Nearmap
Annual Report 2020

Plain-text annual report

2020 ANNUAL REPORT ABOUT NEARMAP Nearmap Ltd (ABN 37 083 702 907) and its subsidiaries (Nearmap or Company) is a leading provider of cloud-based geospatial information services and an innovative location intelligence company. Nearmap captures a rich data set of the real world, providing high value insights to a diverse range of more than 10,000 businesses and government organisations. Using its own patented camera systems and processing software, Nearmap conducts aerial surveys capturing wide-scale urban areas in Australia, New Zealand, the United States of America and Canada multiple times each year, making fresh content instantly available in the cloud via web app or API integration. Every day, Nearmap helps tens of thousands of users conduct virtual site visits for deep, data driven insights – enabling businesses and government organisations to make informed decisions, streamline operations and bolster bottom lines. Founded in Australia in 2007, Nearmap is one of the ten largest aerial survey companies in the world by annual data collection volume and is publicly listed on the Australian Securities Exchange (ASX). Nearmap employs nearly 300 people globally, held a total annual subscription portfolio of $106.4m as at 30 June 2020 and was named as one of Fast Company’s 10 Most Innovative Enterprise Companies in 2020. United States 71% population coverage Canada Australia 64% population coverage 89% population coverage New Zealand 73% population coverage ABOUT NEARMAP 3 CAPTURED: 15 SEPTEMBER 2019 GOLD COAST QLD AUSTRALIA 2 ABOUT NEARMAP CONTENTS Chairman’s Letter CEO’s Report Customer Stories Sustainability Statement Directors’ Report Auditor’s Declaration Consolidated statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Corporate Information 6 8 20 28 41 71 72 73 74 75 78 110 112 116 118 4 CONTENTS CAPTURED: 20 NOVEMBER 2019 TAMPA FL USA CONTENTS 5 CHAIRMAN’S LETTER CHAIRMAN’S LETTER MR PETER JAMES NON-EXECUTIVE CHAIRMAN Dear Shareholder, It is a pleasure to present the Nearmap 2020 financial year Annual Report. A MILESTONE YEAR Nearmap achieved a number of significant milestones in the 2020 financial year (FY20). We exceeded $100 million in Annual Contract Value (ACV), commercially released transformative Artificial Intelligence (AI) content, announced our first ever acquisition as a data imagery company, all while navigating the challenges the COVID-19 pandemic presented to our Company and our customers. This progress leaves Nearmap well positioned to withstand the current economic uncertainty and build upon our leadership in the large and expanding global location intelligence market in the 2021 financial year (FY21). Nearmap has always facilitated flexible working by enabling businesses and governments to conduct work remotely. This trend accelerated in FY20 and Nearmap focused on supporting our customers as they transitioned their organisations to working more remotely. Our customer focus was led by our customer experience and retention team, which was improved and expanded over the course of the financial year to further increase the positive experience our customers receive with their Nearmap subscription. The success we experienced in some of our key industry verticals in FY20 has already demonstrated the positive outcomes that can be achieved by ensuring we remain focused on our customers’ needs. Continued growth in our ACV portfolio has further validated our unique subscription business model and the value businesses and governments derive from our leading geospatial data set. Nearmap has derived a significant advantage over other providers by establishing a repeatable, scalable software business delivering location intelligence insights to customers, many of whom were not able to afford to access these insights in the past. Other companies have tried and will try to replicate the same subscription business model we have, but without the technological capabilities in our possession, we believe they will struggle to succeed. Importantly, Nearmap has continued growing its technology capabilities. After several years of research and development, in FY20 we commercially launched Nearmap AI, expanding our content offering and location intelligence insights. Nearmap AI delivers unparalleled insights and efficiencies for our customers, who can now generate a data set of location intelligence from our software. We also acquired and integrated roof geometry technology, significantly reducing turnaround time for roof measurement and utilising our wide-scale 3D content. Also, we continued to invest in developing the next iteration of the world’s best high-altitude camera system. We have already built the world’s best high-altitude camera systems, but we want to fly higher and faster and further improve the attractive unit economics of our capture program. North America remains our core growth market and in FY20 we delivered 27% growth in ACV. While this represents strong growth, the Company was impacted by several large churn and downgrade events in December 2019 which led to revised guidance in January this year. While each event was unforeseen and beyond our control, clearly this was a disappointing outcome for the Company and our shareholders and something we worked hard to rectify in the second half of FY20. The Australian & New Zealand business continues to be a growing, cash flow generative business. ACV growth of 11% was impacted in the first half as we stretched our local sales leadership team in support of our North American expansion, but I was pleased to see this situation addressed in the second half of the financial year. Our market leadership position here is firmly established and was strengthened even further with a renewed focus on retention as we built out our customer success, experience and retention initiatives in FY20. As a company, we have always promoted flexible working among our people and we were able to respond quickly to the rapid onset of COVID-19, seamlessly transitioning to remote working without impacting our ability to service our customers. We also recognised the importance of cash preservation during these unprecedented times and announced several cash management initiatives in April 2020. These initiatives were fiscally responsible, preserved our Balance Sheet, had a minimal impact on business operations and ensured our strategic growth initiatives continued. I am very proud of our Company’s response to COVID-19 and how our people have adapted during this time. As part of April’s cash management initiatives, the Board and Chief Executive Officer (CEO) agreed to a 25% reduction in their remuneration and the Executive team and all other employees agreed to accept a 20% reduction for a fixed six-month period. In response and excluding the Board, CEO and Executive, employees will be compensated through the issuance of an equivalent value of Nearmap shares. This decision was made with our employees, customers and shareholders in mind; we wanted to protect as many jobs as we could, continue to deliver for our customers and provide more financial certainty for our shareholders during COVID-19. I am pleased everyone accepted the reduction in remuneration and I am sincerely grateful for their understanding. The Board is acutely aware of the impact COVID-19 is having on our communities and considered it appropriate that Board and CEO remuneration remain unchanged in FY21. GOVERNANCE Nearmap seeks to achieve best practice in Corporate Governance and the Company’s Board, senior executives and employees are committed to achieving this goal. The Company has a strong Corporate Governance framework across its operations and details of this, together with relevant policies and procedures, can be found at https://www.nearmap.com/au/en/investors/governance. In June 2020, we updated our Corporate Governance framework to reflect the ASX Corporate Governance Council’s 4th Edition of the ASX Corporate Governance Principles and Recommendations, which applies to Nearmap for its financial year commencing 1 July 2020 and will be reported against as part of annual reporting in FY21. Last September, we appointed Tracey Horton AO as an Independent Non-executive Director. Tracey has made an immediate impact at Nearmap, in particular, by providing extensive guidance in transforming the Nomination and Remuneration Committee into the People, Culture and Remuneration Committee, which Tracey now Chairs. The Board broadened the scope and responsibilities of the Committee this financial year and it provides valuable support and advice to the Board in fulfilling its responsibilities to shareholders. Nearmap continues to support a culture of zero-tolerance towards unethical, illegal or fraudulent activities. In FY20, Nearmap strengthened the framework around the Code of Conduct by adopting a Global Anti-Bribery and Corruption Policy and a Global Whistleblower Policy. These policies provide a framework for Nearmap officers and employees to ensure that they conduct their activities in accordance with legislative requirements and the standards and principles set out in our Code of Conduct. The policies support a culture of transparency and encourage reporting of any suspected unethical, illegal or fraudulent activities. MANAGEMENT Nearmap continues to elevate the strength and experience of our Executive team and we made several changes in this regard in FY20. Recognising the importance of our North American business, we appointed Jeff Adams as our global Chief Revenue Officer. Jeff joined with a strong background in sales leadership across high growth software companies in North America and has already overseen a realignment of our sales strategies across the business. Jeff’s appointment enables Patrick Quigley to focus on the significant opportunity in the North American insurance market and Tony Agresta to provide leadership and support to Jeff as we grow our core North American sales team. Additionally, we appointed Simone Shugg as our new Chief People Officer, who has added a depth of experience from high growth and subscription businesses. OUTLOOK In uniquely challenging circumstances, our Company has remained focused on our growth initiatives and executing these initiatives. In FY21 we will continue to focus on supporting our customers, growing our business and executing our go-to-market strategy. Subsequent to the end of the financial year, Nearmap undertook a $72.1 million Placement and Share Purchase Plan to accelerate the Company’s growth opportunities. Nearmap has continued strong trading in FY21, demonstrating resilience to macroeconomic conditions, and we saw an opportunity to capitalise on the momentum of the business and the tailwinds in the industry. The capital raise will allow Nearmap to accelerate growth opportunities in the Company’s core industry verticals, fast-track the roll-out of the Company’s fourth generation camera system and build out the operational foundations to support future growth aspirations. The capital raise also provides us with strategic flexibility to pursue other growth initiatives while maintaining a disciplined approach to cash management. Nearmap has demonstrated a strong ability to deploy investor capital to drive top line growth and deliver meaningful leadership in the location intelligence market and this capital raise will further cement that leadership position and accelerate our ACV growth. On behalf of the Board and Executive I would like to thank all our people for their passion, focus and professionalism during unprecedented times across the world. Our growth in FY20 has continued to validate our unique subscription business model and the value that customers derive from our content. I am excited for what the future holds as we continue expanding deeper into the dynamic location intelligence market. I look forward to yet another exciting year ahead. PETER JAMES Chairman Sydney, NSW 13 October 2020 6 CHAIRMAN’S LETTER CHAIRMAN’S LETTER 7 CEO’S REPORT CEO’S REPORT DR ROBERT NEWMAN CHIEF EXECUTIVE OFFICER & MANAGING DIRECTOR TO OUR SHAREHOLDERS, EMPLOYEES AND CUSTOMERS, As I reflect upon the achievements of our Company in the last twelve months I am reminded why Nearmap was founded and what our Company set out to achieve – we change the way people view the world, so they can profoundly change the way they work. People definitely changed the way they viewed the world in FY20. Despite the unprecedented circumstances the global economy is facing as a consequence of COVID-19, our Company not only remained focused on our mission but delivered to it; increasing the content types available to our customers, increasing the capability to integrate our content into their workflows, and growing the number of customers using our content. FY20 reinforced our technology and market leadership and our competitive advantage, and we remain in a strong position as we expand our leadership within the global location intelligence market. Nearmap achieved several significant milestones in FY20, including the release of two new content types for our customers. Firstly, after releasing Artificial Intelligence (AI) content in beta towards the end of FY19, Nearmap AI was made commercially available for all of our customers in FY20. Customers with a Nearmap subscription need only to purchase AI credits, valid for an annual contract period, to access this content. The scalable location intelligence insights that Nearmap AI provides are transformative for both our customers and our Company. It delivers on our commitment to continue investment in research and development and expansion of our product suite. In FY20, we also announced the acquisition of technology and intellectual property from Primitive LLC (Pushpin), a deep learning and analytics technology company that extracts data to provide roof geometry insights. This technology is market leading in its ability to semi-automate roof measurement at scale, leverages our existing 3D content and we believe has a potential market size of up to US$200m per year. I have been pleased in how we quickly integrated this technology into our business and with the early success we have had in commercialising this content in North America. Our premium content, whether it be 3D, AI or roof geometry, only exists because of our world leading HyperCamera2 camera systems. In FY20 we continued to invest in the next generation camera system which would enable us to fly above 20,000 feet and still capture imagery at the same 5-7 centimetre resolution we do today. While we are still in the research phase of this camera system, the progress made in FY20 has been very encouraging and I look forward to further progress in FY21. In FY20 we realigned our sales structure to focus on specific industry verticals where we were seeing the strongest adoption of our content. We now have dedicated insurance and government sales teams in North America and Australia & New Zealand and a dedicated solar team in Australia & New Zealand as well. By focusing on specific industry verticals, we believe we can continue the success we have experienced with our existing customers and accelerate the adoption from new customers in those verticals. In January this year and prior to the release of our first half results, we revised our FY20 guidance following several customer losses in our North American business. These events were unexpected and outside of our control and highlighted that, at current scale, our performance in North America can be impacted by a small number of larger customers. As we grow our repeatable and scalable business and expand and diversify our customer base, the potential for a small number of customers to materially impact our results will reduce over time. We worked hard to ensure we remained focused on our customers and delivered on our growth initiatives. Despite the impact of our revised guidance and the spread of COVID-19, Nearmap delivered Group ACV growth of 17% in FY20. North America remains the key growth driver and biggest opportunity for our Company and delivered 27% ACV growth in FY20. We had our first full year of Capture in Canada, capturing 64% of the population, and we expect to see growing traction of sales to customers in that region in FY21. North America now makes up almost 40% of our total ACV portfolio and we expect this to expand above 50% as we grow and integrate more closely with our customer base. Our market leadership position in Australia & New Zealand was strengthened in FY20 with 11% ACV growth over the course of the financial year. Our business here is growing and cash generative and is underpinned by our strong brand recognition and reputation in the marketplace. We did see a slight fall in customer retention as we stretched our sales leadership in support of expansion in North America and in the second half of FY20 we refocused our sales leadership in recognition of that. Our plans to increase investment in customer success, experience and retention were brought forward as a consequence of COVID-19 and I am looking forward to seeing the results of this investment in FY21. The outbreak of COVID-19 saw organisations faced with some distinct challenges; whether they could operate remotely and productively, and what the financial impact of the pandemic might be. Nearmap has always had policies promoting flexible working and we were able to seamlessly and productively transition our people to remote working. Our subscription content is also a remote working enabler for businesses and governments - not only does our online subscription platform enable organisations to access our content remotely but in times of restricted travel, Nearmap enables organisations to continue to operate without the need to physically inspect a site or an asset. Continued ACV growth throughout COVID-19 is testament to the value businesses and government organisations derive from our unique subscription business model. Nearmap provides accurate and up to date aerial imagery to businesses and government entities. When COVID-19 started spreading across the world, we asked ourselves what we could do to help our communities respond to the pandemic. In order to help officials identify locations for temporary medical facilities, plan emergency response mobilisation centres, determine proximity to medical clinics and hospitals, and provide visibility of the site for planning parking and line logistics, we provided our imagery free of charge for COVID-19 relief effort planning to state, local and county health officials and government agencies in North America. We also provided customers with access to enhanced content to help them maintain productivity while staying safe and working flexibly and we facilitated flexible payment terms for a small number of small businesses who were under financial pressure as a result of the pandemic. Nearmap provided its services as per usual and was focussed on supporting customers and continuing to provide them with instant access to our content. Nearmap understands the value of the unique knowledge that can be gained by using timely, wide-scale and detailed post-disaster imagery. When parts of Australia were devastated by bushfires late last year and early in 2020, Nearmap was there. We made a commitment to capture every populated area impacted by the bushfires, an additional 15,000 square kilometres on our standard coverage footprint, and we delivered that content to the people involved in the recovery efforts. Nearmap is committed to recapturing those areas in future years to show how our communities recover over time. FY20 was an unprecedented year but one in which our Company achieved significant milestones; we broadened our customer base beyond 10,000 small and large businesses and organisations, released transformative new content types and continued to grow our ACV in the face of a global pandemic the likes of which none of us have ever experienced. In three years, Nearmap has evolved from a single product, two-dimensional aerial imagery company capturing imagery in Australia and the United States to offering multiple content types of location intelligence and expanding our capture areas to New Zealand and Canada. The significant progress we have made comes down to fantastic people and I want to thank everyone at Nearmap for their dedication and commitment which have enabled our Company to be in the position it is today. Nearmap is well positioned to navigate the uncertain times ahead. Our clear focus in FY21 is to ensure we continue to grow our business, increase our competitive advantage, increase customer retention and monetise the investments we have made in our content and our software. We will continue to invest in research and development while maintaining a disciplined approach to our Balance Sheet and cash flow position. It is difficult to predict what may be ahead for the global economy but on behalf of everyone at Nearmap, I want to thank our shareholders and customers for their support and guidance throughout the course of the financial year. FY20 proved to be quite a journey and I look forward to continuing this journey with you as we build an even stronger leadership position in the global location intelligence market in FY21. 8 CEO’S REPORT CAPTURED: 20 JUNE 2020 SYDNEY NSW AUSTRALIA CEO’S REPORT 9 MILESTONE YEAR WITH RELEASE OF PREMIUM CONTENT TYPES • Commercial release of AI content, representing significant investment in research and development, delivering content which profoundly changes the way people work • Successful acquisition and integration of industry leading roof geometry technology into the product suite, utilising Nearmap 3D content at massive scale • Increased adoption of premium content with more than half the portfolio now relating to subscriptions incorporating premium content types • Continued investment in a next generation camera system to allow higher and faster capture, support expansion of premium content and providing greater utility to our customers CAPTURED: 4 SEPTEMBER 2019 SUN LAKE AZ USA 10 CEO’S REPORT CEO’S REPORT 11 CONTINUED EXPANSION AND PENETRATION OF THE GLOBAL MARKET • Significant milestones passing $100 million in Annual Contract Value and more than 10,000 commercial and government customers • New partnerships in North America and Australia & New Zealand including OpenSolar, Cityworks, Teranet and Eagle Technology • Strong incremental ACV growth of 27% in North America and ACV now being generated from domestic Canadian customers • Strengthening of market leadership in Australia & New Zealand with incremental ACV growth of 11% in FY20 • Alignment of Product, Sales & Marketing to target increased penetration of core growth verticals CAPTURED: 20 SEPTEMBER 2019 NEW YORK NY USA 12 CEO’S REPORT CEO’S REPORT 13 A GLOBALLY RECOGNISED AWARD-WINNING TEAM • Recognition of our world class talent with Nearmap named one of Fast Company’s 10 Most Innovative Enterprise Companies of 2020 • Strengthened Executive and senior leadership teams in support of scaling Nearmap for growth • Successfully transitioned employees to working remotely during COVID-19 and maintained productivity and business continuity with business operations continuing as normal • Focused on the skills and diversity required to capitalise on the global market opportunity Nearmap is creating CAPTURED: 18 JANUARY 2020 LOS ANGELES CA USA 14 CEO’S REPORT CEO’S REPORT 15 IN SUMMARY The 2020 financial year was a milestone year for our Company. We continued to add value to our product suite by releasing transformative new content for more than 10,000 customers, passed $100m in ACV, and validated our unique subscription business model in a time of profound economic uncertainty. That’s quite an achievement for a company with less than 300 employees. It is clear that to be successful in our industry, companies will need to continue to invest in their technology capabilities. For Nearmap, investment in technology remains core to our DNA. This will enable us to expand our content and product suite, increasing the value customers derive from our content and further enabling growth within our core industry verticals. As we navigate FY21 and beyond it is important for us to remain focused on our mission - we change the way people view the world, so they can profoundly change the way they work. Despite recent challenges, there remains a large and growing global market opportunity for Nearmap. We are committed to maintaining and strengthening our leadership in location intelligence content derived from aerial imagery, captured by world leading camera systems, built right here in Australia. ROB NEWMAN Managing Director and Chief Executive Officer Sydney, NSW 13 October 2020 16 CEO’S REPORT CAPTURED: 8 JUNE 2020 JERSEY CITY NJ USA CEO’S REPORT 17 CAPTURES FOR BUSHFIRE RECOVERY Within just a few months following one of the most savage Australian bushfire seasons on record, Nearmap completed the first round of a comprehensive post-fire image capture program. The imagery covers all fire-affected, populated areas in New South Wales, Queensland, South Australia and Victoria totalling 28,500 sq km of fire-affected areas, including 15,000 sq km in addition to our normal coverage footprint. Aerial imagery of fire-ravaged areas assists in the analysis, planning and rebuilding of recovering communities. Nearmap conducts aerial surveys as soon as possible following significant natural disasters or extreme weather events. As you can imagine, it’s challenging to fly amid active fire and take photos in lingering smoke. PARTNERS FOR RECOVERY Nearmap is committed to providing support where and when needed. To have a bigger impact, we’re forming partnerships. Here is how our partners are using Nearmap imagery in responding to the bushfire crisis. • Red Cross Australia uses Nearmap before-and-after location information for the charity’s vital on-the-ground assistance in communities suffering great loss. • Disaster Relief Australia pairs military veterans with emergency responders and medical professionals for disaster relief. Nearmap imagery helps them remove guesswork in making damage assessments. • Australia’s spatial organisations joined the Surveying & Spatial Sciences Institute (SSSI) industry-wide ‘Map-a-thon’ with teams using Nearmap imagery to fully visualise the massive scale and impact of bushfire. We captured the first post-fire images in the aftermath of bushfires that began in September 2019. We plan to follow up the current surveys to document and support recovery - which we all hope will be swift and full. CAPTURED: 30 SEPTEMBER 2019 ADELAIDE SA AUSTRALIA 18 BUSHFIRE RECOVERY CAPTURED: 31 DECEMBER 2019 ADELAIDE SA AUSTRALIA BUSHFIRE RECOVERY 19 CUSTOMER STORIES ENVIRONMENTAL PRESERVATION WITH HIGH-RESOLUTION IMAGERY Customer Story WHO: LAKE COUNTY FOREST PRESERVES Recognised as a leader in conservation, Lake County Forest Preserves protects nearly 31,000 acres - the second-largest Forest Preserve District in Illinois, USA. This includes managing open space and natural areas, and providing outdoor recreation and education opportunities for residents. THEIR CHALLENGE: “Before we started using Nearmap,” says Nick Spittlemeister, GIS Analyst in the Planning and Land Preservation Department, “we were going about every two years between aerial captures. But we needed more consistency, more current imagery we could rely on.” The Department started looking at the capabilities of Nearmap after discovering how many times a year Nearmap captured their area. After a short test run in accessing imagery, they switched all their aerial imagery needs entirely over to Nearmap. HOW NEARMAP HELPS: “Nearmap is just so unique in the fact that you’re able to get aerial photography - get that clear imagery - within a week or two after the capture,” says Spittlemeister. “In my opinion, that completely sells the reason why anyone would want to use Nearmap imagery. And getting it across seasons? We use it all the time across many of our projects, whether they are developmental or restoration. Before Nearmap, we’d have to wait nine to twelve months for access to imagery from other companies.” Dave Cassin, Superintendent of Natural Resources, runs field crews to investigate, identify, and monitor invasive species management, controlled burning, tree planting, tree removal, and more. “We recently burned an area of land that had colonies of phragmites,” explained Cassin. “I used Nearmap imagery to compare that area with an area that had not yet been burned and the phragmites were easily distinguishable. We could actually see the flower heads on a plant.” “Having access to multiple captures across seasons has become a critical component to the care and monitoring of the forest environment, as well as keeping tabs on project progress,” says Kevin Kleinjan, Senior Engineer of Operations and Infrastructure. “We had a project for our Natural Resources Department helping to restore drainage hydrology to a site. The work was done in winter, and with the March capture from Nearmap, we could already see how the hydrology was coming back. The funding for this was part of a grant, and it was extremely beneficial to show the transition and provide extra documentation along with a great narrative. And, to highlight progress and development in this way adds extra excitement to those providing the grants. It’s just been a huge benefit.” During the COVID-19 pandemic, Kleinjan’s team also needed to round up all of the picnic tables in their five dog parks at the request of the local health department. “I had to bring in a crew to go around and get them,“ says Kleinjan “But I didn’t have any data or information available to know how many were out there, or where they were, and our sites are fairly large. But I was able to open up our most recent capture from Nearmap and easily identify and locate all tables.” The ability to plan remotely - and keep crews safe during the pandemic - also helped alleviate the strain of staying compliant with social distancing rules. “We keep finding new ways to use Nearmap,” says Kleinjan. 20 CUSTOMER STORY CAPTURED: 13 MARCH 2020 LAKEWOOD IL USA CUSTOMER STORY 21 TRACKING TREE CANOPY CHANGE WITH MACHINE LEARNING Customer Story WHO: CITY OF RYDE City of Ryde is a vibrant Local Government Area (LGA) just 12km from the central business district of Sydney. With Lane Cove National Park in the North and the Parramatta River in the South, there are lush connecting corridors and river walks, in fact, council staff manage a total of 207 Parks and Open Space areas. THEIR CHALLENGE: City of Ryde aims for a strong sense of balance and sustainability as the City’s population grows by over 30% over the next 15 years. Protecting and enhancing Ryde’s natural and urban environments calls for a quantifiable approach, such as creating a benchmark for the tree canopy across the entire LGA. “In order to protect a resource, you need to be able to measure what you currently have,” says Lindsay Mason, head of the Land Information team at the City of Ryde. “The community values all green space. It doesn’t differentiate who owns it, so we wanted to measure the total tree canopy cover, not just those areas in council’s ownership.” HOW NEARMAP HELPS: Commissioning bespoke aerial surveys is very expensive, and to measure change over time would require several years of captures, scheduled at similar times of the year. With Nearmap, Mason explains, “Not only do we have the up-to-date aerial imagery, we also gained access to the Nearmap catalogue of historical imagery. And since it has been captured using the same method, it’s consistent, which is perfect for analysis.” Along with high-resolution aerial imagery, Nearmap provides location content derived from the image capture process - and that’s where Mason saw the opportunity to take things further for the City of Ryde using the latest Nearmap content offering, Nearmap AI. “I asked the (Nearmap) AI team for their expertise and the latest machine learning technology to help us calculate tree canopy cover from the existing imagery, and I was really impressed with the quality of the results and the time it took to provide the analysis.” Mason says. “It quantified what the tree management staff were seeking to measure and it has provided them with data upon which they can base their business decisions.“ Nearmap fits easily into the LGA’s own ecosystem of geospatial information systems (GIS). “At Ryde, we have over 170 layers of GIS data available to staff, including external services, land parcel boundaries, and house numbers, as well as internal layers for planning, engineering and infrastructure. Now we can add tree canopy cover as an additional overlay,” Mason says. Including the tree canopy layer within the council’s GIS allows City of Ryde’s staff to consider this green space during their daily work and project planning. It also allows them to observe trends to support valuable decision-making and then in turn communicate this information to the local community. 22 CUSTOMER STORY CAPTURED: 18 APRIL 2020 SYDNEY NSW AUSTRALIA CUSTOMER STORY 23 LATEST IMAGERY FOR INCIDENT RESPONSE ACROSS THE NETWORK Customer Story WHO: METRO TRAINS The network control centre at Metro Trains oversees the entire metropolitan network in Greater Melbourne. With rail tracks spanning over 900 km and more than 200 trains, the network is responsible for transporting 450,000 passengers daily. THEIR CHALLENGE: Metro Trains aims to provide a seamless transport solution to keep passengers connected, and that means responding to incidents that may occur on tracks, platforms, or staffed and unstaffed stations. There isn’t much that control centre staff haven’t seen before, except perhaps low passenger volumes during the COVID-19 pandemic lockdown. On an average weekday there are up to 200 incidents ranging from a short delay to an accident or major incident. HOW NEARMAP HELPS: Nearmap provides Metro Trains with ready-to-go aerial imagery for responding to incidents that may be reported anywhere across the rail network. With fast-growing suburbs, nearby roads and traffic changes, there are numerous changes to access points and updates to station properties that simply won’t be reflected in internal documentation or out-dated satellite imagery. Remote site inspections are an almost daily occurrence at Metro, with operators using high-resolution aerial imagery from Nearmap when checking on incidents or complaints. Staff work directly with police and an Emergency Liaison Officer embedded at the centre. Having a detailed view of the entire rail network, including tracks, stations and surrounds is essential, especially as 95 of the network’s 217 stations don’t have staff on hand. If a train is stuck between point A and point B, Metro staff will use Nearmap to check for suitable access. If there’s a trespasser, Metro can provide direction to authorised officers or police, advising where they can get through. Incident response can be impacted by changes in road conditions, or building and construction - changes that are often fast moving. For example, Metro staff checked an incident at Kananook near Frankston, where there have been major changes to the line on account of upgrade works and the Level Crossings Removal project (a Major Rail Project in Victoria). Satellite imagery for the location was out of date, whilst Nearmap had completed 11 aerial surveys in that same timeframe. Frequently updated aerial imagery can provide all the difference, especially when visibility is a must. For Metro Trains, this means ensuring minimal disruption to keep trains on time and commuters safe and happy. 24 CUSTOMER STORY CAPTURED: 17 DECEMBER 2019 MELBOURNE VIC AUSTRALIA CUSTOMER STORY 25 FREQUENT SURVEYS REVEAL TRUTH ON THE ROOF Customer Story WHO: TREMCO Tremco is a USD$7 billion international construction products company providing commercial roofing services that are backed with an exclusive maintenance program - to ensure a property will be leak-proof for as long as the building stands. THEIR CHALLENGE: In the US roofing industry, being able to quickly and accurately assess a roofs condition means saving time and resources on countless site visits. For Tremco, in particular, detailed roof assessments with historical content are also essential for the integrity of the company’s maintenance program. “Before Nearmap, we had a ‘per view fee’ to access aerial imagery,” says Robb Chauvin, Executive Director of Inspection Services. “It was incredibly frustrating because we weren’t able to get the historical comparison we needed when it came to roof assessments. Since I own the responsibility for due diligence across multimillion-dollar assets, I needed to be able to see accurate, clear information and compare it with imagery from prior years.” HOW NEARMAP HELPS: Upon implementing the Nearmap library of content for asset management, current high-resolution imagery became an indispensable tool and resource that multiple units began using across Tremco’s organisation. Chauvin’s team uses high-resolution aerial imagery to evaluate unapproved roof alterations. By accessing an image library with up to six years of historical captures from Nearmap, they can easily track deterioration of a particular roofs condition over a five-year span - or more. The information gleaned from these reviews helps drive important decisions when it comes to commercial roof maintenance. “The best thing for us about using Nearmap imagery is the objective viewpoint it provides. It’s not us with an opinion; it’s us saying, ‘here’s a fact’ based on what’s been captured. It helps insulate us from providing bad data and allows us to just present the facts on a project.” Remote inspection becomes easier when a customer calls to report a roofing issue. Chauvin and his team can begin investigating the problem immediately by pulling up the latest aerial captures within MapBrowser. “It’s common to have a customer call and complain about a leak pouring down a wall in their building. I can immediately pull up the location in MapBrowser, review if any changes have been made to alter the roofs condition over the years, and typically determine fairly quickly what happened to challenge the integrity of the roof. These historical captures help us have an honest conversation with our customer about who is really responsible for an issue.” 26 CUSTOMER STORY CAPTURED: 21 SEPTEMBER 2019 NEW HAVEN CT USA CUSTOMER STORY 27 SUSTAINABILITY STATEMENT SUSTAINABILITY STATEMENT MESSAGE FROM THE CEO I am pleased to present our 2020 Sustainability Statement. This Statement outlines our approach to People & Culture, suppliers, stakeholders, the community, and our activities as they relate to the environment. Nearmap has a positive story to tell on sustainability and by producing this Statement, we hope everyone can understand the significant contribution our Company makes. This financial year has been a particularly challenging one for many communities and organisations. The devastating bushfires in late 2019 and early 2020 had a physical and emotional toll on many communities in Australia and as an imagery company we were in a unique position to help emergency services manage their response. The COVID-19 pandemic has also had an unprecedented global impact, at least in our lifetimes, and the impact to our people and our customers presented challenges to all of us. The way in which companies respond in such times can be a true measure of their corporate values, and I am proud of our Company and our actions in FY20. Nearmap remains at the forefront of building out and integrating additional content types, enabling businesses to make more efficient and better-informed decisions, thereby improving outcomes for the environment and society. Our content types allow customers to save time, reduce their carbon footprint and reduce occupational health and safety risks by not physically travelling to monitor, assess, inspect or visualise a site. I am proud to be working for a company that enables businesses to have a positive impact in the area of sustainability, and I look forward to Nearmap continuing to deliver content which helps facilitate a smarter and more sustainable future. ROB NEWMAN Managing Director and Chief Executive Officer 28 SUSTAINABILITY STATEMENT CAPTURED: 30 JANUARY 2020 KANGAROO ISLAND SA AUSTRALIA SUSTAINABILITY STATEMENT 29 SUSTAINABILITY STATEMENT NEARMAP CORE VALUES Nearmap is committed to fostering a high-performance culture which is diverse and engaged, allowing employees to grow and succeed. This culture is put into action through an emphasis on the core values and by providing all Nearmap employees the necessary resources to succeed in their roles. The Executive lead by example, upholding and role modelling the core values in everything they do. These values encourage employees to: OWN IT We hold ourselves and each other accountable to succeed LOVE IT We are passionate about what we do and how we do it WORK IT We are better when we collaborate RISK IT We are fearless, curious and committed TELL IT We are honest and transparent in our communication The Company’s commitment to an open and engaged culture can be seen throughout the organisation. At monthly all-company stand-ups; the CEO addresses all employees and provides updates on the good, the bad, and the not-so-good, encouraging questions about any topic. Deep-dives are also held each month which allow individual teams to dig deeper into a project, outlining their ambitions to all employees and fostering a transparent and inclusive culture within the organisation. Nearmap has an open-door leadership ethos where all executives and managers, including the CEO, are approachable. This ease of access allows all employees to contribute to key decisions and elevates every employee’s responsibility and impact in the organisation. DIVERSITY & INCLUSION Nearmap is committed to providing a diverse and inclusive workplace, where employees are empowered to live the Company’s core values and be the best they can be. The Board is regularly updated, and is responsible for the oversight of progress the Company is making on all new initiatives and programs, that seek to support diversity and inclusion. Being able to attract, retain and motivate employees from the widest possible pool of available talent is critical in contributing to the ongoing success of the Company. Recruitment and selection practices at all levels of the Company, including at a Board level, are structured so that a diverse range of candidates are considered. The Company is committed to guarding against any conscious or unconscious biases that might discriminate against certain candidates, and in FY20 management undertook formal unconscious bias training, to further assist leaders in understanding how any conscious or unconscious biases can be overcome. Returning to work whilst raising a young family presents unique challenges, and Nearmap specifically ensures its policies are flexible and encouraging of all employees to step back into the workforce if and when they wish to do so. Initially, employees have access to up to twelve weeks paid parental leave for primary carers and two weeks paid parental leave for secondary carers. Upon returning to work, Nearmap ensures it offers all employees a flexible working environment to successfully manage this transition. As an Australian leader in technological innovation, Nearmap believes it has a responsibility to nurture industry talent and promote industry diversity. According to the Australian Government’s 2019 whitepaper Advancing Women in STEM (Science, Technology, Engineering & Mathematics), women are less interested and less confident in STEM subjects compared to men, particularly in the areas of engineering and technology. Completions of STEM subjects by women at a tertiary level are less than 21% and employment across these industries represents only 17% of the qualified population. In FY20, gender diversity at Nearmap was 73% male and 27% female, and within STEM 75% male and 25% female. Women make up 29% of the global management team, which provides a platform to mentor the next generation of women in STEM at Nearmap. Although female representation within STEM is higher than industry average at Nearmap, the Company wants to be part of a movement which encourages, promotes and recruits women to succeed at Nearmap and in their STEM careers. In support of this, several initiatives have been launched to overcome the challenges of recruiting a diverse talent pool within STEM. These initiatives include, but are not limited to, utilising such platforms as: • WORK180, the only platform that pre-screens employers to see how well they support women’s careers, considering arrangements such as parental leave, flexible working arrangements, pay equity, and professional development. Nearmap now advertises all open positions on this platform with a particular focus of attracting STEM candidates. • Hatch, a specialist recruitment firm partnered with nine educational institutions which provides access to a pool of students seeking part time work during study. 55% of Hatch’s student pool are women and 25% are from STEM backgrounds, providing Nearmap with an available pool of female talent to source and match with opportunities within the Company. • LinkedIn, the de facto tool of potential candidates to network and analyse prospective employers. Nearmap has invested in promoting the array of female STEM talent at the Company and highlights the organisation as being a place in which women can successfully develop their STEM career. Age diversity amongst Nearmap employees is spread across five decades, with 42% staff either under 30 or over 45 years of age. Additionally, Nearmap is proud of the cultural and ethnic diversity cultivated in the organisation. Across a workforce of nearly 300 people in Australia and the United States, there were at least 36 different ethnicities represented at the end of FY20. Nearmap actively encourages diverse cultural events to provide a sense of belonging and education on cultural differences within the organisation. EMPLOYEE ENGAGEMENT People are the engine that drives a company to achieve incredible results. A highly engaged team offers their best to an organisation and plays their part in helping a business achieve its vision. Nearmap recognises this, and recently partnered with Culture Amp to measure and monitor engagement across the business on a quarterly basis. This ‘pulse’ check enables barriers to engagement to be identified and remediated quickly. Engagement is a key metric for the business and is embedded within the Company’s DNA. 30 SUSTAINABILITY STATEMENT SUSTAINABILITY STATEMENT 31 CAPTURED: 6 APRIL 2019 TWEED HEADS NSW AUSTRALIA LEARNING & DEVELOPMENT Talent development and retention has been identified as a key business objective for management across the Company, specifically the Executive team. It has been established as a key performance indicator, and investment into establishing an appropriate learning and development strategy has been a key priority. Across the organisation, a number of initiatives were made available to employees in FY20, including but not limited to: • LinkedIn Learning, available to all employees across the organisation. LinkedIn Learning is an online tool which offers over 13,000 video courses taught by industry experts in software, creative, and business skills. With the flexibility of being available to employees when it suits them, it helps develop talent and ensures vital business skills remain current. • 10,000 hours, an eight-month program designed to enhance leadership capability across the organisation. Nearmap wants its future leaders to come from within the Company, and this course is specifically targeted to equip potential future leaders with required capabilities. • Nearmap Learning Library, a global training library that allows all employees to opt into courses which are linked to the core capabilities of their positions. Employees are given the flexibility to focus on the specific skills they want to develop, in conjunction with feedback from management and with specific goals in mind. In addition to these formal initiatives, teams engage in ad hoc training programs over the course of the financial year, and Nearmap has additional budget set aside for employees who wish to enrol in an external course, including support for tertiary education and study leave, which meets the personal development goals of the individual and the Company. Nearmap understands the importance of an ever-evolving marketplace and the Company will continue investing in its people to increase employee engagement, retain its best talent, and remain competitive in the location intelligence industry. Nearmap also operates a Student Industry Placement Scholarship program. A select number of students are recruited for six-month placements working in Artificial Intelligence Systems, Sensor Systems and Survey Systems teams, providing on the job experience and helping them complete their university dissertations. Nearmap is passionate about creating and cultivating opportunities for students to apply their learnings in a cutting-edge commercial environment. WELLBEING & THE COMMUNITY The wellbeing of a company’s employees determines the wellbeing of a company. Nearmap is committed to ensuring the physical and mental wellbeing of its employees is at its utmost and supports all employees in order to achieve this outcome. Nearmap does this in a variety of ways, including but not limited to: Fresh Fruit & Food Nearmap supplies fully stocked kitchens filled with nutritious snacks for breakfast and lunch. Fighting Illness & Disease Nearmap provides free flu vaccinations, an incentive to help smokers quit, and an ergonomic work environment which includes large computer monitors and sit/stand desks. Loyalty Rewarded For every two years an employee has worked at Nearmap, the Company shows its appreciation by rewarding employees with an extra day off. Massage Therapy Each fortnight in-house massages are provided by a qualified masseur to Australian-based employees and contractors when in the office. Work Life Balance Nearmap recognises the productivity benefits and improved business outcomes that flexibility and balance deliver to an organisation. The Company has put in place a specific Work Life Balance Policy, which provides all employees with the right to achieve a work life balance, such as the flexibility of working from home. Wellbeing Allowance In support of an employee’s healthy lifestyle, Nearmap pays a subsidy to employees each month to cover part of their sporting or gym membership. Employee Helpline Employees have confidential access to a global 24/7 counselling service to discuss any issues they may be experiencing in the workplace or personal life. Safe Workspace Nearmap puts new employees through an extensive induction process. As part of this program all employees are taken through a health and safety initiation. Nearmap also participates in the AccessEAP Ambassador Program, a voluntary program and an additional way for organisations to both promote and destigmatise mental health and encourage employees in seeking support. Nearmap has a number of ambassadors outside of the People & Culture team who are trained to understand basic mental health issues and their impact in the workplace, the signs and symptoms of common mental health issues, and how to have a conversation and refer an employee in seeking further support. Tying in with the Company’s focus on wellbeing, Nearmap shared an animated compilation of beautiful captures set to a seven-minute relaxation soundtrack for World Meditation Day, sharing the beauty of the world with everyone during ‘Mindful May’. Nearmap and its employees conducted fundraising to support victims of bushfires in Australia, raising money for both Red Cross Australia and the Bushfire Appeal. Nearmap matched all donations dollar for dollar. In the United States, employees donated money to provide financial support for a children’s primary school in Queens, New York City, to purchase winter coats. 32 SUSTAINABILITY STATEMENT CAPTURED: 1 OCTOBER 2019 WERRIBEE SOUTH VIC AUSTRALIA SUSTAINABILITY STATEMENT 33 SUSTAINABILITY STATEMENTWORKPLACE HEALTH & SAFETY Nearmap is committed to ensuring that employees and external visitors are provided with a safe and healthy working environment. Nearmap ensures safety training is carried out as required for employees and management across every level of the Company, to ensure Nearmap complies with its Workplace Health and Safety (“WHS”) obligations within the workplace. The Executive, People & Culture team and elected WHS representatives review all WHS systems at various stages throughout the year through the use of reporting, annual workplace inspections, risk assessment and other meetings involving relevant stakeholders. WHS representatives are responsible for consulting with employees should they have any WHS concerns, and when Nearmap is implementing new WHS initiatives. People & Culture provide WHS metrics to the Executive and the Board on a regular basis. Information and data captured in these reports ensures senior management have access to all available information in order to make effective decisions regarding the health and safety of Nearmap employees. This information includes reports of any incidents, injuries, or lost time due to injury. At Nearmap, the Company’s key priority is the health, safety and wellbeing of its people. Upon the onset of the COVID-19 pandemic and in line with guidance from the Australian and United States (US) Governments and health agencies, Nearmap transitioned its employees to working remotely across all of its Australian and US offices. Nearmap established a COVID-19 Response Team to continually monitor the impact of the pandemic, issuing frequent communications and holding all-staff and department conferences. These conferences provided employees with consistent updates as it pertained to the impact on Nearmap and their roles, and became regular forums for employees to ask questions and offer feedback. Employees were updated with health and hygiene practices as recommended by health agencies and were encouraged to stay in touch with colleagues using conferencing and messaging channels and via company-wide virtual events. EMPLOYEE MATCHING SHARE SCHEME In FY18 Nearmap established an Employee Matching Share Scheme (“Scheme”) to give permanent part-time and full-time employees the opportunity to invest in Nearmap and share in the Company’s success. Employees elect a percentage of their salary to purchase Nearmap shares, and the Company provides a generous match. The Scheme is designed to instil a sense of ownership in the business among employees and also contributes towards talent retention and an alignment of shared values. The Scheme is optional but has been well received, with over one third of eligible employees choosing to participate in FY20. All employees, including those eligible to participate, must sign the Staff Trading Policy before joining Nearmap and receive additional training when they are onboarded to ensure that they understand the obligations of securities trading as it pertains to the Company’s Continuous Disclosure Policy. 34 SUSTAINABILITY STATEMENT PRIVACY & DATA SECURITY Nearmap understands the importance of protecting the personal and confidential information of customers, suppliers and employees. In day-to-day operations, Nearmap creates, collects and maintains a vast amount of data, and aims to strike a balance between minimising the amount of information collected, and still operating the business in an efficient and effective manner. The type of information collected, how that information is collected, used, stored and protected, and to whom that information may be disclosed is outlined in the Company’s Privacy Policy, a copy of which is available on the Company’s website. Nearmap takes privacy very seriously and ensures that it complies with the Privacy Policy, as well as all applicable federal and state privacy and data security laws in the jurisdictions in which it operates. When any company experiences a data security breach, individual’s privacy rights can also be breached. To mitigate any potential impact, Nearmap has implemented a Data Breach Response Plan (“Plan”). The Plan is designed to ensure that Nearmap can contain, assess and respond to data breaches in a timely fashion, mitigating and minimising the potential harm to affected individuals and complying with its reporting obligations to regulatory bodies. As part of the Plan, any employee made aware of an actual or suspected data breach must notify a member of the Company’s response team, with each business unit represented and the Chief Financial Officer being the primary person responsible for data security breaches. It is the responsibility of the response team to undertake an investigation into any suspected breach incident, to coordinate service providers and subject matter experts as required, and to conduct a series of post-event analyses to minimise the risk of future data security breaches occurring. Data security risks are ever evolving, and it is vital for businesses to keep abreast of any new or emerging trends. Nearmap proactively considers data security risks and has a cyber working committee which meets regularly to consider new developments, and how the Company can continue to improve its cyber awareness and security requirements. This includes but is not limited to implementation of best practice frameworks that enable Nearmap to have visibility and control over its critical infrastructure and assets. The Company has also established a Global Risk Assurance Group (“GRAG”), which is made up of senior representatives from every business unit across Nearmap globally. GRAG acts as the facilitator of all risk information as it pertains to the respective business unit, information which is cascaded from all employees up to Board level through the Enterprise Risk Register. GRAG provides regular updates to the Audit and Risk Management Committee at a Board level, and reports to the Chief Financial Officer at a management level. Nearmap is committed to ensuring that it has the right policies and procedures in place to mitigate cyber security risks and is actively implementing new security measures and best practice frameworks to protect against unauthorised access or disclosure of confidential or other proprietary information. The Company is insured against certain cyber risks and security incidents but is pleased to say it did not receive any complaints regarding data breaches or security incidents during the reporting period. CAPTURED: 15 SEPTEMBER 2019 WEST LINN OR USA SUSTAINABILITY STATEMENT 35 SUSTAINABILITY STATEMENTMODERN SLAVERY On 1 January 2019, the Modern Slavery Act 2018 (Cth) (“Modern Slavery Act”) was introduced, heralding a new statutory modern slavery reporting regime for larger companies operating in Australia. Entities will need to report under the Modern Slavery Act if they are an Australian entity or carry on business in Australia with a minimum annual consolidated revenue of $100 million. As at the date of this Sustainability Statement, Nearmap remains below the Modern Slavery Act reporting threshold, but has opted to take the necessary steps internally to consider the implementation of a Global Modern Slavery Policy and associated processes that address the various risks of modern slavery practices in its global operations and supply chain. Nearmap is committed to ensuring that it has a robust and effective framework and processes that are firmly embedded in how it conducts business, including delivering appropriate awareness with employees and suppliers. ANTI-BRIBERY AND CORRUPTION Nearmap supports and fosters a culture of zero-tolerance towards bribery and corruption in all of the Company’s activities. In addition to the standards and principles set out in the Company’s Code of Conduct, Nearmap has adopted a Global Anti-Bribery and Corruption Policy to monitor the culture of the organisation through reporting of material breaches and enforcing a zero-tolerance approach to contraventions of bribery and corruption laws. The Global Anti-Bribery and Corruption Policy applies to Nearmap Ltd and its related bodies corporate and applies to all officers and employees of the Company. WHISTLEBLOWER PROTECTION Nearmap has adopted a Global Whistleblower Policy that encourages and supports the reporting of any instances of suspected unethical, illegal, fraudulent or undesirable conduct involving the Company’s businesses and provides protections and measures so that those persons who make a report may do so confidentially and without fear of intimidation, disadvantage or reprisal. In doing so, Nearmap has appointed an external service provider to provide an independently monitored external hotline and reporting service for the purposes of managing whistleblowing in line with the Global Whistleblower Policy. The Code of Conduct and the Global Anti-Bribery and Corruption Policy work in tandem with the Global Whistleblower Policy to ensure oversight of the Company’s business activities in compliance with all relevant laws in the jurisdictions in which it operates. SUPPLY CHAIN Nearmap acknowledges the importance of building and maintaining strong relationships with suppliers in order to effectively understand their business models and the ongoing and emerging risks associated with the supply chain which could impact the Company’s operations. The Company’s supply chain is expected to conform with, and uphold the values of, the Company’s Corporate Code of Conduct and its Health, Safety and Environment Policy, both of which can be found on the Company’s website. Nearmap contracts with aerial operators to survey and capture imagery across its coverage areas using the Company’s camera systems to effectively and efficiently deliver its frequent and wide scale capture programs. The aviation industry poses inherent risks and is therefore heavily regulated by federal agencies. Nearmap contractually requires all aerial operators to be fully compliant with applicable regulations before it engages with any aerial operator. The Company requires its aerial operators to provide compliance documentation, including but not limited to Air Operator’s Certificates, and operator documentation or information including aircraft details, insurances and business continuity plans. Nearmap is committed to ensuring it only engages with aerial operators who have appropriate registrations and have regulatory compliance procedures in place to ensure the highest possible levels of safety management. As with any organisation which relies on an important third-party supplier, Nearmap ensures it has an appropriate level of oversight and understands the aviation regulatory and safety environment, and the practices of its aerial operators, in order to design appropriate safety-awareness procedures and support ongoing operations. Nearmap has formed strong partnerships with its aerial operators across the regions within it operates to support transparent communication of any issues and ensuring compliance with safety regulations in relation to aircrafts and its operators. The systems and processes in place have been specifically designed to maintain the highest safety standards. In order to provide customers with the full back catalogue of historical aerial content, Nearmap utilises Amazon Web Services (“AWS”) to host, process and make available all of the Company’s content. Any disruption of, or interference with, the use of such cloud-based services could adversely impact the Company and its operations. Nearmap understands this risk and has implemented risk management processes and designed its systems to mitigate and minimise any such form of disruption or potential service impact to customers. AWS contractually guarantees that its monthly uptime is at least 99.99%. Service credits are provided in the event they do not meet these metrics and AWS provides compensation for any losses Nearmap may incur due to any outages in breach of its agreed service level. Nearmap also plays its part in reducing the impact of any AWS service disruption by ensuring services and content is designed for availability; while also being hosted across multiple sites within a number of regions across the world. AWS has a rigorous approach to its risk and compliance framework, and they disclose their security and control responsibilities to their customers, including Nearmap. This disclosure enables Nearmap to properly assess the risk associated with hosting the Company’s content on the AWS platform. These disclosures include, but are not limited to: • industry certifications and independent third-party attestations; • information about the AWS security and control practices in whitepapers and web site content; and • certificates, reports, and other documentation as required. As a key supplier to Nearmap, the Company is constantly engaged with, and maintains a thorough understanding of AWS’ risk and compliance procedures. Nearmap will continue having ongoing dialogue with AWS, both to ensure these procedures remain well understood and to satisfy its own risk assessment of its third- party suppliers. Nearmap has increased its investment into Artificial Intelligence and Machine Learning, relying on global impact sourcing solutions to enable the Company to build out its technology capabilities in this area. Nearmap is conscious of its corporate social responsibility in ensuring this investment is allocated appropriately so that it benefits the Company but also provides income, technical skills and a valuable workplace to people who might not otherwise have had the opportunity. In FY17, Nearmap partnered with a member company of the Global Impact Sourcing Coalition (“GISC”), an organisation funded by The Rockefeller Foundation. Members of the GISC commit to providing meaningful career opportunities to disadvantaged or vulnerable people across the world through impact sourcing. Member status of the GISC is reviewed annually, ensuring continued compliance with the Coalition’s objectives. In FY20 Nearmap partnered with an additional provider and member company of the GISC to grow and diversify its capabilities. Nearmap values both relationships and outcomes that continue to be achieved. 