Consensus community valuation
Half year results for FY23
Revenue overall is down. Project photomapping revenue ceased and merged into Metromap. Growth in Metromap did not outpace the loss in revenue (2.2m v 800K).
LIDAR revenue got impacted by aviation and weather factors (sounds a bit similar to Elders?)
Operational cashflow increased but also payments for intangibles increased from previous period which I believe is due to all their work upgrading their sensors. Hoping this is a one-off increase
Finally overall expenses increased. Guess this is due to the US work the company commenced in the year (travel/employee expense) and the new sensors being rolled out (D&A).
My assumption is the market wasn't too happy due to the drop in revenue vs the increased expenses. Probably need to wait till next period to see if any of the increased spending is reaping rewards.
[held]
Seek notification just served this up. It seems Aerometrex is hiring more pilots.
I see two big risks to the AMX investment thesis. The first is a clear one; MetroMap is going head to head with a massive incumbent competitor in Nearmap who is much larger and well capitalised. There are some signs AMX is making headway and it may be in their favour that NEA is focusing so hard on US expansion which may allow MetroMap to poach unsatisfied clients.
The second risk is that AMX has committed to ending their project based revenue. This is not an insignificant amount and means AMX is about to go through the same challenges many software business who have pivoted to ARR have found. Short term financial performance gets messed up as reported revenue takes a hit.
Management have stated there is $3.2m to complete largely in 1H22:
That amount is roughly in line with previous half years so numbers in the coming report may not be impacted. For 2H22 and beyond, management are expecting $1-3m of that revenue to migrate to MetroMap:
If that number is at the lower end it leaves them with a big revenue hole to fill. At the higher end project work would largely be replaced with higher margin recurring revenue which would be a great outcome. Watching MetroMap ARR over the next couple of updates will be crucial as AMX may have to win their project based clients to MetroMap vs Nearmap.
AMX breaks their operating business into three segments; MetroMap, LiDAR and 3D. MetroMap is a subscription service for AMX's database of 2D aerial imaging, LiDAR uses laser technology to scan for distance and density and 3D meshes images to create a digital model of a 3D space. AMX has hinted at bringing their LiDAR and 3D offerings into the MetroMap subscription but for now they are still project based. Management provides market share on each segment in their presentations:
With a 6% market share of the Australian subscription aerial imagery market, AMX has a long way to catch the incumbent Nearmap who has over 90% market share. That said, AMX management is confident they have a better offering than NEA and importantly competing strongly on value with a fixed subscription amount compared to NEA who charges based on usage. See my Industry/competitors straw for my take on AMX competing with NEA.
AMX are more established in LiDAR with 18% market share and have invested further in space with a fourth laser sensor and upgrading the remaining three.
Despite being conservative with MetroMap and LiDAR TAM's, management have an "open-ended" TAM for 3D largely because the space is growing so quickly. Like other technologies, as the quality of the product improves it is opening up further use cases that were previously not possible. It represents the blue sky in the AMX investment thesis and helping it is the fact AMX has leading edge tech in the space. Engineering giant WSP was an early client of AMX's 3D data and have continually scaled up as AMX capture more cities and improve their offerings:
Beyond "traditional" use cases in surveying and mapping, AMX is also selling their 3D datasets to metaverse customers who are looking to mirror the real world in a digital setting. They sold their San Francisco model to the Lunaverse project for $250k and have partnered with the Omniscape project to map various US cities to eventually be used in their metaverse. Importantly, AMX is project agnostic, they continue to own the 3D dataset and licence it to whichever metaverse projects would like to use it.
With the pivot from project based revenue to the MetroMap subscription model, AMX has put themselves squarely across the ring from the 800 pound gorilla in the industry Nearmap. The initial growth was strong, but it was always difficult to tell how much was eating into NEA's market share and how much was a transfer of AMX's own project revenue to the subscription model. The latest update in October showed a slowdown in the September quarter which management attributed to some deferred renewals of subscriptions that management expect to be taken up in the December quarter:
I will be keen to see the growth of MetroMap in the upcoming half year results to see if AMX was able to re-accelerate growth from a slow September quarter.
Trying to look ahead, Macquarie recently downgraded NEA primarily due to increased competition from AMX and website traffic does show MetroMap having a very strong January. While we will need to wait for results to get a clearer picture, I do rate Macquarie's channel check research, they were well ahead of other brokers in downgraded Appen after speaking with customers.
AMX was founded in 1980, but it's current iteration began in 2011 when there was a management buyout of the business and ownership was split among key staff and directors. The chart below from the prospectus shows KMP ownership prior to the IPO and the 50%+ ownership that remains today:
Prior to the IPO AMX was a profitable business but a combination of increased investment and Covid meant the business swung to modest operating losses since listing:
