Nearmap Annual Report 2016

Plain-text annual report

2016 Nearmap Limited Annual Report ABN 37 083 702 907 © Nearmap Ltd 2016 Image (above and cover): Sydney Opera House, Sydney, New South Wales, Australia – May 2016 Scan the code to see this location change over time. Chairman’s Letter CEO’s Report Directors’ Report Auditor’s Declaration Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Corporate Information 6 9 26 48 54 55 56 57 58 88 89 91 93 Image (opposite page and cover): Sydney Opera House, Sydney, New South Wales, Australia – May 2016 2016 Annual Report 2016 Annual Report 5 5 ContentsDear Shareholders Dear Shareholders Dear Shareholders It is a pleasure to present the Nearmap 2016 Annual Report, my ﬁ rst as Chairman. It is a pleasure to present the Nearmap 2016 Annual Report, my ﬁ rst as Chairman. It is a pleasure to present the Nearmap 2016 Annual Report, my ﬁ rst as Chairman. The 2016 ﬁ nancial year has positioned Nearmap for further growth, with achievement on our three key priorities – accelerated growth in the Australian business, foundations for success in the United States and enhanced technology leadership. The 2016 ﬁ nancial year has positioned Nearmap for further growth, with achievement on our three key priorities – accelerated growth in the Australian business, foundations for success in the United States and enhanced technology leadership. The 2016 ﬁ nancial year has positioned Nearmap for further growth, with achievement on our three key priorities – accelerated growth in the Australian business, foundations for success in the United States and enhanced technology leadership. The Australian business demonstrated accelerated growth in ﬁ nancial year 2016 with revenue The Australian business demonstrated accelerated growth in ﬁ nancial year 2016 with revenue of $29.7M up 26% and gross proﬁ t of $26.9M up 30% from the prior year. The investment in the of $29.7M up 26% and gross proﬁ t of $26.9M up 30% from the prior year. The investment in the Australian business, through enhanced sales and marketing capability and an experienced local Australian business, through enhanced sales and marketing capability and an experienced local management team, is driving this growth. We are selling our solutions into a growing Australian management team, is driving this growth. We are selling our solutions into a growing Australian market so that in addition to high customer retention rates, we continue to see increased value market so that in addition to high customer retention rates, we continue to see increased value of our product to existing customers plus strong growth in new customers. of our product to existing customers plus strong growth in new customers. The Australian business demonstrated accelerated growth in ﬁ nancial year 2016 with revenue of $29.7M up 26% and gross proﬁ t of $26.9M up 30% from the prior year. The investment in the Australian business, through enhanced sales and marketing capability and an experienced local management team, is driving this growth. We are selling our solutions into a growing Australian market so that in addition to high customer retention rates, we continue to see increased value of our product to existing customers plus strong growth in new customers. Our international expansion into the United States has made signiﬁ cant progress. Following from our ﬁ rst commercial sales in the latter half of ﬁ nancial year 2015, the US business generated revenue of $1M in ﬁ nancial year 2016. A dedicated leadership team encompassing our sales, marketing and ﬁ eld operations functions is in place and we have built the foundations for strong growth in ﬁ nancial year 2017. Our international expansion into the United States has made signiﬁ cant progress. Following from our ﬁ rst commercial sales in the latter half of ﬁ nancial year 2015, the US business generated revenue of $1M in ﬁ nancial year 2016. A dedicated leadership team encompassing our sales, marketing and ﬁ eld operations functions is in place and we have built the foundations for strong growth in ﬁ nancial year 2017. Our international expansion into the United States has made signiﬁ cant progress. Following from our ﬁ rst commercial sales in the latter half of ﬁ nancial year 2015, the US business generated revenue of $1M in ﬁ nancial year 2016. A dedicated leadership team encompassing our sales, marketing and ﬁ eld operations functions is in place and we have built the foundations for strong growth in ﬁ nancial year 2017. We also enhanced our technology leadership through continued investment in new technology and product development. While others in the industry just deliver camera systems, or do surveys, or produce image processing software or deliver maps as a one-off, Nearmap provides solutions which encompass that whole value chain. In addition, during ﬁ nancial year 2016 we have signiﬁ cantly enhanced the value of our product with a high efﬁ ciency capture system and enhanced processing software that delivers richer 3D data to our customers. We also enhanced our technology leadership through continued investment in new technology We also enhanced our technology leadership through continued investment in new technology and product development. While others in the industry just deliver camera systems, or do surveys, and product development. While others in the industry just deliver camera systems, or do surveys, or produce image processing software or deliver maps as a one-off, Nearmap provides solutions or produce image processing software or deliver maps as a one-off, Nearmap provides solutions which encompass that whole value chain. In addition, during ﬁ nancial year 2016 we have signiﬁ cantly which encompass that whole value chain. In addition, during ﬁ nancial year 2016 we have signiﬁ cantly enhanced the value of our product with a high efﬁ ciency capture system and enhanced processing enhanced the value of our product with a high efﬁ ciency capture system and enhanced processing software that delivers richer 3D data to our customers. software that delivers richer 3D data to our customers. Mr Peter James Non-Executive Chairman Mr Peter James Mr Peter James Non-Executive Chairman Non-Executive Chairman Our balance sheet remains strong with no debt and a healthy cash balance of $12.2M as at year end. Our growth in Australia and effective management of our balance sheet has allowed us to fund the US expansion internally. Our balance sheet remains strong with no debt and a healthy cash balance of $12.2M as at year end. Our growth in Australia and effective management of our balance sheet has allowed us to fund the US expansion internally. Our balance sheet remains strong with no debt and a healthy cash balance of $12.2M as at year end. Our growth in Australia and effective management of our balance sheet has allowed us to fund the US expansion internally. Details on our performance for the year, including the CEO’s Report and full set of ﬁ nancial results, can be found in the sections following and I encourage you to read them. Details on our performance for the year, including the CEO’s Report and full set of ﬁ nancial results, can be found in the sections following and I encourage you to read them. Details on our performance for the year, including the CEO’s Report and full set of ﬁ nancial results, can be found in the sections following and I encourage you to read them. In conclusion, I would like to thank our CEO, Rob Newman, together with his executive team of Gerhard Beukes, Paul Lapstun, Leah Rankin, John Biviano and Patrick Quigley for their hard work and achievements to date. We enter the new ﬁ nancial year conﬁ dent that Nearmap is well positioned for continued growth. In conclusion, I would like to thank our CEO, Rob Newman, together with his executive team of In conclusion, I would like to thank our CEO, Rob Newman, together with his executive team of Gerhard Beukes, Paul Lapstun, Leah Rankin, John Biviano and Patrick Quigley for their hard work Gerhard Beukes, Paul Lapstun, Leah Rankin, John Biviano and Patrick Quigley for their hard work and achievements to date. We enter the new ﬁ nancial year conﬁ dent that Nearmap is well positioned and achievements to date. We enter the new ﬁ nancial year conﬁ dent that Nearmap is well positioned for continued growth. for continued growth. I would also like to thank my fellow Directors and our staff for their contributions and commitment I would also like to thank my fellow Directors and our staff for their contributions and commitment I would also like to thank my fellow Directors and our staff for their contributions and commitment to Nearmap. In particular, I would like to thank Ross Norgard, from whom I took over as Chair to Nearmap. In particular, I would like to thank Ross Norgard, from whom I took over as Chair to Nearmap. In particular, I would like to thank Ross Norgard, from whom I took over as Chair in March 2016 and who remains on the Board with his many years of experience in building the in March 2016 and who remains on the Board with his many years of experience in building the in March 2016 and who remains on the Board with his many years of experience in building the Nearmap business. I would like to welcome Ian Morris to the Board who joined in January 2016. Nearmap business. I would like to welcome Ian Morris to the Board who joined in January 2016. Nearmap business. I would like to welcome Ian Morris to the Board who joined in January 2016. Ian brings considerable U.S. and subscription business experience to the team. Ian brings considerable U.S. and subscription business experience to the team. Ian brings considerable U.S. and subscription business experience to the team. I look forward to an exciting year ahead. I look forward to an exciting year ahead. I look forward to an exciting year ahead. Peter James Chairman Peter James Peter James Chairman Chairman Sydney Sydney Sydney 10 October 2016 10 October 2016 10 October 2016 6 6 6 Chairman’s Letter Chairman's Letter Chairman's Letter Chairman's Letter Image: Adventuredome Theme Park, Las Vegas, Nevada, United States – February 2016 Image: Adventuredome Theme Park, Las Vegas, Image: Adventuredome Theme Park, Las Vegas, Nevada, United States – February 2016 Nevada, United States – February 2016 6 Chairman’s LetterChairman’s LetterChairman’s LetterAdventuredome Theme Park, Las Vegas, Nevada, United States – February 2016Perth Stadium, Western Australia, Australia – July 2016 Scan the code to see this location change over time. I am pleased to report that Nearmap delivered on its three key priorities for the 2016 ﬁ nancial year. We have delivered accelerated growth in Australia, built the foundations for success in the US and enhanced our technology leadership. This has positioned Nearmap for continued growth as a disruptor in the global location content market. I am pleased to report that Nearmap I am pleased to report that Nearmap I am pleased to report that Nearmap delivered on its three key priorities delivered on its three key priorities delivered on its three key priorities for the 2016 ﬁ nancial year. We have for the 2016 ﬁ nancial year. We have for the 2016 ﬁ nancial year. We have delivered accelerated growth in Australia, delivered accelerated growth in Australia, delivered accelerated growth in Australia, built the foundations for success in built the foundations for success in built the foundations for success in the US and enhanced our technology the US and enhanced our technology the US and enhanced our technology leadership. This has positioned Nearmap leadership. This has positioned Nearmap leadership. This has positioned Nearmap for continued growth as a disruptor for continued growth as a disruptor for continued growth as a disruptor in the global location content market. in the global location content market. in the global location content market. Dr Rob Newman Managing Director & CEO Dr Rob Newman Managing Director & CEO Dr Rob Newman Dr Rob Newman Managing Director & CEO Managing Director & CEO The Australian operations demonstrate the value and success of our business model. We have seen accelerated growth in our Australian business. On all important metrics, such as revenue, annualised contract value (ACV), customer retention and customer numbers, that growth has been experienced across the entire Australian business. We have seen the increased value of our product result in growth not just in new customers, but also from increasing business with our existing customers, and not isolated to a particular type of customer or sector. The Australian operations The Australian operations The Australian operations demonstrate the value and demonstrate the value and demonstrate the value and success of our business model. success of our business model. success of our business model. We have seen accelerated growth We have seen accelerated growth We have seen accelerated growth in our Australian business. On all in our Australian business. On all in our Australian business. On all important metrics, such as revenue, important metrics, such as revenue, important metrics, such as revenue, annualised contract value (ACV), annualised contract value (ACV), annualised contract value (ACV), customer retention and customer customer retention and customer customer retention and customer numbers, that growth has been numbers, that growth has been numbers, that growth has been experienced across the entire experienced across the entire experienced across the entire Australian business. We have Australian business. We have Australian business. We have seen the increased value of our seen the increased value of our seen the increased value of our product result in growth not just product result in growth not just product result in growth not just in new customers, but also from in new customers, but also from in new customers, but also from increasing business with our increasing business with our increasing business with our existing customers, and not existing customers, and not existing customers, and not isolated to a particular type isolated to a particular type isolated to a particular type of customer or sector. of customer or sector. of customer or sector. The ﬁ rst stage of entry into the US market demonstrated the scope and potential. We have had early wins in this market, including from encumbent providers. We have also focussed on building the foundations to better address the market needs. This included putting local leadership in place, rebuilding our go-to-market strategy and broadening the capability of the product we deliver in that market. I am pleased to report that we delivered on all of this before the end of ﬁ nancial year 2016. This has set up Nearmap for stronger growth in the US market. The ﬁ rst stage of entry into the US The ﬁ rst stage of entry into the US The ﬁ rst stage of entry into the US market demonstrated the scope market demonstrated the scope market demonstrated the scope and potential. We have had early and potential. We have had early and potential. We have had early wins in this market, including from wins in this market, including from wins in this market, including from encumbent providers. We have encumbent providers. We have encumbent providers. We have also focussed on building the also focussed on building the also focussed on building the foundations to better address the foundations to better address the foundations to better address the market needs. This included putting market needs. This included putting market needs. This included putting local leadership in place, rebuilding local leadership in place, rebuilding local leadership in place, rebuilding our go-to-market strategy and our go-to-market strategy and our go-to-market strategy and broadening the capability of the broadening the capability of the broadening the capability of the product we deliver in that market. product we deliver in that market. product we deliver in that market. I am pleased to report that we I am pleased to report that we I am pleased to report that we delivered on all of this before the delivered on all of this before the delivered on all of this before the end of ﬁ nancial year 2016. This has end of ﬁ nancial year 2016. This has end of ﬁ nancial year 2016. This has set up Nearmap for stronger growth set up Nearmap for stronger growth set up Nearmap for stronger growth in the US market. in the US market. in the US market. Nearmap has also delivered on our third key priority; we have enhanced our technology and product leadership. Nearmap is unique in bringing together the complete value chain of capturing and delivering location content. This has enabled our disruptive business model, instant access via subscription to up to date aerial imagery. In ﬁ nancial year 2016 we have signiﬁ cantly enhanced the value of our product with a high efﬁ ciency capture system and improved processing software that delivers richer data, such as 3D to our customers. Nearmap has also delivered on Nearmap has also delivered on Nearmap has also delivered on our third key priority; we have our third key priority; we have our third key priority; we have enhanced our technology and enhanced our technology and enhanced our technology and product leadership. Nearmap is product leadership. Nearmap is product leadership. Nearmap is unique in bringing together the unique in bringing together the unique in bringing together the complete value chain of capturing complete value chain of capturing complete value chain of capturing and delivering location content. and delivering location content. and delivering location content. This has enabled our disruptive This has enabled our disruptive This has enabled our disruptive business model, instant access via business model, instant access via business model, instant access via subscription to up to date aerial subscription to up to date aerial subscription to up to date aerial imagery. In ﬁ nancial year 2016 we imagery. In ﬁ nancial year 2016 we imagery. In ﬁ nancial year 2016 we have signiﬁ cantly enhanced the have signiﬁ cantly enhanced the have signiﬁ cantly enhanced the value of our product with a high value of our product with a high value of our product with a high efﬁ ciency capture system and efﬁ ciency capture system and efﬁ ciency capture system and improved processing software improved processing software improved processing software that delivers richer data, such that delivers richer data, such that delivers richer data, such as 3D to our customers. as 3D to our customers. as 3D to our customers. Image: Perth Stadium, Western Australia, Australia – July 2016 Image: Perth Stadium, Western Australia, Australia – July 2016 Image: Perth Stadium, Western Australia, Australia – July 2016 Image: Perth Stadium, Western Australia, Australia – July 2016 CEO’s Report CEO’s Report CEO’s Report 9 CEO’s Report CEO’s Report 9 9 9 9 CEO’s ReportCEO’s ReportCEO’s ReportCEO’s ReportDelivering these three priorities does not occur without an underlying effective business organisation. The Nearmap team is the foundation upon which we can achieve our goals. We now have over 120 employees in two countries who are working tirelessly to position us for continued growth. I would like to take this opportunity to thank them for their efforts during the year. I would also like to thank my Executive team for the leadership and direction which they have provided. Since I commenced in the role as Managing Director & CEO, we have strengthened the executive team with key hires and promotions. It is a team that can scale with the growth of Nearmap. Supporting all of this is a keen focus across the company on building shareholder value. Nearmap has a strong balance sheet, a track record of growth and demonstrated the operational leverage of our business model. We invest in initiatives that deliver top line growth, that enhance our industry leading position while being disciplined in cost management. Image: City Beach, Western Australia, Australia – July 2016 10 CEO’s Report CEO’s Report A Focus on ExecutionCEO’s Report 11 Scan the code to see this location change over time. City Beach, Western Australia, Australia – July 2016– Grew our Australian ACV (Annualised Contract Value) portfolio 38% to $34.4M through a combination of adding new customers and strong upsells to existing customers. – Added over 1,300 additional business customers, taking the total to 6,800 with over 50,000 active users of the Nearmap offering. – Maintained our high customer retention rate through our unique offering and keen focus on understanding how our customers use our product. – Continued to diversify our customer base across a broad range of industries, customer sizes and a wide variety of use cases. – Based on understanding who uses our product and how it is used, we have identiﬁ ed the addressable market for our current product is at least $250M per year in Australia. – The portfolio lifetime value of the Australian customer base is $338M. Image: Iluka, Western Australia, Australia – July 2016 12 CEO’s Report CEO’s Report Delivering Accelerated Growth in AustraliaScan the code to see this location change over time. Iluka, Western Australia, Australia – July 2016– Built an experienced local leadership team with skills in sales, marketing and geospatial technology. – Rebuilt the marketing strategy with focussed, content-driven outbound campaigns. – Captured ﬁ rst oblique imagery and 3D data, an important requirement for the US market. – Achieved an ACV portfolio of US$1.5M through a combination of renewals, upsells and adding new customers including key customer wins from competitors. – Won new business as well as key customer wins from competitors. – Built partnerships to enhance our customer reach with OmniEarth, Folsom Labs and RoofSnap. Image: Mile High Stadium, Denver, Colorado, United States – June 2016 14 CEO’s Report CEO’s Report Building the Foundations in the US Scan the code to see this location change over time. Mile High Stadium, Denver, Colorado, United States – June 2016– Delivered industry leading 3D data which will open new uses of Nearmap’s location content. – First commercial captures with HyperCamera2, which allow scaling for high efﬁ ciency operation and large area captures. – Proprietary processing software which delivers new content within days of capture was enhanced to allow extraction of 3D data. – Built our internal systems to allow Nearmap to scale rapidly and globally. – Unique business model: instant access via subscription to full content library. – Our location content library has grown to over 800 Terabytes. Image: Gold Coast, Queensland, Australia – August 2016 16 CEO’s Report CEO’s Report Enhancing our Technology LeadershipGold Coast, Queensland, Australia – August 2016– Experienced team of over 120 in Australia and the US with strong experience in subscription and cloud based businesses. – Enhanced Board depth with the appointment of Peter James as Chairman and Ian Morris as US based Non-Executive Director. – Considerably strengthened executive team with key hires and promotions to provide stronger customer focus. – Established Nearmap core values and our company culture. We place the success of our people, our customers and our product at the core of our business. Above: 2016 Nearmap Australia Team and 2016 Nearmap United States Team. Image right: Niagara Falls, New York, United States – April 2016. 18 CEO’s Report CEO’s Report 18 World Class Team Committed to SuccessScan the code to see this location change over time. Niagara Falls, New York, United States – April 2016.The ﬁ nancial year 2016 has been a transformational year for Nearmap. We have demonstrated the success of our business model and shown that we are a growth company with a long runway. We are already the leader in the Australian market and now a disruptor in the US market. We have built our team to allow us to scale and continued our investment in technology to extend our lead. In addition, we have started to build our ﬁ rst strategic partnerships which will broaden our customer reach and add value to location content that we provide. As we look forward we see the continued growth of Nearmap. Our business model and leadership in Australia is well established. We understand how our product is used and the value it provides and we see that we are early in the penetraton of our addressable market. A similar opportunity exists in the US. The market dynamics are different in the US, but we are a disruptor and based on our early successes we plan to drive strong growth in the US. Looking to the long term we see the value of Nearmap’s offering increasing as we serve a number of rapidly emerging industries. Automation of tasks like driving, quoting, planning and auditing will rely on the accurate, up to date location data that Nearmap provides. Dr Rob Newman Managing Director & CEO 10 October 2016 Image: Huntington Beach, California, United States – June 2016 20 CEO’s Report CEO’s Report In SummaryScan the code to see this location change over time. Huntington Beach, California, United States – June 2016Scan the code to see this location change over time. Residential Development, Azusa, California, United States – July 2014Residential Development, Azusa, California, United States – September 2014Residential Development, Azusa, California, United States – May 2015Residential Development, Azusa, California, United States – June 2016Directors’ Report Your Directors submit their report on the consolidated entity consisting of Nearmap Ltd and the entities it controlled at the end of, or during, the year ended 30 June 2016. Directors The names and details of the Company’s Directors in ofﬁ ce during the ﬁ nancial year and until the date of this report are as follows. Directors were in ofﬁ ce for this entire year unless otherwise stated. Names, qualiﬁ cations, experience, directorships and special responsibilities Dr Rob Newman B.Eng(1st Hons), Ph.D. Managing Director & CEO Mr Peter James BA, FAICD Non-Executive Chairman (appointed 18 December 2015) Peter has enjoyed a successful business career with a focus on building emerging technology, media and telecommunications companies. Peter is a member of the Australian Computer Society, a Fellow of the Australian Institute of Company Directors and holds a Bachelor of Arts, Computer Science and Business Administration degree from the University of Canberra. Previously amongst other roles, Peter was a long term director of iiNet where he chaired iiNet’s Strategy and Innovation Committee and was actively involved in the $1.5bn sale to TPG. Current ASX listed company directorships Nearmap Ltd (since December 2015) – Chairman Macquarie Telecom Ltd (ASX:MAQ) – Chairman Droneshield Limited (ASX:DRO) – Chairman Former ASX listed company directorships in the last 3 years: iiNet (ASX: IIN – de-listed 2015) Special duties: Member of the Nomination and Remuneration Committee Chair of the Audit and Risk Management Committee Rob was appointed as CEO of Nearmap on October 2015, after having been a Non-Executive Director of Nearmap (formerly ipernica) for almost 5 years. He has established a unique track record as a successful Australian high technology entrepreneur in both Australia and Silicon Valley. He has twice founded and built businesses based on Australian technology, both times successfully entering overseas markets. These businesses combined have established market values of over $200M. Rob is a trained engineer but has spent his career in marketing, business development and general management in Information Technology focusing on communications. Rob also spent ten years of his career as a venture capitalist co-founding Stone Ridge Ventures, and was previously an investment director for Foundation Capital. As a venture capitalist, Rob has extensive experience in identifying and helping grow companies with signiﬁ cant commercial potential, especially those addressing overseas markets. In the 1980's, Rob was the inventor and co-founder of QPSX Communications Pty Ltd. After founding the company, Rob provided the technical leadership and product strategy. Rob was instrumental in establishing QPSX as a worldwide standard for Metropolitan Area Networks and the company successfully sold products to Telecommunication Carriers in Australia, Europe, Asia and the US. 26 Directors’ Report Directors’ Report 26 Directors’ Report Dr Newman has been recognised with a number of awards including the Bicentennial BHP Pursuit of Excellence Award (Youth Category) and Western Australian Young Achiever of the Year 1987. Current ASX listed company directorships Nearmap Ltd (since February 2011) Pointerra Limited (ASX: 3DP) – Chairman Former ASX listed company directorships in the last 3 years None Special duties None Ross is also founding Chairman of Brockman Resources Ltd, now Non- Executive Director of ASX and Hong Kong listed Brockman Mining Ltd. Current ASX listed company directorships Nearmap Ltd (since 1987) Brockman Mining Ltd (ASX:BCK) Former ASX listed company directorships in the last 3 years Ammtec Ltd (ASX:AEC) (acquired by Australian Laboratory Services Pty Ltd) Special duties Member of the Nomination and Remuneration Committee Member of the Audit and Risk Management Committee Mr Ross Norgard FCA Non-Executive Director In 1987, Ross became the founding Chairman of Nearmap Ltd. Ross Norgard is a Fellow of the Institute of Chartered Accountants and former managing partner of Arthur Andersen and KMG Hungerfords and its successor ﬁ rms in Perth, Western Australia. For over 30 years he has worked extensively in the ﬁ elds of raising venture capital and the ﬁ nancial reorganisation of businesses. He has held numerous positions on industry committees including past Chairman of the Western Australian Professional Standards Committee of the Institute of Chartered Accountants, a former member of the National Disciplinary Committee, former Chairman of the Friends of the Duke of Edinburgh's Award Scheme and a former member of the University of WA's Graduate School of management (MBA Program). Mr. Norgard was appointed Western Australia’s Honorary Consul- General to Finland. Mr Ian Morris MBA Non-Executive Director (appointed 28 January 2016) Ian has enjoyed a successful business career in the US technology sector. He brings this extensive and complementary experience to Nearmap at a time when the Company is accelerating its growth in the US. Mr Morris served as the President and CEO of Market Leader for more than a decade, establishing the company as the leading provider of "software-as- a-service" solutions to the real estate industry. Under his leadership, Market Leader was ranked the 4th fastest growing technology company in North America, leading to a successful IPO in 2004 and the sale of the company to Trulia in 2013 for US$380 million. From top to bottom: Mr Peter James Non-Executive Chairman Dr Rob Newman Managing Director & CEO Mr Ross Norgard Non-Executive Director From top to bottom: Mr Peter James Non-Executive Chairman Dr Rob Newman Managing Director & CEO Mr Ross Norgard Non-Executive Director Directors’ Report Directors’ Report 27 27 Directors’ Report Before joining Market Leader, Ian spent 7 years at Microsoft where he led a number of the company’s early online marketing efforts and later served as the General Manager of Microsoft HomeAdvisor. Ian is a graduate of Bryant University, holds an MBA from Harvard Business School and serves as a strategic advisor and Board member with a number of leading technology companies. Current ASX listed company directorships Nearmap Ltd (since January 2016) Former ASX listed company directorships in the last 3 years None Special duties Member of the Nomination and Remuneration Committee Mr Cliff Rosenberg B.Bus.Sci., M.Sc. Management Non-Executive Director Cliff Rosenberg is the Managing Director for LinkedIn South East Asia, Australia and New Zealand. LinkedIn is the world’s largest professional network with over 430 million members around the globe, of which over 8 million are in Australia. In this role, Cliff’s focus is driving awareness and uptake of LinkedIn’s products, including talents solutions, marketing solutions and sales solutions. Since January 2010, Cliff has set up ofﬁ ces in Sydney, Melbourne and Perth, growing the local team to more than 250 staff, including sales, marketing and public relations personnel. Cliff has a distinguished 20-year career in the digital space, both as an entrepreneur and executive. He was formerly the Managing Director of Yahoo! Australia and New Zealand where he was responsible for all aspects of the local operation for more than three years. He was a Non-Executive Director of Australia’s leading online restaurant booking platform, dimmi.com.au, which was sold to Tripadvisor in early 2015. Prior to joining Yahoo!, Cliff was the Founder and Managing Director of iTouch Australia and New Zealand, a leading wireless application service provider. He grew the Australian ofﬁ ce to one of the largest mobile content and application providers in Australia with key partnerships with companies such as Ninemsn, Yahoo!, Telstra and Vodafone. Previously, Cliff was head of corporate strategy for Vodafone Australasia and also served as an international management consultant with Gemini Consulting and Bain Consulting. He earned a Master of Science degree in Management as well as Bachelor’s degree of Business Science in Economics and Marketing. Current ASX listed company directorships Nearmap Ltd (since July 2012) Pureproﬁ le Ltd (ASX:PPL) Afterpay Ltd (ASX:AFY) Former ASX listed company directorships in the last 3 years None Special duties Chair of the Nomination and Remuneration Committee Member of the Audit and Risk Management Committee From top to bottom: Mr Ian Morris Non-Executive Director Mr Cliff Rosenberg Non-Executive Director From top to bottom: Mr Ian Morris Non-Executive Director Mr Cliff Rosenberg Non-Executive Director 28 Directors’ Report Directors’ Report 28 From top to bottom: Mr Ian Morris Non-Executive Director Mr Cliff Rosenberg Non-Executive Director Directors’ Report Directors interests in the shares and options of the Company As at the date of this report, the interests of the Directors in the shares and options of Nearmap Ltd were: P James R Norgard R Newman C Rosenberg I Morris Ordinary shares 190,000 50,076,295 5,000,000 2,901,000 - Options over ordinary shares 2,500,000 - 3,000,000 1,500,000 1,500,000 Corporate structure Nearmap Ltd is a company limited by shares incorporated and domiciled in Australia. Nature of operations and principal activities The principal activity of the consolidated entity during the course of the ﬁ nancial year was online aerial photomapping via its 100% owned subsidiaries Nearmap Australia Pty Ltd and Nearmap US Inc. Business model Nearmap is an innovative online PhotoMap content provider that creates high quality current and changing maps. The Company generates revenues through licensing its content to a broad range of customers such as government agencies, the commercial sector and small to medium enterprises. Nearmap’s breakthrough technology has been designed to fully automate the process of creating a high deﬁ nition PhotoMap of large areas such as cities quickly and in a cost effective fashion. The technology enables PhotoMaps to be updated more frequently than other providers, which can be months, if not years out of date. Nearmap’s strategy is to effectively monetise all of its content by providing convenient access to the content via desktop and mobile platforms, and through subscription models and value add products supported by e-commerce facilities. The pivotal features underpinning the success of the Nearmap business model are: – the frequency with which this data is updated; – the clarity (resolution) of the PhotoMaps; and – the availability of previous surveys on the same platform, allowing users to track changes at locations over time. Nearmap’s balance sheet remains strong with no debt and a strong cash balance. During the year ended 30 June 2016, Nearmap invested in sales and marketing in the Australian business, the US expansion, and the HyperCamera2 system. Our cash balance remains strong at $12.2m at 30 June 2016. Cash receipts from customers for the year were $37.3m compared to $26.9m for the previous year, an increase of $10.4m (39%). Dividends No dividends have been paid or proposed in respect of the current year (2015: nil). Consolidated result The consolidated entity’s result after provision for income tax was a loss of $7.1m (2015: loss of $0.8m). Review and results of operations For the year ended 30 June 2016, Nearmap reported total revenue of $31.3m, up 20% on corresponding prior year revenue of $26.1m, underpinned by continued customer retention and growth in the customer base. Environmental regulation and performance The current activities of Nearmap are not subject to any signiﬁ cant environmental regulation. However, the Board believes that Nearmap has adequate systems in place to manage its environmental obligations and is not aware of any breach of those environmental requirements as they apply to Nearmap. Directors’ Report Directors’ Report 29 29 Directors’ Report Signiﬁ cant changes in the state of affairs a) In August 2015, two US patents for next-generation aerial camera systems were granted, with several more US patents pending. Progress continues to be made on the HyperCamera2 aerial camera system, which is designed to capture multi-directional oblique views at very high capture efﬁ ciencies. b) On 15 October 2015, Dr Rob Newman was appointed Managing Director and Chief Executive Ofﬁ cer of Nearmap while Mr Gerhard Beukes was promoted to Chief Operating Ofﬁ cer. Mr Beukes continues in his role of Chief Financial Ofﬁ cer. c) On 18 December 2015, the Company appointed Mr Peter James as Deputy Chair and Non- Executive Director of the Company. Peter is an independent director under the Company’s deﬁ nition of independence and is a member of the Nomination and Remuneration Committee and the Audit and Risk Management Committee. d) On 7 December 2015, Nearmap announced the signing of a major contract with an existing customer, which increased its annual contract value to $1.47m. This contract demonstrated Nearmap’s successful business model of working in partnership with customers to grow wider and deeper adoption of Nearmap’s product, adding more value to its customers’ business. Prospects for future years The Directors believe that the business strategies put in place will ensure that the Group continues on its growth trajectory in the foreseeable future. Nearmap is primed to continue generating value to its shareholders in future years, subject to a stable macro- economic environment. The Group will continue to seek new opportunities to build scale and to broaden its customer base. The Group faces a number of risks, including availability and cost of funds, which may impact on its ability to achieve its revenue targets. Indemniﬁ cation and insurance of Directors During the ﬁ nancial year, the Group paid a premium to insure the Directors and ofﬁ cers of the Group. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the ofﬁ cers in their capacity as ofﬁ cers of entities in the Group, and any other payments arising from liabilities incurred by the ofﬁ cers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the ofﬁ cers or the improper use by the ofﬁ cers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. e) On 28 January 2016, Nearmap appointed Mr Ian Morris as a Non- Executive Director of the Company. Ian is an independent director under the Company’s deﬁ nition of independence and is a member of the Nomination and Remuneration Committee. f) On 18 March 2016, Nearmap appointed Mr Peter James as the new Chair of the Company. The previous Chair, Mr Ross Norgard, remains on the Board as a Non- Executive Director. g) On 31 May 2016, Nearmap announced that it had signed a signiﬁ cant new one year subscription contract with an existing customer, one of Australia’s largest digital infrastructure companies. The new contract has an annual value of $1.1m and is the second in excess of $1m executed by Nearmap in FY16. h) On 23 June 2016, Nearmap announced a new strategic partnership with OmniEarth, the US based leader in the Earth observation and geoanalysis industry, for nationwide high- resolution aerial imagery. Signiﬁ cant events subsequent to balance date There were no matters or circumstances speciﬁ c to the Group that have arisen since 30 June 2016 that have signiﬁ cantly affected or may signiﬁ cantly affect: – the Group’s operations in future ﬁ nancial years; or – the results of those operations in future ﬁ nancial years; or – the Group’s state of affairs in future ﬁ nancial years. 30 Directors’ Report Directors’ Report 30 Directors’ Report Share options As at 30 June 2016 there were 37,445,000 unissued ordinary shares under options. Refer to note 6 of the ﬁ nancial statements for further details of the employee options outstanding. Directors’ meetings The number of meetings of Directors (including meetings of committees of Directors) held during the ﬁ nancial year and the number of meetings attended by each Director was as follows: Full Board Meetings B 4 8 7 7 4 1 A 4 8 8 8 4 1 Audit and Risk Committee Meetings B 1 2 1 2 - - A 1 2 1 2 - - Nomination and Remuneration Committee Meetings B 2 2 - 2 2 - A 2 2 - 2 2 - P James1 R Norgard R Newman2 C Rosenberg I Morris3 S Crowther4 1 Appointed as Director 18 December 2015. 2 Mr. Newman stepped down from the Audit and Risk Committee and the Nomination and Remuneration Committee upon his appointment into an executive role on 15 October 2015. 3 Appointed as Director 28 January 2016. 4 Ceased as Director 15 October 2015. A Number of meetings held during the time the Director held ofﬁ ce and the Director was eligible to attend. B Number of meetings attended. Rounding of amounts The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with that instrument, amounts in the consolidated ﬁ nancial report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated. Directors’ Report Directors’ Report 31 31 Directors’ Report Remuneration Report (Audited) This report outlines the remuneration arrangements in place for Directors and key management personnel of Nearmap Ltd (the Company) and the consolidated entity (the Group). The Remuneration Report is set out under the following main headings: A. Principles used to determine the nature and amount of remuneration; B. Details of remuneration; C. Employment contracts; D. Share based compensation; E. Transactions of key management personnel; F. Additional information; and G. Shares under option. The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001. A. Principles used to determine the nature and amount of remuneration Remuneration philosophy The performance of the Company depends upon the quality of its Directors and executives. To prosper, the Company must attract, motivate and retain highly skilled Directors and executives. To this end, the Company embodies the following principles in its remuneration framework: – Provide competitive rewards to attract high calibre executives; – Link executive rewards to shareholder value; and – Establish appropriate, demanding performance hurdles in relation to variable executive remuneration. Nomination and Remuneration Committee The Nomination and Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the Directors, the Managing Director (MD) and the senior management team and ensuring that the Board continues to operate within the established guidelines, including when necessary, selecting candidates for the position of Director. The Nomination and Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of Directors and key management personnel on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder beneﬁ t from the retention of a high quality Board and executive team. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. i) Services from remuneration consultants The Board periodically reviews the level of fees paid to Non-Executive Directors, including seeking external advice. A review was undertaken during FY15 with the assistance of PwC. No change was made to fees, as the current level of fees is deemed appropriate. Remuneration structure In accordance with best practice corporate governance, the structure of Non-Executive Director and key management personnel remuneration is separate and distinct. Non-Executive Director remuneration Objective The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Structure The Constitution and the ASX Listing Rules specify that the aggregate remuneration of Non-Executive Directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the Directors as agreed. The latest determination was at the Annual General Meeting (AGM) held on 30 November 2015 when shareholders approved an aggregate remuneration of $500,000 per year. 32 Directors’ Report Directors’ Report 32 Directors’ Report Remuneration Report (Audited) A. Principles used to determine the nature and amount of remuneration (cont.) Remuneration structure (cont.) Voting and comments made at the Company’s 2015 Annual General Meeting The Company received 16.69% “no” votes on its Remuneration Report for the 2015 ﬁ nancial year. The Company did not receive any speciﬁ c feedback at the AGM or throughout the year on its remuneration practices. Each Director receives a fee for being a Director of the Company. A further fee is paid where additional time commitment is required like that being required by the Chairman of the Company. Key management personnel and Executive Director remuneration Objective The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company and so as to: – reward executives and individual performance against key performance indicators; – align the interests of executives with those of shareholders; – link reward with the strategic goals and performance of the Group; and – ensure total remuneration is competitive by market standards. Structure Remuneration typically consists of the following key elements: Variable Remuneration — Short Term Incentive (STI) Objective The objective of the STI program is to link the achievement of the Company’s operational targets with the remuneration received by the employees charged with meeting those targets. The total potential STI where available is set at a level so as to provide sufﬁ cient incentive to employees to achieve the operational targets and such that the cost to the Company is reasonable in the circumstances. Structure Actual STI payments granted to each employee depend on the extent to which speciﬁ c operating targets set are met. The operational targets consist of a number of Key Performance Indicators (KPIs) covering both ﬁ nancial and non- ﬁ nancial measures of performance. Typically included are measures such as contribution to net proﬁ t after tax, customer management and leadership/team contribution. – Fixed Remuneration – Variable Remuneration – Short Term Incentive (STI); and – Long Term Incentive (LTI). The proportion of ﬁ xed remuneration and variable remuneration (potential short term and long term incentives) is established for each key management personnel by the Nomination and Remuneration Committee. Fixed Remuneration Objective The level of ﬁ xed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually by the Nomination and Remuneration Committee and the process consists of a review of individual performance, relevant comparative remuneration in the market and internal and, where appropriate, external advice on policies and practices. The Board determined that no increase would be made to the ﬁ xed remuneration for the Managing Director and all other key management Personnel in the 2016 ﬁ nancial year as the current level of remuneration was considered appropriate. Structure Senior executives are given the opportunity to receive their ﬁ xed (primary) remuneration in a variety of forms including cash and fringe beneﬁ ts such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company. Directors’ Report Directors’ Report 33 33 Directors’ Report Remuneration Report (Audited) A. Principles used to determine the nature and amount of remuneration (cont.) Remuneration structure (cont.) On an annual basis, after consideration of performance against KPIs, an overall performance rating for the Group and each individual’s performance is made and is taken into account when determining the amount, if any, of the short term incentive pool to be allocated to each employee. The aggregate of annual STI payments available for employees across the Group is subject to the approval of the Nomination and Remuneration Committee. Payments made are usually delivered as a cash bonus. However, STI payments are subject to discretion by the Board based on performance at the end of the year. Variable Remuneration – Long Term Incentive (LTI) Objective The objective of the LTI plan is to reward employees in a manner which aligns this element of remuneration with the creation of shareholder wealth. Australian employees Options are granted with a strike price of at least 143% of the share price prevailing at the time of the grant. Executives are therefore required to achieve a ﬁ xed increase in share price of more than 43% before any value attracts to the individual. The options have a 4 year term with the following service condition structures: – service vesting condition of 1 year for 50% of each tranche granted and 2 years for the second 50% tranche, or; – service vesting condition of 1 year for 33% of each tranche granted, 2 years for 33% of the next tranche and 3 years for the remaining 34%. There are no performance related vesting conditions. The Board believes that this is a challenging ﬁ xed target in share price over the option term and is therefore an appropriate mechanism to align company performance with that of the individual. An employee loan scheme arrangement exists should an employee elect to apply for a loan on exercise of options, which may be granted subject to Nomination and Remuneration Committee discretion. Structure LTI grants to employees are delivered in the form of options and the amount is determined by the Nomination and Remuneration Committee having regard to: – the seniority of the relevant Eligible Person and the position the Eligible Person occupies within the Company; – the length of service of the Eligible Person with the Group; – the record of employment of the Eligible Person with the Group; – the potential contribution of the Eligible Person to the growth of the Group; – the extent (if any) of the existing participation of the Eligible Person (or any Permitted Nominee in relation to that Eligible Person) in the Plan; and – any other matters which the Board considers relevant. United States employees Options are granted with a strike price of the share price prevailing at the time of the grant. . The options have a 5 year term and a service vesting condition of 1 year for 25% of each tranche granted and then in equal tranches at 3 monthly intervals to 4 years for the remaining 75%. There are no performance related vesting conditions. The Board believes that this structure is necessary to attract and retain high calibre executives to deliver the Group’s strategy in the United States market. The Board ensures the alignment of company performance with that of the individual through the STI program as documented above. 34 Directors’ Report Directors’ Report 34 Directors’ Report Remuneration Report (Audited) A. Principles used to determine the nature and amount of remuneration (cont.) Remuneration structure (cont.) Group performance The overall level of executive reward takes into account the nature of the technology commercialisation business and realistic timeframes for generating proﬁ ts. In particular, executive rewards recognise the commercialisation of the Nearmap business and future shareholder wealth contained therein and progress in unlocking the value created to date. Executive performance of the Group has been reviewed over the past 5 years taking into account future shareholder wealth and proﬁ t performance. In considering the Group’s performance and beneﬁ ts for shareholder wealth, the Nomination and Remuneration Committee has given regard to the following indices in respect of the current ﬁ nancial year over the last 5 ﬁ nancial years. Revenue EBITDA (earnings before interest, tax, depreciation and amortisation)1 Change in share price 2016 $’000 $31,289 $632 ($0.18) 2015 $’000 $26,124 $944 $0.16 2014 $’000 $20,069 $3,384 $0.17 2013 $’000 $12,766 $752 $0.22 2012 $’000 $6,106 ($5,941) ($0.03) 1 EBITDA also excludes R&D tax rebates, foreign currency differences and impairment adjustments. The graph below shows Nearmap’s closing share price since 1 July 2012 and the relative performance against the ASX All Ordinaries. NEA AORD 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 30/06/2012 31/12/2012 30/06/2013 31/12/2013 30/06/2014 31/12/2014 30/06/2015 31/12/2015 30/06/2016 Directors’ Report Directors’ Report 35 35 Directors’ Report Remuneration Report (Audited) B. Details of remuneration Directors The following persons were Directors of the Company during the ﬁ nancial year: P James R Norgard S Crowther R Newman C Rosenberg I Morris Non-Executive Chairman (appointed as Deputy Chairman on 18 December 2015, appointed Chairman on 18 March 2016) Non-Executive Director (resigned as Non-Executive Chairman on 18 March 2016) Chief Executive Ofﬁ cer (ceased 15 October 2015) Chief Executive Ofﬁ cer (appointed as Chief Executive Ofﬁ cer on 15 October 2015, previously Non-Executive Director) Non-Executive Director Non-Executive Director (appointed 28 January 2016) Other key management personnel The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the ﬁ nancial year: G Beukes P Lapstun P Peterson L Rankin J Biviano P Quigley Chief Financial Ofﬁ cer and Chief Operating Ofﬁ cer Chief Technology Ofﬁ cer Senior Vice President of Product and Engineering (resigned 29 December 2015) Vice President of Product and Engineering (promoted to VP of Product and Engineering on 1 January 2016) Senior Vice President and General Manager Australia (became a key management personnel on 1 July 2015) Senior Vice President and General Manager North America (appointed on 31 January 2016) 36 Directors’ Report Directors’ Report 36 Directors’ Report Remuneration Report (Audited) B. Details of remuneration (cont.) Details of the remuneration of the Directors and the key management personnel (as deﬁ ned in AASB 124 Related Party Disclosures): Short-term Long-term Non-Executive Directors P James3 R Norgard4 R Norgard C Rosenberg C Rosenberg I Morris5 Salary & Fees8 44,140 64,057 91,324 63,926 51,750 31,963 Non Monetary2 - - - - - - Cash Bonus - - - - - - 2016 2016 2015 2016 2015 2016 Subtotal Non-Executive Directors Long Service Leave - - - - - - Post employment beneﬁ ts 4,193 8,025 8,676 6,074 4,916 3,037 Share- based Payment options1 85,918 - - 60,699 3,858 59,072 Percentage performance related - - - - - - Total 134,251 72,082 100,000 130,699 60,524 94,072 Executive Directors R Newman6 R Newman Former Executive Directors S Crowther7 S Crowther 2016 2015 204,086 143,074 - - - - - - 21,329 13,592 205,689 3,858 431,104 160,524 2016 2015 356,971 56,668 42,896 - 184,080 - 133 - 19,308 - 121,399 3,858 724,787 60,526 2016 2015 485,642 435,718 116,034 63,787 - 140,000 - 15,064 6,841 21,162 - 608,517 727,303 1,403,034 25% - - 10% 1 AASB 2 accounting value determined at grant date, recognised over related vesting periods, plus any incremental beneﬁ t to key management personnel as the result of the grant of a limited recourse loan per the employee loan scheme as disclosed in note 6(i) per the ﬁ nancial statements. 2 Non-monetary beneﬁ ts include the cost to the Company of providing vehicle, living away from home beneﬁ ts and accommodation. 3 Mr James was appointed as Non-Executive Deputy Chairman on 18 December 2015, and was subsequently appointed as Non-Executive Chairman on 18 March 2016. 4 Mr Norgard resigned as Non-Executive Chairman on 18 March 2016. 5 Mr Morris was appointed as Non-Executive Director on 28 January 2016. 6 Mr Newman was appointed as Chief Executive Ofﬁ cer on 15 October 2015. Prior to that appointment, he was a Non-Executive Director of the Company. 7 Mr Crowther ceased employment on 15 October 2015. 8 Includes annual leave. Directors’ Report Directors’ Report 37 37 Directors’ Report Remuneration Report (Audited) B. Details of remuneration (cont.) Other key management personnel (Group) G Beukes3 G Beukes P Lapstun P Lapstun L Rankin4 L Rankin J Biviano J Biviano P Quigley5 2016 2015 2016 2015 2016 2015 2016 2015 2016 Salary & Fees7 281,767 241,263 280,210 247,552 193,479 113,653 325,889 102,471 137,737 Sub-total other key management personnel Non Monetary2 - - - - - - - - - Short-term Long-term Long Service Leave 7,437 2,975 3,046 1,281 129 42 170 38 - Post employment beneﬁ ts 19,308 22,267 19,308 22,425 18,335 12,667 19,308 7,290 14,405 Share- based Payment options1 351,184 562,380 351,507 417,346 44,370 11,725 269,913 88,768 87,778 Percentage performance related 15% 11% 19% 13% 23% 13% 18% 38% 25% Total 772,196 928,885 804,071 788,604 332,963 158,087 746,246 321,875 321,862 Cash Bonus 112,500 100,000 150,000 100,000 76,650 20,000 130,966 123,308 81,942 2016 1,219,082 704,939 2015 - - 552,058 343,308 10,782 4,336 90,664 1,104,752 64,649 1,080,219 2,977,113 2,197,451 Former key management personnel (Group) P Peterson6 P Peterson 2016 2015 187,098 254,218 Total Directors and key management personnel 2016 2,452,879 2015 1,594,617 - - - 100,000 - 1,553 9,654 22,583 76,647 365,440 273,399 743,794 - 13% 158,930 63,787 736,138 583,308 10,915 20,953 147,796 1,508,487 5,014,920 121,986 2,180,678 4,565,329 1 AASB 2 accounting value determined at grant date, recognised over related vesting periods, plus any incremental beneﬁ t to key management personnel as the result of the grant of a limited recourse loan per the employee loan scheme as disclosed in note 6(i) per the ﬁ nancial statements. 2 Non-monetary beneﬁ ts include the cost to the Company of providing vehicle, living away from home beneﬁ ts and accommodation. 3 Mr Beukes was appointed as Chief Operating Ofﬁ cer on 15 October 2015. He remains the Chief Financial Ofﬁ cer of the Company. 4 Ms Rankin was promoted to VP of Engineering and Product on 1 January 2016. 5 Mr Quigley joined the Company as Senior Vice President and General Manager North America on 31 January 2016. 6 Mr Peterson resigned on 29 December 2015. 7 Includes annual leave. 38 Directors’ Report Directors’ Report 38 Directors’ Report Remuneration Report (Audited) B. Details of remuneration (cont.) Name Non-Executive Directors P James R Norgard C Rosenberg I Morris Former Executive Director S Crowther Executive Director R Newman Other key management personnel G Beukes P Lapstun L Rankin J Biviano P Quigley Former other key management personnel P Peterson Salaries and beneﬁ ts 2016 Fixed remuneration LTI1 2016 At risk – STI 2016 36% 100% 54% 37% 100% 58% 40% 38% 64% 46% 47% 72% 64% - 46% 63% - 17% 45% 44% 13% 36% 27% 28% - - - - - 25% 15% 19% 23% 18% 25% - 1 LTI awards have service related vesting conditions. See Section A for further details on the remuneration structure of Directors and key management personnel. Directors’ Report Directors’ Report 39 39 Directors’ Report Remuneration Report (Audited) C. Employment contracts All executive employees and key management personnel are employed under contract. All executives have ongoing contracts and as such only have commencement dates and no expiry dates. Details of key management personnel and executives contracts as at 30 June are: Name R Newman G Beukes P Lapstun L Rankin J Biviano P Quigley Notice period for termination at will 6 months 4 months 4 months 4 months 3 months No notice period Notice period for termination at cause 6 months 4 months 4 months 4 months 3 months No notice period – On resignation any unvested options are forfeited. Limited recourse loans (LRLs) are only granted to key management personnel in respect of vested options, therefore the loans are not subject to cancellation on resignation. – The Company may terminate an employment agreement by providing the respective written notice period or provide payment in lieu of the notice period (based on the ﬁ xed component of remuneration). On such termination by the Company, any LTI options that have vested, or will vest during the notice period will be required to be exercised within 180 days from termination date (unless agreed otherwise by the Company) or their options expiry date if earlier. LTI options that have not yet vested will be forfeited. – The Company may terminate an employment contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, the employee is only entitled to that portion of remuneration which is ﬁ xed, and only up to the date of termination. On termination with cause any unvested options will immediately be forfeited. – If an employee ceases to be employed by the Company (including by way of resignation, retirement, dismissal, etc) and has an outstanding LRL, the employee may elect to have the Company sell the loan shares and apply the net proceeds of the sale in repayment of the loan or repay the outstanding amount on the loan. This determination must generally be made within 1 month of the date of ceased employment. – There are no formal contracts between the Company and Non-Executive Directors in relation to remuneration other than the letter of appointment that stipulates the remuneration as at the commencement date. 40 Directors’ Report Directors’ Report 40 Directors’ Report Remuneration Report (Audited) D. Share based compensation Options A share option incentive scheme has been established whereby Directors and certain employees of the Group may be issued with options over the ordinary shares of the Company. The options, which are usually issued for nil consideration at an exercise price calculated with reference to prevailing market prices and a 43% premium thereon are issued in accordance with performance guidelines established by the Directors of the Company. The options are issued for terms of up to 4 years and are exercisable on various dates (usually in 2 or 3 equal annual tranches when vested) within 4 years from the issue date. The options only vest under certain conditions, principally centred on the employee still being employed, or the Director still engaged, at the time of vesting (that is, once the service has been satisﬁ ed). The options cannot be transferred without the approval of the Company’s Board and are not quoted on the ASX. As a result plan participants may not enter into any transaction designed to remove the “at risk” aspect of an option before it is exercised. Options were issued to Directors and key management personnel during the year ended 30 June 2016, refer to the table below and note 6 per the ﬁ nancial statements for details. Limited recourse loans (LRL) Nearmap’s Employee Share Option Plan includes an Employee Loan Scheme that permits Nearmap to grant ﬁ nancial assistance to employees by way of LRLs to enable them to exercise options and acquire shares. Interest on the loans is payable by key management personnel at loan maturity and accrues daily. During the year the shareholders resolved to allow the Company to determine the rate of interest applicable to LRLs (currently the cash rate set by the Reserve Bank of Australia). Previously this was set at a statutory interest rate. Loans are repayable three years after the issue date subject to the total share value being greater that the loan’s principal plus accrued interest. The date of alteration was 30 November 2015, and the market price of the underlying equity on that date was $0.37. There were no other changes to the terms of the grant prior to and after the modiﬁ cation. Employee Surname Beukes Lapstun Lapstun Beukes Beukes Beukes Beukes Beukes Employee First Name Gerhard Paul Paul Gerhard Gerhard Gerhard Gerhard Gerhard No. of Options 1,000,000 2,500,000 2,500,000 750,000 750,000 750,000 750,000 1,000,000 Grant Date 9 Dec 2013 8 Mar 2014 8 Mar 2015 19 Dec 2013 19 Dec 2013 4 Apr 2014 4 Apr 2015 9 Dec 2013 Maturation Date 7 Dec 2013 8 Mar 2017 17 Apr 2015 27 Mar 2015 27 Mar 2015 17 Apr 2015 17 Apr 2015 7 Dec 2013 Exercise Price Pre Modiﬁ cation 0.0896 0.1787 0.1776 0.4955 0.5153 0.6310 0.6273 0.0896 Exercise Price Post Modiﬁ cation 0.0862 0.1705 0.1637 0.4764 0.4803 0.6004 0.5767 0.0862 Pre Modiﬁ cation Fair Value 0.0344 0.0407 0.0720 0.0259 0.0259 0.0331 0.0666 0.0338 Post Modiﬁ cation Fair Value 0.0349 0.0421 0.0746 0.0278 0.0278 0.0367 0.0708 0.0343 Directors’ Report Directors’ Report 41 41 Directors’ Report Directors’ Report Remuneration Report (Audited) Directors’ Report Remuneration Report (Audited) Remuneration Report (Audited) D. Share based compensation (cont.) D. Share based compensation (cont.) Compensation options D. Share based compensation (cont.) Each option entitles the holder to subscribe for one fully paid ordinary share in the entity at an exercise price determined Compensation options Compensation options at a 43% premium to the market price of the shares on the date of grant. When an individual is granted a LRL to exercise Each option entitles the holder to subscribe for one fully paid ordinary share in the entity at an exercise price determined Each option entitles the holder to subscribe for one fully paid ordinary share in the entity at an exercise price determined their option, the effect is to extend the life of the original option. The exercise price includes interest accrued. at a 43% premium to the market price of the shares on the date of grant. When an individual is granted a LRL to exercise at a 43% premium to the market price of the shares on the date of grant. When an individual is granted a LRL to exercise their option, the effect is to extend the life of the original option. The exercise price includes interest accrued. their option, the effect is to extend the life of the original option. The exercise price includes interest accrued. Exercise Price per share Exercise Price (options)/ Exercise Price per share Value per Current per share (options)/ Option/ price (options)/ Value per Current Value per Current Share at per share Option/ price price Option/ Grant Date1 (loans)2 Share at per share per share Share at $ $ (loans)2 Grant Date1 (loans)2 Grant Date1 Vesting Date $ $ $ $ Value of exercised Value of during the exercised period3 during the $ period3 $ Value of exercised Expiry during the Date Expiry period3 $ Date Vesting Date Vesting Date Expiry Date Cancelled or expired Cancelled during the or expired during the period Grant Date Cancelled or expired during the Granted during the Granted Granted period during the during the period period Vested during the Vested Vested period during the during the period period Exercised Unvested at balance during the Exercised Unvested Exercised Unvested period date at balance during the at balance during the period date period date - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Number Number Number period Grant Date period Grant Date 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 0.1125 0.1125 0.1125 0.1135 0.1135 0.1135 Mar 16 Mar 16 Mar 16 Nov 15 Nov 15 Nov 15 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 0.1125 0.1125 0.1125 0.1125 0.1125 0.1125 0.1135 0.1135 0.1135 0.1135 0.1135 0.1135 Mar 16 Mar 16 Mar 16 Mar 16 Mar 16 Mar 16 Nov 15 Nov 15 Nov 15 Nov 15 Nov 15 Nov 15 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 833,333 833,333 833,333 833,333 833,334 833,333 833,333 833,334 833,334 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 30 June 2016 Directors 30 June 2016 30 June 2016 P James Directors Directors - Options P James P James - Options - Options - Options - Options - Options - Options - Options - Options R Newman R Newman - Options R Newman - Options - Options - Options - Options - Options - Options - Options - Options C Rosenberg C Rosenberg - Options C Rosenberg - Options - Options - Options - Options - Options - Options - Options - Options I Morris I Morris - Options I Morris - Options - Options - Options - Options - Options - Options - Options - Options Former Director Former Director S Crowther S Crowther Former Director - 2,500,000 - Options 2,500,000 - Options S Crowther - 2,500,000 - Options 2,500,000 - Options - - Options 2,500,000 1,000,000 - Options - 1,000,000 - Options - 2,500,000 - Options 1,000,000 - Options - 1,000,000 - Options 1,000,000 - Options - - LRL4 - - LRL4 5,000,000 - 1,000,000 - Options - - - LRL 5,000,000 - - LRL - LRL4 5,000,000 - - LRL 5,000,000 - 1 AASB 2 accounting value determined at grant date as disclosed in note 6(i) per the ﬁ nancial statements. 1 AASB 2 accounting value determined at grant date as disclosed in note 6(i) per the ﬁ nancial statements. 2 Current price of LRLs determined based on the loan principal plus accrued interest divided by the number of shares exercised. 2 Current price of LRLs determined based on the loan principal plus accrued interest divided by the number of shares exercised. 1 AASB 2 accounting value determined at grant date as disclosed in note 6(i) per the ﬁ nancial statements. 3 Value determined based on the share price at exercise date less exercise price. 3 Value determined based on the share price at exercise date less exercise price. 2 Current price of LRLs determined based on the loan principal plus accrued interest divided by the number of shares exercised. 4 Mr Crowther repaid his loans prior to the interest rate change. 4 Mr Crowther repaid his loans prior to the interest rate change. 3 Value determined based on the share price at exercise date less exercise price. 4 Mr Crowther repaid his loans prior to the interest rate change. 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 1,000,000 1,000,000 2,500,000 1,000,000 1,000,000 1,000,000 5,000,000 5,000,000 1,000,000 5,000,000 5,000,000 5,000,000 5,000,000 - - - - - - - - - - - 5,000,000 - - 5,000,000 - - - 0.2943 0.2943 0.2943 0.2160 0.2943 0.2160 0.2160 0.0775 0.2160 0.0805 0.0775 0.0805 Nov 13 Nov 13 Nov 13 Nov 14 Nov 13 Nov 14 Nov 14 Dec 14 Nov 14 Nov 13 Dec 14 Nov 13 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 0.2943 0.2943 0.2160 0.2160 0.0775 0.0805 Nov 13 Nov 13 Nov 14 Nov 14 Dec 14 Nov 13 Nov 15 Nov 15 Nov 15 Nov 15 Nov 15 Nov 15 Mar 16 Mar 16 Mar 16 Mar 16 Mar 16 Mar 16 0.1547 0.1547 0.1547 0.1547 0.1547 0.1547 0.1135 0.1135 0.1135 0.1135 0.1135 0.1135 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Nov 15 Nov 15 Nov 15 Mar 16 Mar 16 Mar 16 0.1547 0.1547 0.1547 0.1135 0.1135 0.1135 100% 100% 100% 100% 100% 100% - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 0.55 0.55 0.55 0.56 0.56 0.56 0.56 0.56 0.56 0.40 0.40 0.40 0.55 0.55 0.55 0.55 0.55 0.55 Mar 17 Mar 18 Mar 19 Mar 17 Mar 18 Mar 17 Mar 19 Mar 18 Mar 19 Mar 20 Mar 20 Mar 20 Mar 20 Mar 20 Mar 20 Mar 20 Mar 20 Mar 20 0.56 0.56 0.56 0.56 0.56 0.56 Nov 16 Nov 17 Nov 18 Nov 16 Nov 17 Nov 16 Nov 18 Nov 17 Nov 18 Nov 19 Nov 19 Nov 19 Nov 19 Nov 19 Nov 19 Nov 19 Nov 19 Nov 19 0.56 0.56 0.56 0.56 0.56 0.56 Nov 16 Nov 17 Nov 18 Nov 16 Nov 17 Nov 16 Nov 18 Nov 17 Nov 18 Nov 19 Nov 19 Nov 19 Nov 19 Nov 19 Nov 19 Nov 19 Nov 19 Nov 19 Mar 17 Mar 18 Mar 19 0.40 0.40 0.40 0.40 0.40 0.40 Mar 20 Mar 20 Mar 20 Mar 17 Mar 18 Mar 17 Mar 19 Mar 18 Mar 19 Mar 20 Mar 20 Mar 20 Mar 20 Mar 20 Mar 20 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 0.76 0.76 1.08 1.08 0.0792 0.0838 Nov 15 Nov 16 Nov 16 Nov 17 Nov 13 Nov 14 0.76 0.76 0.76 1.08 0.76 1.08 1.08 0.0792 1.08 0.0838 0.0792 0.0838 Nov 17 Nov 17 Nov 18 Nov 18 Dec 17 Nov 16 Nov 15 Nov 16 Nov 15 Nov 16 Nov 16 Nov 17 Nov 16 Nov 13 Nov 17 Nov 14 Nov 13 Nov 14 - - - - 396,179 419,021 Nov 17 Nov 17 Nov 17 Nov 18 Nov 17 Nov 18 Nov 18 Dec 17 Nov 18 Nov 16 Dec 17 Nov 16 - - - - - - - 396,179 - 419,021 396,179 419,021 42 42 42 Directors’ Report Directors’ Report Directors’ Report Directors’ Report 42 Directors’ Report Directors’ Report Remuneration Report (Audited) Directors’ Report Remuneration Report (Audited) Remuneration Report (Audited) D. Share based compensation (cont.) Compensation options (cont.) D. Share based compensation (cont.) D. Share based compensation (cont.) Compensation options (cont.) Compensation options (cont.) Exercise Price per share (options)/ Exercise Price Exercise Price Value per Current per share per share Option/ price (options)/ (options)/ Share at per share Current Value per Value per Current Grant Date1 (loans)2 price Option/ Option/ price $ $ per share Share at Share at per share (loans)2 Grant Date1 Vesting (loans)2 Grant Date1 Date $ $ $ $ 0.2943 0.2943 0.2943 0.76 0.2943 0.2160 0.2943 0.76 0.2943 0.2160 0.2160 1.08 0.2160 0.1157 0.2160 1.08 0.2160 0.1157 0.1157 0.56 0.1157 0.1157 0.1157 0.56 0.1157 - 0.1157 0.56 0.1157 0.0425 - 0.0805 - 0.0425 0.4197 0.0425 0.0425 0.0425 0.4197 0.0419 0.0425 0.5359 0.0419 0.0419 0.0419 0.5359 0.0419 - 0.0419 0.0761 - - 0.76 0.76 0.76 1.08 0.76 1.08 1.08 0.56 1.08 0.56 0.56 0.56 0.56 0.0805 0.56 0.4197 0.0805 0.4197 0.4197 0.5359 0.4197 0.5359 0.5359 0.0761 0.5359 0.0761 Nov 15 Nov 16 Nov 16 Nov 17 Nov 16 Nov 17 Nov 18 Dec 13 Dec 13 Jun 14 Apr 14 Apr 15 Dec 14 0.76 0.76 1.08 1.08 0.56 0.56 0.56 0.1611 0.1526 Nov 15 Nov 16 Nov 16 Nov 17 Nov 16 Nov 17 Nov 18 Mar 14 Mar 15 0.76 0.76 0.76 1.08 0.76 1.08 1.08 0.56 1.08 0.56 0.56 0.56 0.56 0.1611 0.56 0.1526 0.1611 0.1526 Cancelled or expired during the Cancelled or expired during the period Grant Date Cancelled or expired during the Granted during the period Granted Granted during the during the period period Vested during the period Vested Vested during the during the period period Unvested Exercised at balance during the period date Exercised Unvested Exercised Unvested at balance during the at balance during the period date period date Number Number Number period Grant Date period Grant Date - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Nov 13 Nov 13 Nov 14 Nov 14 Nov 15 Nov 15 Nov 15 Dec 13 Apr 15 Apr 15 Apr 15 Apr 15 Mar 15 Nov 13 Nov 13 Nov 13 Nov 14 Nov 13 Nov 14 Nov 14 Nov 15 Nov 14 Nov 15 Nov 15 Nov 15 Nov 15 Dec 13 Nov 15 Apr 15 Dec 13 Apr 15 Apr 15 Apr 15 Apr 15 Apr 15 Apr 15 Mar 15 Apr 15 Mar 15 - - - - - - - - - - 100% - - 100% 100% 100% 100% 100% 100% - 100% 100% - - - - - - - - - - - - - - - - - 1,250,000 - - - - - - - - - - - - - 100% - - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - 100% 100% - - - - - - - - - - - - - - - - - 1,250,000 - 1,250,000 - - - - - - - - - - - - - - - - - - - - - - - 1,250,000 1,250,000 1,250,000 1,250,000 500,000 1,250,000 1,250,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 1,000,000 500,000 500,000 750,000 1,000,000 1,000,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 1,000,000 750,000 1,000,000 1,000,000 30 June 2016 Other key management personnel 30 June 2016 30 June 2016 G Beukes Other key management personnel Other key management personnel - Options G Beukes G Beukes - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - LRL - Options - Options - LRL - LRL - LRL - LRL - LRL - LRL - LRL - LRL - LRL - LRL - LRL - LRL - LRL - LRL - LRL - LRL - LRL P Lapstun P Lapstun - Options - Options P Lapstun - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - LRL - LRL - Options - LRL - LRL - LRL - LRL L Rankin L Rankin 0.1608 - - Options - Options L Rankin 0.1608 - - Options - Options - Options 0.1608 - - Options 0.1157 - - Options - Options 0.1608 - - Options 0.1157 - - Options - Options 0.1157 - - Options 0.1157 - - Options - Options - 0.1157 - Options 0.1532 - - Options - Options - 0.1157 - Options 0.1532 - - Options - Options 0.1532 - - Options 0.1532 - - Options 0.1532 - - Options 1 AASB 2 accounting value determined at grant date as disclosed in note 6(i) per the ﬁ nancial statements. - Options 0.1532 - 1 AASB 2 accounting value determined at grant date as disclosed in note 6(i) per the ﬁ nancial statements. 2 Current price of LRLs determined based on the loan principal plus accrued interest divided by the number of shares exercised. 2 Current price of LRLs determined based on the loan principal plus accrued interest divided by the number of shares exercised. 3 Value determined based on the share price at exercise date less exercise price. 1 AASB 2 accounting value determined at grant date as disclosed in note 6(i) per the ﬁ nancial statements. 3 Value determined based on the share price at exercise date less exercise price. 2 Current price of LRLs determined based on the loan principal plus accrued interest divided by the number of shares exercised. 3 Value determined based on the share price at exercise date less exercise price. - - - 100% - 100% - 100% - 100% 100% 100% - 100% 100% 100% - 100% 100% 100% - 100% 100% 100% - 100% 100% - (2,500,000) - 100% - - - - - 0.2943 0.2943 0.2943 0.2943 0.2943 0.2160 0.2160 0.2943 0.2160 0.2160 0.2160 0.1157 0.1157 0.2160 0.1157 0.1157 0.1157 0.1157 0.1157 0.1157 - - 0.1157 0.0070 0.0070 - 0.0070 - - - - - - - - - - - - - (2,500,000) - - (2,500,000) - 1,250,000 1,250,000 1,250,000 1,250,000 1,250,000 500,000 500,000 1,250,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 2,500,000 2,500,000 500,000 2,500,000 2,500,000 2,500,000 2,500,000 1,250,000 - 1,250,000 - - - - - - - - - - - - - - - 150,000 150,000 150,000 150,000 150,000 83,333 83,333 150,000 83,333 83,333 83,333 83,334 83,334 83,333 333,333 333,333 83,334 333,333 333,333 333,333 333,333 333,333 333,333 333,333 - - - - - - - - - - - 100% 100% - 100% 100% 100% 100% 100% 100% - - 100% - - - - 1,250,000 - - - - - - - - - - - - - 100% 100% - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Nov 13 Nov 13 Nov 13 Nov 14 Nov 13 Nov 14 Nov 14 Nov 15 Nov 14 Nov 15 Nov 15 Nov 15 Nov 15 Mar 14 Nov 15 Mar 15 Mar 14 Mar 15 Dec 14 Dec 14 Dec 14 Nov 15 Dec 14 Nov 15 Nov 15 Nov 15 Nov 15 May 16 Nov 15 May 16 May 16 May 16 May 16 May 16 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Nov 13 Nov 13 Nov 14 Nov 14 Nov 15 Nov 15 Nov 15 Mar 14 Mar 15 Dec 14 Dec 14 Nov 15 Nov 15 Nov 15 May 16 May 16 May 16 0.1608 0.1608 0.1157 0.1157 0.1157 0.1532 0.1532 0.1532 100% 100% 100% 100% 100% 100% 100% 100% - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Value of exercised during the Value of period3 exercised $ during the period3 $ Value of Expiry exercised Date during the period3 Expiry $ Date Vesting Date Vesting Date Expiry Date Nov 15 Nov 16 Nov 15 Nov 16 Nov 16 Nov 17 Nov 16 Nov 16 Nov 17 Nov 17 Nov 16 Nov 18 Nov 17 Dec 13 Nov 18 Dec 13 Dec 13 Jun 14 Dec 13 Apr 14 Jun 14 Apr 15 Apr 14 Dec 14 Apr 15 Dec 14 Nov 17 Nov 17 Nov 18 Nov 18 Nov 19 Nov 19 Nov 19 Dec 16 Apr 18 Apr 18 Apr 18 Apr 18 Dec 18 Nov 17 Nov 17 Nov 18 Nov 18 Nov 19 Nov 19 Nov 19 Mar 17 Mar 18 Nov 15 Nov 16 Nov 15 Nov 16 Nov 16 Nov 17 Nov 16 Nov 16 Nov 17 Nov 17 Nov 16 Nov 18 Nov 17 Mar 14 Nov 18 Mar 15 Mar 14 Mar 15 Nov 17 Nov 17 Nov 17 Nov 18 Nov 17 Nov 18 Nov 18 Nov 19 Nov 18 Nov 19 Nov 19 Nov 19 Nov 19 Dec 16 Nov 19 Apr 18 Dec 16 Apr 18 Apr 18 Apr 18 Apr 18 Apr 18 Apr 18 Dec 18 Apr 18 Dec 18 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 416,231 - Nov 17 Nov 17 Nov 17 Nov 18 Nov 17 Nov 18 Nov 18 Nov 19 Nov 18 Nov 19 Nov 19 Nov 19 Nov 19 Mar 17 Nov 19 Mar 18 Mar 17 Mar 18 - - - - - - - - - - - - - 416,231 - - 416,231 - 0.85 0.85 0.56 0.56 0.56 0.68 0.68 0.68 Dec 16 Dec 17 Nov 16 Nov 17 Nov 18 May 17 May 18 May 19 0.85 0.85 0.85 0.56 0.85 0.56 0.56 0.56 0.56 0.68 0.56 0.68 0.68 0.68 0.68 0.68 Dec 18 Dec 18 Nov 19 Nov 19 Nov 19 May 20 May 20 May 20 Dec 16 Dec 17 Dec 16 Nov 16 Dec 17 Nov 17 Nov 16 Nov 18 Nov 17 May 17 Nov 18 May 18 May 17 May 19 May 18 May 19 Dec 18 Dec 18 Dec 18 Nov 19 Dec 18 Nov 19 Nov 19 Nov 19 Nov 19 May 20 Nov 19 May 20 May 20 May 20 May 20 May 20 - - - - - - - - - - - - - - - - - - - - - - - - Directors’ Report Directors’ Report Directors’ Report Directors’ Report 43 43 43 43 Directors’ Report Remuneration Report (Audited) Directors’ Report Directors’ Report Remuneration Report (Audited) Remuneration Report (Audited) D. Share based compensation (cont.) Compensation options (cont.) D. Share based compensation (cont.) D. Share based compensation (cont.) Compensation options (cont.) Compensation options (cont.) date Number - - - - - - - - - - - - - - - - - - period Grant Date Cancelled or expired during the 0.79 0.79 0.79 0.56 0.56 0.56 100% 100% 100% 100% 100% 100% 0.1453 0.1453 0.1453 0.1157 0.1157 0.1157 Mar 15 Mar 15 Mar 15 Nov 15 Nov 15 Nov 15 Exercised Unvested at balance during the period Cancelled or expired during the Cancelled or expired during the period Grant Date Exercise Price per share (options)/ Exercise Price Value per Current Exercise Price per share price Option/ per share (options)/ per share Share at (options)/ Current Value per (loans)2 Grant Date1 Current Value per price Option/ $ $ Option/ price per share Share at Share at per share (loans)2 Grant Date1 (loans)2 Grant Date1 $ $ $ $ 0.79 0.1453 0.79 0.1453 0.79 0.1453 0.79 0.1453 0.56 0.1157 0.79 0.1453 0.56 0.1157 0.79 0.1453 0.56 0.1157 0.1157 0.56 0.1157 0.56 0.56 0.1157 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.1480 0.39 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.1480 0.39 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.1480 0.39 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.1480 0.39 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.1480 0.39 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.39 0.1480 0.1480 0.39 0.1480 0.39 0.1480 0.39 date 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Number Number 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 500,000 1,000,000 1,000,000 500,000 1,000,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 375,000 93,750 375,000 93,750 375,000 93,750 93,750 93,750 93,750 375,000 93,750 93,750 93,750 375,000 93,750 93,750 93,750 375,000 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 Vested during the period Vested Vested during the during the period period - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - period Grant Date Mar 15 Mar 15 Mar 15 Mar 15 Nov 15 Mar 15 Nov 15 Mar 15 Nov 15 Nov 15 Nov 15 Nov 15 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Unvested Exercised at balance during the period date Exercised Unvested at balance during the period - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Granted during the period 30 June 2016 Granted Granted Other key management personnel during the during the period 30 June 2016 J Biviano period 30 June 2016 Other key management personnel - - Options Other key management personnel J Biviano - - Options J Biviano - - Options - - Options - - Options - - Options 100% - Options - - Options - - Options 100% - Options - - Options 100% - Options 100% - Options 100% - Options 100% - Options 100% - Options 100% - Options P Quigley 100% - Options 100% - Options P Quigley 100% - Options P Quigley - Options 100% - Options 100% - Options - Options 100% - Options - Options 100% - Options 100% - Options 100% - Options - Options 100% - Options - Options 100% - Options 100% - Options - Options 100% - Options 100% - Options - Options - Options 100% 100% - Options - Options 100% - Options - Options 100% - Options 100% - Options - Options 100% - Options 100% - Options - Options 100% - Options 100% - Options - Options 100% - Options - Options 100% - Options 100% - Options 100% - Options - Options 100% - Options 100% - Options - Options 100% - Options 100% - Options - Options 100% - Options - Options 100% - Options 100% - Options 100% - Options - Options 100% - Options 100% - Options - Options 100% - Options 100% - Options - Options 100% - Options 100% - Options - Options 100% - Options - Options 100% - Options 100% - Options 100% - Options - Options 100% - Options 100% - Options - Options 100% - Options - Options 100% - Options 100% - Options - Options - Options 100% 100% - Options Former other key management personnel Former other key management personnel - Options 100% P Peterson P Peterson 1,250,000 - Options 0.2943 100% - 1,250,000 - Options Former other key management personnel 1,250,000 - Options 0.2943 100% - 1,250,000 - Options P Peterson 500,000 - Options 0.2160 100% - 500,000 - Options 0.2943 100% - 1,250,000 - Options 500,000 - Options 0.2160 100% - 500,000 - Options 0.2943 100% - Options 1,250,000 - - Options 0.2160 100% 500,000 - 1 AASB 2 accounting value determined at grant date as disclosed in note 6(i) per the ﬁ nancial statements. 1 AASB 2 accounting value determined at grant date as disclosed in note 6(i) per the ﬁ nancial statements. - Options 0.2160 100% 500,000 - 2 Current price of LRLs determined based on the loan principal plus accrued interest divided by the number of shares exercised. 2 Current price of LRLs determined based on the loan principal plus accrued interest divided by the number of shares exercised. 3 Value determined based on the share price at exercise date less exercise price. 3 Value determined based on the share price at exercise date less exercise price. 1 AASB 2 accounting value determined at grant date as disclosed in note 6(i) per the ﬁ nancial statements. 2 Current price of LRLs determined based on the loan principal plus accrued interest divided by the number of shares exercised. 3 Value determined based on the share price at exercise date less exercise price. 44 44 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 0.1480 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 Feb 16 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 0.39 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Nov 13 Nov 13 Nov 14 Nov 13 Nov 14 Nov 13 Nov 14 Nov 14 Directors’ Report Directors’ Report - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 0.2943 0.2943 0.2160 0.2160 Nov 13 Nov 13 Nov 14 Nov 14 100% 100% 100% 100% - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Vesting Date Expiry Date Value of Expiry exercised Date during the period3 $ - - - - - - Value of exercised during the period3 Value of $ exercised during the period3 $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Expiry Date Mar 19 Mar 19 Mar 19 Mar 19 Nov 19 Mar 19 Nov 19 Mar 19 Nov 19 Nov 19 Nov 19 Nov 19 Jan 21 Jan 21 Jan 21 Jan 21 Jan 21 Jan 21 Nov 21 Jan 21 Jan 21 Jan 21 Nov 21 Nov 21 Jan 21 Jan 21 Nov 21 Nov 21 Jan 21 Jan 21 Nov 21 Nov 21 Jan 21 Jan 21 Nov 21 Nov 21 Jan 21 Jan 21 Nov 21 Nov 21 Jan 21 Jan 21 Nov 21 Nov 21 Jan 21 Jan 21 Nov 21 Nov 21 Jan 21 Jan 21 Nov 21 Nov 21 Jan 21 Jan 21 Nov 21 Nov 21 Nov 21 Jan 21 Nov 21 Nov 21 Nov 21 Nov 21 Nov 21 Nov 21 Vesting Date Vesting Date Mar 16 Mar 17 Mar 18 Mar 16 Nov 16 Mar 17 Nov 17 Mar 18 Nov 18 Nov 16 Nov 17 Nov 18 Feb 17 May 17 Aug 17 Feb 17 Nov 17 May 17 Nov 17 Aug 17 Feb 18 Nov 17 Feb 18 Nov 17 May 18 Feb 18 May 18 Feb 18 Aug 18 May 18 Aug 18 May 18 Nov 18 Aug 18 Nov 18 Aug 18 Feb 19 Nov 18 Feb 19 Nov 18 May 19 Feb 19 May 19 Feb 19 Aug 19 May 19 Aug 19 May 19 Nov 19 Aug 19 Nov 19 Aug 19 Feb 20 Nov 19 Feb 20 Nov 19 May 20 Feb 20 Aug 20 Feb 20 Nov 20 May 20 Aug 20 Nov 20 Mar 19 Mar 19 Mar 19 Nov 19 Nov 19 Nov 19 Jan 21 Jan 21 Jan 21 Jan 21 Nov 21 Jan 21 Nov 21 Jan 21 Nov 21 Jan 21 Nov 21 Jan 21 Nov 21 Jan 21 Nov 21 Jan 21 Nov 21 Jan 21 Nov 21 Jan 21 Nov 21 Jan 21 Nov 21 Nov 21 Nov 21 Nov 21 Mar 16 Mar 17 Mar 18 Nov 16 Nov 17 Nov 18 Feb 17 May 17 Aug 17 Nov 17 Nov 17 Feb 18 Feb 18 May 18 May 18 Aug 18 Aug 18 Nov 18 Nov 18 Feb 19 Feb 19 May 19 May 19 Aug 19 Aug 19 Nov 19 Nov 19 Feb 20 Feb 20 May 20 Aug 20 Nov 20 0.76 0.76 1.08 1.08 Nov 15 Nov 16 Nov 16 Nov 17 0.76 0.76 1.08 0.76 1.08 0.76 1.08 1.08 Nov 17 Nov 17 Nov 18 Nov 18 Nov 15 Nov 16 Nov 16 Nov 15 Nov 17 Nov 16 Nov 16 Nov 17 Nov 17 Nov 17 Nov 18 Nov 17 Nov 18 Nov 17 Nov 18 Nov 18 - - - - - - - - - - - - 44 Directors’ Report Directors’ Report 44 Directors’ Report Remuneration Report (Audited) D. Share based compensation (cont.) Modiﬁ cation of terms of share-based payment transactions A modiﬁ cation of terms of share-based payment transactions occurred when the Board accepted key management personnel’s loan request to exercise fully vested options under the Employee Loan Scheme through a LRL in lieu of cash payment of the exercise price. See details below for share-based payment transactions which have been modiﬁ ed in this way during the reporting period. Refer to Section E “Financial assistance under the employee share option plan” for further details in respect of the terms of the loans granted to these key management personnel. E. Transactions of key management personnel Shares held in the Company 30 June 2016 Directors P James R Norgard R Newman C Rosenberg I Morris Former Directors S Crowther1 Other key management personnel G Beukes P Lapstun L Rankin J Biviano P Quigley Balance at 1 July 2015 Exercise of Options Net Other Change 30 June 2016 Balance Balance held nominally - 50,076,295 4,000,000 2,775,000 - 10,000,000 5,755,000 5,000,000 - - - - - - - - - - - - - - 190,000 - 1,000,000 126,000 - 190,000 50,076,295 5,000,000 2,901,000 - 190,000 50,036,295 5,000,000 2,901,000 - - n/a n/a - (500,000) - - - 5,755,000 4,500,000 - - - 3,255,000 4,500,000 - - - 1 Mr Crowther ceased his employment on 15 October 2015. At the date of cessation of employment, Mr Crowther held 10,000,000 Nearmap shares. Directors’ Report Directors’ Report 45 45 Directors’ Report Remuneration Report (Audited) E. Transactions of key management personnel (cont.) Loan options held in the Company 30 June 2016 Former Directors S Crowther2 Balance at 1 July 2015 Exercise of LRL Net Other Change1 30 June 2016 Balance Balance held nominally 10,000,000 (10,000,000) - n/a n/a Other key management personnel G Beukes P Lapstun 5,000,000 5,000,000 - - - (2,500,000) 5,000,000 2,500,000 5,000,000 2,500,000 1 Includes expired options, cancellations and other acquisitions, transfers and disposals. 2 Mr Crowther ceased his employment on 15 October 2015. As at the date of cessation of employment, Mr Crowther held 10,000,000 LRLs over 10,000,000 Nearmap shares. Financial assistance under the Employee Share Option Plan LRLs advanced to key management personnel during the year ended 30 June 2016 amounted to $2,317,500 (30 June 2015: $3,067,500). Interest on the loans during the period has been accrued at rates of between 1.75% and 5.65%. F. Additional information The Company has applied fair value measurement provisions of AASB 2 Share-based Payment for all options and LRLs granted to Directors and employees. The fair value of such grants is being amortised and disclosed as part of Director and employee remuneration on a straight-line basis over the vesting period. Options granted as part of Director and employee remuneration have been valued using the Black-Scholes Option Pricing Model, which takes account of factors including the option exercise price, the current level and volatility of the underlying share price, the risk-free interest rate, expected dividends on the underlying share, current market price of the underlying share and the expected life of the option. LRLs have also been valued using the Black-Scholes Option Pricing Model. Refer to note 6(i) per the ﬁ nancial statements for details of share based payments and all new options granted to all employees during the year ended 30 June 2016. 46 Directors’ Report Directors’ Report 46 Directors’ Report Remuneration Report (Audited) G. Shares under option Unissued ordinary shares of the Company under option at the date of this report are as follows: Date options granted 8 April 2013 12 April 2013 22 July 2013 30 September 2013 21 November 2013 24 February 2014 21 November 2014 8 December 2014 6 March 2015 7 July 2015 30 November 2015 30 November 2015 1 February 2016 1 February 2016 18 March 2016 18 March 2016 20 May 2016 Expiry date 9 April 2017 15 April 2017 25 July 2017 2 October 2017 21 November 2017 24 February 2018 21 November 2018 11 December 2018 6 March 2019 7 July 2015 30 November 2019 30 November 2020 31 January 2021 30 November 2021 18 March 2020 18 March 2020 20 May 2020 Strike price of options $0.172 $0.179 $0.444 $0.544 $0.761 $0.730 $1.080 $0.850 $0.790 $0.790 $0.560 $0.400 $0.390 $0.390 $0.395 $0.551 $0.680 Number under option 500,000 300,000 200,000 700,000 5,000,000 2,250,000 2,000,000 2,650,000 3,000,000 300,000 12,145,000 400,000 1,500,000 1,500,000 1,500,000 2,500,000 1,000,000 37,445,000 This is the end of the audited Remuneration Report. Lead Auditor’s Independence Declaration The Lead Auditor’s Independence Declaration is set out on page 48 and forms part of the Directors’ Report for the ﬁ nancial year ended 30 June 2016. Signed in accordance with a resolution of the Directors. On behalf of the Board Dr R Newman Managing Director & CEO 23 August 2016 Directors’ Report Directors’ Report 47 47 Lead Auditor’s Independence Declarati on under secti on 307C of the Corporati ons Act 2001 To: the Directors of Nearmap Ltd I declare that, to the best of my knowledge and belief, in relation to the audit for the ﬁ nancial year ended 30 June 2016 there have been: i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii) no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Trent Duvall Partner Sydney 23 August 2016 KPMG, an Australian partnership and a member ﬁ rm of the KPMG network of independent member ﬁ rms aﬃ liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Profession Standards Legislation. 48 Auditor’s Declaration Auditor's Declaration 48 Image: Southern California Logistics Airport, Victorville, California, United States – July 2016 Image: Manly Vale, NSW – October 2014 49 Southern California Logistics Airport, Victorville, California, United States – July 201650 Las Vegas, Nevada, United States – May 2016Scan the code to see this location change over time. Hope Valley, Western Australia, Australia – May 2016Consolidated Statement of Comprehensive Income for the year ended 30 June 2016 Revenue Other income Total revenue Expenses Employee beneﬁ ts expense Amortisation and depreciation Net foreign exchange differences Other operational expenses Total expenses (Loss) / proﬁ t before tax Income tax expense Loss after tax Notes 4 4 6 5 7 Consolidated 2016 $’000 30,882 407 31,289 (20,303) (5,642) (90) (9,947) (35,982) (4,693) (2,442) (7,135) 2015 $’000 23,702 2,422 26,124 (15,357) (3,137) 398 (7,401) (25,497) 627 (1,416) (789) Other comprehensive income Exchange differences on translation of foreign operations Unrealised loss on cash ﬂ ow hedges 1 (31) (205) (57) Total comprehensive loss attributable to members of the Company (7,165) (1,051) Loss per share attributable to the ordinary equity holders of the Company Basic loss per share (cents per share) Diluted loss per share (cents per share) 14 14 (2.01) (2.01) (0.24) (0.24) The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 54 Financial Report Financial Report 54 Consolidated Statement of Financial Position as at 30 June 2016 Current assets Cash and cash equivalents Trade receivables Other current receivables Total current assets Non-current assets Plant and equipment Intangible assets Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Unearned income Employee beneﬁ ts Other current liabilities Current tax liabilities Total current liabilities Non-current liabilities Deferred tax liabilities Employee beneﬁ ts Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Proﬁ ts reserve Accumulated losses Total equity Notes 13 9 12 11 7 4 7 8 Consolidated 2016 $’000 12,189 4,273 1,774 18,236 6,167 17,240 2,624 26,031 2015 $’000 17,169 4,316 3,540 25,025 4,381 11,266 4,697 20,344 44,267 45,369 1,339 18,908 1,731 1,005 123 23,106 2,525 143 2,668 1,620 15,726 1,779 1,069 - 20,194 2,411 184 2,595 25,774 22,789 18,493 22,580 28,779 10,365 7,078 (27,729) 18,493 27,621 8,475 7,078 (20,594) 22,580 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. Financial Report Financial Report 55 55 Consolidated Statement of Changes in Equity for the year ended 30 June 2016 Consolidated At 1 July 2015 Loss for the year Other comprehensive income: Changes in fair value of cash ﬂ ow hedges Exchange differences on translation of foreign operations Total comprehensive income for the year Transactions with owners of the Company: Loan share options exercised Share options exercised Share-based payment transactions At 30 June 2016 Contributed Accumulated Losses $’000 (20,594) (7,135) Equity $’000 27,621 - Share Based Payment Other Reserve Reserves $’000 (262) - $’000 8,737 - Proﬁ ts Reserve $’000 7,078 - - - - - - (7,135) - - - - - - 1,139 19 - 28,779 - - - (27,729) - - - 7,078 - - 1,920 10,657 (31) 1 (30) - - - (292) Total Equity $’000 22,580 (7,135) (31) 1 (7,165) 1,139 19 1,920 18,493 Consolidated At 1 July 2014 Loss for the year Other comprehensive income: Changes in fair value of cash ﬂ ow hedges Exchange differences on translation of foreign operations Total comprehensive income for the year Transactions with owners of the Company: Share options exercised Share-based payment transactions At 30 June 2015 27,113 - (19,805) (789) 7,078 - 6,119 - - - 20,505 (789) - - - - - (789) - - - - - - 508 - 27,621 - - (20,594) - - 7,078 - 2,618 8,737 (57) (57) (205) (262) - - (262) (205) (1,051) 508 2,618 22,580 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 56 Financial Report Financial Report 56 Consolidated Statement of Cash Flows for the year ended 30 June 2016 Cash ﬂ ows from operating activities Receipts from customers Payments to suppliers and employees1 Interest received Other receipts R&D refund received Income taxes received / (paid) Net cash from operating activities Cash ﬂ ows from investing activities Purchase of plant and equipment Payments for development costs Proceeds from sale of plant and equipment Net cash used in investing activities Cash ﬂ ows from ﬁ nancing activities Proceeds from exercise of share options Proceeds from exercise of loans share options Transfers to non cash trust deposits Net cash from ﬁ nancing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of movement in exchange rates on cash held Cash and cash equivalents at end of year Notes 13 13 Consolidated 2016 $’000 37,286 (38,703) 454 - 1,828 420 1,285 (3,035) (4,427) 72 (7,390) 19 1,139 (112) 1,046 (5,059) 17,169 79 12,189 2015 $’000 26,876 (26,947) 545 76 - (420) 130 (3,164) (3,935) 11 (7,088) 508 - - 508 (6,450) 23,347 272 17,169 1 Includes capture costs in Australia and the US of $1,964,000 and $5,350,000 respectively (2015: $2,091,000, $2,932,000). The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. Financial Report Financial Report 57 57 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 The notes include information which is required to understand the ﬁ nancial statements and is material and relevant to the operations, ﬁ nancial position and performance of the Group. The notes are organised into the following sections: A. Basis of preparation B. Key ﬁ nancial results 1. Reporting entity 4. Segment results C. Capital structure & ﬁ nancial risk management 2. Signiﬁ cant & revenue 8. Contributed equity accounting policies 5. Other operational 3. Other conﬁ rmations expenses 6. Personnel expenses 7. Income tax 9. Financial instruments – fair value and risk management 10. Dividends paid on ordinary shares D. Investing activities 11. Intangibles 12. Plant and equipment 13. Cash ﬂ ow statement E. Other 14. Earning per share 15. Expenditure commitments 16. Parent entity information 17. Group entities 18. Auditor’s remuneration A. Basis of preparation In this section: This section sets out the basis upon which the Group’s ﬁ nancial statements are prepared as a whole. Speciﬁ c accounting policies are described in their respective notes to the ﬁ nancial statements. This section also shows information on new accounting standards, amendments and interpretations, and whether they are effective in 2016 or later years. We explain how these changes are expected to impact the ﬁ nancial position and performance of the Group. The Group’s current liabilities exceeded its current assets as at 30 June 2016 by $4,870,000 including a current liability for unearned income of $18,908,000. Unearned income includes income received in advance which has been deferred in the statement of ﬁ nancial position until service is performed. The preliminary ﬁ nal report has been prepared on a going concern basis, based on the Group’s cash ﬂ ows for the current year and estimated proﬁ ts and cash ﬂ ows for future year. 1. Reporting entity Nearmap Ltd (the ‘Company’) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The Company’s registered ofﬁ ce is at Level 6, 6–8 Underwood Street Sydney NSW 2000. These consolidated ﬁ nancial statements as at 30 June 2016 comprise the Company and its subsidiaries (collectively referred as the ‘Group’ and individually ‘Group entities’). The Group is a for-proﬁ t entity and the nature of the operations and principal activities of the Group are described in the Directors’ Report. The Group is primarily involved in the provision of online PhotoMap content via its 100% owned subsidiaries Nearmap Australia Pty Ltd and Nearmap US Inc. The consolidated ﬁ nancial statements for the year ended 30 June 2016 were authorised for issue in accordance with a resolution of the Directors on 23 August 2016. 