar trend in the ANZ market, ACV churn continued to fall, reaching 8.4% at the end of the half.

A focus on winning new SME customers in the U.S., an important element of our land and expand sales strategy, saw the number of subscriptions in U.S. increased by almost 25% in the half to 1,178. Our ANZ business recorded strong ACV growth of $4.5 million, a 35% increase on H1 FY '18. This growth was driven by $2.6 million from new Nearmap customers, and expansion to the existing portfolio of $2.9 million. Annualized percentage churn fell again to 5.3%, down from 7.3% at the end of the FY '18 financial year.

The customer base continues to be diversified across a range of industries and use cases. Highlighting the growing value of our content, 36% of our portfolio have subscribed to us on multiyear deals, with 1 in 5 customers now also accessing enhanced Oblique, Panorama or 3D content.

The evolution of our capture program has been driven by the ongoing investment in our capture technology. The U.S. footprint has been expanded to cover more than 400 urban areas all at a reduced cost to H2 of FY '18. We've also continued to expand our capture footprint to cover new areas of urban development and customer interest.

Product and technology investment in the half continued to be focused on the development of new content and customer features. These included the launch of a range of new products such as off-line 3D subscription availability and roof measurement tools. We also upgraded our in-house research capability to derive greater insight from our extensive data set.

The efficient deployment of capital funds remains a strong focus and, as shown by the cash waterfall in the presentation, Australian cash flows of $14.4 million continued to self-fund the U.S. as well as corporate operations. Importantly, the U.S. business is now at a scale whereby the ACV portfolio exceeds the annual cost of capture, meaning that incremental expenditure in that market drives further growth in the ACV portfolio with a consequent growth in the portfolio lifetime value.

The cash balance as at 31 December was $81.3 million, which includes the net proceeds of the $70 million capital raise in September. Excluding the impact of the capital raise for a moment, the core business had a net cash outflow of $3 million over the half, consistent with the guidance given at the start of the year regarding the cash flow neutral position of the core business over the course of the full year. Deployment of the capital raise proceeds against the 3 strategic initiatives identified at the time of the raise is now underway, and Rob will discuss this in more detail shortly.

Reflecting the strong ACV growth, group sales revenues grew to $35.5 million, a 45% increase on prior year. The growing efficiency of our capture program meant that we were able to increase frequency and coverage whilst simultaneously reducing capture costs. ANZ gross margins remain at 95% whilst in the U.S., gross margins grew to 50%, demonstrating the leverage and scale of our business model. Group gross margins increased by 2% in the prior comparative period to 82%.

Reflecting disciplined cost management and further demonstrating the scale of our business model, the rate of growth in the operating cost base was half that of revenue growth. Group operating expenses increased by 23%, and we closed the half with an EBITDA of $8.1 million. It's important to note that these results reflect the outcomes of the investment program, which has been underway at Nearmap since our last capital raise in 2016, with a focus on efficient capital deployment and driving investment returns.

2018 has been a landmark year for Nearmap in so many ways, with new products and ongoing improvements to unit economics, delivering strong ACV portfolio growth in our core markets. The performance in H1 FY '19 follows a very strong second half to FY '18 and the positive outlook for the business is enhanced by the recent capital raise, enabling Nearmap to accelerate its strategic objectives in pursuit of the considerable global market opportunity.

With that in mind, I'll hand back to Rob for the outlook for the upcoming period and an update on those strategic priorities.

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

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Thanks, Andy. Before I get onto those topics, let me come back to my earlier point. Nearmap is uniquely positioned to be the market leader in delivering Reality as a Service globally. With the proceeds from our capital raise, we are now able to accelerate some of those key strategic priorities to achieve that global leadership. So let me talk about those initiatives.

Firstly, we've already committed at least $5 million to be invested over the next 12 months into an expanded U.S. sales and marketing strategy. That will provide deep penetration into a specific U.S. vertical and geography. Planning and operational setup of this initiative is already underway, with the campaign to be announced and launched in Q4 of this financial year.

Secondly, we'll invest at least $5 million over the coming 18 months in our geographic expansion into the Canadian market. We estimate the addressable market opportunity to be somewhere between CAD 300 million and CAD 400 million. We will commence capturing Canadian content in April with the initial coverage of 60% of the population. We will leverage our existing U.S. infrastructure for sales, marketing and operations as well as explore partnerships to speed our entry into that market.

