There’s one clear way to keep investors happy if you’re an ASX-listed tech company, even when you’re not heavily impacted by coronavirus, and Nearmap (ASX: NEA) was the latest to demonstrate what’s now become a major trend in Australian workplaces when it cut the pay of all its staff by 20% and its shares jumped by more than 14%.
In a statement to the ASX on Tuesday morning, Nearmap said it “has not seen a material impact on current trading conditions” but was cutting the company’s headcount by 10%, reducing payments to the board and CEO Dr Rob Newmann by 25% and reducing employee remuneration by 20%, as well as deferring FY20 short-term bonuses.
After the initial leap, Nearmap shares eased to end the day up 3.33% at $1.24.
The company’s changes, kicking in on May 1 for six months, are predicted to deliver around a 30% saving in operating and capital costs, with Nearmap’s intention to be cash flow break-even by the end of FY20, 9-15 months ahead of the previous plans. The company’s guidance for H2 FY20 remains materially unchanged.
The cloud-based subscription business, based at Sydney’s Barangaroo, has a strong US operating base, and was deemed an essential service. Its clients are primarily based in insurance, and government, with the company able to analyse things such as solar panels and roofing, swimming pools and other infrastructure patterns.
“Nearmap is taking steps to manage the near-term cost base without materially impacting investment in the company’s growth initiatives during this time,” its ASX statement said.
“The proposed measures will enable Nearmap to preserve cash, maintain a strong balance sheet, and maximise flexibility without the need for additional capital.”
Dr Newman said the company’s focus was on the health and wellbeing of its team, and supporting customers.
“For the Nearmap business, the unprecedented circumstances have meant we have had to make some difficult decisions to provide a clear path forward for our team, customers, suppliers and shareholders,” he said.
“These decisions will see us well-positioned to navigate the road ahead and will allow us to continue to fully invest in our growth initiatives including the commercialisation of AI and roof geometry content and investment in the development of a next generation camera system.”
Chief Financial Officer Andy Watt said the cost management initiatives let Nearmap maintain capital flexibility, and give strength the balance sheet.
“The business has been through a period of significant growth which means that there are areas that we can scale back to former levels for a period of time while we navigate our way through the current environment. We retain the core of our business, continue to invest in areas that offer the potential for strong returns and remain confident in the long-term growth aspirations of the business.”
Nearmap’s share price had already fallen 45% in 2020 after losing a major customer and slowdown in mapping for autonomous vehicles saw the business downgrade its annualised contract values (ACV) forecast for FY20 down, from $116-120 million, to $102-110 million at the end of January.
In its H1 FY20 results, the company had ACV growth of 23%, with revenue of $46.3 million for the six months and statutory loss after tax for the period of $18.6 million.