2. Signiﬁ cant accounting policies Signiﬁ cant accounting policies have been moved next to the respective note disclosure. Other relevant policies are in this section. 58 Financial Report Financial Report 58 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 b) Changes in accounting policies and new standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2016, and have not been applied in preparing these consolidated ﬁ nancial statements. None of these are expected to have a signiﬁ cant effect on the consolidated ﬁ nancial statements of the Group, except for AASB 9 Financial Instruments, AASB15 Revenue from Contracts with Customers, and AASB 16 Leases, which become mandatory for the Group’s 2019, 2019 and 2020 consolidated ﬁ nancial statements respectively and could change the classiﬁ cation and measurement of ﬁ nancial instruments, revenue recognition and lease recognition. The Group does not plan to adopt these standards early and the extent of the impact has not been determined. A. Basis of preparation 2. Signiﬁ cant accounting policies (cont.) a) Basis of accounting The consolidated ﬁ nancial statements are general purpose ﬁ nancial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated ﬁ nancial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The consolidated ﬁ nancial statements have been prepared on a historical cost basis, except for the revaluation of certain ﬁ nancial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. The Group is of a kind referred to in ASIC Corporations (Rounding in ﬁ nancial/Directors’ Reports) Instrument 2016/191 and in accordance with that instrument, amounts in the consolidated ﬁ nancial report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated. Certain comparative amounts have been reclassiﬁ ed to conform with current year presentation. c) Basis of consolidation The ﬁ nancial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated ﬁ nancial statements, all intercompany balances and transactions, income and expenses and proﬁ t and losses resulting from intra-group transactions have been eliminated. Subsidiaries are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The ﬁ nancial statements of subsidiaries are included in the consolidated ﬁ nancial statements from the date that control commences until the date that control ceases. When the Company ceases to have control, joint control or signiﬁ cant inﬂ uence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in proﬁ t or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or ﬁ nancial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Company had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassiﬁ ed to proﬁ t or loss. Financial Report Financial Report 59 59 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 A. Basis of preparation 2. Signiﬁ cant accounting policies (cont.) d) Signiﬁ cant accounting judgements, estimates and assumptions The carrying amount of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key judgments and estimates which are material to the ﬁ nancial report are found in the following notes: – Note 6(i): Share-based payments – Note 7: Income tax – Note 11: Intangibles Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Foreign currency differences are generally recognised in proﬁ t or loss. However, foreign currency differences arising from the translation of the following item is recognised in OCI: – qualifying cash ﬂ ow hedges to the extent that the hedges are effective. ii) Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into Australian dollars at the exchange rates at the dates of the transactions. Foreign currency differences are recognised in OCI and accumulated in the translation reserve. e) Foreign currencies i) Foreign currency transactions Both the functional and presentation currency of the Company and its Australian subsidiaries is Australian dollars (A$). Each entity in the Group determines its own functional currency and items included in the ﬁ nancial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. 3. Other conﬁ rmations Contingent liabilities As at 30 June 2016, the Directors are not aware of any contingent liabilities in relation to the Company or the Group. Subsequent events There were no matters or circumstances speciﬁ c to the Company or the Group that have arisen since 30 June 2016 that have signiﬁ cantly affected or may signiﬁ cantly affect: – the Company or Group’s operations in future years; – the results of those operations in future ﬁ nancial years; or – the Company or Group’s state of affairs in future ﬁ nancial years. Related parties Other than the loans granted under the employee loan scheme as disclosed in note 6 per the ﬁ nancial statements, there have been no sales, purchases or other transactions with related parties during the year ended 30 June 2016 (year ended 30 June 2015: nil). 60 Financial Report Financial Report 60 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results In this section: This section explains the results and performance of Nearmap Ltd and provides additional information about those individual line items in the ﬁ nancial statements that the Directors consider most relevant in the context of the operations of the entity, including: a) Accounting policies that are relevant for understanding the items recognised in the ﬁ nancial statements; and b) Analysis of the Group’s result for the year by reference to key areas, including: segment results and revenue, operational expenses, personnel costs including share-based payments and income tax. 4. Segment results and revenue This note provides results by operating segment for the year ended 30 June 2016. Operating segments are reported in a manner that is consistent with the internal reporting provided to the Chief Operating Decision Maker. The Chief Operating Decision Maker has been identiﬁ ed as the Nearmap Board who ultimately makes strategic decisions. This note also provides additional information on revenue, including types of revenue and the respective recognition criteria. i) Segment reporting An overview of the new operating segments is provided below: Segment Australia United States Corporate Information Responsible for all sales and marketing efforts in Australia. Responsible for all sales and marketing efforts in the United States. Holds all the IP and product “know-how” which allows Nearmap to deliver its product offering, being online aerial photomapping. The segment facilitates the day to day survey operations globally. Cost of revenue are all the costs directly attributable to the ongoing delivery of the subscription product, including amortisation of capture costs and technology costs. Sales and marketing costs include direct in-country costs. General and administration costs for the Corporate segment represent all operating expenses and product design and uncapitalised development expenses. The assets and liabilities of the Group are reported and reviewed by the Chief Operating Decision Maker in total and not allocated by operating segment. Therefore, operating segment assets and liabilities are not disclosed. Financial Report Financial Report 61 61 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results 4. Segment results and revenue (cont.) i) Segment reporting (cont.) Year ended 30 June 2016 Total revenue Cost of revenue1 Gross Proﬁ t Sales & marketing General & administration Segment contribution Amortisation & depreciation2 FX Loss Income tax expense Loss after tax Year ended 30 June 2015 Total revenue Cost of revenue1 Gross Proﬁ t Sales & marketing General & administration Segment contribution Amortisation & depreciation2 FX Gain Income tax expense Loss after tax Australia $’000 29,746 (2,828) 26,918 (7,774) (2,693) 16,451 United States $’000 1,002 (3,036) (2,034) (5,755) (4,151) (11,940) Corporate $’000 541 - 541 - (6,660) (6,119) Australia $’000 23,615 (2,891) 20,724 (5,875) (2,774) 12,075 United States $’000 11 (1,322) (1,311) (1,997) (3,342) (6,650) Corporate $’000 2,498 - 2,498 - (5,549) (3,051) Total $’000 31,289 (5,864) 25,425 (13,529) (13,504) (1,608) (2,995) (90) (2,442) (7,135) Total $’000 26,124 (4,213) 21,911 (7,872) (11,665) 2,374 (2,145) 398 (1,416) (789) 1 Includes amortisation of capitalised capture costs 2 Includes amortisation and depreciation of business combinations and global assets 62 Financial Report Financial Report 62 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results 4. Segment results and revenue (cont.) Accounting policy – revenue recognition and measurement Revenue is recognised to the extent that it is probable that the economic beneﬁ ts will ﬂ ow to the Group and the revenue can be reliably measured. The following speciﬁ c revenue recognition criteria must also be met before revenue is recognised: Subscription revenue Subscription revenue is recognised over the life of the contract in line with when the signiﬁ cant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, and the amount of revenue can be measured reliably. The timing of the transfer of risks and rewards varies depending on the individual terms of the subscription agreement. On-demand revenue On-demand revenue is recognised in accordance with the percentage of completion method. The stage of completion is measured by reference to percentage area captured to date as a percentage of the total estimated capture area for each contract. Royalty income Royalty income is earned through third parties who sell Nearmap imagery on behalf of the Group. It is recognised when the contract of sale between the parties have been signed. Grant income Grant income is the New South Wales payroll grant of $134,000 received from Ofﬁ ce of State Revenue. It is recognised when incremental headcounts are hired for new jobs created. Interest income Interest income is recognised as interest accrues using the effective interest method. Unearned revenue Prepaid amounts received from customers in advance are deferred to the relevant future subscription agreement periods. Unearned revenue comprises photo mapping subscription license service fees charged, the revenue for which is primarily recognised in the proﬁ t or loss over the subscription period. Unearned revenue at 30 June 2016 was $18,908,000 (2015: $15,726,000). ii) Total revenue Subscription revenue On-demand revenue Royalty income Grant income Interest income R&D tax credit Total revenue Consolidated 2016 $’000 30,592 75 81 134 30,882 407 - 407 31,289 2015 $’000 23,432 194 - 76 23,702 594 1,828 2,422 26,124 Financial Report Financial Report 63 63 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results 5. Other operational expenses Servicing and processing costs Operating lease expenses Travel and ofﬁ ce costs Audit, consulting and legal fees Insurance costs Marketing costs Subscription costs All other operating expenses Consolidated 2016 $’000 1,790 917 1,560 1,652 304 1,532 1,128 1,064 9,947 2015 $’000 1,241 452 1,836 1,896 232 410 655 679 7,401 6. Personnel expenses Personnel disclosures include information on i) share-based payments, ii) employee beneﬁ ts expense and iii) key management personnel. i) Share-based payments An Employee Share Option Plan has been established whereby Directors and certain employees of the consolidated entity may be issued with options over the ordinary shares of the Company. The options, which are usually issued for nil consideration at an exercise price calculated with reference to prevailing market prices, are issued in accordance with terms established by the Directors of the Company. The options are generally issued for 4 years and are exercisable on various dates (usually in 2 or 3 equal annual tranches when vested) within 4 years from the issue date. The options cannot be transferred without the approval of the Company’s Board and are not quoted on the ASX. Nearmap’s Employee Share Option Plan also includes an Employee Loan Scheme that permits Nearmap to grant ﬁ nancial assistance to employees by way of LRLs to enable them to exercise options and acquire shares. 64 Financial Report Financial Report 64 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results 6. Personnel expenses (cont.) i) Share-based payments (cont.) Key estimates and judgments The Group estimates the fair value of equity-settled transactions (share options and LRLs at the date at which they are granted. The fair value is determined using the Black-Scholes model and includes assumptions in the following areas: risk free rate, volatility and estimated service periods. The expected life of the options is based on historical data and not necessarily indicative of exercise patters than may occur. The expected volatility reﬂ ects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be actual outcome. No other features of options granted were incorporated into the measurement of fair value. There are no voting or dividend rights attached to the options. Accounting policy - recognition and measurement of share-based payments In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Company (‘market conditions’) if applicable. The fair value of equity-settled transactions is recognised, together with the corresponding increase in equity, over the period in which the performance conditions are fulﬁ lled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting period’). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reﬂ ects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. The proﬁ t or loss charge or credit for a period represents the movement in cumulative expense recognised at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. A modiﬁ cation of terms of share-based payment transactions occurs when the Board accepts a loan request submitted by an employee of the Group to exercise fully vested options under the Employee Loan Scheme through a LRL in lieu of cash payment of the exercise price. Since the terms of an equity-settled award are modiﬁ ed, as a minimum an expense is recognised as if the terms had not been modiﬁ ed. In addition, an expense is recognised for any modiﬁ cation that increases the total fair value of the share-based payment arrangement, or is otherwise beneﬁ cial to the employee, as measured at the date of modiﬁ cation. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modiﬁ cation of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reﬂ ected as additional share dilution in the computation of earnings per share. Financial Report Financial Report 65 65 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results 6. Personnel expenses (cont.) i) Share-based payments (cont.) Expenses arising from share-based payment transactions during the year was $1,920,000 (2015: $2,618,000). The following table lists the options and LRLs granted and the inputs to the model used to measure their fair value for the years ended 30 June 2016 and 30 June 2015 to key management personnel: Model inputs to share option and LRL grants 30 June 2016 (key management personnel) Grant date Expiry date 30 June 2015 21 Nov 2014 21 Nov 2018 1 Dec 2014 1 Dec 2017 10 Mar 2015 10 Mar 2018 27 Mar 2015 27 Mar 2018 17 Apr 2015 17 Apr 2015 30 June 2016 17 Apr 2018 17 Apr 2018 30 Nov 2015 30 Nov 2019 30 Nov 2015 30 Nov 2019 31 Jan 2016 31 Jan 2021 18 Mar 2016 18 Mar 2020 18 Mar 2016 18 Mar 2020 20 May 2016 20 May 2020 Exercise price2 $ Number of options / LRLs granted Fair value at grant date $ Expected price volatility % Risk free interest rate % Expected life (years) 1.08 0.09 0.18 0.09 0.49 0.63 0.56 0.56 0.39 0.40 0.551 0.68 5,000,000 5,000,000 2,500,000 1,000,000 1,500,000 1,500,000 4,500,000 4,750,000 3,000,000 1,500,000 2,500,000 1,000,000 0.2160 0.5934 0.3792 0.4839 0.2980 0.2628 0.1135 0.1157 0.1486 0.1547 0.1125 0.1532 60 75 75 75 75 75 53 53 53 53 53 58 2.77 2.35 1.96 1.78 1.79 1.79 2.19 2.19 1.89 1.89 2.05 1.73 2.75 3 3 3 3 3 3.5 3.5 3.5 3.5 3.5 3.5 1 These relate to grants of LRLs to key management personnel under the Employee Loan Scheme. 2 The exercise price of LRLs is determined based on the loan principal plus accrued interest divided by the number of shares exercised. 66 Financial Report Financial Report 66 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results 6. Personnel expenses (cont.) i) Share-based payments (cont.) The following table lists the options and LRLs granted and the inputs to the model used to measure their fair value for the years ended 30 June 2016 and 30 June 2015 to other executives: Model inputs to share option and LRL grants 30 June 2016 (Other Executives) Grant date Expiry date 30 June 2015 11 Dec 2014 11 Dec 2018 23 Dec 2014 23 Dec 2017 6 Mar 2015 6 Mar 2015 6 Mar 2019 6 Mar 2020 24 Jun 2015 24 Jun 2018 30 June 2016 7 Jul 2015 30 Jun 2019 30 Nov 2015 30 Nov 2019 30 Nov 2015 30 Nov 2020 Exercise price2 $ Number of options / LRLs granted Fair value at grant date $ Expected price volatility % Risk free interest rate % Expected life (years) 0.85 0.08 0.79 0.56 0.09 0.79 0.56 0.40 4,050,000 400,000 3,000,000 2,710,000 200,000 700,000 3,295,000 400,000 0.1608 0.5734 0.1453 0.2037 0.5435 0.1631 0.1157 0.1553 57 75 56 56 75 54 53 53 2.77 2.25 1.98 1.98 2.06 2.08 2.19 2.19 2.75 3 2.75 2.75 3 3.5 3.5 3.5 1 These relate to grants of LRLs to key management personnel under the Employee Loan Scheme. 