Thirdly, we'll invest at least $5 million over 18 months on expanded product and content in the form of location intelligence, enabling 3D content in MapBrowser and continuing the evolution of our world-leading camera system. The expansion of our internal technology capability and headcount is already underway, and this is something which I am extremely passionate about.

My entire career has been based on the belief that Australia has the capability to generate homegrown sustainable global technology businesses, and not just license it or sell it off. In order for that to happen, Australian technology businesses must meet the challenge and provide opportunities for STEM students and workers to have rich and stimulating careers here without feeling compelled to move to more traditional technology hubs to seek employment.

I am proud that Nearmap is creating these opportunities right here in the Sydney CBD. For people all the way from Ph. Ds. in robotics and artificial intelligence through to providing undergraduate engineering students with internships where they can apply their learnings in a cutting-edge commercial environment. These opportunities are core to Nearmap's DNA.

With our company's vision and the 3 strategic growth initiatives I mentioned earlier already underway, we continue to assess other opportunities for both inorganic and organic growth, including acquisition opportunities if these were to be accretive. As well as implementing these initiatives, our focus remains on continuing to deliver the scale emerging in our core business. As such, we expect that our business-as-usual sales and marketing costs will be broadly consistent with those in the first half, and these we have demonstrated are capable of supporting higher revenues. The impact of our 3 strategic initiatives are aimed to deliver further growth over a 12- to 18-month time frame.

H2 FY '19 will also see continued enhancement in our product, with a range of releases to be rolled out to increase the workflow utility and customer stickiness of our MapBrowser platform. Building on our 3D content, which is already available to customers off-line through their existing subscriptions, we also anticipate releasing our groundbreaking wide-scale 3D visualization and export tools in our simple to use MapBrowser in this half.

Finally, in addition to the 3 strategic priorities outlined, we will continue to invest to support sustained growth. Given our disciplined approach to capital management, we reaffirm our cash flow breakeven guidance for FY '19, excluding the deployment of the capital raise proceeds. This marks a turning point for Nearmap after several years of investment in our U.S. operations, our product, our technology, our capture program and most importantly, in our people.

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

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Questions and Answers

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Operator [1]

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

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

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Can you hear me?

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Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [3]

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Yes. All good. Thanks, Owen.

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

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Well done on a cracking results, a few positives to draw out there. I just want to targeting on -- just on the 3D product, it looks like that's going to be a positive launch in the second half. Can you just maybe provide some color around what you're seeing in the first half and some of the customers that are using your products? And just around the pricing model and just around how the uptake is going to give you confidence to put in the MapBrowser and start marketing the products?

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Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [5]

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Yes. Thanks, Owen. So 3D is, as we said, that was an off-line product, so our customers select an area of interest within our MapBrowser platform. We then deliver that to them, so they can import that into their existing CAD or design tools. The areas that we've seen early traction are in public safety, construction engineering and in local government, so all of those are either for planning applications or design applications. So yes, there's a strong demand for that 3D content across a range of industries. Now obviously, as you know, we are an online SaaS business, so the next phase of that now is to provide that product within MapBrowser, so that be visualization product with some tools also taking to some basic design, and that will happen in this half. So -- and I think the other part of the question was around pricing. We still price on an area of interest basis. It's what our customers are used to. Now we will look at our pricing and packaging as part of releasing it in MapBrowser because, obviously, that's a usage-based subscription model in January -- in general, sorry. So -- but at this stage, we're doing on an area of interest basis.

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

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And the customers using it, are they embedding the 3D product within their workflows? Or is it more a visualization tool...

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

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No, they're embedding it within their workflow. Yes, good question, Owen. No, they're embedding it within their workflows. So if you look at the construction engineering application, what they'll do is when they're doing a design for a new building or looking at what it might be like to remove the building from a particular location, they create the kind of 3D broad wide-scale environment using Nearmap, and then put the new building into it, that becomes part of their design workflow and also marketing of a property. Similarly, for public safety, we have actually replaced on-site physical visits by police officers to secure an event or a marathon or something like that. We've replaced that with the line of sight capabilities that's available in third-party tools using our 3D content.

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Owen Humphries, Canaccord Genuity Limited, Research Division - Senior Industrials Analyst [8]

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Great. Okay. And just around, and I suppose, machine learning and obviously, you guys are big data players. So just targeting in how many customers actually use your content for -- to tabulate algorithms to machine learning? And then secondly, I noticed you talked about inorganic opportunities and significant acquisitions. Do they sort of look -- could you just provide a bit more color around what that could look like or what you could be targeting to bolt on to your business?

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Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [9]

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Yes, so in regards to the first part of the question, look, there's a smaller number of our large or most sophisticated customers since the start-up to take our content and apply machine learning to it. Typically, that's being displayed at 2D ortho content. We consider the other content as being fairly valuable and something that, at this stage, we're not broadly licensing to machine learning so that's within the constraints of our contract. And look, typically, what our customers and partners are doing with that is they're combining our data set with other data sets to provide insights into specific industries such as insurance or fin services, et cetera. So those -- that's in a well-established part of our business now for a number of years. And in terms of the second part of your question, which is regarding the acquisition. Look, I think what we're doing is, and you can kind of see, we've grown up from being a 2D ortho imagery company into adding literally other dimensions to our product. But what's important is embedding more into our customers' workflows. So providing the tools and insights, so that they're -- actually, have their data embedded in our environment or our data embedded in their day-to-day workflows. And so tools that can give -- help in -- that are generic across a broad number of industries and some of those we're relating ourselves, but the tools that support our customers and/or insights out of our data in the year, as we look for adding to our own internal development.

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Owen Humphries, Canaccord Genuity Limited, Research Division - Senior Industrials Analyst [10]

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Right, okay. Okay. And maybe it looks like the U.S. is working. Contribution ratio is running above the 100%,very effective unit economics. When do you get the sense now you're expanding into Canada, but this is -- as you flagged multiple times in your presentation, this is a global opportunity. When do you think -- and you've got a balance sheet capacity. When do you think you'll look to expand more broadly from North America? What is the milestone you're looking for there?

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Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [11]

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Yes. Look, I think one of the big challenges we have and I alluded to it in the presentation here is scaling our organization requires hiring really good technical people and technical salespeople, marketing, et cetera. And so I think, at this stage, you know that we've performed. We do what we say we're going to do. We execute well. So taking on Canada, bringing on 3D, all the things that we've got ahead of us for this year is probably enough for this -- remember, the North American summer is only a couple of months away. So taking on Canada in this North American summer makes sense. Going to other geographies, we'll be careful about where we go. What are the right economics? What are the right capture? What's the competition and our capacity to support those markets? But yes, they're on the radar screen, but probably not this North American summer.

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Operator [12]

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Your next question comes from the line of Garry Sherriff from RBC.

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Garry Sherriff, RBC Capital Markets, LLC, Research Division - Analyst [13]

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Rob and Andy, just a couple of quick questions. One, margin expansion. Seriously impressive, particularly at that EBITDA line. I'd be interested to get a sense from you guys as to where you think gross profit margins and also EBITDA margins can sustainably get to in the medium term.

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Andrew Watt, Nearmap Ltd - CFO [14]

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Yes. Thanks, Garry. I think if we take a look, in turn, so the gross margin, as you see in the Australian business, we've got a very established capture program and the efficiencies of that program have been known for a long time, so running at sort of 95% there. We are seeing the real improvement in the U.S. As you expected, our revenue grows as our ACV grows. So the growth from 2% to 50% clearly is significant. Over the medium to long term, we expect that the U.S. margins can replicate what we see in Australia. So obviously, that's a path that we're on. And so I think we can have around the 90% mark over the next 2 to 3 years or something that we can expect to be achievable for gross margins. And then looking down the P&L down to EBITDA, clearly, the investments that we've made in prior years and the efficient deployment of capital, you're seeing that now through the EBITDA margin, the fact that our revenue, our top line was growing at twice the rate of our expenses shows you the leverage that we have in our business model, so EBITDA beginning to grow. Clearly, the intent of raising the capital bond 6 months ago so we could accelerate opportunities and move faster into new areas. And so we will always keep an eye on that EBITDA margin and there are the targets that we set ourselves. But I think for us, it's still maintaining that focus on growth and exploiting the opportunities ahead of us. So it's a bit more difficult to where we see EBITDA heading, given that we've got a lot of opportunity ahead of us. But we're, obviously, very pleased with the results for the first half and it validates the investments that we made previously.

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Garry Sherriff, RBC Capital Markets, LLC, Research Division - Analyst [15]

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Second question just in relation to the U.S. Specifically, what end markets are you gaining the most traction in? And could you maybe give us a sense of what some of the next core verticals you are launching into the U.S.?

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Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [16]

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Yes, so look at -- initial entrance into the U.S. is focused on the -- obviously on the construction engineering market, would have been very successful in penetrating that local government and solar. Then the industry that came to us that we didn't really expect was the insurance industry, although I would say that a lot of that -- a lot of the sales insurance industry are our partners, where as I mentioned before, they're combining our data set with other data that they have to provide a solution to the actual insurance providers or insurance carriers themselves. So look, I'm comfortable with those. If you actually have to look at the analyst pack, there's one area where we significantly underrepresented relative to the Australian market, and that's in utilities. And so we are investing in growing our strategic account team in the U.S., again, as part of the capital raise to really start to break out government from utilities and other strategic accounts. So I think there's plenty of opportunity, but again, we still only just have 1% penetrated into the U.S. market, so we've got plenty of ground to cover.

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Garry Sherriff, RBC Capital Markets, LLC, Research Division - Analyst [17]

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And just a final question on Canada. You said you're considering partnerships to speed entry. I'm just wondering, I can't recall you doing that in the past. Can you maybe just share exactly how that might work?

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Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [18]

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Yes, look, I think it's similar to what actually evolved in our U.S. sales. As I mentioned, we've got a number of partners to take our data, combine it with their data sets, or with workflow solutions and provide that to specific vertical industries. And having got that experience in the U.S., we can see the same opportunity in Canada. So there are partner -- there are potential partners there I should say who already have Canadian customers. And in fact, we've already arranged one particular partnership who is present in Canada and will make use of our Canadian content day 1. So it's the combination of our direct sales efforts, combined with those existing partners and new partners we're adding that will help speed the market entry into Canada.

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Operator [19]

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

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James Bales, Morgan Stanley, Research Division - Equity Analyst [20]

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Firstly, on the money to be deployed from the proceeds to the capital raise. I'd just like to understand, have you got a figure in mind for what will be put to work in FY '19? And beyond that, it seems like you've sort of flagged a $10 million per annum run-rate with the numbers that you've given over 18 months. I'd like to just understand what sort of revenue you intend to have locked in and the quantum of those -- that ring-fenced cash burn, if you like, into '20 and '21?

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Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [21]

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Yes. So let me pick up on a couple of those points, right? So first of all, just at a high level, I think the capital raise is very important for us because we're committing at least $15 million through those 3 initiatives that we're just starting there. And if we hadn't have done the capital raise, we would not have had the capital to make those commitments, so it really does allow us to accelerate the business. And we also talked about in the presentation here is that we do expect returns from each of those 3 investments over that 18-month period. So look, that will help the growth, but I think we've got good predictable growth out of our business as usual. You understand that you know all the metrics behind that, the investment we make in our sales and marketing, our Sales Team Contribution Ratio, so that drives the core growth in the business but then making these additional investments then drives accelerated growth. So that won't return day 1, that's over '19 --12- to 18-month period, but we see that. In terms of kind of additional uses of capital as we see success in those geographic expansions and/or in the data penetration to the U.S. market and/or with the additional product that we're putting out there, we'll continue to drive those harder.

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James Bales, Morgan Stanley, Research Division - Equity Analyst [22]

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Right. So do you guys have a feel for the quantum of capital that will be booked to work this year and sort of how much cash burn will be there in the near term?

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Andrew Watt, Nearmap Ltd - CFO [23]

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Yes. So as you know, the 3 initiatives that we've laid out in front of you, if you take each of them, in turn, actually. If we look at Canada, we've said that we'll perform a first capture this financial year. And then the sales and marketing there will follow the year afterwards, the returns, as Rob said, coming to FY '20 and beyond. So I guess, the capture cost, we've got a fairly good understanding what that looks like, but the majority of the spend for Canada will sort of be backloaded into FY '20. You then have the sales and marketing initiatives. Again, we expect that to be up and running. In the U.S., our targeted sales and marketing -- sales and marketing are put in the U.S. in Q4. So again, we'll start to see the hiring and some of the additional marketing spend which are coming through this financial year. But again, you'll see the majority of that spend also coming through in FY '20. We've already started investing in some of our internal machine learning and 3D and other product initiatives. And we started that expenditure towards the end of -- the last calendar year, so it's a little bit further ahead in terms of expenditure. But the answer to your question is most of the expense that we flagged will come through in FY '20. You will see some this year. We're not going to commit to the exact number because it depends on where the opportunity sits and how fast we can go in certain areas but it gives you a sense of sort of quantum over a medium-term period.