2 The exercise price of LRLs is determined based on the loan principal plus accrued interest divided by the number of shares exercised. The following table lists the roll-forward in number of options for the years ended 30 June 2016 and 30 June 2015 for key management personnel and other executives combined: Reconciliation of options issued under Employee Share Option Plan 30 June 2016 30 June 2015 Balance at 1 July Granted Forfeited Exercised Balance 30 June Vested & exercisable Total number of options 35,750,000 14,760,000 (1,805,000) (18,150,000) 30,555,000 1,950,000 Weighted average price $ 0.37 0.86 0.6 0.14 0.79 0.32 30 June 2016 Total number of options 30,555,000 21,645,000 (14,005,000) (750,000) 37,445,000 6,025,000 Weighted average price $ 0.79 0.53 0.57 0.14 0.64 0.69 Financial Report Financial Report 67 67 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results 6. Personnel expenses (cont.) i) Share-based payments (cont.) LRLs advanced to key management personnel LRLs advanced to key management personnel during the year ended 30 June 2016 amounted to $2,317,000 (30 June 2015: $3,068,000). Loans are interest bearing and interest accrues daily. Interest on the loans during the period has been accrued at rates of between 1.75% and 5.65%. Loans are repayable three years after the issue date subject to the total share value being greater than the loan’s principal plus accrued interest. No loans to key management personnel were repaid during the year. Details in relation to key management personnel, including remuneration paid, are included in the Remuneration Report section of the Director’s Report. LRLs advanced to other executives LRLs advanced to other executives during the year ended 30 June 2016 amounted to $86,000 (30 June 2015: $45,000). Loans are interest bearing and interest accrues daily. Interest on the loans during the period has been accrued at rates of between 1.75% and 5.65%. Loans are repayable four years after the issue date subject to the total share value being greater than the loan’s principal plus accrued interest. No loans to other executives were repaid during the year. ii) Employee beneﬁ ts expense Share based payment expense Deﬁ ned contribution plan expense Other employee beneﬁ ts expenses iii) Key management personnel disclosures Short-term employee beneﬁ ts Short-term employee bonus Long-term employee beneﬁ ts Post-employment beneﬁ ts Share-based payments Consolidated 2015 $’000 2,618 779 11,960 15,357 Consolidated 2015 $’0001 1,658 583 21 122 2,181 4,565 2016 $’000 1,920 1,044 17,339 20,303 2016 $’000 2,612 736 11 148 1,508 5,015 1 Mr J Biviano and Ms L Rankin became key management personnel in the current year. The comparatives have been amended to include their respective remuneration in the prior year. 68 Financial Report Financial Report 68 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results 7. Income tax Key estimates and judgments Deferred tax Pursuant to AASB 112 Income Taxes, the Company has assessed its best estimate of the probability that future taxable proﬁ ts will be available against which the Group can utilise its unused tax losses and deductible temporary differences in future periods. Accounting policy - recognition and measurement of income tax Research and development tax incentive The Group accounts for the beneﬁ t of refundable research and development tax incentives as government grant income, which is recognised when there is reasonable assurance that the Group will comply with the conditions that attach to the incentive and that it will be received. The income is recognised in Other Income on a systematic basis over the periods in which the Group recognises the related research and development expense. The Group accounts for any non-refundable research and development tax credits as an income tax beneﬁ t. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable proﬁ t will be available against which the deductible temporary differences, and the carry- forward of unused tax assets and unused tax losses can be utilised: – except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting proﬁ t nor taxable proﬁ t or loss; and – in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable proﬁ t will be available against which the temporary differences can be utilised. Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for ﬁ nancial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences: – except where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting proﬁ t nor taxable proﬁ t or loss; and – in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Financial Report Financial Report 69 69 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results 7. Income tax (cont.) Accounting policy - recognition and measurement of income tax (cont.) Income tax (cont.) The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufﬁ cient taxable proﬁ t will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable proﬁ t will allow the deferred tax asset to be recovered. Tax consolidation The Company and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Nearmap Ltd, and the controlled entities in the tax consolidated Group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated Group continues to be a standalone taxpayer in its own right. In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated Group. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Income taxes relating to items recognised directly in equity are recognised in equity and not in the proﬁ t and loss. 70 Financial Report Financial Report 70 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results 7. Income tax (cont.) Income tax expense Current tax expense Deferred tax expense Numerical reconciliation of income tax expense to prima facie tax payable (Loss) / proﬁ t before income tax Tax at the Australian tax rate of 30% (2015:30%) Tax effect of amounts which are not deductible in calculating taxable income: R&D grant Effect of higher tax rate in the US Shared based payments expense Entertainment expenses Other non-deductible expenses Current year losses for which no deferred tax asset is recognised Over provision in the prior year Consolidated 2016 $’000 (869) (1,573) (2,442) (4,693) 1,408 266 600 (532) (79) 31 (4,320) 184 (2,442) 2015 $’000 (194) (1,222) (1,416) 627 (188) 955 347 (788) (5) (1,737) - - (1,416) Financial Report Financial Report 71 71 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 B. Key ﬁ nancial results 7. Income tax (cont.) Deferred tax balances 2016 R&D credits carry forward Tax losses Unearned revenue Provisions and other accruals Plant and equipment Intangible assets Other Derivative instruments Unrealised foreign exchange loss Net tax assets/(liabilities) 2015 Tax losses Unearned revenue Provisions and other accruals Plant and equipment Intangible assets Prepayments Derivative instruments Net tax assets/(liabilities) Recognised in the statement of proﬁ t or loss $’000 2,102 (1,875) - 240 (2) (1,947) 18 - (109) (1,573) Balance 1 July $’000 - 4,300 39 341 (52) (2,359) - 17 - 2,286 Change in recognised amount $’000 (743) (468) 388 168 836 (838) 22 21 - (614) - 4,020 285 (57) (464) (2) - 3,782 4,597 (3,983) 51 (1,888) - 1 - (1,222) (297) 2 5 1,893 (1,895) 1 17 (274) Balance 30 June $’000 1,359 1,957 427 749 782 (5,144) 40 38 (109) 99 4,300 39 341 (52) (2,359) - 17 2,286 Assets $’000 - 1,957 427 255 (15) - - - - 2,624 4,300 39 341 - - - 17 4,697 Liabilities $’000 1,359 -- -- 494 797 (5,144) 40 38 (109) (2,525) -- -- -- (52) (2,359) -- -- (2,411) 72 Financial Report Financial Report 72 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 C. Capital structure and ﬁ nancial risk management In this section: This section outlines how Nearmap manages its capital structure and discusses the Group’s exposure to various ﬁ nancial risks and how the Group manages these risks. Capital Risk Management The Group’s objective in managing capital is to safeguard its ability to continue as a going concern, so it can continue to commercialise intellectual property with the ultimate objective of providing returns to shareholders whilst maintaining an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure the Company may issue new shares, sell assets, consider joint ventures and may return capital in some form to shareholders. 8. Contributed equity Ordinary shares are classiﬁ ed as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Details in relation to share option movements and the share incentive scheme are contained in note 6. 2016 2015 Movement in shares on issue Balance at the beginning of the year Issue of shares during the year Issued from exercise of share options Issued from exercise of loans share options Repayment of loans Balance at the end of the year Number of shares 355,496,101 - 250,000 500,000 - 356,246,101 $'000 27,621 - 19 - 1,139 28,779 Number of shares 337,346,101 - 6,050,000 12,100,000 - 355,496,101 $'000 27,113 - 508 - - 27,621 Terms and conditions of contributed equity Ordinary shares: Ordinary shares have the right to receive dividends as declared and in the event of winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on the shares held. Financial Report Financial Report 73 73 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 C. Capital structure and ﬁ nancial risk management Accounting policy – derivative ﬁ nancial instruments and hedge accounting The Group holds derivative ﬁ nancial instruments to hedge its foreign currency risk exposures. These derivative instruments are designated as cash ﬂ ow hedging instruments. The effective portion of changes in the fair value of the derivative is recognised in OCI and accumulated in the hedging reserve. Any ineffective portion of changes in the fair value of the derivatives is immediately recognised in proﬁ t or loss. The amount accumulated in equity is retained in OCI and reclassiﬁ ed to proﬁ t or loss in the same period or periods during which the hedged item affects proﬁ t or loss. 9. Financial instruments – fair value and risk management Accounting policy – ﬁ nancial instruments carried at fair value The fair value of ﬁ nancial assets and ﬁ nancial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of these instruments is categorised into different levels of the fair value hierarchy based on the inputs used in the valuation techniques as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can assess at the measurement date. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period which the transfer has occurred. The Group’s principal ﬁ nancial instruments comprise cash, short-term deposits and derivatives. The Group is primarily exposed to the following risks arising from ﬁ nancial instruments: – Market risk, particularly in relation to foreign currencies (see 9(ii)); – Credit risk (see 9(iii)). This note provides information about the Group’s exposure to the above risks and its objectives, policies and processes for measuring and managing those risks. i) Risk management framework The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board of Directors have established the Audit and Risk Management Committee which is responsible for developing and monitoring the Group’s risk management policies. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies are reviewed regularly to reﬂ ect changes in the market and the Group’s activities. 74 Financial Report Financial Report 74 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 C. Capital structure and ﬁ nancial risk management 9. Financial instruments – fair value and risk management (cont.) ii) Market risk Market risk is the risk that changes in market prices – such as foreign exchange rates and interest rates – will affect the Group’s income or the value of its holdings of ﬁ nancial instruments. The Group uses derivatives to manage market risk related to foreign currencies. All such transactions are carried out within the guidelines of the Group’s risk management policies. Currency risk The Group’s functional currency is the Australian dollar (AUD) and it is exposed to currency risk on payments denominated in the United States dollar (USD). The Group uses forward exchange contracts to hedge its currency risk, all of which have a maturity of less than six months from the reporting date. The currency risk relating to payments denominated in USD have been fully hedged, with the forward exchange contracts maturing on the same dates that the forecast payments are expected to occur. These contracts are designated as cash ﬂ ow hedges. In respect of other monetary assets and liabilities denominated in foreign currencies, the Group’s policy is to ensure the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary. Exposure to foreign currency risk The summary quantitative data about the Group’s exposure to foreign currency risk is as follows: Cash and cash equivalents Receivables and other assets Payables and other liabilities Gross exposure Consolidated 2016 US$’000 1,960 288 851 3,099 2015 US$’000 2,110 344 980 3,434 The following signiﬁ cant exchange rates applied during the year: USD Average rate Year end spot rate 2016 0.7283 2015 0.8382 2016 0.7426 2015 0.7680 Financial Report Financial Report 75 75 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 C. Capital structure and ﬁ nancial risk management 9. Financial instruments – fair value and risk management (cont.) ii) Market risk (cont.) Sensitivity analysis A 10 percent strengthening or weakening of the Australian to US dollar exchange rate would have increased / (decreased) the net assets denominated in foreign currencies by the following amounts: 10% -10% Consolidated 2016 $’000 (171) 209 2015 $’000 (174) 213 Interest rate risk The Group is exposed to changes in interest rates as it relates to the Company’s short-term deposits. The Company monitors changes in interest rates regularly to ensure the best possible return on deposits. Changes to interest rates in this context are not considered a signiﬁ cant ﬁ nancial risk. iii) Credit risk Credit risk is the risk of ﬁ nancial loss to the Group if a customer or counterparty to a ﬁ nancial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and forward exchange contracts. The Group trades primarily with recognised, creditworthy third parties. Trade and other receivables The Group’s exposure to credit risk is inﬂ uenced mainly by the individual characteristics of each customer. Receivable balances are monitored on an ongoing basis, with the result that the Group’s exposure to bad debts is not signiﬁ cant. Ageing proﬁ le of trade receivables Current 31 to 60 days overdue Over 61 days overdue Over 90 days overdue Impairment loss Consolidated 2016 $’000 4,119 33 68 225 (172) 4,273 2015 $’000 4,202 91 16 19 (12) 4,316 76 Financial Report Financial Report 76 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 C. Capital structure and ﬁ nancial risk management 9. Financial instruments – fair value and risk management (cont.) iii) Credit risk (cont.) Cash and cash equivalents The Group held cash and cash equivalents with bank and ﬁ nancial institution counterparties which are rated BBB or above based on Standards & Poors ratings. Derivatives The forward exchange contracts are entered into with bank institutions which are rated BBB or above based on Standard & Poor ratings and are authorised in accordance with our Foreign Exchange Risk Management Policy. The carrying amount of the Group’s ﬁ nancial assets represents maximum credit exposure and is as follows: Cash and cash equivalents Trade receivables Prepayments and other receivables Consolidated 2016 $’000 12,189 4,273 1,774 2015 $’000 17,169 4,316 3,540 Accounting policy – trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 7–60 days. The Group has no reliance on any major customers. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account for impairment is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms (such as signiﬁ cant ﬁ nancial difﬁ culties of the debtor, probability of bankruptcy, etc). The amount of the impairment loss is recognised in proﬁ t or loss within other expenses. When a trade receivable for which an impairment allowance has been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement. Liquidity Risk Liquidity risk is the risk that the Group will encounter difﬁ culty in meeting the obligations associated with its ﬁ nancial liabilities that are settled by delivering cash or another ﬁ nancial asset. The Group’s objective is to maintain a balance between continuity of funding and ﬂ exibility through the use of its cash and funding requirements. The Group continually monitors forecast and actual cash ﬂ ows and the maturity proﬁ les of assets and liabilities to manage its liquidity risk. Financial Report Financial Report 77 77 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 C. Capital structure and ﬁ nancial risk management 9. Financial instruments – fair value and risk management (cont.) iv) Fair values The fair values of other ﬁ nancial assets and ﬁ nancial liabilities, together with the carrying amounts in the Consolidated Statement of Financial Position, at 30 June 2016 and 30 June 2015 is detailed below. Financial liabilities Forward exchange contracts used for hedging1 2016 $’000 Carrying amount (126) $’000 2015 $’000 Fair value Carrying amount (57) (126) $’000 Fair value (57) 1 The forward exchange contracts are not quoted in active markets as they are not traded on a recognised exchange. Instead, the Group uses valuation techniques (present value techniques) which use both observable and unobservable market inputs. As these ﬁ nancial instruments use valuation techniques with unobservable inputs that are not signiﬁ cant to the overall valuation, these instruments are included in Level 2 of the fair value hierarchy. There were no transfers between levels of the fair value hierarchy during the year-ended 30 June 2016. The Group has not disclosed the fair values for ﬁ nancial instruments such as short-term trade receivables and payables because their carrying amounts are a reasonable approximation of fair values. 10. Dividends paid on ordinary shares No dividends were paid or proposed for the year ending 30 June 2016 (2015: nil). Franking credit balance The amount of franking credits available for the subsequent ﬁ nancial year are: Franking account balance as at the beginning of the ﬁ nancial year at 30% (2015: 30%) Franking credits utilised through the receipt of R&D credits as at the end of the ﬁ nancial year Consolidated 2016 $’000 - - - - 2015 $’000 - - - - Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the ﬁ nancial year but not distributed at reporting date. 78 Financial Report Financial Report 78 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 D. Investing activities In this section: This section outlines Nearmap’s investment in intangible assets and property, plant and equipment as well as a broader discussion on the entity’s cash ﬂ ows. 11. Intangibles Key estimates and judgments Capture costs Pursuant to AASB 138 Intangible Assets, the Company has assessed its best estimate of the probability that the expected future economic beneﬁ ts attributable to the Group’s digital imagery will ﬂ ow to the entity. As a result, capture costs directly attributable and necessary to create and upload digital imagery online have been recognised as an intangible asset. Capture costs capitalised are being amortised over a period of 5 years. Amortisation of capture costs has been included within ‘depreciation and amortisation expenses’ in the Consolidated Statement of Comprehensive Income. Impairment of assets The Group assesses impairment at each reporting date by evaluation of conditions speciﬁ c to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates, including forecasting of proﬁ ts, cash ﬂ ows, and discount rates. Accounting policy - impairment of assets The Group assesses at each reporting period whether there is an indication that an asset (other than goodwill or intangibles with indeﬁ nite useful life) may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inﬂ ows that are largely independent of those from other assets or groups of assets and the assets value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash generating unit to which it belongs. When the carrying amount of an asset or cash generating unit exceeds its recoverable amount, the asset or cash generating unit is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash ﬂ ows are discounted to their present value using a pre-tax discount rate that reﬂ ects current market assessments of the time value of money and the risks speciﬁ c to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in estimate used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised in the asset in prior years. Such reversal is recognised in proﬁ t or loss unless the asset is carried at revalued amount, in which case the reversal is treated as revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Financial Report Financial Report 79 79 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 D. Investing activities 11. Intangibles (cont.) Accounting policy - recognition and measurement of intangibles Research and development costs Intangible assets acquired separately are capitalised at cost and those arising from a business combination are capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets. The amortisation period and method for intangible assets are reviewed at least annually to determine if the useful lives should be changed. Where there is an expectation that the period or method does not match the consumption of the economic beneﬁ ts embedded within the asset, the useful life of the asset will be amended to reﬂ ect this change. Intangible assets are tested for impairment where an indicator of impairment exists, and in the case of intangibles under development impairment is tested annually or at each reporting period where an indicator exists, at the cash- generating unit level. A summary of the amortisation applied to the Group's intangible assets is as follows: Development costs, patents, capture costs and licences Useful lives Finite (generally for a period of 5–20 years). Amortisation method used Amortised over the period of expected future beneﬁ t. The expected useful life is reviewed annually. Internally generated or acquired and internally generated. Impairment testing Annually as at 30 June for assets not yet available for use and more frequently when an indication of impairment exists. The patents and licences have been granted or are expected to be granted for a minimum of 20 years by the relevant government agency with the option of renewal without signiﬁ cant cost at the end of this period provided that the Group meets certain predetermined targets. Accordingly, the patents and licences have been determined to have ﬁ nite useful lives. Gains or losses arising from de- recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the proﬁ t or loss when the asset is derecognised. Research costs and costs that do not meet the deﬁ nition of development costs for the purpose of the standard are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic beneﬁ ts, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected beneﬁ t from the related project. The carrying value of an intangible asset arising from development expenditure is tested for impairment annually when the asset is not yet available for use or more frequently when an indication of impairment rises during the reporting period. 80 Financial Report Financial Report 80 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 D. Investing activities 11. Intangibles (cont.) Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquiree’s identiﬁ able assets, liabilities and contingent liabilities. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate the carrying value may be impaired. All goodwill acquired through business combinations has been allocated to the nearmap.com cash generating unit. The recoverable amount of the nearmap.com cash generating unit has been determined based on a value-in-use calculation using cash ﬂ ow projections based on Board approved budgets and a 4 year forecast period approved by senior management. No impairment was recognised at 30 June 2016 (2015: nil). Goodwill $’000 Development costs $’000 Capture costs $’000 Reconciliation of carrying amount as at 30 June 2016 Balance at the beginning of the year Additions Amortisation Transfers to Plant and equipment (at net book value) 135 - - - Closing balance at the end of the year 135 At 30 June 2016 Cost Accumulated amortisation Closing net book amount Reconciliation of carrying amount as at 30 June 2015 Balance at the beginning of the year Additions Amortisation Closing balance at the end of the year At 30 June 2015 Cost Accumulated amortisation Closing net book amount 135 - 135 135 - - 135 135 - 135 5,358 3,872 (2,825) (526) 5,879 13,783 (7,904) 5,879 4,166 3,431 (2,239) 5,358 13,480 (8,122) 5,358 5,125 7,135 (1,913) 32 10,379 13,018 (2,639) 10,379 745 5,023 (643) 5,125 5,862 (737) 5,125 Other $’000 648 555 (363) 7 847 1,408 (561) 847 222 591 (165) 648 853 (205) 648 Total $’000 11,266 11,562 (5,101) (487) 17,240 28,344 (11,104) 17,240 5,268 9,045 (3,047) 11,266 20,330 (9,064) 11,266 Financial Report Financial Report 81 81 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 D. Investing activities 12. Plant and equipment Accounting policy – plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Depreciation is calculated over the estimated useful life of the assets, between 2 and 10 years, on a straight line basis. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each ﬁ nancial year end. i) De-recognition and disposal An item of plant and equipment is derecognised upon disposal or when no future economic beneﬁ ts are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in proﬁ t or loss in the year the asset is derecognised. Reconciliation of carrying amount as at 30 June 2016 Balance at the beginning of the year Additions Disposals Depreciation Transfers from Intangible assets (at net book value) Closing balance at the end of the year At 30 June 2016 Cost Accumulated depreciation Closing net book amount Reconciliation of carrying amount as at 30 June 2015 Balance at the beginning of the year Additions Disposals Depreciation Closing balance at the end of the year At 30 June 2015 Cost Accumulated depreciation Closing net book amount Ofﬁ ce equipment & furniture $’000 519 665 - (380) 20 824 1,844 (1,020) 824 233 470 (10) (174) 519 922 (403) 519 Camera systems $’000 3,862 2,390 (114) (1,262) 467 5,343 10,872 (5,529) 5,343 1,169 3,129 - (436) 3,862 5,101 (1,239) 3,862 Total $’000 4,381 3,055 (114) (1,642) 487 6,167 12,716 (6,549) 6,167 1,402 3,599 (10) (610) 4,381 6,023 (1,642) 4,381 82 Financial Report Financial Report 82 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 D. Investing activities 13. Cash ﬂ ow statement Cash and short-term deposits in the Consolidated Statement of Financial Position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the Statement of Cash Flow, cash and cash equivalents consist of cash and cash equivalents as deﬁ ned above, net of outstanding bank overdrafts. Cash at banks and short term deposits earn interest at ﬂ oating rates based on daily bank deposit rates. The Company had no ﬁ nancing facilities as of 30 June 2016 (2015: nil). Consolidated Reconciliation of the net loss to the net cash ﬂ ows from operations Loss after tax Adjustment for non-cash items Amortisation and depreciation Capitalised amortisation and depreciation Net unrealised exchange differences Share based payment expense Loss on disposal of non-current assets Changes in assets and liabilities Payables and other current liabilities Receivables Provision for employee beneﬁ ts Other non-current assets Income tax Net cash from operating activities Reconciliation of cash Cash equivalents comprises Cash at bank and on hand Short term deposits at call 2016 $’000 (7,135) 6,747 (1,105) 10 1,920 42 2,806 1,809 (89) (6,030) 2,310 1,285 5,319 6,870 12,189 2015 $’000 (789) 3,658 (522) (480) 2,618 - 2,710 (4,561) 1,023 (5,023) 1,496 130 4,665 12,504 17,169 Financial Report Financial Report 83 83 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 E. Other In this section: This section provides information on items which require disclosure to comply with Australian Accounting Standards and other regulatory pronouncements however are not considered critical in understanding the ﬁ nancial performance or position of the Group. 14. Earnings per share Basic earnings per share is calculated as net proﬁ t/loss attributable to shareholders, adjusted to exclude costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net proﬁ t attributable to shareholders, adjusted for: – costs of servicing equity (other than dividends); – the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and – other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. Net loss attributable to ordinary equity holders Net loss used in calculating diluted earnings per share Weighted average number of ordinary shares on issue used in the calculation of basic proﬁ t per share Weighted average number of ordinary shares on issue used in the calculation of diluted proﬁ t per share Consolidated 2016 $’000 (7,135) (7,135) 2015 $’000 (789) (789) Number of shares Number of shares 355,572,813 330,667,744 355,572,813 330,667,744 Earnings per share attributable to the ordinary equity shareholders of the Company: Basic loss per share (cents per share) Diluted loss per share (cents per share) (2.01) (2.01) (0.24) (0.24) The options granted to employees are considered to be ordinary shares and are included in the determination of diluted earnings per share to the extent to which they are dilutive. There have been no other conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of these ﬁ nancial statements. 84 Financial Report Financial Report 84 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 E. Other 15. Expenditure commitments Accounting policy – leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulﬁ lment of the arrangement is dependent on the use of a speciﬁ c asset or assets and the arrangement conveys a right to use the asset. Operating lease payments are recognised as an expense in the proﬁ t or loss on a straight line basis over the lease term. Lease incentives are recognised in the income statement as an integral part of the total lease expense. Expenditure commitments There are no capital expenditure commitments or hire purchase commitments contracted at 30 June 2016 (2015: nil). Operating lease commitments Minimum lease payments – Not later than one year – Later than one year and no later than ﬁ ve years Aggregate lease expenditure contracted for at reporting date 2016 $’000 1,176 2,076 3,252 2015 $’000 330 67 397 Operating lease commitments relate primarily to commercial ofﬁ ce premises and IT related leases. These leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. 16. Parent entity information Financial position information relating to the Company Current assets Total assets Current liabilities Total liabilities Net assets Contributed equity Reserves Accumulated losses Total shareholder equity Loss and total comprehensive income of the parent entity 2016 $’000 22,240 22,454 (187) (188) 22,266 28,779 10,533 (17,046) 22,266 (1,914) 2015 $’000 21,057 21,271 (101) (101) 21,170 27,621 8,680 (15,131) 21,170 (2,844) Financial Report Financial Report 85 85 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 E. Other 16. Parent entity information (cont.) Information relating to the Company The parent entity has not entered into any guarantees with its subsidiaries. Details of the contingent liabilities of the Group are contained in note 3. There are no contingent liabilities of the parent entity. Details of the contractual commitments of the Group are contained in note 15. There are no contractual commitments of the parent entity. Wholly owned Group transactions Loans made by the Company to and from wholly-owned subsidiaries are repayable on demand and unsecured. No interest is charged on the loans (2015: nil). Loans to wholly-owned subsidiaries Beginning of the year Loans advanced Loan repayments End of the year 2016 $’000 8,380 7,583 (534) 15,429 2015 $’000 961 7,770 (351) 8,380 17. Group entities The consolidated ﬁ nancial statements incorporate the assets, liabilities of the following subsidiaries in accordance with the accounting policy described in note 2: Equity holding Name of entity QPSX Communications Pty Ltd Nearmap Australia Pty Ltd IPR 8 Pty Ltd Ipernica Ventures Pty Ltd Ipernica Holdings Pty Ltd Nearmap USA Pty Ltd Nearmap Aerospace Inc. Nearmap US, Inc. Nearmap Remote Sensing US, Inc. Country of incorporation Australia Australia Australia Australia Australia Australia United States United States United States 2016 % 100 100 100 100 100 100 100 100 100 2015 % 100 100 100 100 100 100 100 100 - 86 Financial Report Financial Report 86 Notes to the Consolidated Financial Statements for the year ended 30 June 2016 E. Other 18. Auditor remuneration During the year, the following fees were paid or payable for services provided by the auditor of the Company and its related practices: Consolidated Audit services paid to KPMG – an audit or review of the ﬁ nancial statements of the entity Remuneration paid to KPMG for audit services Non-audit services paid to KPMG – other assurance matters for the entity and any other entity in the consolidated Group – taxation advisory for the entity and any other entity in the consolidated Group – other advisory for the entity and any other entity in the consolidated Group Remuneration paid to KPMG for non-audit services 2016 $’000 92 92 18 89 54 161 2015 $’000 81 81 - 79 48 127 Financial Report Financial Report 87 87 Directors’ Declaration In accordance with a resolution of the Directors of the Company, I state that: In the opinion of the Directors: a) the ﬁ nancial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the consolidated entity’s ﬁ nancial position as at 30 June 2016 and of its performance for the year ended on that date; and ii) complying with Accounting Standards and Corporations Regulations 2001 and other mandatory professional reporting standards; and b) the Company has included in the notes to the ﬁ nancial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards; c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and d) the remuneration disclosures set out in the Directors’ Report (as part of audited Remuneration Report) for the year ended 30 June 2016, comply with section 300A of the Corporations Act 2001. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with sections 295A of the Corporations Act 2001 for the ﬁ nancial period ending 30 June 2016. On behalf of the Board Dr R Newman Managing Director & CEO Sydney 23 August 2016 88 Directors’ Declaration Directors' Declaration 88 Independent Auditor’s Report to the members of Nearmap Ltd Report on the ﬁ nancial report We have audited the accompanying ﬁ nancial report of Nearmap Ltd (the Company), which comprises the consolidated statement of ﬁ nancial position as at 30 June 2016, and consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash ﬂ ows for the year ended on that date, notes 1 to 18 comprising a summary of signiﬁ cant accounting policies and other explanatory information and the Directors’ declaration of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the ﬁ nancial year. Directors’ responsibility for the ﬁ nancial report The Directors of the Company are responsible for the preparation of the ﬁ nancial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the ﬁ nancial report that is free from material misstatement whether due to fraud or error. In note 2(a), the Directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the ﬁ nancial statements of the Group comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the ﬁ nancial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the ﬁ nancial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ﬁ nancial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the ﬁ nancial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the ﬁ nancial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the ﬁ nancial report. We performed the procedures to assess whether in all material respects the ﬁ nancial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s ﬁ nancial position and of its performance. We believe that the audit evidence we have obtained is sufﬁ cient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. KPMG, an Australian partnership and a member ﬁ rm of the KPMG network of independent member ﬁ rms aﬃ liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Profession Standards Legislation. Independent Auditor’s Report Independent Auditor's Report 89 89 Auditor’s opinion In our opinion: a) the ﬁ nancial report of the Group is in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the Group’s ﬁ nancial position as at 30 June 2016 and of its performance for the year ended on that date; and ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. b) the ﬁ nancial report also complies with International Financial Reporting Standards as disclosed in note 2(a). Report on the Remuneration Report We have audited the Remuneration Report included in pages 32 to 47 of the Directors’ Report for the year ended 30 June 2016. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with auditing standards. Auditor’s opinion In our opinion, the Remuneration Report of Nearmap Ltd for the year ended 30 June 2016, complies with Section 300A of the Corporations Act 2001. KPMG Trent Duvall Partner Sydney 23 August 2016 90 Independent Auditor’s Report Independent Auditor's Report 90 Shareholder Information Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows. The information is current as at 8 September 2016. a) Distribution of ordinary shares The number of shareholders, by size of holding, are: Range 1–1,000 1,001–5,000 5,001–10,000 10,001–100,000 100,001 and over Total Number of holders Number of shares 387,869 7,470,020 13,053,941 74,623,375 261,010,896 356,546,101 532 2,589 1,599 2,368 322 7,410 The number of shareholders holding less than a marketable parcel of ordinary shares is: 263 121,012 b) Distribution of unquoted options ESOP options exercisable at a range of prices between $0.39 and $1.08 expiring on various dates between 25 July 2017 and 30 November 2021. Range 1–1,000 1,001–5,000 5,001–10,000 10,001–100,000 100,001 and over Total Number of holders Number of options - - - 695,000 34,975,000 35,670,000 - - - 12 32 44 Shareholder Information Shareholder Information 91 91 Shareholder Information c) Twenty largest shareholders The names of the twenty largest registered holders of quoted ordinary shares are: Name 42,446,172 1 National Nominees Limited 38,155,167 2 Longfellow Nominees Pty Ltd 23,369,666 3 JP Morgan Nominees Australia Limited 11,881,128 4 Longfellow Nominees Pty Ltd 6,165,364 5 RBC Investor Services Australia Nominees Pty Limited 4,505,981 6 Citicorp Nominees Pty Limited 4,351,500 7 BNP Paribas Noms Pty Ltd 3,850,941 8 Mr Jason Mak 3,397,179 9 Mr Graham Grifﬁ ths 3,250,000 10 Oxidex Pty Ltd 3,145,000 11 Venture Skills Pty Ltd 3,062,205 12 ABN Amro Clearing Sydney Nominees Pty Ltd 2,901,000 13 HSBC Custody Nominees (Australia) Limited 2,639,796 14 Mr Paul Arthur Peterson 2,619,995 15 HSBC Custody Nominees (Australia) Limited 2,575,914 16 Australian Executor Trustees Limited 17 Mr Simon Benedict Crowther & Mrs Fiona Kyla Crowther 2,500,000 2,380,019 18 Mrs Alison Farrelly 2,055,664 19 Roan Industries Pty Limited 2,000,098 20 Doctors Own Pty Ltd 167,252,789 Total Number of shares Percentage of shares 11.90 10.70 6.55 3.33 1.73 1.26 1.22 1.08 0.95 0.91 0.88 0.86 0.81 0.74 0.73 0.72 0.70 0.67 0.58 0.56 46.91 d) Substantial Shareholders The names of substantial shareholders who have notiﬁ ed the Company in accordance with section 671B of the Corporations Act 2001 are: Name 1. Ross Norgard1 1 As provided to the Company on 29 December 2014. Number of shares Percentage of shares 14.38 50,076,295 e) Voting rights All ordinary shares carry one vote per share without restriction. No voting rights are attached to options. f) Securities Exchange Quotation The Company’s ordinary shares are listed on the Australian Securities Exchange (Code: NEA). The Home Exchange is Perth. g) Corporate Governance Statement The Company’s Corporate Governance Statement for the 2016 ﬁ nancial year can be accessed at: http://static.nearmap.com/investors/governance/statement/Corporate_Governance_Statement.pdf 92 Shareholder Information Shareholder Information 92 Corporate Information Nearmap Ltd ABN 37 083 702 907 Directors Peter James (Non-Executive Chairman) Rob Newman (Managing Director & CEO) Ross Norgard (Non-Executive Director) Ian Morris (Non-Executive Director) Cliff Rosenberg (Non-Executive Director) Company Secretary Shannon Coates Registered Ofﬁ ce Level 6, 6–8 Underwood Street Sydney NSW 2000 Website www.nearmap.com Solicitors DLA Piper Bankers Commonwealth Bank of Australia Wells Fargo Share Register Computershare Registry Services Pty Ltd Level 11, 172 St Georges’ Terrace Perth WA 6000 Auditors KPMG Australia Tower Three International Towers Sydney 300 Barangaroo Avenue Sydney NSW 2000 Corporate Information Corporate Information 93 93 Space X & Tesla Design Studios, Hawthorne, California, United States – June 2016Space X & Tesla Design Studios, Hawthorne, California, United States – June 2016Designed by Martin & Vic Printed by Optima Press nearmap.com

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