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James Bales, Morgan Stanley, Research Division - Equity Analyst [24]

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Great. And then separately, you used to flag a couple of metrics on the proportion of multiyear deals and the proportion where of sales where you're getting additional products into the mix. Can you sort of talk to what proportion is incremental sales you're getting that on, like you said, the standard go to market and how's that changed?

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Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [25]

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Look, we haven't separated the metric at that level of detail. But look, actually, our salespeople, when they're bringing new business to Nearmap, they do sell the bundled solution. And unless it's kind of a very small customer who really just needs the ortho imagery, more often than not, we engage them in at least the Oblique content. The 3D content is newer and that tends to typically go to customers who already know us. But certainly, the Oblique content is something where the new sales, that's a significant part of our new sales effort.

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Operator [26]

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Your next question comes from the line of [Chris Bainbridge from Paytons]. It looks that the line [Chris] has disconnected. (Operator Instructions) The next question comes from the line of Mark Fichera from Foster Stockbroking.

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Mark Fichera, Foster Stockbroking Pty Ltd., Research Division - Executive Director of Equities Research & Head of Research [27]

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Just a quick question. On the $5 million to be invested in Canada, is that predominantly capture cost or is there some sales and marketing in there? I was just wondering on the breakup on that.

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Andrew Watt, Nearmap Ltd - CFO [28]

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Yes. So thanks, Mark. The blend, it's capture cost and sales and marketing. As we've said all along, we'll use the existing U.S. infrastructure largely to move into the U.S. in terms of our sales and marketing approach. And the first area of expenditure is the capture cost. As you can imagine, we're going to capture around 60% of the population, most of that population is in a fairly condensed areas, so the capture costs are pretty well contained. It's more work into the Australian model than the U.S. model. And -- but yes, the $5 million is roughly split sort of 50-50 between capture and sales and marketing. Clearly, as we see line of success and we get more customers on board we can then run properly the sales and marketing expenditure. But again, the metrics we're going to track them and you know how are we going to monitor success in that market. So this gets us going.

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Operator [29]

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

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Owen Humphries, Canaccord Genuity Limited, Research Division - Senior Industrials Analyst [30]

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I'd like to just have a quick follow-up question. I noticed that churn is now running at record lows, particularly in Australia. But just on the U.S. Obvious question, you guys are entering the market, you're the disruptor. Have you seen any competitive response from the incumbents yet? Or are they kind of -- have they adjusting their revenue models, business models, the way they capture? Are you seeing anything on the competitive front that we've not -- we haven't talked about?

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Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [31]

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No, we haven't talked about. Thanks, Owen. As it turns out, although we talked about some of our competitors a little bit, the practicality is we actually don't bump into them as often, as you would expect. Our business model is so different that often, we are dealing with customers who haven't purchased our imagery before or just using kind of the free satellite imagery or those kinds of things. So it's only really in counties where we bump into the more traditional players. And in that respect, we haven't seen either a hard competitive response and certainly not a change in business strategy. So at this stage, I mean, look, we're always very aware of what's going on in the market over there and prepared to react, but at this stage, not a strong direct competitive threat.

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Operator [32]

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(Operator Instructions) There are no further questions at this time. I'd like to hand today's conference back to today's presenters. Please continue.

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Robert Melville Newman, Nearmap Ltd - CEO, MD & Executive Director [33]

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Great. Well, thank you very much, everybody, for participating in the call. Look, as you can tell, Nearmap is in a very strong growth position. I think we're pleased with our record U.S. growth this half. Also, lifetime value going over $1 billion. So it really all demonstrates the scale in our business. So thank you for your support and look forward to meeting many of you over the next couple of days.

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Operator [34]

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