36 SUSTAINABILITY STATEMENT CAPTURED: 21 MAY 2020 LOS ANGELES CA USA SUSTAINABILITY STATEMENT 37 SUSTAINABILITY STATEMENTSUSTAINABILITY STATEMENT THE ENVIRONMENT The Nearmap vision embodies both its business purpose as well as characterising how the Company’s location intelligence has a positive impact on the environment: “We change the way people view the world, so they can profoundly change the way they work”. Access to Nearmap content enables customers to reduce physical visits to sites, allowing them to perform a multitude of tasks from their desk. Customer feedback indicates that up to 80% of customers use Nearmap content to reduce physical visits to sites. This has a direct correlation to a reduction in carbon dioxide (“CO2”) emissions that would otherwise have been emitted by customers travelling to and from these sites. In order to provide customers with content, Nearmap engages aerial operators to fly the Company’s proprietary camera systems. These flights will emit CO2, however, the impact is limited given a typical plane flying these camera systems is lightweight and carries only the pilot and the camera system. Nearmap recognises these emissions and continually invests in technology which could lead to a reduction in emissions per square kilometre. Specifically, the Company is researching methods to enable its camera systems to be flown higher and faster, reducing the time required to capture imagery at the same resolution thereby reducing CO2 emissions associated with the capture program. Based on an understanding of customer usage, Nearmap is confident that CO2 emissions associated with content captured from the Company’s aerial operators are offset many times over by the reduction in emissions attributed to reduced travel by the Company’s customers on the ground. Data generated by the Company continues to grow, driven in recent years by the addition of new content types, the frequency of capture across an increased number of geographies and the addition of Artificial Intelligence content. This data requires substantial storage capacity, which consumes a significant amount of energy and Nearmap has considered the most energy efficient way to store this content and thereby limiting the environmental impact. Cloud computing substantially reduces energy consumption, given on-site server utilisation rates typically average between 10-20% across industry. Nearmap contracts AWS, the world’s largest cloud computing platform, to host the Company’s extensive data set. By doing so, Nearmap utilises a more energy efficient process than if it were to host this data on proprietary servers at the Company’s offices or any co-located sites. Nevertheless, the energy required to host the Company’s data is still significant and Nearmap continually evaluates ways to improve its storage efficiency and associated environmental impact. This can include utilising more efficient virtual servers for processing and lifecycle of data to ensure only required data is accessible. In November 2014, AWS announced a long-term commitment to achieve 100% renewable energy usage for their global infrastructure footprint and last year AWS’ parent company, Amazon, pledged a target of 80% of total energy generation powered by renewable energy by 2024 and 100% by 2030, on its path to net zero carbon by 2040, a decade ahead of the Paris Accord’s goal of 2050. Nearmap is encouraged by the ambitious targets which have been set and will continue engaging with AWS to encourage progress toward these targets. AWS has committed to updating Nearmap on its progress. Nearmap considers the welfare of the broader community and the environment as part of its Health, Safety and Environment Policy, a copy of which can be found on the Company’s website. As outlined in the Health, Safety and Environment Policy, decision-making at Board and management levels must take into account environmental issues as a high priority, and the identification of potential environmental problems requires ongoing review by employees, management and the Board. Despite a limited environmental footprint, Nearmap takes its environmental responsibilities seriously and is committed to improving its impact where it can. The Company’s small direct environmental footprint is reflected in office energy consumption, waste and water usage in Australia and the United States. As the Company increases its investment and expansion plans, it is likely that this footprint will increase, and the Company is actively considering the degree to which it can manage the impact of this growth. 38 SUSTAINABILITY STATEMENT There are a range of reporting frameworks that currently exist for Australian companies to disclose their environmental impact. Discussion papers from the Australian Securities Exchange and the Australian Council of Superannuation Investors have made reference to the Task Force on Climate-Related Financial Disclosure initiative, established in 2015 by the Financial Stability Board, to develop voluntary, consistent climate-related disclosure. Nearmap will continue monitoring industry adoption of climate reporting frameworks to consider if there is an appropriate disclosure framework for the Company to report against. Two thirds of the Company’s employees are based in its Sydney office, part of the Barangaroo precinct, which is one of only eighteen precincts globally to be part of the C40 Cities-Clinton Climate Initiatives Climate Positive Development Program and Australia’s first large scale carbon neutral community. Tower One in Barangaroo is one of Australia’s most sustainable high-rise buildings and the Nearmap office has been awarded 5.5 stars under the National Australian Built Environment Rating System. In addition to such systems as sensor lights and intelligent lifts in the Sydney office, Nearmap facilitates an office environment which encourages employees to minimise the environmental impact of their day-to-day activities. This includes such measures as: • issuing new employees with a water bottle to reduce the use of single use plastics; Nearmap does not provide employees with any single use plastic for daily use; • providing recycling bins for paper, mixed recycling, organics and coffee pods; • installing filtered water taps and supplying crockery and cutlery in the kitchen; • reducing printing through software such as DocuSign to electronically manage business agreements; and • utilising Shred-X to provide a closed loop, secure documentation destruction and recycling service. Prior to the COVID-19 pandemic, employees engaged via online software platforms, minimising the need for travel and improving overall productivity. With the onset of COVID-19, Nearmap accelerated the usage of these platforms and employees moved to engaging completely virtually. In the ordinary course of business a degree of travel would be required as the Company continues with its expansion plans and in FY20 the Company changed travel providers to enable Nearmap to more closely monitor air travel by employees and, by default, the environmental impact their travel has. As a technology company, Nearmap will from time to time produce electronic waste. The Company’s technology team is solely based out of the Sydney office and has arrangements with building management for any electronic waste, such as monitors or cables, to be donated to not-for-profit organisations or social enterprise businesses if they can be reused, or recycled if they cannot. Customers use Nearmap to monitor areas impacted by climate change, detect illegal dumping, changes in water runoff, assess natural disaster risk, monitor green space, historic sites and preserve the natural environment. Eight percent of the Company’s global customer base by Annualised Contract Value are solar installation companies, who utilise Nearmap content to efficiently assess and price solar installation for potential customers, increasing the supply of renewable energy to tens of thousands of households and businesses. Nearmap is proud to have built a company which empowers individuals and organisations to make an overwhelmingly positive impact on the environment and Nearmap is committed to playing its part in facilitating a greener and more sustainable future. CAPTURED: 15 SEPTEMBER 2019 LAKE OSWEGO OR USA SUSTAINABILITY STATEMENT 39 DIRECTORS’ REPORT DIRECTORS’ REPORT NEARMAP BOARD OF DIRECTORS ABOVE FROM LEFT TO RIGHT BACK ROW MS TRACEY HORTON MR ROSS NORGARD MR CLIFF ROSENBERG MS SUE KLOSE FRONT ROW DR ROB NEWMAN MR PETER JAMES 40 DIRECTORS’ REPORT CAPTURED: 5 MARCH 2020 NEW YORK NY USA DIRECTORS’ REPORT 41 DIRECTORS’ REPORT The Directors submit their report together with the consolidated financial statements of the Group, consisting of Nearmap Ltd (“Nearmap” or the “Company”) and the entities it controlled at the end of, or during, the financial year ended 30 June 2020 and the auditor’s report thereon. The Directors of the Company at any time during, or since the end of, the financial year are: MS TRACEY HORTON AO, B.ECON.(HONS), MBA, FAICD, FGIA INDEPENDENT NON-EXECUTIVE DIRECTOR MR PETER JAMES MR PETER JAMES, BA, FAICD INDEPENDENT NON-EXECUTIVE CHAIRMAN DR ROB NEWMAN, B.ENG (1ST HONS), PH.D. CHIEF EXECUTIVE OFFICER & MANAGING DIRECTOR 42 DIRECTORS’ REPORT Peter has extensive experience as Chair, Non-executive Director and Chief Executive Officer across a range of publicly listed and private companies, particularly in emerging technologies and e-commerce. Previously among other roles, Peter was a long-term Director of iiNet, chairing iiNet’s Strategy and Innovation Committee. Peter is a successful investor in digital media and technology businesses in Australia and the US and travels extensively in reviewing innovation and consumer trends globally. Peter is an experienced and successful business leader with significant strategic and operational expertise. He brings a strong record of corporate governance and stakeholder communication and is a Fellow of the Australian Computer Society. Peter holds a BA degree with majors in Business and Computer Science. SPECIAL RESPONSIBILITIES: Member of the Audit and Risk Management Committee Member of the People, Culture and Remuneration Committee CURRENT ASX LISTED COMPANY DIRECTORSHIPS: • Nearmap Ltd (since 21 December 2015) - Non-executive Chairman • Macquarie Telecom Ltd (ASX: MAQ) (since 2 April 2012) - Non-executive Chairman • Droneshield Limited (ASX: DRO) (since 1 April 2016) - Non-executive Chairman • UUV Aquabotix Ltd (ASX: UUV) (since 9 March 2017) - Non-executive Chairman • Keytone Dairy Corporation Limited (ASX: KTD) (since 25 September 2018) - Non-executive Director FORMER ASX LISTED COMPANY DIRECTORSHIPS IN THE LAST 3 YEARS: • Dreamscape Networks Limited (ASX: DN8) (from 16 September 2016 to 30 October 2019) - Non-executive Chairman Rob has a unique track record as a successful Australian technology entrepreneur in Australia and Silicon Valley. He has twice founded and built Australian technology businesses, both successfully entering overseas markets. Rob is a trained engineer and spent his career in marketing, business development and general management in Information Technology businesses focusing on communications. Rob also spent ten years 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 growth companies with significant commercial potential, especially those addressing overseas markets. In the 1980s, Rob was the inventor and co- founder of QPSX Communications Pty Ltd. Rob provided the technical leadership and product strategy and was instrumental in establishing QPSX as a worldwide standard for Metropolitan Area Networks. CURRENT ASX LISTED COMPANY DIRECTORSHIPS: • Nearmap Ltd (since 17 February 2011). Appointed CEO & Managing Director in October 2015 FORMER ASX LISTED COMPANY DIRECTORSHIPS IN THE LAST 3 YEARS: • Pointerra Limited (ASX: 3DP) (30 June 2016 to 9 November 2018) - Non-executive Director MS SUE KLOSE, B.SCI.ECON., MBA, GAICD INDEPENDENT NON-EXECUTIVE DIRECTOR Tracey is an experienced Company Director with significant global strategy experience and is currently a Non-executive Director of GPT Group Limited (ASX: GPT), a member of the Australian Takeovers Panel and the National Board of the Australian Institute of Company Directors, Chair of Australian Industry Skills Committee and was, until recently, Chair of Navitas Limited (ASX: NVT). Tracey’s extensive prior board experience includes a wide range of listed, government and not-for-profit boards. Tracey has lived, worked, and studied in Australia, the US, Canada and the UK. Tracey was previously a Winthrop Professor and Dean of the University of Western Australia’s Business School. Prior to that she held executive and senior management roles with Bain & Company in North America, and in Australia with advisory firm Poynton and Partners and the Reserve Bank of Australia. Tracey has a Bachelor of Economics (Hons) from the University of WA and an MBA from Stanford University. SPECIAL RESPONSIBILITIES: Chair of the People, Culture and Remuneration Committee Member of the Audit and Risk Management Committee CURRENT ASX LISTED COMPANY DIRECTORSHIPS: • Nearmap Ltd (since 1 September 2019) - Non-executive Director • The GPT Group Ltd (ASX: GPT) (since 1 May 2019) - Non-executive Director FORMER ASX LISTED COMPANY DIRECTORSHIPS IN THE LAST 3 YEARS: • Navitas Limited (ASX: NVT) (13 June 2012 - 16 November 2016) - Non-Executive Director • Navitas Limited (ASX: NVT) (16 October 2016 - 8 July 2019) - Non-Executive Chairman Sue is an experienced senior executive and board director, with a diverse background in Software as a Service (SaaS) businesses with a focus on digital strategy, corporate development, partnerships and business growth in Australia and the US. Sue was previously the Chief Marketing Officer of GraysOnline, where she was responsible for brand development, marketing operations and digital product strategy. In prior roles in consulting and global media companies including News Ltd (ASX: NWS), Sue has led strategic planning and development and is passionate about helping teams continually seek new opportunities for growth and innovation. As Director of Digital Corporate Development for News Ltd, Sue screened hundreds of potential investments, leading multiple acquisitions, establishing the CareerOne and Carsguide joint ventures, and holding multiple board roles in high- growth digital and SaaS businesses. Sue has an MBA with honours in Finance, Strategy and Marketing from the JL Kellogg School of Management at Northwestern University, and a Bachelor of Science in Economics from the Wharton School of the University of Pennsylvania. Sue is currently a Non-executive Director of Pureprofile (ASX: PPL) and Stride Mental Health Limited, one of Australia’s largest mental health care providers. SPECIAL RESPONSIBILITIES: Chair of the Audit and Risk Management Committee Member of the People, Culture and Remuneration Committee CURRENT ASX LISTED COMPANY DIRECTORSHIPS: • Nearmap Ltd (since 14 August 2017) - Non- executive Director • Pureprofile Ltd (ASX: PPL) (since 17 July 2018) - Non-executive Director FORMER ASX LISTED COMPANY DIRECTORSHIPS IN THE LAST 3 YEARS: • None DIRECTORS’ REPORT 43 DIRECTORS’ REPORT MR ROSS NORGARD, FCA NON-EXECUTIVE DIRECTOR In 1987, Ross became the founding Chairman of Nearmap Ltd. He held this role until 18 March 2016, at which point he moved into a Non-executive role. University of Western Australia’s Graduate School of Management (MBA Program). Ross is also Western Australia’s Honorary Consul- General to Finland. Ross is a former managing partner of Arthur Andersen and KMG Hungerfords and its successor firms in Perth, Western Australia. For over 30 years he has worked extensively in the fields of raising venture capital and the financial reorganisation of businesses. He has held numerous positions on industry committees including former Chairman of the Western Australian Professional Standards Committee of the Institute of Chartered Accountants, a former member of the National Disciplinary Committee of the Institute of Chartered Accountants, former Chairman of the Friends of the Duke of Edinburgh’s Award Scheme and a former member of the SPECIAL RESPONSIBILITIES: Member of the Audit and Risk Management Committee Member of the People, Culture and Remuneration Committee CURRENT ASX LISTED COMPANY DIRECTORSHIPS: • Nearmap Ltd (since 1987) - Non-executive Director • Brockman Mining Ltd (ASX: BCK) (since 22 August 2012) - Non-executive Director FORMER ASX LISTED COMPANY DIRECTORSHIPS IN THE LAST 3 YEARS: • None Cliff has more than 20 years’ experience leading change and innovation in technology and media companies. As the former Managing Director of LinkedIn for Australia, NZ and South-East Asia, Cliff started the Australian office in 2009 and oversaw the expansion of LinkedIn in Australia from 1 million members in 2009 to more than 8 million members in 2017. Previously, he was Managing Director at Yahoo! Australia and New Zealand, and prior to that role he was the founder and Managing Director of iTouch Australia NZ where he grew the Australian office to one of the largest mobile content and application providers in Australia. Previously Cliff was head of corporate strategy for Vodafone Australasia and also served as an international management consultant with Gemini Consulting and Bain Consulting. Cliff has more than ten years’ experience on the boards of publicly listed companies. His current directorships include Nearmap, A2B Australia Limited (ASX: A2B), TechnologyOne (ASX: TNE) and Bidcorp (JSE: BID). Cliff was also a Non-Executive Director with Dimmi (online reservations company bought by Tripadvisor. com in May 2015) and Afterpay Touch Group (ASX: APT). He holds a Bachelor of Business Science (Hons) from the University of Cape Town and a Masters of Science (Hons) from the Universitat Ben Gurion Ba-Negev. SPECIAL RESPONSIBILITIES: Member of the Audit and Risk Management Committee Member of the People, Culture and Remuneration Committee CURRENT ASX LISTED COMPANY DIRECTORSHIPS: • Nearmap Ltd (since 3 July 2012) - Non-executive Director • A2B Australia Ltd (ASX: A2B) (since 25 August 2017) - Non-executive Director • Technology One Pty Ltd (ASX: TNE) (since 27 February 2019) - Non-executive Director FORMER ASX LISTED COMPANY DIRECTORSHIPS IN THE LAST 3 YEARS: • Pureprofile Ltd (ASX: PPL) (12 June 2015 to 28 February 2019) - Non-executive Director • IXUP Ltd (ASX: IXU) (29 September 2017 to 2 July 2019) - Non-executive Director • Afterpay Touch Group Ltd (ASX: APT) (23 March 2016 to 24 May 2020) - Non-executive Director MR CLIFF ROSENBERG, B.BUS.SCI., M.SC. MANAGEMENT INDEPENDENT NON-EXECUTIVE DIRECTOR 44 DIRECTORS’ REPORT MR IAN MORRIS, MBA (RESIGNED, 14 NOVEMBER 2019) INDEPENDENT NON-EXECUTIVE DIRECTOR He has also served as a strategic advisor and Board member to a number of leading US technology companies. CURRENT ASX LISTED COMPANY DIRECTORSHIPS: • None FORMER ASX LISTED COMPANY DIRECTORSHIPS IN THE LAST 3 YEARS: • Nearmap Ltd (28 January 2016 to 14 November 2019) - Non-executive Director Ian has enjoyed a successful business career in the US technology sector. He currently is the CEO of Likewise, Inc., a Gates Ventures backed technology company which he co- founded. Previously he served as President and CEO of Market Leader for more than a decade, a leading provider of real estate Software as a Service (SaaS) solutions. 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$380M. Ian also spent seven years at Microsoft leading early online marketing efforts and later served as the General Manager of Microsoft HomeAdvisor. COMPANY SECRETARY Ms Shannon Coates LLB was appointed to the position of company secretary in June 2013. Ms Coates is a qualified lawyer, Chartered Secretary and graduate of the AICD Company Directors course, with over 20 years’ experience in corporate law and compliance. She is currently company secretary to a number of publicly listed and unlisted companies and has provided company secretarial and corporate advisory services to boards and various committees across a variety of industries, including financial services, resources, manufacturing and technology. CAPTURED: 29 MARCH 2020 QUEENSTOWN NEW ZEALAND DIRECTORS’ REPORT 45 DIRECTORS’ REPORT DIRECTORS’ MEETINGS The number of meetings of Directors (including meetings of committees of Directors) held during the financial year and the number of meetings attended by each Director are as follows: FULL BOARD MEETINGS AUDIT AND RISK MANAGEMENT COMMITTEE MEETINGS PEOPLE, CULTURE AND REMUNERATION COMMITTEE MEETINGS3 ELIGIBLE TO ATTEND ATTENDED ELIGIBLE TO ATTEND ATTENDED ELIGIBLE TO ATTEND ATTENDED P James R Newman T Horton1 S Klose I Morris2 R Norgard C Rosenberg 11 11 9 11 4 11 11 11 11 85 11 4 10 11 4 - 3 4 - 4 4 4 24 45 4 - 3 4 3 - 2 3 1 3 3 3 24 2 3 - 3 3 1 Tracey Horton was appointed as a Director on 1 September 2019. 2 Ian Morris resigned as a Director on 14 November 2019. 3 The Committee was re-named from Nomination and Remuneration Committee to People, Culture and Remuneration Committee on 9 June 2020. 4 Dr Newman attended these committee meetings as an invitee. 5 Ms Horton attended one meeting of the Audit and Risk Committee as an invitee. Ms Horton did not attend one of the Board meetings due to another previously scheduled Board meeting that prevented her attendance. PRINCIPAL ACTIVITIES The principal activity of the Group during the course of the financial year was the provision of online aerial photomaps to business customers via subscription through its 100% owned subsidiaries, Nearmap Australia Pty Ltd and Nearmap US, Inc. There were no significant changes in the nature of the activities of the Group during the year. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS In the opinion of the Directors, there were no significant changes in the state of affairs of the Group that occurred during the financial year under review. OPERATING AND FINANCIAL REVIEW Overview of the Group Founded in Australia in 2007, Nearmap is a location intelligence company capturing data about the real world and providing insights to a diverse range of businesses. By subscribing to Nearmap, customers can remotely plan and inspect, monitor and validate, assess risk, communicate and visualise, estimate and quote, and generate leads, enabling businesses to increase their productivity by reducing the need for costly, time-consuming site visits. Nearmap has a diverse subscription base of more than 10,000 customers across a number of industry verticals. These verticals include Architecture, Construction, Engineering (25% of the Group’s customer portfolio), Insurance (19% of the Group’s customer portfolio), Solar (8% of the Group’s customer portfolio), Utilities (11% of the Group’s customer portfolio), Commercial (16% of the Group’s customer portfolio), Roofing (3% of the Group’s customer portfolio), and Government Organisations (18% of the Group’s customer portfolio). Given this diversity, the Group does not have concentration risk on specific industry segments or individual customers. Using its own patented camera systems and processing software, the Group captures wide-scale urban areas in Australia (89% population coverage), New Zealand (73% population coverage), the United States (71% population coverage) and Canada (64% population coverage) multiple times each year. The updated content is delivered to customers as Orthogonal (2D) imagery, Oblique cardinal direction imagery, 3D models and, as of June 2020, via Nearmap AI, a new product that enables customers to more accurately and efficiently measure change and quantify attributes through a series of data sets constructed from machine learning models deployed across the Group’s high-definition aerial images. The Group’s content includes a wide range of analytics and tools, including artificial intelligence content, and is instantly available in the cloud via web app or API integration. The pivotal features underpinning the success of the Nearmap business model are: • the frequency with which this data is captured and updated; • the clarity (resolution) of the imagery provided; • the large geographic scale of the coverage area; and • the availability of previous surveys on the same platform, allowing users to track changes at locations over time. The Group is a participant in the large, fragmented and growing global location intelligence market, holding a global market share of less than 1%. The Group’s strategy is to effectively monetise its content by providing convenient access to the content via desktop and mobile platforms, through a subscription model and value-add products supported by e-commerce facilities. The Group generates revenues in two main geographic regions, Australia and New Zealand (together “ANZ”), and the United States and Canada (together “NA”). See segment reporting in note 3 to the consolidated financial statements for more details of the financial performance of the Group’s operating segments. Review of operations Financial performance For the year ended 30 June 2020, the Group reported revenue of $96.7m (30 June 2019: $77.6m), and a net loss after tax of $36.7m (30 June 2019: $14.9m). GROUP ACV PORTFOLIO (A$’000) OPENING ACV New business Net upsell Churn Net incremental ACV Foreign exchange CLOSING ACV TOTAL REVENUE Total net expenses (ex. D&A, interest, tax) EBITDA Depreciation and amortisation EBIT Net finance income Tax benefit/(expense) NPAT EARNINGS PER SHARE (CENTS PER SHARE) OPERATING CASH FLOW FY20 90,240 16,028 8,288 (8,889) 15,427 770 106,437 96,714 (87,643) 9,071 (46,698) (37,627) 524 386 (36,717) (8.14) 12,088 FY19 66,234 17,386 9,152 (3,514) 23,024 982 90,240 77,642 (62,158) 15,484 (26,659) (11,175) 1,338 (5,097) (14,934) (3.43) 24,899 YOY $ 24,006 (1,358) (864) (5,375) (7,597) (212) 16,197 19,072 (25,485) (6,413) (20,039) (26,452) (814) 5,483 (21,783) (4.71) (12,811) YOY % 36% (8%) (9%) (153%) (33%) (22%) 18% 25% (41%) (41%) (75%) (237%) (61%) (108%) (146%) (137%) (51%) Total revenue for the year ended 30 June 2020 (FY20) increased 25% to $96.7m compared to total revenue for the year ended 30 June 2019 (FY19) of $77.6m. ANZ revenue increased 13% to $60.2m compared to prior revenue of $53.2m, while NA revenue increased 49% to $36.5m compared to prior year revenue of $24.5m. 46 DIRECTORS’ REPORT DIRECTORS’ REPORT 47 DIRECTORS’ REPORT OPERATING AND FINANCIAL REVIEW (CONT.) Review of operations (cont.) The increase in revenue is correlated to the 18% growth in the Annual Contract Value (“ACV”) portfolio over the same period. The drivers behind ACV growth for the year ended 30 June 2020 are: • New business: New customers contributed $16.0m of incremental ACV in FY20. This increase is marginally down on prior year, in part impacted by the onset of COVID-19, but shows the continued penetration of the total addressable market to new user groups across key industry segments in both ANZ and NA. The NA and ANZ segments respectively represented $10.2m and $5.8m of the Group’s new business for the year ended 30 June 2020. • Net upsell: Net upsell is the aggregate of customer upgrades offset by downgrades. Net upsell in FY20 totalled $8.3m which was $0.9m below prior year but includes a significant downgrade from an enterprise customer in NA impacted by a downturn in the autonomous vehicle sector. Net upsell across both segments highlights the increasing value that existing customers derive from Nearmap, and the success of cross-selling into new products and features. The NA and ANZ segments respectively reported net upsell of $4.2m and $4.1m during the year ended 30 June 2020. • Churn: As a subscription business selling annual contracts, a key focus for sales and marketing activities is the retention of existing customers. Nearmap has invested significantly in customer retention activities and in FY19 recorded ACV portfolio churn of 5.3%. In FY20 this number increased to 9.9%, largely due to two large-enterprise churn events relating to the cancellation by a partner which was subject to a permanent court injunction, and the loss of a customer contract due to the slowdown in mapping for the autonomous vehicle industry. Without these two events, churn would have been 5.4% which is consistent with prior year and a strong result when considering the change in the macroeconomic environment as a result of COVID-19. The NA and ANZ segment respectively reported churns worth $5.5m and $3.4m during the year ended 30 June 2020. COVID-19 had the impact of slowing sales velocity during March-June 2020. Despite this, the Group continued to grow its overall ACV portfolio during this period, demonstrating the strength of business operations and the increasing relevance of the Group’s products to many customers who themselves are working remotely and are unable to make physical site visits. Revenue is recognised evenly over the subscription period, while ACV represents the annualised value of all active subscription contracts in effect at a particular date. The difference between ACV growth and revenue growth is a result of the timing of new business, net upsell and churn events across the financial year. Excluding the impact of the two material NA churns at the end of the first half, revenue growth would have aligned with ACV growth for the year ended 30 June 2020. Group EBITDA for the year ended 30 June 2020 is down 41% to $9.1m compared to prior year Group EBITDA of $15.5m. In ANZ, EBITDA is down 23% to $10.5m compared to prior year EBITDA of $13.7m. Offsetting the increase in revenue, an increase in staff related expenses of 33% or $7.7m compared to prior year is the main driver of the decrease in EBTIDA. This is in line with the commitment made during the September 2018 capital raise to expand the sales, marketing, product and technology teams to support and accelerate the delivery of strategic objectives. In NA, EBITDA is down 178% to ($1.4m) compared to prior year of $1.8m. The drivers of the decrease in NA are consistent with those in ANZ. Group NPAT for the year ended 30 June 2020 is down 146% to ($36.7m) compared to prior year of ($14.9m). The decrease in NPAT is driven by the decrease in EBITDA, and by an increase of 75% or $20.0m in depreciation and amortisation expense resulting from the increased cost base and the accelerated depreciation of capture costs (5 years to 2 years) implemented prospectively from 1 January 2019. The net tax expense of the Group reduced by $5.5m mainly as a result of a $1.9m reduction in current tax expense in Australia and a favourable net deferred tax adjustment of $3.6m. Other drivers of the decrease in NPAT include a decrease of $0.8m in net finance income resulting from lower interest income on the Group’s cash and cash equivalents, a $0.6m increase in interest expense as a result of the adoption of AASB 16 on 1 July 2019, offset by a $0.5m foreign exchange gain for the year ended 30 June 2020. Financial position The Group’s balance sheet remains strong with no debt and a closing cash balance at 30 June 2020 of $36.1m (30 June 2019: $75.9m). The 30 June 2019 balance included a significant part of the net proceeds from a fully underwritten $70.0m capital placement to institutional investors in September 2018. The decrease between 30 June 2019 and 30 June 2020 is in line with the intended use of the capital raised, being the investment in the sales and marketing workforce, the development of international and partnership opportunities, and new product and technology development. During the year ended 30 June 2020 the Group implemented a number of cash management initiatives in response to the macroeconomic uncertainty created by COVID-19. This resulted in a 30% reduction to the overall cost base and included a 10% reduction to permanent employment costs, a temporary 20% reduction to employee salaries for a 6-month period from 1 May 2020 (offset by the grant of restricted- stock units of an equivalent value to non-KMPs), a temporary 25% reduction to Non-executive Director fees and the Chief Executive Officer & Managing Director’s salary for the same period, and various other cost savings across the business. In doing so, the Group accelerated the drive to cash flow breakeven and brought greater strength and flexibility to the balance sheet. The Group’s net working capital, excluding cash and cash equivalents and deferred revenue, increased 128% to $7.3m from $3.2m between 30 June 2019 and 30 June 2020. The increase is mainly driven by trade receivables which have increased by $9.2m, in line with the increase in revenue, offset by an increase in current lease liabilities of $4.5m resulting from the adoption of AASB 16 on 1 July 2019 (see below). Cash receipts from customers for the year were $100.2m compared to $86.9m for the previous year, an increase of $13.3m or 15%. On 1 July 2019, the Group adopted new accounting standard AASB 16 Leases (AASB 16) using the modified retrospective approach under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, comparative figures have not been restated in the consolidated financial statements. The newly effective standard introduced a single, on-balance sheet accounting model for lessees. Upon transition, the Group, as a lessee, has recognised right-of-use assets of $6.0m in property, plant and equipment on the consolidated statement of financial position representing its right to use the underlying assets, deferred tax assets of $0.1m, lease liabilities of $7.8m representing its obligation to make lease payments, derecognised the lease liabilities accounted for under AASB 117 Leases of $1.2m and recognised the initial application impact of $0.4m in accumulated losses. As at 30 June 2020, the carrying value of the right-of-use assets and lease liabilities are respectively $14.1m and $14.4m. See note 2 to the financial statements for a comprehensive review of the impact of the transition to AASB 16 Leases on the consolidated statement of financial position and the Group’s accounting policy. The Group’s net assets as at 30 June 2020 decreased 35% to $56.7m, from $87.7m at 30 June 2019. The decrease is mainly driven by the $37.5m comprehensive loss recorded by the Group for the year ended 30 June 2020 and the $0.4m opening retained earnings adjustment on initial application of AASB 16, offset by $2.0m increase in contributed equity resulting from the exercise of share options and repayment of limited recourse loans, and a $5.0m increase in share-based payment reserve. DIVIDENDS No dividends have been paid or proposed in respect of the current year (30 June 2019: nil). EVENTS SUBSEQUENT TO THE REPORTING DATE No other matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years. LIKELY DEVELOPMENTS The Group will continue to implement the business strategies put in place to ensure that the Group continues on its growth trajectory in the foreseeable future, subject to a stable macro-economic environment. The Group will continue to seek new opportunities to build scale and to broaden its customer base, sales and marketing capability, product offering and technological advantage. In reliance on s299A(3) of the Corporations Act 2001, we have not disclosed further information on business strategies and prospects, because disclosure of that information is likely to result in unreasonable prejudice to the Group. ENVIRONMENTAL REGULATION The current activities of the Group are not subject to any significant environmental regulation. However, the Board believes that the Group has adequate systems in place to manage its environmental obligations and is not aware of any breach of those environmental requirements during the period covered by this report as they apply to the Group. 48 DIRECTORS’ REPORT DIRECTORS’ REPORT 49 DIRECTORS’ REPORT DIRECTORS’ INTERESTS The relevant interest of each Director in the shares, debentures, interests in registered schemes and rights and options over such instruments issued by the companies within the Group and other related bodies corporate, as notified by the Directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this report are as follows: ORDINARY SHARES OPTIONS OVER ORDINARY SHARES P James R Newman T Horton S Klose R Norgard C Rosenberg SHARE OPTIONS 2,382,000 9,600,000 20,000 100,000 27,738,921 3,201,000 - 2,302,018 - - - - As at 30 June 2020 there were 16,979,545 unissued ordinary shares under option. Refer to note 5 to the consolidated financial statements for further details of the Group’s share-based payment plans. INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITOR Indemnification of officers The Company has agreed to indemnify the current Directors and certain Senior Executives of the Company and its controlled entities against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors or Senior Executives of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including legal fees. Since the end of the previous financial year, the Group has paid insurance premiums in respect of Directors’ and officers’ liability and legal expenses insurance contracts. The insurance premiums relate to: • legal costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome; and • other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage or to cause detriment to the Company. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnification of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES Non-audit services During the year, KPMG, the Group’s auditor, has performed certain other services in addition to the audit and review of the consolidated financial statements. The Board has considered the non-audit services provided during the year by the auditor of the Group, KPMG, and in accordance with written advice provided by resolution of the Audit and Risk Committee, is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor; and • the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision- making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards. Details of the amounts paid to KPMG and its network firms for audit and non-audit services provided during the year are outlined in note 18 to the consolidated financial statements. Lead auditor’s independence declaration The lead auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 71 and forms part of the Directors’ report for the financial year ended 30 June 2020. 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 financial report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated. REMUNERATION REPORT The remuneration report on pages 52 to 68 forms part of this Director’s Report. This report is made in accordance with a resolution of the Directors. On behalf of the Board of Directors Rob Newman Chief Executive Officer & Managing Director 18 August 2020 50 DIRECTORS’ REPORT DIRECTORS’ REPORT 51 INTRODUCTION This remuneration report outlines the remuneration arrangements in place for Directors and Key Management Personnel of Nearmap Ltd (the Company) and the consolidated entity (the Group) for the year ended 30 June 2020. CONTENTS: A. Key Management Personnel (KMP) disclosed in this report B. Principles used to determine the nature and amount of remuneration C. Details of remuneration D. Employment contracts E. Share-based compensation F. Transactions with Key Management Personnel G. Additional information H. Shares under option The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001 and forms part of the Directors’ Report. A. KEY MANAGEMENT PERSONNEL (KMP) DISCLOSED IN THIS REPORT KMP are the directors and employees who have authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year. On that basis, the following roles and individuals are addressed in this report: Directors The following persons were Directors of the Company during the current and previous financial year and up to the date of this report, unless otherwise stated: P James R Newman T Horton S Klose R Norgard Non-executive Chairman Chief Executive Officer & Managing Director Non-executive Director (appointed 1 September 2019) Non-executive Director Non-executive Director C Rosenberg Non-executive Director I Morris Non-executive Director (resigned 14 November 2019) Senior executives classified as KMP The following persons were Senior executives classified as KMP of the Group during the current and previous financial year and up to the date of this report, unless otherwise stated: A Watt T Celinski H Sanchez S Shugg J Adams T Agresta S Preston P Quigley S Steel Chief Financial Officer Chief Technology Officer Chief Marketing Officer (appointed 8 October 2018) Chief People Officer (appointed 21 October 2019) Chief Revenue Officer (appointed 20 February 2020)1 Vice President of Product (until 20 February 2020)1 Vice President of Sales – Australia (until 20 February 2020)1 Senior Vice President and General Manager – International and Partners (until 20 February 2020)1 Vice President, People & Culture (resigned 4 September 2019 and last day of employment 31 March 2020) 1 Effective 20 February 2020, the Group appointed J Adams as Chief Revenue Officer, reporting directly to R Newman as Chief Executive Officer. As a result, T Agresta, S Preston and P Quigley had their reporting lines changed to report directly to J Adams and are therefore no longer considered KMPs in the sense intended by the Corporations Act 2001 and the Australian Accounting Standards Board (AASB). B. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION Remuneration philosophy The performance of the Group depends upon the quality of its Directors and executives. To prosper, the Group must attract, motivate and retain highly skilled Directors and executives. To this end, the Group applies 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. People, Culture and Remuneration Committee The People, Culture and Remuneration Committee (formerly “Nomination and remuneration committee”) of the Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the Directors and the Chief Executive Officer & Managing Director, and ensuring that the Board continues to operate within the established guidelines, including when necessary, selecting candidates for the position of Director. The Committee makes recommendations to the Board for the fixed and variable remuneration for the Chief Executive Officer & Managing Director, and reviews and recommends the overall Group variable remuneration framework to the Board. The Committee also reviews and endorses the Chief Executive Officer & Managing Director’s recommendations for KMP remuneration packages. The People, Culture and Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of Directors and the Chief Executive Officer & Managing Director on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high-quality Board and executive team. Securities trading policy A securities trading policy (“Trading Policy”) has been adopted by the Board to provide guidance to Directors, employees of the Group, and other parties who may have access to price sensitive information, who may be contemplating dealing in the Company’s securities or the securities of entities with whom the Company may have dealings. The Trading Policy is designed to ensure that any trading in the Company’s securities is in accordance with the law. Any non-compliance with the Trading Policy will be regarded as an act of serious misconduct. The Trading Policy is available on the Nearmap website at www.nearmap.com/ au/en/investors/governance. Remuneration structure In accordance with best practice corporate governance, the structure of Non-executive Director and KMP remuneration is separate and distinct. (i) 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, while incurring a cost which is acceptable to shareholders. Structure: Each Non-executive Director receives a fee for being a Director of the Company. 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 15 November 2018 when shareholders approved an aggregate remuneration of $850,000 per year. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned among Directors is reviewed annually. During the year ended 30 June 2018, fees were introduced for the sub-committee Chairs and members (other than the Board Chair) to recognise their additional responsibilities. The current base Director fees per annum, including statutory superannuation, are: Chairman Non-executive Director Committee Chair 30 JUNE 2020 $175,000 $110,000 $10,000 The Board periodically reviews the level of fees paid to Non-executive Directors, including seeking external advice. The last external review was undertaken during the year ended 30 June 2019 by Godfrey Remuneration to benchmark Non-executive Director remuneration and the proposed design of an equity plan. Following this review, it was agreed that an equity plan would not be put in place for Non-executive Directors. A grant of Non-executive Director share options was last made during the year ended 30 June 2016. No grants were made in the years ended 30 June 2017, 30 June 2018, 30 June 2019 or 30 June 2020. During the year ended 30 June 2020, KPMG were engaged to provide general remuneration advice including the preparation of a discussion paper on COVID-19 related remuneration arrangements for employees, KMPs and Non-executive Directors. The total costs of this exercise were $21,450 including GST. Following the review, all Non-executive Director fees were reduced by 25% for a period of 6 months, effective 1 May 2020. The Company is planning a comprehensive review of its remuneration structure, to be conducted over the course of FY21. 52 DIRECTORS’ REPORT DIRECTORS’ REPORT 53 DIRECTORS’ REPORTREMUNERATION REPORT (AUDITED)B. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION (CONT.) (ii) Key management personnel and Executive Director remuneration Objective: The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group in order 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: 1) Fixed Remuneration 2) Variable Remuneration, comprising: - Short-Term Incentive (STI); and - Long-Term Incentive (LTI). 1) Fixed Remuneration Objective: The level of fixed remuneration is set to provide a base level of remuneration which is both appropriate to the position and competitive in the market. Fixed remuneration is reviewed annually by the People, Culture and Remuneration Committee. The process consists of a review of individual performance, comparative remuneration in the market and internal and, where appropriate, external advice on policies and practices. During the year ended 30 June 2020, performance related adjustments were made to the fixed remuneration of the Chief Executive Officer & Managing Director, the Vice President of Product, the Chief Technology Officer, the Vice President of Sales – Australia, the Senior Vice President and General Manager – International Partnerships & Expansion, the Chief Marketing Officer, and the Chief Financial Officer. Fixed remuneration for KMP was reduced by 20% for a six-month period from 1 May 2020 in response to the uncertainty created by the impact of COVID-19. Fixed remuneration for the Non-executive Directors and the Chief Executive Officer & Managing Director was reduced by 25% for the same period. Continuing revenue growth during the COVID-19 affected period meant that the Group was ineligible for any Australian or US government-funded salary incentives schemes e.g. Jobkeeper allowance. See note 5 of the consolidated financial statements for further details of the impact of COVID-19 on non-KMP remuneration structures. 2) Variable Remuneration Structure: Senior executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and fringe benefits 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 Group. Short Term Incentive (STI) Objective: The objective of the STI program is to link the achievement of the Group’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 to provide sufficient incentive to employees to achieve the operational targets at a cost to the Group that is reasonable in the circumstances. Structure: Actual STI payments granted to each employee depend on the extent to which specific operating targets are met. The operational targets consist of a number of Key Performance Indicators (KPIs) covering individual and Group performance measures aligned to the short- term success of the business. The performance measures are set as follows: • Group performance: 60% of the STI comprises a Group Revenue target. The payout is scaled to the internal Group Revenue target (FY20 Group Revenue Target $102.3m). Subject to meeting the gateway, outperformance results in higher than target payments (maximum payout of 150% of the 60%), while underperformance results in below target payments (target achievement of 90% or less results in nil payment). The Group removed the EBITDA threshold for FY20 (FY19: EBITDA threshold > $0) to align variable remuneration with the Group’s revenue growth strategy. Group performance will be measured against incremental ACV in FY21, further aligning employee incentivisation with the primary operating metric for the business. • Individual performance: 40% of the STI comprises personal performance targets, typically including employee engagement, leadership/team contribution and functional specific deliverables. Executives responsible for sales have an uncapped STI aligned to internal ACV growth targets. STI payments are made, subject to Board discretion, if the relevant targets are achieved. If the targets are not achieved, then any STI payment is discretionary and will only be made if the Board deems that the executive has demonstrated exceptional performance in meeting other objectives. The amount of annual STI payments available for employees across the Group is subject to the approval of the Board, on the recommendation of the People, Culture and Remuneration Committee. Payments made are usually delivered as a cash bonus paid after the release of the audited financial statements. 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. Structure: There are two components to the LTI granted to KMP: a share option grant upon hiring and a yearly share option grant thereafter. • New hire award: options are granted to KMP upon becoming an executive of the Group. One-off LTI grants to new executives are delivered in the form of options with the amount for the Chief Executive Officer & Managing Director recommended by the People, Culture and Remuneration Committee and approved by the Board, and for other executive KMP by the Chief Executive Officer & Managing Director with endorsement by the People, Culture and Remuneration Committee. Consideration is given to: • The seniority of the relevant Eligible Person and the position the Eligible Person occupies within the Group; • The potential contribution of the Eligible Person to the growth of the Group; and • Any other matters which the Board considers relevant. One-off LTI grants to new executives granted subsequent to 1 July 2017 are granted at the closing share price on the grant date and vest in equal tranches over 3 years. Vesting is subject to the executive continuing in employment or service. See Section E of the remuneration report for further details. • Annual award: Executives are entitled to an annual award, set at 40% of total remuneration (an increase from 25% in FY19 to further incentivise KMP on attaining long-term value creation for share-holders), and subject to a total shareholder return (TSR) growth performance vesting condition and to the Executive continuing in employment or service until the vesting date. TSR is a measure of the increase in the price of a share (assuming dividends are reinvested). The number of options that will vest (and become exercisable) at the vesting date will be determined by reference to the achievement of a percentage of the Group’s compound annual growth rate (CAGR) in TSR over the period commencing on the grant date and ending on the vesting date, as follows: CAGR % ACHIEVED % OF OPTIONS WHICH WILL VEST 15% 16% 17% 18% 19% 20% 50% 60% 70% 80% 90% 100% Options are issued with a strike price based on the five-day volume weighted average price of the Company’s shares as traded on the ASX over the five trading days prior to the date of the annual general meeting. Options vest 36 months from the date of grant and expire 48 months after the date of grant. An employee loan scheme arrangement exists should an employee elect to apply for a loan on exercise of premium-priced options granted prior to 30 June 2017, which may be granted at the discretion of the Chief Executive Officer & Managing Director. Refer to section E for limited recourse loans. 54 DIRECTORS’ REPORT DIRECTORS’ REPORT 55 DIRECTORS’ REPORTREMUNERATION REPORT (AUDITED)B. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION (CONT.) (iii) Group Performance The overall level of executive reward takes into account the technology commercialisation nature of the business and realistic timeframes for generating profits. In particular, executive rewards recognise the commercialisation of the Nearmap business and future shareholder wealth contained therein and the progress that has been made in unlocking value to date. In considering the Group’s performance and benefits for shareholder wealth, the People, Culture and Remuneration Committee has given regard to the following indices over the last 5 financial years. Total revenue and other income Change in share price 2020 $’000 2019 $’000 2018 $’000 2017 $’000 2016 $’000 $97,513 $79,375 $54,140 $41,065 $31,289 ($1.53) $2.64 $0.53 $0.20 ($0.18) The graph below shows the Company’s closing share price since 1 July 2015 and the relative performance against the ASX All Ordinaries. e c i r P e r a h S 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 AORD NEA NEA CAGR: 39% AORD CAGR: 2% 1/07/15 1/07/16 1/07/17 1/07/18 1/07/19 1/07/20 C. DETAILS OF REMUNERATION Performance for the year ended 30 June 2020 is reflected in the outcome of the variable components of the remuneration framework: • Group performance: Group Revenue was delivered to 95.3% of management target which, based on the tiered earnings schedule, means that employees are entitled to a payout of 76.3% of their target. This would have equated to a payout of 45.8% of the 60% Group performance entitlement. • Individual performance: The People, Culture and Remuneration Committee would normally review the Chief Executive Officer & Managing Director’s performance against the individual performance criteria set at the start of the year and would review and endorse the Chief Executive Officer & Managing Director’s recommendations relating to KMP performance against individual targets. • Based on Group and Individual performance criteria, the likely STI payout to KMP for the year ended 30 June 2020 would have been at or close to 85.8%. However, due to the exceptional circumstances presented by COVID-19, the Board opted to make a discretionary payment of 50% of the maximum payout to all KMP, with the timing of payment at Board discretion. In using its discretion, the Board felt that a 50% payout was appropriate to provide recognition of the ongoing efforts of KMP in maintaining business operations and in continuing to deliver growth during a challenging economic period, where the Group has made some difficult decisions to significantly reduce operating expenses, including headcount reductions, in the light of economic uncertainty. • Executives with a commission based STI were paid in accordance with the terms of their commission schemes. • STI payout percentages to Directors and KMP are shown below: GROUP TARGET REVENUE SALES TARGET ACV INDIVIDUAL TARGET FUNCTIONAL SPECIFIC SUB-TOTAL TARGET ACTUAL TARGET ACTUAL TARGET ACTUAL TARGET ACTUAL DISCRETIONARY TOTAL DIRECTORS R Newman 60% - - - 40% OTHER KEY MANAGEMENT PERSONNEL J Adams T Celinski H Sanchez S Shugg A Watt 0% 60% 60% 60% 60% - - - - - 100% 50% - - - - - - - - - 40% 40% 40% 40% - - - - - - 100% 100% 100% 100% 100% 100% 50% - - - - 50% 50% - 50% 50% 50% 50% 50% 50% 50% 50% 50% • LTI grants were awarded to the Chief Executive Officer & Managing Director and other KMP as follows: - Dr Newman received a grant of 812,101 market-priced share options vesting in three years, as approved at the Company AGM on 14 November 2019 (executive annual award); - Mr Celinski, Mr Sanchez, Ms Shugg and Mr Watt received grants on 14 November 2019 of 495,499, 400,261, 490,351 and 464,611 market- priced share options respectively, vesting in three years (executive annual award); and - Upon joining the Company during the 2020 financial year, Ms Shugg received a grant of 200,000 market-priced share options, vesting in equal tranches over three years (new hire LTI grant). - Upon joining the Company during the 2020 financial year, Mr Adams received a grant of 1,500,000 market-priced share options, vesting in equal tranches over three years (new hire LTI grant). Statutory remuneration tables The following table of KMP remuneration has been prepared in accordance with accounting standards and the Corporations Act 2001 (Cth) requirements. 56 DIRECTORS’ REPORT DIRECTORS’ REPORT 57 DIRECTORS’ REPORTREMUNERATION REPORT (AUDITED) C. DETAILS OF REMUNERATION (CONT.) SHORT-TERM LONG-TERM POST-EMPLOYMENT SALARY & FEES1 CASH BONUS LONG SERVICE LEAVE2 SUPER- ANNUATION TERMINATION BENEFITS SHARE-BASED PAYMENT OPTIONS3 TOTAL PERCENTAGE PERFORMANCE RELATED8 NON-EXECUTIVE DIRECTORS P James P James T Horton4 S Klose5 S Klose R Norgard R Norgard C Rosenberg6 C Rosenberg 2020 2019 2020 2020 2019 2020 2019 2020 2019 153,158 123,287 83,714 105,023 70,776 96,271 73,059 111,250 85,000 FORMER NON-EXECUTIVE DIRECTORS I Morris6,7 I Morris 2020 2019 45,333 104,886 EXECUTIVE DIRECTORS S Klose5 S Klose R Newman R Newman 2020 2019 2020 2019 - 9,299 584,583 157,751 12,450 525,468 291,427 6,320 - - - - - - - - - - - - - - - - - - - - - - - - - - 14,550 11,712 7,953 9,977 6,724 9,146 6,941 - - - - - 883 21,003 20,531 - - - - - - - - - - - - 6,222 - - - 167,708 17,040 152,040 - - - - - - 91,667 115,000 77,499 105,417 80,001 111,250 7,618 92,618 - 45,333 14,581 119,466 - - - 16,404 - - - - - - - - - - - - - 306,630 1,082,417 456,807 1,300,553 43% 33% ASX Listing Rule 10.17 states that ‘Directors’ fees’ constitutes fees, including superannuation, but excluding securities issued. The total Directors’ fees paid to Non-executive Directors during the year ended 30 June 2020, excluding share-based payments, was $636,375 which is within the amount determined at the AGM on 15 November 2018. SHORT-TERM LONG-TERM POST-EMPLOYMENT SALARY & FEES1 CASH BONUS LONG SERVICE LEAVE2 SUPER- ANNUATION TERMINATION BENEFITS SHARE-BASED PAYMENT OPTIONS3 TOTAL PERCENTAGE PERFORMANCE RELATED4 OTHER KEY MANAGEMENT PERSONNEL A Watt A Watt T Celinski T Celinski H Sanchez H Sanchez S Shugg5 J Adams5 2020 2019 2020 2019 2020 2019 2020 2020 328,667 90,251 320,000 181,759 352,367 96,251 350,600 197,771 280,333 77,751 202,372 114,523 239,759 165,498 95,251 81,211 FORMER KEY MANAGEMENT PERSONNEL T Agresta6 T Agresta S Preston6 S Preston P Quigley6 P Quigley S Steel7 S Steel 2020 2019 2020 2019 2020 2019 2020 2019 240,473 233,711 324,041 171,614 227,067 151,260 318,100 301,897 405,240 63,066 491,793 602,452 141,545 - (2,403) 225,600 131,052 1,142 2,527 1,577 1,557 186 130 75 98 - - - 528 1,411 - - 21,003 20,531 21,003 20,531 21,003 15,399 15,752 - - - 15,752 20,531 - - 13,223 20,531 - - - - - - - - - - - - - - - - 179,999 622,447 205,289 729,156 210,071 681,249 182,238 751,326 174,047 553,264 88,931 421,299 180,118 530,978 256,490 503,199 102,463 576,647 98,369 594,023 130,719 525,326 112,156 754,095 157,431 625,737 144,630 1,238,874 (79,814) 72,551 82,626 460,952 44% 36% 36% 26% 36% 34% 34% 16% 55% 34% 50% 50% 34% 57% 0% 41% 1 Salary includes annual leave. All KMP salary and fees were reduced by 20% for a period of 6 months, effective 1 May 2020 due to COVID-19. 2 Relates to long service leave accrued during the year with a negative balance representing an overall reduction in the employee leave provision compared to prior year. 3 AASB 2 accounting value determined at grant date, recognised over related vesting periods. The amount included as remuneration is not related to or indicative of the benefit (if any) that the individual KMP may ultimately realise should the equity instruments vest. The notional value of options as at the date of their grant has been determined in accordance with the accounting policy in note 5 to the consolidated financial statements. 4 Performance related remuneration comprises short-term cash bonuses together with share-based payments which are subject to Total Shareholder Return vesting conditions. 5 Ms Shugg and Mr Adams commenced on 24 October 2019 and 20 February 2020 respectively. The remuneration for these executives reflects their time in their KMP roles. 6 T Agresta, S Preston and P Quigley remuneration for FY20 is for the period from 1 July 2019 to 20 February 2020, reflecting their time in their KMP roles. 7 Ms Steel’s last day was 31 March 2020. 1 Salary includes annual leave. All Non-executive Director and Executive Director fees were reduced by 25% for a period of 6 months, effective 1 May 2020 due to COVID-19. 2 Relates to long service leave accrued during the year with a negative balance representing an overall reduction in the employee leave provision compared to prior year. 3 AASB 2 accounting value determined at grant date, recognised over related vesting periods. The amount included as remuneration is not related to or indicative of the benefit (if any) that the individual KMP may ultimately realise should the equity instruments vest. The notional value of options as at the date of their grant has been determined in accordance with the accounting policy in note 5 to the consolidated financial statements. 4 Ms Horton was appointed as Non-executive Director on 1 September 2019. 5 Ms Klose was appointed as interim Chief Marketing Officer on 5 March 2018 and temporarily became an Executive Director, remaining on the board. Ms Klose completed her role as interim Chief Marketing Officer on 5 July 2018 and returned to her role as Non-executive Director on 6 July 2018. 6 Mr Rosenberg and Mr Morris elected to have their remuneration remitted through management companies. Total fees remitted were inclusive of superannuation guarantee contributions. 7 Mr Morris resides in the US. The remuneration disclosures represent the US compensation components translated to AUD at average exchange rates for the year. Mr Morris resigned on 14 November 2019. 8 Performance related remuneration comprises short-term cash bonuses together with share-based payments which are subject to Total Shareholder Return vesting conditions. 58 DIRECTORS’ REPORT DIRECTORS’ REPORT 59 DIRECTORS’ REPORTREMUNERATION REPORT (AUDITED)C. DETAILS OF REMUNERATION (CONT.) The overall KMP fixed and variable remuneration framework is established by the People, Culture and Remuneration Committee. The proportion of fixed and potential at risk components for the KMP as a percentage of potential target total annual remuneration for the 2020 year, is shown below: SALARIES AND BENEFITS 2020 LTI1 2020 AT RISK – STI 2020 NON – EXECUTIVE DIRECTORS P James T Horton S Klose R Norgard C Rosenberg FORMER NON – EXECUTIVE DIRECTORS I Morris EXECUTIVE DIRECTORS R Newman OTHER KEY MANAGEMENT PERSONNEL A Watt T Celinski H Sanchez S Shugg J Adams T Agresta S Preston P Quigley S Steel 100% 100% 100% 100% 100% 100% 40% 40% 40% 40% 40% 66% 40% 33% 31% 100% - - - - - 40% 40% 40% 40% 40% - 40% 33% 31% - - - - - - 20% 20% 20% 20% 20% 33% 20% 33% 38% - 1 Annual LTI awards have performance related vesting conditions. See Section B for further detail on the remuneration structure of Directors and KMP. D. EMPLOYMENT CONTRACTS All executive employees and KMP are employed under contract. All executives have ongoing contracts and as such only have commencement dates and no expiry dates. Details of KMP contracts as at 30 June 2020 are: NAME R Newman A Watt T Celinski J Adams H Sanchez S Shugg NOTICE PERIOD FOR TERMINATION 6 months 4 months 3 months 3 months 3 months 3 months On resignation any unvested options are forfeited. Limited Recourse Loans (LRLs) may be granted to KMP in respect to vested premium priced options. If an employee ceases to be employed by the Group (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 one month of the date of ceased employment. The Group may terminate an employment agreement by providing the respective written notice period or provide payment in lieu of the notice period (based on the fixed component of remuneration). On such termination by the Group, 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 or the options’ expiry date if earlier. LTI options that have not yet vested will be forfeited. The Group 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 fixed, and only up to the date of termination. On termination with cause any unvested options will immediately be forfeited. 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. E. SHARE-BASED COMPENSATION Options A share option incentive scheme, the Nearmap Employee Share Option Plan, has been established whereby Directors and certain employees of the Group may be issued with options over ordinary shares of the Company. In Australia, up until 30 June 2017, options were issued for nil consideration at an exercise price calculated with reference to prevailing market prices and a 43% premium in accordance with performance guidelines established by the Directors of the Company. From 1 July 2017, all options issued are for nil consideration at an exercise price calculated with reference to prevailing market prices. The grants are either issued for 4 years: (i) with TSR growth performance vesting conditions and are exercisable after three years; or (ii) without any performance vesting conditions and are exercisable on various dates (usually in two or three equal annual tranches when vested). In the US, options are issued for nil consideration at an exercise price equal to the prevailing market price. The options are issued for terms up to four or five years and are exercisable on various dates within four or five years from grant date. The options only vest under certain conditions, principally centred on the employee still being employed at the time of vesting (that is, once the service has been satisfied), or specified performance hurdles being achieved to determine vesting. 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. Refer to the tables later in this section for details of the options that were issued to KMP during the year ended 30 June 2020. Limited Recourse Loans (LRLs) The Nearmap Employee Share Option Plan includes an Employee Loan Scheme that permits the Company to grant financial assistance to Australia-based employees by way of LRLs to enable them to exercise premium priced options granted prior to 30 June 2017 and acquire shares. Interest on the loans is payable by KMP at loan maturity and accrues daily. The Company determines the interest rate applicable to LRLs (currently the cash rate set by the Reserve Bank of Australia plus 20 basis points). 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. The employee does not have a beneficial interest in the shares until the loan is repaid with any such shares being held in escrow until this time. For accounting purposes, the granting of the LRL is considered to be a modification to the existing option. Any increase in the fair value of the option is recognised as an expense immediately at the date the limited recourse loan is granted. 60 DIRECTORS’ REPORT DIRECTORS’ REPORT 61 DIRECTORS’ REPORTREMUNERATION REPORT (AUDITED)E. SHARE-BASED COMPENSATION (CONT.) Limited Recourse Loans (LRLs) (cont.) If the employee fails to repay the loan, the Company takes security over the option shares and can sell some or all of the shares to repay the loan. In the event that the shares are sold for an amount less than the amount of the loan and any interest, the employee is only required to repay the loan and any interest to the amount of the sale proceeds. The Company has no other recourse against the employee. The Group does not expect to grant new LRLs in future financial years as the last premium priced options held by Australia-based KMP have been exercised during the year ended 30 June 2020. Compensation options (i) Grants made prior to 30 June 2017 Each option entitles the holder to subscribe for one fully paid ordinary share in the Company at an exercise price determined at a 43% premium to the market price of the shares on the date of grant (Australia) or the market price on grant date (US). When an individual is granted an LRL to exercise their option, the effect is to extend the life of the original option. The exercise price includes interest accrued. (ii) Grants made after 30 June 2017 Each option entitles the holder to subscribe for one fully paid ordinary share in the Company at an exercise price determined by the market price of the shares on the date of grant. When an individual is granted an LRL to exercise their option, the effect is to extend the life of the original option. The exercise price includes interest accrued. Details on unvested options over ordinary shares in the Company that were granted as compensation to each KMP during the reporting period, lapsed or forfeited by KMP during the reporting period, and vested during the reporting period are as follows: YEAR ENDED 30 JUNE 2020 UNVESTED BALANCE AT 1 JULY GRANTED DURING THE PERIOD LAPSED OR FORFEITED DURING THE PERIOD VESTED DURING THE PERIOD UNVESTED BALANCE AT 30 JUNE GRANT DATE VALUE PER OPTION/SHARE AT GRANT DATE1 $ EXERCISE PRICE PER SHARE (OPTIONS)/ CURRENT PRICE PER SHARE (LOANS) $ VESTING DATE EXPIRY DATE DIRECTORS R Newman - Options - Options - Options - Options 666,667 933,908 556,009 - - - - 812,101 OTHER KEY MANAGEMENT PERSONNEL J Adams - Options - Options - Options T Celinski - Options - Options - Options - Options - - - 500,000 500,000 500,000 333,000 334,000 377,324 - - - - 495,499 1 AASB 2 accounting value determined at grant date. 62 DIRECTORS’ REPORT - - - - - - - - - - - 666,667 - Nov 16 - - - - - - 933,908 Nov 17 556,009 Nov 18 812,101 Nov 19 500,000 Feb 20 500,000 Feb 20 500,000 Feb 20 333,000 - Feb 18 - - - 334,000 Feb 18 377,324 Dec 18 495,499 Nov 19 0.2191 0.2490 0.4910 0.7770 0.6321 0.6899 0.7625 0.3283 0.3863 0.4910 0.7770 1.06 Dec 19 Dec 20 0.71 Nov 20 Nov 21 1.60 Nov 21 Nov 22 2.48 Nov 22 Nov 23 1.81 Feb 21 Feb 24 1.81 Feb 22 Feb 24 1.81 Feb 23 Feb 24 0.82 0.82 1.60 2.48 Feb 20 Feb 22 Feb 21 Feb 22 Nov 21 Nov 22 Nov 22 Nov 23 YEAR ENDED 30 JUNE 2020 UNVESTED BALANCE AT 1 JULY GRANTED DURING THE PERIOD LAPSED OR FORFEITED DURING THE PERIOD VESTED DURING THE PERIOD UNVESTED BALANCE AT 30 JUNE GRANT DATE VALUE PER OPTION/SHARE AT GRANT DATE1 $ EXERCISE PRICE PER SHARE (OPTIONS)/ CURRENT PRICE PER SHARE (LOANS) $ VESTING DATE EXPIRY DATE OTHER KEY MANAGEMENT PERSONNEL H Sanchez - Options - Options - Options - Options - Options S Shugg - Options - Options - Options - Options A Watt - Options - Options - Options - Options 120,000 120,000 120,000 300,949 - - - - - 400,261 - - - - 66,667 66,667 66,666 490,351 833,334 556,753 346,774 - - - - 464,611 FORMER OTHER KEY MANAGEMENT PERSONNEL 12,500 12,500 12,500 12,500 142,112 100,000 100,000 100,000 324,534 - - - - - - - - - - 451,381 258,345 538,793 346,774 - - - - 464,611 T Agresta2 - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options S Preston2 - Options - Options - Options - Options S Steel - Options - Options - Options - - - - - - - - - - - - - - - - - - - - - - - - - - - 120,000 - Oct 18 - - - - - - - - 120,000 Oct 18 120,000 Oct 18 300,949 Dec 18 400,261 Nov 19 66,667 Oct 19 66,667 Oct 19 66,666 Oct 19 490,351 Nov 19 833,334 - Dec 16 - - - 556,753 Nov 17 346,774 Dec 18 464,611 Nov 19 12,500 12,500 12,500 12,500 - - - - Jul 16 Jul 16 Jul 16 Jul 16 - 142,112 Nov 17 100,000 - Jul 18 - - - - 100,000 Jul 18 100,000 Jul 18 324,534 Dec 18 451,381 Nov 19 258,345 - Mar 17 - - - 538,793 Nov 17 346,774 Dec 18 464,611 Nov 19 0.2867 0.4208 0.5218 0.4910 0.7770 0.9636 1.0670 1.2358 0.7770 0.2241 0.2490 0.4910 0.7770 0.2678 0.2744 0.2807 0.2868 0.2490 0.2134 0.3032 0.3710 0.4910 0.7770 0.1614 0.2490 0.4910 0.7770 0.1614 0.2490 0.4910 1.65 Oct 19 Oct 22 1.65 Oct 20 Oct 22 1.65 Oct 21 Oct 22 1.60 Nov 21 Nov 22 2.48 Nov 22 Nov 23 2.97 Oct 20 Oct 23 2.97 Oct 21 Oct 23 2.97 Oct 22 Oct 23 2.48 Nov 22 Nov 23 0.93 Dec 19 Dec 20 0.71 Nov 20 Nov 21 1.60 Nov 21 Nov 22 2.48 Nov 22 Nov 23 0.41 Sep 19 Jun 21 0.41 Dec 19 Jun 21 0.41 Mar 20 Jun 21 0.41 Jun 20 Jun 21 0.71 Nov 20 Nov 21 1.12 Jul 19 1.12 Jul 20 1.12 Jul 21 Jul 22 Jul 22 Jul 22 1.60 Nov 21 Nov 22 2.48 Nov 22 Nov 23 0.64 Mar 20 Mar 21 0.71 Nov 20 Nov 21 1.60 Nov 21 Nov 22 2.48 Nov 22 Nov 23 0.64 Mar 20 Mar 21 0.71 Nov 20 Nov 21 1.60 Nov 21 Nov 22 232,511 422,055 250,032 - - - - 232,511 422,055 250,032 - - - Mar 17 - Nov 17 - Dec 18 1 AASB 2 accounting value determined at grant date. 2 Effective 20 February 2020, the Group appointed J Adams as Chief Revenue Officer, reporting directly to R Newman as Chief Executive Officer. As a result, T Agresta, S Preston and P Quigley had their reporting lines changed to report directly to J Adams and are therefore no longer considered KMP in the sense intended by the Corporations Act 2001 and the Australian Accounting Standards Board (AASB). DIRECTORS’ REPORT 63 DIRECTORS’ REPORTREMUNERATION REPORT (AUDITED)E. SHARE-BASED COMPENSATION (CONT.) YEAR ENDED 30 JUNE 2020 UNVESTED BALANCE AT 1 JULY GRANTED DURING THE PERIOD VESTED DURING THE PERIOD LAPSED OR FORFEITED DURING THE PERIOD UNVESTED BALANCE AT 30 JUNE GRANT DATE VALUE PER OPTION/SHARE AT GRANT DATE1 $ EXERCISE PRICE PER SHARE (OPTIONS)/ CURRENT PRICE PER SHARE (LOANS) $ VESTING DATE EXPIRY DATE FORMER OTHER KEY MANAGEMENT PERSONNEL P Quigley2 - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options - Options 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 93,750 639,507 493,856 - - - - - - - - - - - - 677,072 - - - - - - - - - - - - 93,750 93,750 93,750 93,750 93,750 93,750 93,750 - Feb 16 - Feb 16 - Feb 16 - Feb 16 - Feb 16 - Feb 16 - Feb 16 - - - - - 93,750 Feb 16 93,750 Feb 16 639,507 Nov 17 493,856 Dec 18 677,072 Nov 19 0.1323 0.1323 0.1367 0.1367 0.1410 0.1410 0.1451 0.1490 0.1528 0.2490 0.4910 0.7770 0.39 Aug 19 Jan 21 0.39 Aug 19 Nov 21 0.39 Nov 19 Jan 21 0.39 Nov 19 Nov 21 0.39 Feb 20 Jan 21 0.39 Feb 20 Nov 21 0.39 May 20 Nov 21 0.39 Aug 20 Nov 21 0.39 Nov 20 Nov 21 0.71 Nov 20 Nov 21 1.60 Nov 21 Nov 22 2.48 Nov 22 Nov 23 1 AASB 2 accounting value determined at grant date. 2 Effective 20 February 2020, the Group appointed J Adams as Chief Revenue Officer, reporting directly to R Newman as Chief Executive Officer. As a result, T Agresta, S Preston and P Quigley had their reporting lines changed to report directly to J Adams and are therefore no longer considered KMP in the sense intended by the Corporations Act 2001 and the Australian Accounting Standards Board (AASB). All unvested options expire on the earlier of their expiry date or termination of the individual’s employment. In addition to a continuing employment service condition, vesting is conditional on the Group achieving certain performance hurdles. Details of the performance criteria are included in the long-term incentives section on page 55. Modification of Terms of Share-based Payment Transactions A modification to the terms of share-based payment transactions occurs when the Board accepts a KMP’s loan request to exercise fully vested options under the Employee Loan Scheme through an LRL in lieu of cash payment of the exercise price. Please refer to Section F, Financial assistance under the Employee Share Option Plan, for details of the terms of the loans granted to these KMP. F. TRANSACTIONS WITH KMP Options over shares held in the Company The movement during the reporting period by number of options on ordinary shares held directly or indirectly by each KMP is as follows: BALANCE AT 1 JULY 19 GRANTED AS COMPENSATION EXERCISED VALUE EXERCISED2 FORFEITED BALANCE AT 30 JUNE 20 VESTED DURING THE YEAR VESTED AND EXERCISABLE AT 30 JUNE 20 DIRECTORS P James R Newman1 FORMER DIRECTORS 1,500,000 2,156,584 - 1,500,000 $3,268,500 812,101 666,667 $1,200,001 I Morris 750,000 - 750,000 $1,713,750 OTHER KEY MANAGEMENT PERSONNEL J Adams T Celinski H Sanchez S Shugg A Watt1 - 1,500,000 1,044,324 660,949 - 495,499 400,261 690,351 - - - - - - - - 1,736,861 464,611 833,334 $1,608,335 FORMER OTHER KEY MANAGEMENT PERSONNEL 866,646 451,381 - - - - - - - - - - - - - - - 2,302,018 666,667 - 1,500,000 - - - - - - 1,539,823 333,000 1,061,210 120,000 690,351 - 1,368,138 833,334 333,000 120,000 - - 1,318,027 150,000 200,000 3,435,435 656,250 1,437,500 1,350,179 258,345 - T Agresta P Quigley S Preston1 S Steel 3,283,363 1,143,913 904,598 677,072 525,000 $244,136 464,611 258,345 $769,125 - - - 672,087 232,511 - 232,511 1 The exercise of options for these employees was funded through the grant of an LRL under the Employee Loan Scheme. 2 Value determined based on the share price at exercise date less exercise price. Loan shares held in the Company The shares held in the Company include loan shares as follows: YEAR ENDED 30 JUNE 2020 BALANCE AT 1 JULY 19 EXERCISE OF OPTIONS NET OTHER CHANGE BALANCE AT 30 JUNE 20 BALANCE HELD NOMINALLY DIRECTORS R Newman 3,933,333 666,667 - 4,600,000 4,600,000 OTHER KEY MANAGEMENT PERSONNEL S Steel1 A Watt 465,020 1,666,666 833,334 FORMER OTHER KEY MANAGEMENT PERSONNEL S Preston 516,689 258,345 - (465,020) - - - - 2,500,000 2,500,000 775,034 775,034 64 DIRECTORS’ REPORT DIRECTORS’ REPORT 65 1 During the year ended 30 June 2020, LRLs relating to 465,020 shares were repaid, releasing the shares from holding lock. Financial assistance under the Employee Share Option Plan LRLs advanced to KMP during the year ended 30 June 2020 amounted to $1,647,009 (30 June 2019: $3,227,820). Interest on the loans during the period has been accrued at a rate of between 0.45% and 1.45%. The loans are not recognised in the consolidated statement of financial position. DIRECTORS’ REPORTREMUNERATION REPORT (AUDITED)F. TRANSACTIONS WITH KMP (CONT.) Shares held in the Company During the year ended 30 June 2020, the number of shares held by KMP changed per the table below. This includes the issue of shares following the exercise of options previously granted as compensation. Modification of terms of share-based payment transactions AASB 2 Share-based Payments requires that the grant of LRLs for the settlement of share options shall be considered as a modification to the valuation of the options. The standard also requires that any increase in the fair value of the modified option be recognised in the consolidated statement of profit or loss. During the year ended 30 June 2020, the following share-based payment transactions were modified as a result of an LRL: GRANT DATE NUMBER OF OPTIONS GRANTED EXERCISE PRICE AT GRANT DATE VESTING DATE EXPIRY DATE ORIGINAL FAIR VALUE ORIGINAL VALUATION INPUTS DIRECTORS R Newman Nov 16 666,667 $1.06 Dec 19 Dec 20 1,200,001 OTHER KEY MANAGEMENT PERSONNEL A Watt Dec 16 833,334 $0.93 Dec 19 Dec 20 1,608,335 BALANCE AT 1 JULY 19 EXERCISE OF OPTIONS AMOUNT PAID/OPTION SHARES PURCHASED SHARES GRANTED SHARES SOLD BALANCE AT 30 JUNE 20 BALANCE HELD NOMINALLY FORMER OTHER KEY MANAGEMENT PERSONNEL S Preston Mar 17 258,345 $0.64 Mar 20 Mar 21 244,136 YEAR ENDED 30 JUNE 2020 DIRECTORS P James R Newman T Horton R Norgard C Rosenberg FORMER DIRECTORS 1,282,000 1,500,000 8,933,333 666,667 - 48,076,295 3,201,000 - - - $0.55 $1.06 - - - - - 20,000 - - - - - - - (400,000) 2,382,000 2,382,000 - - 9,600,000 9,600,000 20,000 20,000 (20,337,374) 27,738,921 27,698,921 - 3,201,000 3,201,000 I Morris 150,000 750,000 $0.40 $0.00 - (900,000) - - OTHER KEY MANAGEMENT PERSONNEL A Watt 1,666,666 833,334 $0.93 - 8,456 - 2,508,456 2,508,456 FORMER OTHER KEY MANAGEMENT PERSONNEL T Agresta S Preston P Quigley S Steel2 - - 516,689 258,345 - 525,000 465,020 - - $0.64 $0.39 - - - - - 21,160 - 15,128 - - - - - 21,160 775,034 540,128 465,020 21,160 775,034 540,128 465,020 1 Shares granted as part of the Employee Matching Share Scheme. For further information, refer to note 5 to the consolidated financial statements. 2 The balance held by S Steel is as at 31 March 2020, her last day of employment by the Group. There are no amounts unpaid on the shares as a result of the exercise of the options in the year ended 30 June 2020 outside of the LRLs granted to KMP, as outlined previously. DATE OF MODIFICATION VALUE PER SHARE/OPTION AT MODIFICATION DATE EXPECTED LOAN LIFE (YEARS) MODIFIED EXERCISE PRICE LOAN INTEREST RATE RISK FREE INTEREST RATE EXPECTED VOLATILITY MODIFIED FAIR VALUE INCREMENTAL VALUE MODIFIED VALUATION INPUTS DIRECTORS R Newman Dec 19 $1.85 OTHER KEY MANAGEMENT PERSONNEL A Watt Dec 19 $1.96 FORMER OTHER KEY MANAGEMENT PERSONNEL S Preston May 20 $1.03 G. ADDITIONAL INFORMATION 2 2 2 $1.08 0.95% 0.77% 53.02% 1,233,841 $33,840 $0.95 0.95% 0.77% 53.02% 1,634,500 $26,165 $0.65 0.45% 0.26% 68.92% 266,097 $21,961 The Group has applied the fair value measurement provisions of AASB 2 Share-based Payment for all options 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. The fair value of executive option plans at grant date is determined using a Black-Scholes or Monte Carlo option pricing model depending on the terms and conditions of each option, that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. 66 DIRECTORS’ REPORT DIRECTORS’ REPORT 67 DIRECTORS’ REPORTREMUNERATION REPORT (AUDITED)G. ADDITIONAL INFORMATION (CONT.) All unissued ordinary shares of the Company under option (relating to KMP and other personnel) as at 30 June 2020 are listed below: DATE OPTIONS GRANTED EXPIRY DATE EXERCISE PRICE OF OPTIONS NUMBER UNDER OPTION Dec 15 Feb 16 Feb 16 Jul 16 Mar 17 Dec 17 Feb 18 Nov 17 Feb 18 Jul 18 Oct 18 Nov 18 Nov 18 Oct 19 Oct 19 Nov 19 Nov 19 Feb 20 Nov 20 Jan 21 Nov 21 Jun 21 Mar 21 Nov 21 Nov 21 Nov 21 Feb 22 Jul 22 Oct 22 Nov 22 Nov 22 Oct 23 Oct 23 Nov 23 Nov 23 Feb 24 This is the end of the audited remuneration report. $0.40 $0.39 $0.39 $0.41 $0.64 $0.71 $0.71 $0.71 $0.82 $1.12 $1.65 $1.60 $1.60 $2.97 $2.58 $2.48 $2.48 $1.81 25,000 125,000 1,500,000 100,000 232,511 2,676,073 106,196 933,908 667,000 300,000 360,000 556,009 2,714,744 200,000 727,217 812,101 3,443,786 1,500,000 16,979,545 LEAD AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration is set out on page 71 and forms part of the Directors’ Report for the financial year ended 30 June 2020. Signed in accordance with a resolution of the Directors. On behalf of the Board DR R NEWMAN Managing Director and Chief Executive Officer 18 August 2020 68 DIRECTORS’ REPORT DIRECTORS’ REPORT 69 CAPTURED: 1 OCTOBER 2019 INGLEWOOD CA USA DIRECTORS’ REPORTREMUNERATION REPORT (AUDITED)AUDITOR’S DECLARATION Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Nearmap Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Nearmap Limited for the financial year ended 30 June 2020 there have been: To the Directors of Nearmap Limited i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and I declare that, to the best of my knowledge and belief, in relation to the audit of Nearmap Limited for the no contraventions of any applicable code of professional conduct in relation to the audit. financial year ended 30 June 2020 there have been: ii. i. ii. KPMG KPMG no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. Caoimhe Toouli Partner Sydney Caoimhe Toouli 18 August 2020 Partner Sydney 18 August 2020 CAPTURED: 4 JUNE 2020 MELBOURNE VIC AUSTRALIA 70 DIRECTORS’ REPORT KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. AUDITOR’S DECLARATION 71 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 NOTES 30 JUNE 2020 $’000 30 JUNE 2019* $’000 NOTES 30 JUNE 2020 $’000 30 JUNE 2019* $’000 Revenue Other income TOTAL REVENUE AND OTHER INCOME Employee benefits expense Amortisation1 Depreciation1 Other operational expenses2 TOTAL EXPENSES OPERATING LOSS Net finance costs2 LOSS BEFORE TAX Income tax benefit/(expense) LOSS AFTER TAX FOR THE YEAR ATTRIBUTABLE TO THE OWNERS OF NEARMAP LTD OTHER COMPREHENSIVE INCOME Items that may be reclassified to profit or loss: Exchange differences on translation of foreign operations Fair value loss on cash flow hedges Transfer of hedging gains to the consolidated statement of profit or loss Income tax associated with these items OTHER COMPREHENSIVE INCOME FOR THE YEAR 3 4 11 12 4 6 7 96,714 799 97,513 (56,542) (38,200) (8,498) (31,224) (134,464) (36,951) (152) (37,103) 386 (36,717) (44) (957) (103) 318 (786) 77,642 1,733 79,375 (36,843) (23,227) (3,432) (25,495) (88,997) (9,622) (215) (9,837) (5,097) (14,934) 194 (26) - 8 176 TOTAL COMPREHENSIVE LOSS FOR THE YEAR ATTRIBUTABLE TO THE OWNERS OF NEARMAP LTD (37,503) (14,758) LOSS PER SHARE Basic loss per share for the year (cents per share) Diluted loss per share for the year (cents per share) 14 14 (8.14) (8.14) (3.43) (3.43) 1 In the prior year, amortisation and depreciation were presented in the same line item. In the current year the expenses are presented separately to enable more comparability. Comparative figures have been adjusted accordingly. 2 In the prior year, other finance costs of ($24) thousand were presented within other operational expenses, and net foreign exchange loss of ($191) thousand were disclosed on the face of the consolidated statement of profit or loss. In the current year, other finance costs and net foreign exchange loss are presented within net finance costs to enable more comparability. Comparative figures have been adjusted accordingly. * The Group has initially applied AASB 16 Leases at 1 July 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying AASB 16 Leases is recognised in retained earnings at the date of initial application. See note 2 (i) for further information regarding the transition to AASB 16 Leases on 1 July 2019. The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the notes to the consolidated financial statements on pages 78 - 109. CURRENT ASSETS Cash and cash equivalents Trade receivables Other current receivables Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets Deferred tax assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Unearned revenue Employee benefits Lease liabilities Other current liabilities Current tax liabilities TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liabilities Employee benefits Lease liabilities Other non-current liabilities TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Profits reserve Accumulated losses TOTAL EQUITY 13 9 12 11 7 2 7 2 8 36,140 23,706 612 3,180 63,638 33,408 47,415 4,313 85,136 148,774 5,574 49,576 6,534 4,500 2,398 1,220 69,802 9,716 379 9,896 2,233 22,224 92,026 75,914 14,535 3,078 2,663 96,190 16,782 42,132 3,086 62,000 158,190 3,777 42,034 5,701 - 5,446 2,107 59,065 10,190 280 - 1,002 11,472 70,537 56,748 87,653 126,577 19,055 7,078 (95,962) 56,748 124,617 14,843 7,078 (58,885) 87,653 * The Group has initially applied AASB 16 Leases at 1 July 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying AASB 16 Leases is recognised in retained earnings at the date of initial application. See note 2 (i) for further information regarding the transition to AASB 16 Leases on 1 July 2019. The above consolidated statement of financial position should be read in conjunction with the notes to the consolidated financial statements on pages 78 - 109. 72 FINANCIAL REPORT FINANCIAL REPORT 73 CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2020 CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS AS AT 30 JUNE 2020 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 NOTES 30 JUNE 2020 $’000 30 JUNE 2019* $’000 NOTES CONTRIBUTED EQUITY ACCUMULATED LOSSES PROFITS RESERVE CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Other receipts Income taxes paid NET CASH FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant and equipment Payments for development costs Payment for capture costs Proceeds from sale of plant and equipment Proceeds from sale of unlisted investments NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from share offer Proceeds from exercise of share options Proceeds from repayment of share option loans Payments for treasury shares Payments for lease liabilities1 NET CASH FROM FINANCING ACTIVITIES NET (DECREASE)/INCREASE 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 100,189 (87,290) 849 10 (1,670) 12,088 (8,253) (17,436) (24,085) 251 - 86,866 (62,517) 1,404 21 (875) 24,899 (8,238) (8,926) (20,133) 14 150 (49,523) (37,133) - 1,596 396 (400) (3,921) (2,329) (39,764) 75,914 (10) 36,140 67,146 3,210 381 (197) - 70,540 58,306 17,530 78 75,914 13 2 13 1 The Group has classified cash payments for the principal portion and the interest portion of lease payments as financing activities. * The Group has initially applied AASB 16 Leases at 1 July 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying AASB 16 Leases is recognised in retained earnings at the date of initial application. See note 2 (i) for further information regarding the transition to AASB 16 Leases on 1 July 2019. The application of AASB 16 Leases has led to operating lease payments previously included in net cash from operating activities now being included as payments for lease liabilities within net cash flow from financing activities. The above consolidated statement of cash flows should be read in conjunction with the notes to the consolidated financial statements on pages 78 - 109. AT 30 JUNE 2019* Adjustment on initial application of AASB 16 (net of tax) 2 AT 1 JULY 2019 Loss for the year Other comprehensive income: Fair value loss on cash flow hedges (net of tax) Transfer of hedging gains to the consolidated statement of profit or loss (net of tax) Exchange differences on translation of foreign operations TOTAL COMPREHENSIVE LOSS FOR THE YEAR Transactions with owners of the Company: Share options exercised Repayment of share option loans Share-based payment expense Treasury shares acquired Treasury shares reissued to employees AT 30 JUNE 2020 8 8 5 8 8 AT 30 JUNE 2018 Adjustment on initial application of AASB 15 (net of tax) AT 1 JULY 2018 Loss for the year Other comprehensive income: Fair value loss on cash flow hedges (net of tax) Exchange differences on translation of foreign operations TOTAL COMPREHENSIVE LOSS FOR THE YEAR Transactions with owners of the Company: Share issue Share options exercised Repayment of share option loans Share-based payment expense Treasury shares acquired AT 30 JUNE 2019 8 8 8 5 8 $’000 124,617 - 124,617 - - - - - 1,596 396 - (400) 368 $’000 (58,885) (358) (59,243) (36,717) - - - (36,717) - - - - (2) $’000 7,078 - 7,078 - - - - - - - - - - $’000 52,995 - 52,995 - - - - 68,228 3,210 381 - (197) $’000 (44,062) 111 (43,951) (14,934) - - (14,934) - - - - - $’000 7,078 - 7,708 - - - - - - - - - SHARE-BASED PAYMENTS RESERVE $’000 OTHER RESERVES TOTAL EQUITY $’000 $’000 15,053 (210) 87,653 - - (358) 15,053 (210) 87,295 - - - - - - - 5,364 - (366) - (36,717) (670) (670) (72) (44) (72) (44) (786) (37,503) - - - - - 1,596 396 5,364 (400) - SHARE-BASED PAYMENTS RESERVE $’000 OTHER RESERVES TOTAL EQUITY $’000 $’000 13,369 (386) 28,994 - - 111 13,369 (386) 29,105 - - - - - - - 1,684 - - (14,934) (18) 194 176 (18) 194 (14,758) - - - - - 68,228 3,210 381 1,684 (197) 124,617 (58,885) 7,078 15,053 (210) 87,653 126,577 (95,962) 7,078 20,051 (996) 56,748 NOTES CONTRIBUTED EQUITY ACCUMULATED LOSSES PROFITS RESERVE 74 FINANCIAL REPORT FINANCIAL REPORT 75 * The Group has initially applied AASB 16 Leases at 1 July 2019, using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying AASB 16 Leases is recognised in retained earnings at the date of initial application. See note 2 (i) for further information regarding the transition to AASB 16 Leases on 1 July 2019. The above consolidated statement of changes in equity should be read in conjunction with the notes to the consolidated financial statements on pages 78 - 109. CAPTURED: 28 FEBRUARY 2020 SYDNEY NSW AUSTRALIA 76 FINANCIAL REPORT CAPTURED: 18 APRIL 2020 SYDNEY NSW AUSTRALIA FINANCIAL REPORT 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The notes include information which is required to understand the consolidated financial statements and is material and relevant to the financial position and performance of the Group. The notes are organised into the following sections: A. BASIS OF PREPARATION B. KEY FINANCIAL RESULTS C. CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT D. INVESTING ACTIVITIES E. OTHER 1. Reporting entity 3. Segment results, revenue 8. Capital and reserves 11. Intangibles 14. Earnings per share and other income 2. Summary of significant accounting policies 4. Expenses 9. Financial instruments 12. Property, plant and 15. Expenditure commitments 5. Share-based payment plans 10. Dividends paid on ordinary shares 6. Net finance costs 7. Income tax equipment 13. Reconciliation of cash flow from operating activities 16. Parent entity information 17. Group entities 18. Auditor’s remuneration 19. Related parties 20. Contingent liabilities 21. Subsequent events A. BASIS OF PREPARATION IN THIS SECTION This section sets out the basis upon which the Group’s consolidated financial statements are prepared as a whole. Specific accounting policies are described in their respective notes to the consolidated financial statements. This section also shows information on new accounting standards, amendments and interpretations, and whether they are effective in the year ended 30 June 2020 or later years. We explain how these changes are expected to impact the financial position and performance of the Group. 1. REPORTING ENTITY Nearmap Ltd (the “Company”) is a for-profit company domiciled in Australia. These consolidated financial statements for the year ended 30 June 2020 comprise the Company and its subsidiaries (together referred to as the “Group”). The Company’s registered office is at Level 4, Tower One, International Towers 100 Barangaroo Avenue, Barangaroo NSW 2000. The principal activity of the Group during the course of the financial year was the provision of online aerial photomaps to business customers via subscription through its 100% owned subsidiaries, Nearmap Australia Pty Ltd and Nearmap US, Inc. Going concern basis of accounting The Group has recognised a net loss after tax of $36,717 thousand for the year ended 30 June 2020. As at that date, the Group has no external debt, but current liabilities exceed current assets by $6,164 thousand. However, the Group’s current liabilities include unearned income of $49,576 thousand. Unearned income includes income received in advance which has been deferred in the consolidated statement of financial position until the service is performed. These liabilities are expected to be settled without a corresponding cash outflow. The consolidated financial statements have been prepared on a going concern basis, which assumes the Group will continue its operations and be able to meet its obligations as and when they become due and payable. This assumption is based on the Group’s ability to meet its future cash flow requirements given the breakeven cash flow projection for the 30 June 2021 financial year, and existing cash reserves held as at 30 June 2020. These consolidated financial statements were authorised for issue by the Board of Directors on Tuesday, 18 August 2020. 78 FINANCIAL REPORT 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement of compliance These consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements also comply with International Financial Reporting Standards (IFRS) and Interpretations (IFRICs) as issued by the International Accounting Standards Board (IASB). The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments and share-based payments, which are respectively measured at fair value in accordance with AASB 9 Financial Instruments and AASB 2 Share-based Payment. Functional and presentation currency The consolidated financial statements are presented in Australian dollars, which is Nearmap Ltd’s functional and presentation currency. Rounding of amounts The Company 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 financial statements and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated. Principles of consolidation The consolidated financial statements incorporate all assets, liabilities and results of the Company and its subsidiaries. Subsidiaries are all those entities over which the Group has control. 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 assets, liabilities and results of subsidiaries are included in the consolidated financial statements from the date that control commences, until the date that control ceases. Where the Company ceases to have control of a subsidiary, it derecognises the assets, liabilities and other components of equity of the subsidiary. Any resulting gain or loss is recognised in the consolidated statement of profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses, and profit and losses resulting from intra-group transactions have been eliminated. Foreign currencies Foreign currency transactions Each entity in the Group determines its own functional currency and items included in the financial 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. 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 the consolidated statement of profit or loss. However, foreign currency differences arising from the translation of qualifying cash flow hedges (to the extent that the hedges are effective) and foreign currency differences arising from monetary items that in substance form part of the net investment in the foreign operations are recognised in other reserves via the consolidated statement of other comprehensive income (OCI). 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 presented in the foreign currency translation reserve (FCTR) included in other reserves in equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to the consolidated statement of profit or loss as part of the profit or loss on disposal. Significant accounting judgements, estimates and assumptions In preparing these consolidated financial statements, management makes judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. The key judgements and estimates which are material to the financial report are found in the following notes: Lease term Share-based payment plans Income tax Trade receivables – expected credit loss Intangibles – recognition and recoverability NOTE PAGE 2 5 7 9 11 80 89 92 99 100 FINANCIAL REPORT 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020 Transition On transition, for leases classified as operating leases under AASB 117, lease liabilities were measured at the present value of the remaining lease payments discounted at the Group’s incremental borrowing rate as at 1 July 2019. The weighted average rate applied is 4.32%. Right-of- use assets are measured at their carrying amount as if AASB 16 had been applied since the commencement date, discounted using the lessee’s incremental borrowing rate at 1 July 2019. Impact on transition On transition to AASB 16, the Group recognised right-of-use assets, lease liabilities and deferred tax assets, and derecognised lease incentive liabilities, recognising the difference in accumulated losses. The impact on transition is summarised below: AS REPORTED 30 JUNE 2019 $’000 AASB 16 TRANSITION ADJUSTMENTS $’000 ADJUSTED OPENING BALANCE 1 JULY 2019 $’000 Property, plant and equipment Deferred tax asset TOTAL ASSETS IMPACT Other current liabilities Other non-current liabilities Current lease liabilities Non-current lease liabilities TOTAL LIABILITIES IMPACT Accumulated losses TOTAL EQUITY IMPACT 16,782 3,086 19,868 5,446 1,002 - - 6,448 (58,885) (58,885) 6,0251 144 6,169 (231) (1,002) 2,267 5,493 6,527 (358) (358) 22,807 3,230 26,037 5,215 - 2,267 5,493 12,975 (59,243) (59,243) 1 The AASB 16 transition adjustment of $6,025 thousand on the property, plant and equipment balance comprises the recognition of right-of-use assets of $6,530 thousand, including make good assets of $505 thousand, and an equivalent reduction in the office equipment & furniture balance of $505 thousand as a result of the reclassification of the make good asset carrying value within right-of-use assets. Note 12 provides a reconciliation of the opening balance adjustment by category of property, plant and equipment. The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as at 30 June 2019 as follows: Operating lease commitments as at 30 June 2019 Less: Impact of discounting Commitments relating to short-term and low value leases LEASE LIABILITIES AS AT 1 JULY 2019 $’000 8,306 (514) (32) 7,760 A. BASIS OF PREPARATION (CONT.) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) Changes in accounting policies (i) AASB 16 Leases The Group has initially adopted AASB 16 Leases (AASB 16) from 1 July 2019. The newly effective standard introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised right-of-use assets representing its right to use the underlying assets and lease liabilities representing its obligation to make lease payments. The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying AASB 117 Leases (AASB 117) and Interpretation 4 at the date of initial application. The Group also elected to use the practical expedient outlined in AASB 16 for leases with a term of less than 12 months and no purchase options, and leases of low value assets. The cost related to these leases is recognised on a straight-line basis over the term of the lease. The Group has applied AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 30 June 2019 has not been restated – i.e. it is presented, as previously reported, under AASB 117 and related interpretations. The Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. On transition to AASB 16, all leases entered into by the Group were classified as operating leases under AASB 117 and related interpretations, and the payments recognised on a straight-line basis in the consolidated statement of profit or loss over the term of the lease. The details of the changes in accounting policies are disclosed below. Definition of a lease The Group leases many assets, namely properties and office equipment. Previously, the Group determined at contract inception whether an arrangement was or contained a lease under Interpretation 4 Determining Whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. Under AASB 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. Significant accounting policy The Group recognises a right-of-use asset and a lease liability at the lease commencement date, being the date that the underlying asset is available for use. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjustment for certain remeasurement of the lease liability. The cost of the right-of-use asset includes the amount of recognised lease liabilities, initial direct costs inherent to the lease, and the expected costs to make good the leased asset, less any incentive received. The Group presents right-of-use assets in property, plant, and equipment, the same line items as it presents underlying assets of the same nature that it owns. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The lease payments include fixed payments (including in substance fixed payments) and variable lease payments that depend on an index or rate. Variable payments that do not depend on an index or rate are recognised as an expense in the consolidated statement of profit or loss as they are incurred. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised. The Group has applied judgement to determine the lease term for some lease contracts that include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognised. 80 FINANCIAL REPORT FINANCIAL REPORT 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020 (ii) AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business On October 22, 2018, the International Accounting Standards Board issued amendments to IFRS 3 Business Combinations. Consequently, AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business (AASB 2018-6) was issued in December 2018 by the Australian Accounting Standards Board. The amendments seek to clarify whether a transaction results in an asset or a business acquisition. The amendments include an election to use a concentration test, which is a simplified assessment that results in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. If a preparer chooses not to apply the concentration test, or the test is failed, then the assessment focuses on the existence of a substantive process. The amendments apply for annual reporting periods beginning on or after January 1, 2020, however, early adoption is permitted. The Group has early adopted AASB 2018-6 in the year ended 30 June 2020 on a prospective basis. Accordingly, there was no retrospective adjustment to the Group results. (iii) AASB Interpretation 23 Uncertainty over Income Tax Treatments The Group has initially adopted AASB Interpretation 23 Uncertainty over Income Tax Treatments (Interpretation 23) from 1 July 2019. Interpretation 23 clarifies how to apply the recognition and measurement requirements in AASB 112 Income Taxes, when there is uncertainty regarding income tax treatments. The Interpretation addresses whether an entity needs to consider uncertain tax treatments separately, the assumptions an entity should make about the examination of tax treatments by taxation authorities, how an entity should determine taxable profit and loss, tax bases, unused tax losses, unused tax credits, and tax rates, and how an entity considers changes in facts and circumstances in such determinations. The adoption of Interpretation 23 did not have an impact on the Group’s consolidated financial statements. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. The following amended standards and interpretations are not expected to have a significant impact on the Group’s consolidated financial statements: (i) Amendments to References to Conceptual Framework in IFRS Standards (ii) Definition of Material (amendments to AASB 101 Presentation of Financial Statement and AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors) A. BASIS OF PREPARATION (CONT.) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.) Impact for the period The carrying value and movements of the Group’s right-of-use assets and lease liabilities during the year ended 30 June 2020 are set out below: RIGHT-OF-USE ASSETS PROPERTY $’000 OFFICE EQUIPMENT $’000 LEASE LIABILITIES $’000 AS AT 1 JULY 2019 Additions (new lease arrangements)1 Depreciation expense Interest expense on unwinding of lease liabilities Payments Foreign exchange adjustments AS AT 30 JUNE 2020 Included in the consolidated statement of financial position as: Current lease liabilities Non-current lease liabilities TOTAL LEASE LIABILTIES 6,466 11,436 (3,992) - - 146 14,056 64 - (33) - - - 31 7,760 9,876 - 596 (3,921) 85 14,396 4,500 9,896 14,396 1 On 1 July 2019, Nearmap Australia Pty Ltd entered into a contract for the lease of office premises located at Level 5, Tower One, International Towers, 100 Barangaroo Avenue, Barangaroo. The lease was announced as a subsequent event in the 2019 Annual Report and was excluded from operating lease commitments as at 30 June 2019. Other new lease arrangements entered into by the Group during the year ended 30 June 2020 include two new contracts entered into by Nearmap US, Inc for office premises in New York City (20 West 36th Street, New York, New York) and Arlington, Virginia (Suite 1301, 1225 South Clark Street, Arlington, Virginia). The Group recognised rent expense from short-term leases of $291 thousand for the year ended 30 June 2020. Maturity analysis – contractual undiscounted cash flows Less than one year One to five years TOTAL UNDISCOUNTED LEASE LIABILITY The Group has expenditure commitments of nil in relation to short-term leases as at 30 June 2020. 30 JUNE 2020 $’000 4,765 10,647 15,412 82 FINANCIAL REPORT FINANCIAL REPORT 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020YEAR ENDED 30 JUNE 2020 Revenue TOTAL REVENUE Capture cost amortisation1 Storage, administration & other TOTAL COST OF REVENUE GROSS PROFIT GROSS MARGIN % Direct sales & marketing Indirect sales & marketing TOTAL SALES & MARKETING COSTS General & administration Overhead depreciation2 Other income Finance costs3 TOTAL GENERAL & ADMINISTRATION SEGMENT CONTRIBUTION Amortisation & depreciation of unallocated assets Foreign exchange gain LOSS BEFORE TAX Income tax benefit LOSS AFTER TAX ANZ $’000 60,223 60,223 (6,000) (1,025) (7,025) 53,198 88% (8,906) (5,878) (14,784) (10,725) (2,162) - - (12,887) 25,527 NA $’000 36,491 36,491 (23,529) (5,537) (29,066) 7,425 20% (19,864) (8,129) (27,993) (9,233) (1,638) - - (10,871) (31,439) UNALLOCATED $’000 - - - - - - - - - - (18,469) (1,570) 799 (681) (19,921) (19,921) TOTAL $’000 96,714 96,714 (29,529) (6,562) (36,091) 60,623 63% (28,770) (14,007) (42,777) (38,427) (5,370) 799 (681) (43,679) (25,833) (11,799) 529 (37,103) 386 (36,717) 1 During the year ended 30 June 2019, the Group reviewed the appropriateness of the amortisation period and methodology for capture costs and determined that the period be reduced from 5 years to 2 years, reflecting growing demand for more recent imagery. The change in estimate was applied prospectively from 1 January 2019. For the year ended 30 June 2020, the 2-year useful life policy was applied consistently throughout the year. 2 Overhead depreciation includes right-of-use asset depreciation of $4,025 thousand for the year ended 30 June 2020. The Group has applied AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 30 June 2019 has not been restated. 3 Excluding foreign exchange gains, which are presented on a consolidated level below segment contribution. B. KEY FINANCIAL RESULTS IN THIS SECTION This section explains the results and performance of the Group and provides additional information about those individual line items in the consolidated financial statements that the Directors consider most relevant in the context of the operations of the Group, including: - accounting policies that are relevant for understanding the items recognised in the consolidated financial statements; and - 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, net finance costs and income tax. 3. SEGMENT RESULTS, REVENUE AND OTHER INCOME This note provides results by operating segment for the year ended 30 June 2020. Operating segments are reported in a manner that is consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The CODM has been identified as the Nearmap Executive Team which ultimately makes strategic decisions. This note also provides additional information on revenue, including types of revenue and the respective recognition criteria. Segment reporting The CODM assess the Group’s performance based on geographical areas of operation. Accordingly, the Group has identified two reportable segments, which are presented below: SEGMENT INFORMATION Australia & New Zealand (ANZ) Responsible for all sales and marketing efforts in Australia and New Zealand. North America (NA) Responsible for all sales and marketing efforts in the United States and Canada. Cost of revenue are all the costs directly attributable to the ongoing delivery of the subscription product, including amortisation of capture costs. Sales and marketing costs include direct in-country costs. A portion of general and administration costs, representing general operating expenses, remain unallocated in determining the segment contribution presented to the CODM. These unallocated costs comprise the product and technology department costs, and the portion of the corporate department costs that are not allocated to specific segments. The assets and liabilities of the Group are reported and reviewed by the CODM in total and are not allocated by operating segment. Operating segment assets and liabilities are therefore not disclosed. 84 FINANCIAL REPORT FINANCIAL REPORT 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020B. KEY FINANCIAL RESULTS (CONT.) 3. SEGMENT RESULTS, REVENUE AND OTHER INCOME (CONT.) YEAR ENDED 30 JUNE 2019 Revenue TOTAL REVENUE Capture cost amortisation1 Storage, administration & other TOTAL COST OF REVENUE GROSS PROFIT GROSS MARGIN % Direct sales & marketing Indirect sales & marketing TOTAL SALES & MARKETING COSTS General & administration Overhead depreciation Other income Finance costs2 TOTAL GENERAL & ADMINISTRATION SEGMENT CONTRIBUTION Amortisation & depreciation of unallocated assets Foreign exchange loss LOSS BEFORE TAX Income tax expense LOSS AFTER TAX ANZ $’000 53,173 53,173 (3,860) (1,039) (4,899) 48,274 91% (8,531) (2,864) (11,395) (8,786) (224) - - (9,010) 27,869 NA $’000 24,469 24,469 (14,146) (3,158) (17,304) 7,165 29% (13,009) (3,970) (16,979) (8,552) (468) - - (9,020) (18,834) UNALLOCATED $’000 - - - - - - - - - - (12,429) (98) 1,733 (24) (10,818) (10,818) TOTAL $’000 77,642 77,642 (18,006) (4,197) (22,203) 55,439 71% (21,540) (6,834) (28,374) (29,767) (790) 1,733 (24) (28,848) (1,783) (7,863) (191) (9,837) (5,097) (14,934) 1 During the year ended 30 June 2019, the Group reviewed the appropriateness of the amortisation period and methodology for capture costs and determined that the period be reduced from 5 years to 2 years, reflecting growing demand for more recent imagery. The change in estimate was applied prospectively from 1 January 2019, and an additional $7,980 thousand was recorded in the consolidated statement of profit or loss the Group. No change was made to the straight-line amortisation method. 2 Excluding foreign exchange loss, which are presented on a consolidated level below segment contribution. Revenue and other income ACCOUNTING POLICY – RECOGNITION AND MEASUREMENT OF REVENUE FROM CONTRACTS WITH CUSTOMERS The Group derives its revenue primarily from subscription fees for its online location intelligence services and, to a lesser extent royalty services. Revenue is recognised when control of these services is transferred to the Group’s customers, in an amount that reflects the consideration the Group expects to be entitled to in an exchange for those services, excluding GST. The following paragraphs provide information about the nature and timing of satisfaction of performance obligations in contracts with customers, including revenue recognition policies: (i) Subscription revenue: The Group’s subscription services represent a single promise to provide continuous access to its digital aerial imagery. As each day of providing access to the software is substantially the same and the customer simultaneously receives and consumes the benefit as access is provided, the Group has determined that its subscriptions services arrangement include a single performance obligation comprised of a series of distinct services. Revenue from subscription services is recognised over time on a rateable basis over the contract term beginning on the date that the Group’s service is made available to the customer. Subscription periods are typically annual or multi-year in duration, are billed in advance annually and are non-refundable. Typically, subscriptions automatically renew at the end of the subscription period unless the customer specifically terminates it prior to the end of the period. (ii) Royalty income: The Group earns royalty revenue through third parties who sell Nearmap imagery on behalf of the Group. Revenue is recognised when the performance obligation to which the royalty relates has been satisfied. (iii) Grant income: Reflects the New South Wales payroll grant received from the Office of State Revenue when incremental headcounts is hired for new jobs created. (iv) Interest income is recognised as interest accrues using the effective interest method. Disaggregation of revenue TYPES OF REVENUE AND OTHER INCOME Subscription revenue1 Royalty income TOTAL REVENUE Interest income Grant income Gain on disposal of assets Gain on sale of unlisted investments TOTAL OTHER INCOME TOTAL REVENUE AND OTHER INCOME 30 JUNE 2020 $’000 30 JUNE 2019 $’000 96,576 138 96,714 676 10 113 - 799 97,513 77,125 517 77,642 1,553 21 9 150 1,733 79,375 1 In the prior year, on-demand revenue ($134 thousand) and subscription revenue ($76,991 thousand) were presented in two separate line items. In the current year, on-demand revenue and subscription revenue are presented within subscription revenue given their similar nature. Comparative figures have been adjusted accordingly. 30 JUNE 2020 $’000 30 JUNE 2019 $’000 PRIMARY GEOGRAPHICAL MARKETS1 Australia & New Zealand North America Unallocated TOTAL REVENUE AND OTHER INCOME SUBSCRIPTION REVENUE BY INDUSTRY2 Architecture, Construction & Engineering Commercial/Other Government Utilities Insurance & Property Solar TOTAL SUBSCRIPTION REVENUE 60,223 36,491 799 97,513 26,539 19,345 15,856 11,377 15,525 7,934 96,576 53,173 24,469 1,733 79,375 20,536 17,517 11,292 9,913 10,934 6,933 77,125 1 The Group’s revenue by geography is based on customer billing address. 2 In the prior year, on-demand revenue of $134 thousand was presented separately from subscription revenue and was not included in the disaggregation of revenue by industry. In the current year, on-demand revenue and subscription revenue are presented together within subscription revenue given their similar nature. Comparative figures have been adjusted accordingly. 86 FINANCIAL REPORT FINANCIAL REPORT 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020B. KEY FINANCIAL RESULTS (CONT.) 3. SEGMENT RESULTS, REVENUE AND OTHER INCOME (CONT.) Contract balances Contract assets Contract assets primarily relate to unbilled amounts typically resulting from sales contracts where revenue recognised exceeds the amount billed to the customer. The contract asset is transferred to trade receivable when the right becomes unconditional. The Group has $3,927 thousand contract assets as at 30 June 2020 (30 June 2019: $1,489 thousand) which are recognised within trade receivable. Contract liabilities (unearned revenue) Unearned revenue primarily consists of billings and payments received in advance of revenue recognition. The Group primarily bills and collects payments from customers for services in advance on an annual basis. The Group initially records subscriptions fees as unearned revenue and then recognises revenue as performance obligations are satisfied over the subscription period. The totality of the unearned revenue balance at 1 July 2019 has been recognised as revenue as at 30 June 2020. Significant changes in contract liabilities are as follows: BALANCE AT THE BEGINNING OF THE YEAR Invoice issued during the year Decrease due to revenue recognised in the year Foreign exchange adjustment BALANCE AT THE END OF THE YEAR 30 JUNE 2020 $’000 30 JUNE 2019 $’000 42,034 100,766 (93,957) 733 49,576 33,911 85,654 (77,531) - 42,034 Transaction price allocated to remaining performance obligations Total transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as at the end of the financial year is referred to as revenue backlog. Revenue backlog consists of unearned revenue, as reported in the consolidated statement of financial position (billed backlog), and unbilled customer commitments (unbilled backlog). Unbilled backlog is an operational measure representing future unearned revenue amounts that are to be invoiced under existing multi-year agreements and that are not included in unearned revenue on the consolidated statement of financial position. As at 30 June 2020, total backlog was $107,397 thousand (30 June 2019: $86,015 thousand), expected to be recognised in the consolidated statement of profit of loss in the following financial years: Year ended 30 June 2021 Year ended 30 June 2022 Year ended 30 June 2023 and thereafter TOTAL REVENUE BACKLOG 30 JUNE 2020 $’000 30 JUNE 2019 $’000 69,317 24,264 13,816 107,397 64,511 13,702 7,802 86,015 4. EXPENSES Other operational expenses Servicing and processing costs Marketing costs Travel costs1 Subscription fees Audit, consulting and legal fees Operating lease expenses Office and other rental costs1 Insurance costs All other operating expenses2 30 JUNE 2020 $’000 30 JUNE 2019 $’000 6,617 5,322 3,577 4,921 3,956 - 1,942 1,069 3,820 4,547 5,255 3,689 3,095 3,117 2,208 1,217 680 1,687 TOTAL OTHER OPERATIONAL EXPENSES 31,224 25,495 1 Office costs of $1,217 thousand and travel costs of $3,689 thousand were previously included within travel and office costs for the year ended 30 June 2019. For the year ended 30 June 2020, these operational cost categories have been disclosed separately and comparative figures have been adjusted accordingly. 2 Other finance costs of $24 thousand were previously included within all other operating expenses for the year ended 30 June 2019. For the year ended 30 June 2020, these costs have been disclosed separately within net finance costs and comparative figures have been adjusted accordingly. Note 6 provides a detail of elements included in net finance costs. Employee benefits expense Salaries, wages, and other employee expense Net share-based payment expense1 Defined contribution plan expense TOTAL EMPLOYEE BENEFITS EXPENSE 30 JUNE 2020 $’000 30 JUNE 2019 $’000 49,789 4,062 2,691 56,542 33,286 1,684 1,873 36,843 1 The Group capitalises a portion of its share-based payments cost in intangible assets and property, plant and equipment. Refer to note 5 for the reconciliation of the total cost incurred by the Group with the amount recognised in the consolidated statement of profit or loss. 5. SHARE-BASED PAYMENT PLANS ACCOUNTING POLICY - RECOGNITION AND MEASUREMENT OF SHARE-BASED PAYMENTS The Group operates various equity-settled share-based payment plans, providing share options and Restricted Stock Units (RSUs) to employees in exchange for services rendered, as outlined further in this note. The grant-date fair value of equity-settled share-based payment arrangements granted to employees is recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards, ending on the date on which the relevant employees become fully entitled to the award. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service conditions. For awards subject to a service condition only, no expense is recognised if they do not ultimately vest. The expense or income for the year represents the movement in cumulative expense recognised at the beginning and end of that year. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation. 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 modification of the original award. The granting of limited recourse loans (LRL) is considered to be a modification to the existing options. Any increase in the fair value of the option is recognised as an expense immediately at the date the LRL is granted. The LRLs are not recognised in the consolidated financial statements. The dilutive effect, if any, of outstanding equity-settled share-based payment instruments is reflected as additional share dilution in the computation of earnings per share. 88 FINANCIAL REPORT FINANCIAL REPORT 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020B. KEY FINANCIAL RESULTS (CONT.) 5. SHARE-BASED PAYMENT PLANS (CONT.) KEY ESTIMATES AND JUDGEMENTS The Group estimates the fair value of equity-settled share-based payments at the date at which they are granted. The fair values of options granted include assumptions in the following areas: risk free rate, volatility, expected life and expected achievement of TSR performance hurdles, if applicable. The expected volatility reflects the assumption that the historical volatility is indicative of future trends and may not reflect the actual outcome. The expected life of the options is based on historical data, which may also not necessarily reflect future exercise patterns. At 30 June 2020, the Group had the following share-based payment arrangements. Employee Share Option Plan An Employee Share Option Plan (ESOP) 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 as at the date of grant, are issued in accordance with terms established by the Directors of the Company. The options cannot be transferred without the approval of the Company’s Board and are not quoted on the ASX. The grants are issued with a life of four years either: (i) with Total Shareholder Return (TSR) growth performance vesting conditions, exercisable after three years; or (ii) without any performance vesting conditions, exercisable on various dates (usually in two or three equal annual tranches when vested). All options are settled by issuing ordinary shares. The Nearmap ESOP also includes an Employee Loan Scheme that permits the Company to grant financial assistance to employees by way of LRLs to enable them to exercise options and acquire shares. The employee does not have a beneficial interest in the shares until the loan is repaid with any such shares being held in escrow until that time. The Group recorded a net expense of $1,882 thousand in the year ended 30 June 2020 (30 June 2019: $1,598 thousand) in relation to the ESOP. In addition, $62 thousand has been capitalised in the cost of intangible assets and property, plant and equipment (30 June 2019: nil). Employee Matching Share Rights Plan Employees have the opportunity to purchase shares in Nearmap using up to 5% of their annual base salary. For every three acquired shares, the employee will be awarded a right to receive one additional share in Nearmap under the conditions outlined in the Employee Matching Share Rights Plan. The Group recorded a net expense of $198 thousand in the year ended 30 June 2020 (30 June 2019: $86 thousand) in relation to the Employee Matching Share Rights Plan. In addition, $81 thousand has been capitalised in the cost of intangible assets and property, plant and equipment (30 June 2019: nil). Long Term Incentive Plan The Group introduced a new incentive plan during the year ended 30 June 2020. Pursuant to the new employee Long Term Incentive Plan (LTIP), certain key senior employees are granted either options issued with a life of 4 years or RSUs representing between 15% and 25% of the employee’s base remuneration. The rights vest in 9 tranches over three years from the date of the initial grant, subject to ongoing employment. All vested rights under the LTIP are settled by issuing ordinary shares. Additionally, during the year ended 30 June 2020 a one-off grant was made to all non-KMP employees to compensate for the 20% salary reduction implemented as a result of COVID-19 during the period of 1 May 2020 until 31 October 2020 (Salary Compensation Grant). The number of equity instruments to be issued under this grant is dependent on the Company’s closing share price on the day prior to the 2020 Annual General Meeting. As a result, as at 30 June 2020, no instruments have been issued under this grant. The Group recorded a net expense of $1,982 thousand in the year ended 30 June 2020 (30 June 2019: nil) in relation to the LTIP, of which $834 thousand relates to the Salary Compensation Grant (30 June 2019: nil). In addition, $1,159 thousand has been capitalised in the cost of intangible assets and property, plant and equipment (30 June 2019: nil). MOVEMENT IN SHARE OPTIONS AND LOANS 30 JUNE 2020 WEIGHTED AVERAGE EXERCISE PRICE 30 JUNE 2019 WEIGHTED AVERAGE EXERCISE PRICE NUMBER OF OPTIONS OUTSTANDING AT THE BEGINNING OF THE YEAR 16,337,184 Options lapsed/forfeited Options exercised – loans granted Options exercised – cash payment Options granted (1,371,303) (1,958,346) (3,085,333) 7,057,343 $0.84 $1.58 $0.90 $0.51 $2.37 23,668,600 (1,409,750) (4,615,867) (5,894,894) 4,589,095 NUMBER OF OPTIONS OUTSTANDING AT THE END OF THE YEAR 16,979,545 $1.53 16,337,184 VESTED & EXERCISABLE 2,348,011 $0.57 4,033,250 $0.66 $0.68 $0.81 $0.57 $1.35 $0.84 $0.46 As at 30 June 2020, there were 16,979,545 options outstanding (30 June 2019: 16,337,184) at exercise prices ranging from $0.39 to $2.97 (30 June 2019: $0.39 to $1.65) and a weighted average remaining contractual life of 2.40 years (30 June 2019: 2.26 years). The fair values of the options granted under the LTIP and ESOP were determined using the Black-Scholes model, or the Monte Carlo model for TSR vesting performance grants. The following table presents the weighted average assumptions used to determine the fair values of options granted: ESOP – MONTE CARLO ESOP – BLACK-SCHOLES LTIP – BLACK-SCHOLES 30 JUNE 2020 30 JUNE 2019 30 JUNE 2020 30 JUNE 2019 30 JUNE 2020 30 JUNE 2019 Dividend yield (%) Risk-free interest rate (%) Expected life (years) Expected volatility for the share price (%) WEIGHTED-AVERAGE FAIR VALUES ($) 0.00 0.85 4.00 52.18 0.78 0.00 2.17 3.00 57.50 0.49 0.00 0.67 3.00 56.66 0.74 0.00 2.19 2.00 47.20 0.36 0.00 0.75 2.66 53.13 0.88 - - - - - The expected volatility is based on the historical volatility of the Company’s share price. The risk-free interest rate used is equal to the yield on Australian Government Bonds at the date of grant with a term equal to the expected life of options. The grant of LRLs for the settlement of share options is considered as a modification to the valuation of the options. Any increase in the fair value of the modified option is recognised as expense in the consolidated statement of profit or loss. During the year ended 30 June 2020, the issue of LRLs resulted in an incremental expense of $60 thousand relating to KMPs and $25 thousand for other employees (30 June 2019: $285 thousand and $50 thousand). MOVEMENT IN RESTRICTED STOCK UNITS (RSUs) 30 JUNE 2020 WEIGHTED-AVERAGE FAIR VALUE 30 JUNE 2019 WEIGHTED-AVERAGE FAIR VALUE NUMBER OF RSUs OUTSTANDING AT THE BEGINNING OF THE YEAR RSUs lapsed/forfeited RSUs granted NUMBER OF RSUs OUTSTANDING AT THE END OF THE YEAR - (209,565) 1,139,537 929,972 - $2.58 $2.57 $2.56 - - - - - - - - The fair value of RSUs on measurement date is based on the closing market price on the day preceding the grant. 6. NET FINANCE COSTS Interest expense on unwinding of lease liabilities Net foreign exchange (gain)/loss Other finance costs NET FINANCE COSTS 30 JUNE 2020 $’000 30 JUNE 2019 $’000 596 (529) 85 152 - 191 24 215 90 FINANCIAL REPORT FINANCIAL REPORT 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020B. KEY FINANCIAL RESULTS (CONT.) 7. INCOME TAX ACCOUNTING POLICY - RECOGNITION AND MEASUREMENT OF INCOME TAX Income tax Income tax expense comprises current and deferred tax. It is recognised in the consolidated statement of profit or loss except to the extent that it related to items recognised directly in equity or OCI. Current tax comprises the expected tax payable or receivable on the taxable income or loss of the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: (i) temporary difference on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; (ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future; and (iii) taxable temporary differences arising on the initial recognition of goodwill. 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 profit will be available against which they can be utilised. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary difference is insufficient to recognise a deferred tax asset in full, the future taxable profits, adjusted for reversal of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of the future taxable profits improves. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that is has become probable that future taxable profits will be available against which they can be used. 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. Research and Development tax incentive The Group accounts for any non-refundable research and development tax credits as an income tax benefit, which are recognised when there is reasonable assurance that the Group will comply with the conditions that are attached to the incentive and that it will be received. Tax consolidation The Company and its wholly owned Australian controlled entities have formed an income tax consolidated group under the tax consolidation regime. 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. KEY ESTIMATES AND JUDGEMENTS Deferred tax Where it is probable that future taxable profit will be available against which carried forward tax losses can be utilised, a deferred tax asset is recognised for these amounts, subject to shareholder continuity and other requirements. No material deferred asset has been recognised for losses in the United States, given the uncertainty of the timing of future profitability. Income tax expense Current tax expense Deferred tax benefit/(expense) TOTAL INCOME TAX BENEFIT/(EXPENSE) NUMERICAL RECONCILIATION OF INCOME TAX BENEFIT/(EXPENSE) TO PRIMA FACIE TAX PAYABLE Loss before income tax Tax at the Australia tax rate of 30% (30 June 2019: 30%) Tax effect of amounts which are not deductible in calculating taxable income: Research and development grant Effect of lower tax rate in the US Share-based payments expense Entertainment expenses Recognition of previously unrecognised deductible temporary differences Current year losses for which no deferred tax asset is recognised Over/(under) provision in the prior year TOTAL TAX BENEFIT/(EXPENSE) 30 JUNE 2020 $’000 30 JUNE 2019 $’000 (953) 1,339 386 (37,103) 11,131 - (2,414) (1,609) (115) - (7,202) 595 386 (2,646) (2,451) (5,097) (9,837) 2,951 181 (2,416) (505) (88) 743 (5,819) (144) (5,097) The Group has an unrecognised deferred tax asset of $25,921 thousand in respect of US tax losses as at 30 June 2020 (30 June 2019: $18,288 thousand). The unrecognised tax losses have expiry dates ranging from 2035 to 2040. Deferred income tax The movement in deferred tax balances and the Group’s net deferred tax balance are outlined below. The net deferred tax asset balance relates to US entities and the net deferred tax liability balance relates to Australian entities. YEAR ENDED 30 JUNE 2020 BALANCE AT 1 JULY RECOGNISED IN PROFIT OR LOSS Unearned revenue Provisions and other accruals Property, plant and equipment Intangible assets Other Derivative instruments Unrealised foreign exchange loss $’000 2,682 1,546 (111) (12,088) 837 (31) 61 $’000 667 327 762 (372) 144 - (189) NET TAX ASSETS/(LIABILITIES) (7,104) 1,339 RECOGNISED DIRECTLY IN EQUITY $’000 64 8 144 - (172) 318 - 362 BALANCE AT 30 JUNE NET DEFERRED TAX ASSETS NET DEFERRED TAX LIABILITIES $’000 3,413 1,881 795 (12,460) 809 287 (128) $’000 3,413 647 253 - - - - $’000 - 1,234 542 (12,460) 809 287 (128) (5,403) 4,313 (9,716) 92 FINANCIAL REPORT FINANCIAL REPORT 93 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020 B. KEY FINANCIAL RESULTS (CONT.) 7. INCOME TAX (CONT.) YEAR ENDED 30 JUNE 2019 BALANCE AT 1 JULY RECOGNISED IN PROFIT OR LOSS R&D credits carry forward Unearned revenue Provisions and other accruals Property, plant and equipment Intangible assets Other Derivative instruments Unrealised foreign exchange loss $’000 874 2,177 1,253 69 (10,348) 11 (42) 119 $’000 (874) 391 267 (181) (1,740) (256) - (58) RECOGNISED DIRECTLY IN EQUITY $’000 - 114 26 1 - 1,082 11 - BALANCE AT 30 JUNE NET DEFERRED TAX ASSETS NET DEFERRED TAX LIABILITIES $’000 - 2,682 1,546 (111) (12,088) 837 (31) 61 $’000 - 2,682 379 25 (1) - - - $’000 - - 1,167 (136) (12,087) 837 (31) 61 NET TAX ASSETS/(LIABILITIES) (5,887) (2,451) 1,234 (7,104) 3,086 (10,190) C. CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT IN THIS SECTION This section outlines how the Group manages its capital structure and discusses the Group’s exposure to various financial 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 Group may issue new shares, sell assets, consider joint ventures and may return capital in some form to shareholders. 8. CAPITAL AND RESERVES ACCOUNTING POLICY - RECOGNITION AND MEASUREMENT OF CONTRIBUTED EQUITY AND RESERVES Shares issued are classified as contributed equity. Incremental costs directly attributable to the issue of new shares or options are deducted from the fair value of contributed equity issued, net of tax. Details in relation to share-based payment plans, including share options, are contained in note 5. When shares recognised as contributed equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognised as a deduction from contributed equity. When treasury shares are reissued subsequently as part of the Employee Matching Share Rights Plan, the amount of the consideration paid upon repurchase is recognised as an increase in contributed equity. Any surplus of deficit between the consideration paid and the amount recognised in the share-based payments reserve upon vesting of the rights is presented in accumulated losses. Reserves include: (i) Share-based payments reserve: comprises the cumulative expense relating to the fair value of options, RSUs, and rights on issue to key management personnel, senior executives and employees of the Group. (ii) Profit reserve: comprises profits appropriated by the parent company of the Group. (iii) Other reserves: includes the foreign currency translation reserve representing foreign currency translation differences arising on the translation of financial statements of the Group’s foreign entities into the Group presentation currency (as described in note 2), and the cash flow hedge reserve representing the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred that are recognised in other comprehensive income (as described in note 9). Contributed equity The contributed equity of the Company consists only of fully paid ordinary shares. Holders of theses ordinary shares are entitled to receive dividends as declared from time to time, are entitled to one vote per share at general meetings of the Company, 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. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. Treasury shares Treasury shares are shares in the Company that are held by the Employee Matching Share Rights Plan Trust (the Trust) for the purpose of issuing shares under the Employee Matching Share Rights Plan. All rights attached to the Company’s shares held by the Trust are suspended until those shares are reissued. As at 30 June 2020, the Trust held 135,222 of the Company’s shares (30 June 2019: 43,998). MOVEMENT IN SHARES ON ISSUE YEAR ENDED 30 JUNE 2020 BALANCE AT THE BEGINNING OF THE YEAR Issued from exercise of share options Issued from exercise of share option loans Repayment of share option loans2 Treasury shares acquired3 Treasury shares vested and transferred to employees3 BALANCE AT THE END OF THE YEAR YEAR ENDED 30 JUNE 2019 BALANCE AT THE BEGINNING OF THE YEAR Issue of shares during the year, net of tax1 Issued from exercise of share options Issued from exercise of share option loans Repayment of share option loans2 Treasury shares acquired3 BALANCE AT THE END OF THE YEAR NUMBER OF SHARES 448,280,616 3,085,333 1,958,346 - - - $’000 124,617 1,596 - 396 (400) 368 453,324,295 126,577 394,019,855 43,750,000 5,894,894 4,615,867 - - 52,995 68,228 3,210 - 381 (197) 448,280,616 124,617 1 On 7 September 2018, the Company completed a $70,000 thousand capital raise (before costs), through a fully underwritten institutional placement of 43,750,000 new fully paid ordinary shares at the offer price of $1.60. The Company incurred a total of $2,854 thousand in transaction costs, which included $856 thousand representing the deferred tax impact. 2 During the year, total loans of $391 thousand (30 June 2019: $372 thousand) and accruing interest of $5 thousand (30 June 2019: $9 thousand) were repaid to the Company, thereby releasing 631,686 shares (30 June 2019: 613,333) previously under holding lock. 3 The Company introduced an employee matching share rights plan during the year ended 30 June 2019. The balance of treasury shares acquired of $400 thousand as at 30 June 2020 (30 June 2019: $197 thousand) relates to shares purchased under the plan that will be reissued to participants at the end of the vesting periods. The balance of treasury shares vested and transferred to employees of $368 thousand as at 30 June 2020 (30 June 2019: nil) relates to shares that have been reissued to participants during the financial year. 94 FINANCIAL REPORT FINANCIAL REPORT 95 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020 C. CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT (CONT.) 9. FINANCIAL INSTRUMENTS ACCOUNTING POLICY - RECOGNITION AND MEASUREMENT OF FINANCIAL INSTRUMENTS Recognition and initial measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial instruments are initially measured at fair value, adjusted for transaction costs, unless they are classified as fair value through profit or loss in which case transaction costs are expensed in the consolidated statement of profit or loss immediately. Classification and subsequent measurement On initial recognition, a financial instrument is classified and measured at: (i) amortised cost; (ii) fair value through other comprehensive income (FVOCI – Financial asset only); or (iii) fair value through profit or loss (FVTPL). The Groups financial assets and financial liabilities, which comprise cash and cash equivalent, trade receivables, other current receivables, other current assets, trade and other payables, other current liabilities, and derivative financial instruments, are all classified and measured at amortised cost on initial recognition, except the derivative financial instruments (derivatives) which are classified and measured at FVTPL. Financial instruments classified and measured at amortised cost on initial recognition are subsequently measured at amortised cost using the effective interest rate method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains, and losses and impairment are recognised in the consolidated statement of profit or loss. Financial instruments classified and measured at FVTPL on initial recognition are subsequently measured at fair value. The derivatives entered into by the Group are used to hedge the variability in cash flows associated with highly probable forecast transaction arising from changes in foreign exchange rates. The Group designates these derivatives as cash flow hedging instruments and applies hedge accounting. The effective portion of changes in fair value of the derivatives is recognised in OCI and accumulated in the hedging reserve. Any ineffective portion of changes in the fair value of the derivatives is recognised immediately in the consolidated statement of profit or loss. The amount accumulated in the hedging reserve is reclassified to the consolidated statement of profit or loss in the same period or periods during which the hedged expected future cash flow affects the consolidated statement of profit or loss. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. Impairment of financial assets Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available. Derecognition of financial instruments Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is discharged, cancelled or expires. On derecognition of financial liabilities, the difference between the carrying amount extinguished and the consideration paid is recognised in the consolidated statement of profit or loss. Offsetting Financial assets and financial liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the assets and settle the liabilities simultaneously. ACCOUNTING POLICY – FAIR VALUE MEASUREMENT “Fair value” is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as “active” if transaction for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction. The fair value of assets and liabilities is categorised into different levels of the fair value hierarchy based on the inputs used in the valuation techniques as follows: (i) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can assess at the measurement date; (ii) 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); and (iii) 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. KEY ESTIMATES AND JUDGEMENTS Impairment of financial assets The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. There is no single customer making up a material percentage of the Group’s revenue. The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. As at 30 June 2020, COVID-19 hasn’t had a significant impact on the recoverability of the Group’s balances receivable. The Group uses an allowance matrix to measure the ECL of trade receivables. Loss rates are calculated using a “roll rate” method based on the probability of a receivable progressing through successive stages of delinquency to write-off. Roll rates are calculated based on the age of the receivable at the end of the financial year. The Group also recognises specific allowances for known credit risk of some individual customer accounts. The allowance for expected credit losses assessment requires a degree of estimation and judgement and may not reflect actual write-off in future periods. Carrying amounts and fair values The fair value and carrying value of derivatives as at 30 June 2020 is $957 thousand and is included in other current liabilities (30 June 2019: $103 thousand included in other current assets). The net unrealised loss of $957 thousand on changes in fair value of the derivatives during the year ended 30 June 2020 has been recognised in OCI (30 June 2019: $26 thousand recognised in OCI). Derivatives are not quoted in active markets as they are not traded on a recognised exchange. Therefore, the Group uses valuation techniques (present value techniques) which use both observable and unobservable market inputs. As these financial instruments use valuation techniques with unobservable inputs that are not significant 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 years ended 30 June 2020 and 30 June 2019. The carrying value less impairment provision of trade receivables, other current receivables, other current assets trade and other payables, and other current liabilities are assumed to approximate their fair values due to their short-term nature. Financial risk management Risk management framework The Company’s board of Directors have an 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 reflect changes in the market and the Group’s activities. 96 FINANCIAL REPORT FINANCIAL REPORT 97 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020C. CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT (CONT.) 9. FINANCIAL INSTRUMENTS (CONT.) 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 financial 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. (a) Currency risk Nature of risk The Group’s functional currency is the Australian dollar (AUD) and it is exposed to currency risk on payments denominated in United States dollars (USD). The Group’s policy is to hedge 85% to 125% of its estimated foreign currency exposure in respect of forecast purchases over the following 12 months at any point in time. The Group uses forward exchange contracts to hedge its currency risk, with the forward exchange contracts maturing on the same dates that the forecast payments are expected to occur. All foreign exchange contracts at 30 June 2020 have a maturity of less than twelve months from the reporting date. These contracts are designated as cash flow 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 significant exposure to foreign currency risk is as follows: Cash and cash equivalent Receivables and other assets Payables and other liabilities GROSS EXPOSURE The following significant exchange rates have been applied. USD Sensitivity analysis 30 JUNE 2020 USD $’000 30 JUNE 2019 USD $’000 1,499 6,909 2,650 11,058 948 3,429 2,132 6,509 AVERAGE RATE YEAR-END SPOT RATE 30 JUNE 2020 30 JUNE 2019 30 JUNE 2020 30 JUNE 2019 0.6712 0.7153 0.6863 0.7013 A reasonably possible strengthening or weakening of the AUD against the USD would have affected the measurement of financial instruments denominated in USD and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases: Cash flow hedges All derivates entered into by the Group are foreign exchange contracts. The settlement amounts and average contractual exchange rates of foreign exchange contracts were as follows: MATURITY 0-3 months 3-6 months TOTAL DERIVATIVE BUY UNITED STATES DOLLARS AVERAGE EXCHANGE RATES DERIVATIVE ASSET/(LIABILITY) 30 JUNE 2020 $’000 30 JUNE 2019 $’000 30 JUNE 2020 $’000 30 JUNE 2019 $’000 30 JUNE 2020 $’000 30 JUNE 2019 $’000 3,800 1,800 2,000 2,000 0.6196 0.6038 0.7128 0.7195 (602) (355) (957) 43 60 103 (b) Interest rate risk The Group is exposed to changes in interest rates as it relates to the Group’s short-term deposits. The Group 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 significant financial risk. The average interest rate received on deposits during the year was 1.61%. Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s cash and cash equivalent, term deposits, trade receivables from customers, other current receivables and amounts receivable from forward exchange contracts. The Group trades primarily with recognised, creditworthy third parties. The maximum exposure to credit risk at the reporting date in relation to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the consolidated statement of financial position and notes to the consolidated financial statements. (a) Cash and cash equivalent, term deposits, amounts receivable from forward exchange contracts The Group manages credit risk by placing cash and cash equivalent, term deposits and forward exchange contracts with high quality financial institutions. High quality financial institutions are those which are rated least BBB (as rated by Standard & Poors). (b) Trade and other receivables The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the Group based on recent sales experience, historical collection rates and forward-looking information that is available. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. The ageing of trade receivables and movement in the allowance for expected credit loss are presented below. Current 31 to 60 days overdue Over 61 days overdue Over 90 days overdue Impairment provision TRADE RECEIVABLE Contract Assets TOTAL TRADE RECEIVABLES CARRYING AMOUNT 30 JUNE 2020 $’000 18,169 998 410 1,184 (982) 19,779 3,927 23,706 30 JUNE 2019 $’000 12,738 230 183 135 (240) 13,046 1,489 14,535 Contract assets primarily relate to unbilled amounts typically resulting from sales contracts when revenue recognised exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. 30 JUNE 2020 USD (10% movement) 30 JUNE 2019 USD (10% movement) 98 FINANCIAL REPORT PROFIT OR LOSS EQUITY, NET OF TAX STRENGTHENING $’000 WEAKENING $’000 STRENGTHENING $’000 WEAKENING $’000 6 (14) (8) 18 (769) (276) 939 338 BALANCE AS AT 1 JULY Provision used during the year Additional provision recognised Foreign exchange adjustment BALANCE AS AT 30 JUNE 30 JUNE 2020 $’000 30 JUNE 2019 $’000 240 (488) 1,249 (19) 982 173 (76) 143 - 240 FINANCIAL REPORT 99 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020C. CAPITAL STRUCTURE AND FINANCIAL RISK MANAGEMENT (CONT.) 9. FINANCIAL INSTRUMENTS (CONT.) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group continually monitors forecast and actual cash flows and the maturity profiles of assets and liabilities. The Group manages liquidity risk by maintaining cash reserves and liquid assets in excess of expected cash outflows. As at 30 June 2020, all financial liabilities have a remaining contractual maturity of less than 1 year. Contractual cash outflows relating to lease liabilities are presented in note 2 (i). 10. DIVIDENDS PAID ON ORDINARY SHARES No dividends were paid or proposed for the year ending 30 June 2020 (30 June 2019: nil). Franking credits available for the year ending 30 June 2020 was $1,390 thousand (30 June 2019: nil). D. INVESTING ACTIVITIES IN THIS SECTION This section outlines the Group’s investment in intangible assets and property, plant and equipment as well as a broader discussion on the entity’s cash flows. 11. INTANGIBLES Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in the consolidated statement of profit or loss as incurred. Amortisation Amortisation is recognised in the consolidated statement of profit or loss on a straight-line basis over the estimated useful life of the intangible asset, from the date it is available for use. The estimated useful lives are as follows: (i) Capitalised capture costs: 2 years (ii) Development costs: 3-5 years (iii) Intellectual property: 5 years (iv) Patent, domains and trademark costs: 5-20 years The amortisation period and method for intangible assets is reviewed at least annually to determine if they remain appropriate. Where there is an expectation that the amortisation period or method does not match the consumption of the economic benefits embedded within the asset, the useful life of the asset will be adjusted to reflect this change. Impairment The Group assesses at each reporting period whether there is an indication that an asset (other than goodwill or intangibles with indefinite 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 cost of disposal (FVLCD) and its value in use (ViU), and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In such cases the asset is tested for impairment as part of the cash generating unit (CGU) to which it belongs. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset or CGU is considered impaired and is written down to its recoverable amount. 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 amortisation, had no impairment loss been recognised in the asset in prior years. Such reversal is recognised in the consolidated statement of profit or loss. Intangible assets are tested for impairment where an indicator of impairment exists. Intangibles under development are tested at the cash- generating unit level for impairment annually or at each reporting period where an indicator of impairment exists. Derecognition Gains or losses arising from derecognition of an intangible asset are measured as the difference between the disposal proceeds received and the carrying amount of the asset and are recognised in the consolidated statement of profit or loss when the asset is derecognised. ACCOUNTING POLICY – RECOGNITION AND MEASUREMENT OF INTANGIBLES KEY ESTIMATES AND JUDGEMENTS Research and development costs Expenditure on research activities is recognised in the consolidated statement of profit or loss as incurred. Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognised in the consolidated statement of profit or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses. Capture costs Capture costs comprise the cost of aerial surveys, third party processing costs, and employee benefit costs directly attributable and necessary to create and upload digital imagery online. Subsequent to initial recognition, capture costs are measured at cost less accumulated amortisation and any accumulated impairment loss. Other intangibles Other intangible assets include mainly intellectual property and patents that are acquired by the Group and have finite useful lives. These intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. Capture costs Pursuant to AASB 138 Intangible Assets, the Group has assessed its best estimate of the probability that the expected future economic benefits attributable to the Group’s digital imagery will flow 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. During the year ended 30 June 2020, the Group reviewed the appropriateness of the amortisation period and methodology for capture costs and determined that straight-line amortisation and a 2-year useful life remain appropriate based on up to date customer map tile requests. Development costs Management has made judgements in assessing when internal projects enter the development phase, namely around determining the commercial feasibility and assessing the probability of future economic benefits relating to that project. Impairment of assets The Group assesses impairment at each reporting date by evaluation of conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. ViU and FVLCD calculations performed in assessing recoverable amounts incorporate a number of key estimates, including forecasting of profits, cash flows, and discount rates. 100 FINANCIAL REPORT FINANCIAL REPORT 101 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020Impairment testing The Group’s CGUs have been identified as North America (NA) and Australia and New Zealand (ANZ), in accordance with the business segments. The recoverable amount is the higher of an asset’s FVLCD and its ViU. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. In determining the recoverable amount of assets, in the absence of quoted market prices, estimates are made regarding the present value of future post tax cash flows. These estimates require significant management judgement and are subject to risk and uncertainty that may be beyond the control of the Group; hence there is a possibility that changes in circumstances will materially alter projections, which may impact the recoverable amount of assets at each reporting date. In the current period, FVLCD has derived a higher value for both CGUs. FVLCD is an estimate of the amount that a market participant would pay for an asset or CGU, less cost of disposal. The fair value has been determined using assumptions to calculate the present value of the estimated future post tax cash flows expected to arise from the continued use of the asset including the anticipated cash flow effects to develop the asset or CGU from its current early stage of operation into its intended mature operating state. Cash flows have been discounted using an appropriate post tax discount rate to arrive at a net present value of the CGU, less an estimate of disposal costs for the business, which is then compared against the CGU’s carrying value. The FVLCD calculations are based primarily on level 3 inputs as defined in note 9 to the consolidated financial statements. For the purpose of impairment testing, goodwill is allocated to the ANZ CGU which is expected to benefit from the synergies of the business combinations in which goodwill arises. The carrying amounts of the ANZ and NA CGUs as at 30 June 2020 comprise: Goodwill Intangible assets Property, plant and equipment ANZ 135 13,466 18,966 NA - 33,814 14,442 GROUP 135 47,280 33,408 The key assumptions used in determining recoverable values for the ANZ and NA CGUs as at 30 June 2020 are presented below. CASH FLOW PROJECTIONS The projected cash flows are based on 2020 actual results, 2021 financial budget approved by management and the Board and 2022 to 2025 financial projections approved by the Board. These projections are based on company experience and external information sources of the available target market. The industry segments in the Group’s customer portfolio have not been significantly impacted by COVID-19. However, in preparing financial projections, the Group has considered the macroeconomic uncertainty arising from COVID-19 and the likely impact on each CGU’s cash flows. For NA specifically, the projections have been adjusted to reflect the historical growth rates achieved by the ANZ segment during a similar expansion phase. DISCOUNT RATE The discount rates used in the discounted cash flow model reflect the Group’s estimate of the time value of money and risks specific to each CGU. The discount rates have been determined based on each CGU’s bottom-up post-tax weighted average cost of capital (WACC), adjusted for market risk and specific risk factors, if applicable. The post-tax discount rate is 11.5% (13.1% pre- tax) for ANZ and 12.5% (14.4% pre-tax) for NA. TERMINAL GROWTH RATE The terminal value growth rates have been determined based on expectations of long-term operating conditions. For both the ANZ and NA CGUs, the Group has applied a 3% terminal growth rate in the terminal value. The recoverable amount for the ANZ CGU continues to significantly exceed its carrying amount. In order for the NA CGU’s recoverable amount to equal its carrying amount, the following changes in assumptions would be required: NA INCREASE/(DECREASE) IN ASSUMPTIONS REQUIRED FOR RECOVERABLE AMOUNT TO EQUAL CARRYING AMOUNT 5-YEAR AVERAGE REVENUE GROWTH TERMINAL GROWTH RATE (11.1%) (18.9%) DISCOUNT RATE (BPS) 11.0% Management does not consider these changes in assumptions to be reasonably possible. D. INVESTING ACTIVITIES (CONT.) 11. INTANGIBLES (CONT.) Reconciliation of carrying amount GOODWILL $’000 DEVELOPMENT COSTS $’000 CAPTURE COSTS $’000 INTELLECTUAL PROPERTY $’000 OTHER $’000 TOTAL $’000 YEAR ENDED 30 JUNE 2020 Opening net book value 135 Additions Disposals Amortisation Foreign exchange adjustment CLOSING NET BOOK VALUE AT 30 JUNE 2020 Cost Accumulated amortisation CLOSING NET BOOK VALUE - - - - 135 135 - 135 11,642 14,959 - (7,931) - 18,670 46,546 (27,876) 18,670 30,030 23,516 - (29,529) - 24,017 84,275 (60,258) 24,017 - 4,899 - (606) 125 4,418 5,001 (583) 4,418 325 6 (25) (134) 3 175 42,132 43,380 (25) (38,200) 128 47,415 1,940 137,897 (1,765) (90,482) 175 47,415 GOODWILL $’000 DEVELOPMENT COSTS $’000 CAPTURE COSTS $’000 INTELLECTUAL PROPERTY $’000 OTHER $’000 TOTAL $’000 YEAR ENDED 30 JUNE 2019 Opening net book value 135 Additions Disposals Amortisation Accelerated amortisation1 Foreign exchange adjustment - - - - - 8,029 8,621 - (5,010) - 2 CLOSING NET BOOK VALUE 135 11,642 AT 30 JUNE 2019 Cost Accumulated amortisation CLOSING NET BOOK VALUE 135 - 135 31,587 (19,945) 11,642 27,904 20,133 - (10,026) (7,980) (1) 30,030 60,759 (30,729) 30,030 - - - - - - - - - - 231 305 - 36,299 29,059 - (211) (15,247) - - (7,980) 1 325 42,132 1,955 94,436 (1,630) (52,304) 325 42,132 1 During the year ended 30 June 2019, the Group reviewed the appropriateness of the amortisation period and methodology for capture costs and determined that the period be reduced from 5 years to 2 years, reflecting growing demand for more recent imagery. Amortisation of the intangible capture asset was accelerated from 1 January 2019 with an additional $7,980 thousand booked through the consolidated statement of profit or loss in the year ended 30 June 2019. In addition, other operating research costs of $1,472 thousand were recognised in other operational expenses during the year ended 30 June 2020 (30 June 2019: $479 thousand). 102 FINANCIAL REPORT FINANCIAL REPORT 103 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020D. INVESTING ACTIVITIES (CONT.) 12. PROPERTY, PLANT AND EQUIPMENT ACCOUNTING POLICY – RECOGNITION AND MEASUREMENT OF PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are measured 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, the cost of dismantling and removing the items and restoring the site on which they are located, and the employee benefit costs directly attributable to the assembly process in the case of camera systems. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment is recognised in the consolidated statement of profit or loss. Subsequent expenditure Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group. Depreciation Depreciation is recognised on a straight-line basis to write down the cost less estimated residual value over the estimated useful life of the assets. The assets’ residual values, useful lives and depreciation methods are reviewed at each financial year end and adjusted if appropriate. The following useful lives are applied: (i) Office equipment & furniture: 3 years (ii) Camera systems: 5 years (iii) Spare parts and stand-by equipment: 7-10 years (iv) Right-of-use assets: 2-5 years Derecognition and disposal An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to be obtained from its use. Gains or losses arising from the derecognition of an asset (calculated as the difference between the proceeds received and the carrying amount of the asset) is included in the consolidated statement of profit or loss in the year the asset is derecognised. YEAR ENDED 30 JUNE 2020 AT 30 JUNE 2019 Adjustment on initial application of AASB 16 AT 1 JULY 2019 Additions Disposals Depreciation Foreign exchange adjustment CLOSING NET BOOK VALUE AT 30 JUNE 2020 Cost Accumulated depreciation CLOSING NET BOOK VALUE YEAR ENDED 30 JUNE 2019 Opening net book value Additions Disposals Depreciation Foreign exchange adjustment CLOSING NET BOOK VALUE AT 30 JUNE 2019 Cost Accumulated depreciation CLOSING NET BOOK VALUE OFFICE EQUIPMENT & FURNITURE $’000 CAMERA SYSTEMS $’000 RIGHT-OF-USE ASSETS $’000 2,164 (505) 1,659 4,422 - (1,402) (15) 4,664 7,465 (2,801) 4,664 1,143 1,742 - (720) (1) 2,164 4,718 (2,554) 2,164 14,618 - 14,618 3,248 (138) (3,071) - 14,657 29,382 (14,725) 14,657 10,840 6,496 (6) (2,712) - 14,618 26,397 (11,779) 14,618 - 6,530 6,530 11,436 - (4,025) 146 14,087 18,086 (3,999) 14,087 - - - - - - - - - TOTAL $’000 16,782 6,025 22,807 19,106 (138) (8,498) 131 33,408 54,933 (21,525) 33,408 11,983 8,238 (6) (3,432) (1) 16,782 31,115 (14,333) 16,782 As at 30 June 2020, property, plant and equipment includes right-of-use assets of $14,087 thousand related to leased properties and office equipment. See note 2 (i) for further information regarding the transition to AASB 16 on 1 July 2019. 104 FINANCIAL REPORT FINANCIAL REPORT 105 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 202013. RECONCILIATION OF CASH FLOW FROM OPERATING ACTIVITIES Cash and short-term deposits in the consolidated statement of financial position comprise cash at bank and on hand, deposits on call and short- term deposits with a maturity of three months or less. Cash at bank, deposits on call and short-term deposits earn interest at floating rates based on daily bank deposit rates that are recognised in other income in the consolidated statement of profit or loss. The Group had no financing facilities as at 30 June 2020 (30 June 2019: nil). RECONCILIATION OF LOSS AFTER TAX TO NET CASH FLOWS FROM OPERATIONS Loss after tax (36,717) (14,934) 30 JUNE 2020 $’000 30 JUNE 2019 $’000 ADJUSTMENT FOR NON-CASH ITEMS Amortisation and depreciation Foreign exchange differences Movement in hedge reserve Deferred tax effect on capital issue cost Share-based payment expense Gain on sale of unlisted investments Gain on disposal of property, plant and equipment Interest expense – lease liability CHANGES IN ASSETS AND LIABILITIES Payables and other liabilities Receivables and other current assets Provision for employee benefits Other non-current liabilities Income tax and deferred tax NET CASH FROM OPERATING ACTIVITIES RECONCILIATION OF CASH Cash and cash equivalents comprise: Cash at bank and on hand Deposit on call Short term deposits at call 46,698 (273) - - 4,062 - (113) 596 5,484 (6,356) 833 - (2,126) 12,088 6,466 2,362 27,312 36,140 26,659 191 18 1,082 1,684 (150) (9) - 13,109 (6,267) 702 (174) 2,988 24,899 4,649 - 71,265 75,914 E. OTHER IN THIS SECTION This section provides information on items which require disclosure to comply with Australian Accounting Standards and other regulatory pronouncements that are not considered critical in understanding the financial performance or position of the Group. 14. EARNINGS PER SHARE Basic earnings per share is calculated as net profit or 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 profit attributable to shareholders, adjusted for: (i) costs of servicing equity (other than dividends); (ii) the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and (iii) 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. Loss after tax attributable to ordinary equity holders Loss used in calculating diluted earnings per share Weighted average number of ordinary shares on issue used in the calculation of basic earnings per share Weighted average number of ordinary shares on issue used in the calculation of diluted earnings per share 30 JUNE 2020 $’000 30 JUNE 2019 $’000 (36,717) (36,717) (14,934) (14,934) NUMBER OF SHARES NUMBER OF SHARES 451,283,637 451,283,637 434,891,500 434,891,500 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) (8.14) (8.14) (3.43) (3.43) 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. For the year ended 30 June 2020, options have not been included in calculating diluted EPS because their effect is anti-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 financial statements. 15. EXPENDITURE COMMITMENTS Expenditure commitments There are no capital expenditure commitments or hire purchase commitments contracted at 30 June 2020 (30 June 2019: nil). Operating lease commitments Minimum lease payments: Not later than one year Later than one year and no later than five years AGGREGATE LEASE EXPENDITURE CONTRACT AT YEAR END1 30 JUNE 2020 $’000 30 JUNE 2019 $’000 - - - 2,307 5,999 8,306 1 On 1 July 2019, the Group adopted AASB 16. The group has applied AASB 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for 30 June 2019 has not been restated. The newly effective standard introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised lease liabilities representing its obligation to make lease payments. Refer to note 2 to the consolidated financial statements for the reconciliation of operating lease commitments on 30 June 2019 to lease liabilities on 1 July 2019. Operating lease commitments relate primarily to commercial office premises and IT related leases. These leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. 106 FINANCIAL REPORT FINANCIAL REPORT 107 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020 E. OTHER (CONT.) 16. PARENT ENTITY INFORMATION Current assets Total assets Current liabilities Total liabilities NET ASSETS Contributed equity1 Reserves Accumulated losses TOTAL SHAREHOLDER EQUITY TOTAL COMPREHENSIVE (LOSS)/INCOME OF THE PARENT ENTITY 30 JUNE 2020 $’000 30 JUNE 2019 $’000 27,326 125,867 (1,056) (15,163) 110,704 126,807 19,382 (35,485) 110,704 (4,587) 71,555 124,555 (2,057) (16,023) 108,532 124,302 15,125 (30,895) 108,532 1,270 1 The Group’s contributed equity in the consolidated statement of financial position is presented net of treasury shares held by Nearmap Australia Pty Ltd of $230 thousand (30 June 2019: $315 thousand). The parent entity entered into a Deed of Cross Guarantee (the Deed) dated 31 May 2017 with its subsidiaries. Under the Deed each company guarantees the debts of the others. By entering into the Deed, the wholly owned entities have been relieved from the requirement to prepare a financial report and Directors’ report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 issued by the Australian Securities and Investments Commission. Refer to note 17 for listing of subsidiaries. Details of the contingent liabilities of the Group are contained in note 20. 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. 17. GROUP ENTITIES The consolidated financial statements incorporate the assets, liabilities and equity of the following subsidiaries in accordance with the accounting policy described in note 2: NAME OF ENTITY Nearmap Australia Pty Ltd Ipernica Ventures Pty Ltd Nearmap Holdings Pty Ltd Nearmap USA Pty Ltd Nearmap Aerospace Inc. Nearmap US, Inc. Nearmap Remote Sensing US, Inc. 108 FINANCIAL REPORT COUNTRY OF INCORPORATION EQUITY HOLDING 2020 % 2019 % Australia Australia Australia Australia United States United States United States 100 100 100 100 100 100 100 100 100 100 100 100 100 100 18. AUDITOR’S REMUNERATION The following fees were paid or are payable at 30 June 2020 for services provided by the auditor of the Group and its related practices during the financial year: 30 JUNE 2020 $ 30 JUNE 2019 $ AUDIT SERVICES PAID TO KPMG Remuneration paid to KPMG for audit or review of the financial statements of the entity 190,000 150,000 NON-AUDIT SERVICES PAID TO KPMG Other advisory for the entity and any other entity in the Group Total services other than statutory audit TOTAL PAID/PAYABLE TO KPMG 19. RELATED PARTIES (i) Compensation of key management personnel Employee benefits Post-employment benefits Termination benefits Share-based payments TOTAL COMPENSATION OF KEY MANAGEMENT PERSONNEL (ii) Transactions with key management personnel 39,500 39,500 229,500 13,725 13,725 163,725 30 JUNE 2020 $ 30 JUNE 2019 $ 4,621,671 170,365 - 1,618,154 6,410,190 5,233,024 149,448 135,047 1,410,288 6,927,807 Financial assistance under the Employee Share Option Plan The Nearmap ESOP includes an Employee Loan Scheme that permits Nearmap to grant financial assistance to employees by way of loan to enable them to exercise options and acquire shares. These loans bear interest at rates that ranged from 0.45% to 1.45% during the year ended 30 June 2020 (30 June 2019: 1.50% to 1.70%) and are repayable four years after the issue date. The loans are not recognised in the consolidated statement of financial position. SHARE OPTION LOANS OUTSTANDING AT THE BEGINNING OF THE YEAR Share option loans repaid during the period Share option loans provided during the period Interest accrued on share option loans SHARE OPTION LOANS OUTSTANDING AT THE END OF THE YEAR 30 JUNE 2020 $ 30 JUNE 2019 $ 6,556,950 (396,449) 1,759,008 49,058 7,968,567 3,013,597 (381,220) 3,862,321 62,252 6,556,950 Other than the loans granted to KMP under the employee loan scheme, there have been no sales, purchases or other transactions with related parties during the year ended 30 June 2020 (30 June 2019: nil). 20. CONTINGENT LIABILITIES As at 30 June 2020, except for bank guarantees of $2,356 thousand, the Directors are not aware of any contingent liabilities in relation to the Company or the Group (30 June 2019: $2,356 thousand). 21. SUBSEQUENT EVENTS No other matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years. FINANCIAL REPORT 109 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS’ DECLARATION DIRECTORS’ DECLARATION In accordance with a resolution of the Directors of the Company, I state that: In the opinion of the Directors: (a) the financial 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 financial position as at 30 June 2020 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 financial 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 2020, 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 financial period ending 30 June 2020. On behalf of the Board Rob Newman Chief Executive Officer & Managing Director 18 August 2020 110 FINANCIAL REPORT CAPTURED: 21 MARCH 2020 DUNDAS ONTARIO CANADA FINANCIAL REPORT 111 INDEPENDENT AUDITOR’S REPORT Independent Auditor’s Report Independent Auditor’s Report To the shareholders of Nearmap Limited To the shareholders of Nearmap Limited Report on the audit of the Financial Report Independent Auditor’s Report Report on the audit of the Financial Report To the shareholders of Nearmap Limited Opinion Opinion We have audited the Financial Report of Report on the audit of the Financial Report Nearmap Limited (the Company). We have audited the Financial Report of Nearmap Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in In our opinion, the accompanying Opinion accordance with the Corporations Act Financial Report of the Company is in 2001, including: accordance with the Corporations Act We have audited the Financial Report of 2001, including: Nearmap Limited (the Company). • giving a true and fair view of the Group's financial position as at 30 June • giving a true and fair view of the In our opinion, the accompanying 2020 and of its financial performance for Group's financial position as at 30 June Financial Report of the Company is in the year ended on that date; and 2020 and of its financial performance for accordance with the Corporations Act the year ended on that date; and 2001, including: • complying with Australian Accounting Standards and the Corporations • complying with Australian Accounting • giving a true and fair view of the Regulations 2001. Standards and the Corporations Group's financial position as at 30 June Regulations 2001. 2020 and of its financial performance for the year ended on that date; and The Financial Report comprises: The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2020 • Consolidated statement of financial position as at 30 June 2020 • Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes • Consolidated statement of profit or loss and other The Financial Report comprises: in equity, and Consolidated statement of cash flows for the comprehensive income, Consolidated statement of changes year then ended in equity, and Consolidated statement of cash flows for the • Consolidated statement of financial position as at 30 June year then ended 2020 • Notes including a summary of significant accounting policies • Notes including a summary of significant accounting • Consolidated statement of profit or loss and other policies comprehensive income, Consolidated statement of changes • Directors' Declaration. in equity, and Consolidated statement of cash flows for the • Directors' Declaration. The Group consists of Nearmap Limited (the Company) and year then ended the entities it controlled at the year end or from time to time The Group consists of Nearmap Limited (the Company) and • Notes including a summary of significant accounting during the financial year. the entities it controlled at the year end or from time to time policies during the financial year. • Directors' Declaration. The Group consists of Nearmap Limited (the Company) and the entities it controlled at the year end or from time to time during the financial year. • complying with Australian Accounting Basis for opinion Standards and the Corporations Basis for opinion Regulations 2001. We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the Basis for opinion audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for We are independent of the Group in accordance with the Corporations Act 2001 and the ethical evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of Our responsibilities under those standards are further described in the Auditor’s responsibilities for the Code. the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the audit of the Financial Report section of our report. Code. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. KPMG, an Australian partnership and a member firm of the KPMG network of independent member KPMG, an Australian partnership and a member firms affiliated with KPMG International Cooperative firm of the KPMG network of independent member (“KPMG International”), a Swiss entity. firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Liability limited by a scheme approved Legislation. under Professional Standards Legislation. Key Audit Matters Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. Key Audit Matters are those matters that, in our professional judgement, were of most significance in our This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming audit of the Financial Report of the current period. our opinion thereon, and we do not provide a separate opinion on this matter. This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Carrying value of intangible assets of the US business Carrying value of intangible assets of the US business Refer to Note 11 to the Financial Report Refer to Note 11 to the Financial Report The key audit matter How the matter was addressed in our audit The key audit matter The group has $47,415,000 of intangible assets comprising primarily capture costs and The group has $47,415,000 of intangible assets development costs. comprising primarily capture costs and The intangible assets attributed to the US development costs. business total $33,814,000. These assets are The intangible assets attributed to the US assessed for impairment at the US business business total $33,814,000. These assets are cash generating unit (CGU) level, using a Fair assessed for impairment at the US business Value Less Cost of Disposal model (“FVLCD” or cash generating unit (CGU) level, using a Fair “the model”). Value Less Cost of Disposal model (“FVLCD” or The assessment of impairment was a key audit “the model”). matter because it involved significant judgement The assessment of impairment was a key audit in evaluating the assumptions used by the Group matter because it involved significant judgement in their FVLCD model. in evaluating the assumptions used by the Group The key judgements we focused on included: in their FVLCD model. • Complex modelling, particularly those The key judgements we focused on included: containing judgemental allocations of • Complex modelling, particularly those corporate assets and costs to CGUs, using containing judgemental allocations of forward-looking assumptions tend to be corporate assets and costs to CGUs, using prone to greater risk for potential bias, error forward-looking assumptions tend to be and inconsistent application. These prone to greater risk for potential bias, error conditions necessitate additional scrutiny by and inconsistent application. These us, in particular to address the objectivity of conditions necessitate additional scrutiny by sources used for assumptions, and their us, in particular to address the objectivity of consistent application. sources used for assumptions, and their Future cash flow projections for FY2021 to consistent application. 2025 - The US business is still in the early Future cash flow projections for FY2021 to stage of maturity which increases the risk of 2025 - The US business is still in the early inaccurate forecasts. stage of maturity which increases the risk of inaccurate forecasts. • • How the matter was addressed in our audit Our procedures included: • We challenged the forecasts, assumptions, and • We evaluated the methodology applied by the Our procedures included: Group in allocating corporate assets and costs • We evaluated the methodology applied by the across CGU's for consistency with our Group in allocating corporate assets and costs understanding of the business and the criteria in across CGU's for consistency with our the accounting standards; understanding of the business and the criteria in • We assessed the methodology in the model for the accounting standards; consistency with the basis required by Australian • We assessed the methodology in the model for Accounting Standards; consistency with the basis required by Australian Accounting Standards; the objectivity of sources on which the • We challenged the forecasts, assumptions, and assumptions are based. We compared the cash the objectivity of sources on which the flow projections for FY 2021 to 2025 in the model assumptions are based. We compared the cash to those in the latest Board approved budgets and flow projections for FY 2021 to 2025 in the model evaluated their consistency with the Group's to those in the latest Board approved budgets and intentions as outlined in Directors' minutes and evaluated their consistency with the Group's strategy documents. We also used our knowledge intentions as outlined in Directors' minutes and of the business and considered external sources strategy documents. We also used our knowledge including analysts' expectations and industry of the business and considered external sources trends. The forecast growth was also assessed including analysts' expectations and industry against the actual growth rate achieved in the trends. The forecast growth was also assessed establishment of the Australian business as well against the actual growth rate achieved in the as market research reports; establishment of the Australian business as well • We assessed the historical accuracy of forecasts as market research reports; by comparing to actual results, to use in our • We assessed the historical accuracy of forecasts evaluation of projections included in the model. by comparing to actual results, to use in our evaluation of projections included in the model. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. 112 INDEPENDENT AUDITOR’S REPORT 78 78 CAPTURED: 6 FEBRUARY 2020 SYDNEY NSW AUSTRALIA Other Information Other Information Other Information Other Information is financial and non-financial information in Nearmap Limited’s annual reporting which is Other Information is financial and non-financial information in Nearmap Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information is financial and non-financial information in Nearmap Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Remuneration The Other Information we obtained prior to the date of this Auditor’s Report was the Remuneration Report. The Chairman’s letter, CEO’s Report, Sustainability Statement and Corporate Information are The Other Information we obtained prior to the date of this Auditor’s Report was the Remuneration Report. The Chairman’s letter, CEO’s Report, Sustainability Statement and Corporate Information are expected to be made available to us after the date of the Auditor's Report. Report. The Chairman’s letter, CEO’s Report, Sustainability Statement and Corporate Information are expected to be made available to us after the date of the Auditor's Report. expected to be made available to us after the date of the Auditor's Report. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinions. will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinions. Remuneration Report and our related assurance opinions. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report Responsibilities of the Directors for the Financial Report Responsibilities of the Directors for the Financial Report The Directors are responsible for: The Directors are responsible for: The Directors are responsible for: • • • • • • • • • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 Standards and the Corporations Act 2001 implementing necessary internal control to enable the preparation of a Financial Report that gives a implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error true and fair view and is free from material misstatement, whether due to fraud or error assessing the Group and Company's ability to continue as a going concern and whether the use of assessing the Group and Company's ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters assessing the Group and Company's ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. to obtain reasonable assurance about whether the Financial Report as a whole is free from material to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and misstatement, whether due to fraud or error; and to issue an Auditor’s Report that includes our opinion. to issue an Auditor’s Report that includes our opinion. to issue an Auditor’s Report that includes our opinion. Auditor’s responsibilities for the audit of the Financial Report Auditor’s responsibilities for the audit of the Financial Report Auditor’s responsibilities for the audit of the Financial Report Our objective is: Our objective is: Our objective is: • • • • • • Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of Nearmap Limited for the year ended 30 June 2020, complies with Section 300A of the Corporations Act 2001. 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 responsibilities We have audited the Remuneration Report included in pages 14 52 to 33 of the Directors’ report for the year ended 30 June 2020. 68 Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Caoimhe Toouli Partner Sydney 18 August 2020 114 INDEPENDENT AUDITOR’S REPORT 79 79 79 80 CAPTURED: 7 APRIL 2019 MELBOURNE VIC AUSTRALIA SHAREHOLDER INFORMATION 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 1 September 2020. (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 NO OF HOLDERS NO OF SHARES 12,895 12,676 3,964 3,708 265 33,508 7,033,629 33,418,005 30,456,510 97,558,475 285,724,983 454,191,602 The number of shareholders holding less than a marketable parcel of ordinary shares is: 580 (being 165 Shares as at 1 September 2020) (B) DISTRIBUTION OF UNQUOTED OPTIONS The Company has the following unquoted securities on issue: • 15,694,187 Employee Share Plan options. The options expire on various dates between 28 June 2021 and 14 November 2023 and are exercisable at a range of prices between $0.39 and $2.97 each. • 1,427,853 Long Term Incentive Plan options. The options expire 1 October 2023 and are exercisable at $2.575. The options are held by 13 employees. • 1,450,190 Restricted Stock Units held by 92 employees. (C) TWENTY LARGEST SHAREHOLDERS The names of the twenty largest registered holders of quoted ordinary shares are: NO OF SHARES % OF SHARES NAME 1. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 2. J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 3. NATIONAL NOMINEES LIMITED 4. CITICORP NOMINEES PTY LIMITED 5. LONGFELLOW NOMINEES PTY LTD 6. MRS JENNIFER LEE NORGARD 7. BNP PARIBAS NOMINEES PTY LTD 8. MUTUAL TRUST PTY LTD 9. NETWEALTH INVESTMENTS LIMITED 10. VENTURE SKILLS PTY LTD 11. LONGFELLOW NOMINEES PTY LTD 12. MR JASON MAK 13. BNP PARIBAS NOMS PTY LTD 14. VENTURE SKILLS PTY LTD 15. MR ANDREW DAVID WATT 16. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 17.BNP PARIBAS NOMINEES PTY LTD 18. MRS ALISON FARRELLY 19. AUSTRALIAN EXECUTOR TRUSTEES LIMITED 20. EST MR GRAHAM GRIFFITHS TOTAL (D) SUBSTANTIAL SHAREHOLDERS 51,091,073 29,166,554 20,163,192 19,226,601 19,020,875 10,809,292 8,509,864 7,298,344 6,663,189 4,600,000 4,218,046 3,972,941 3,364,436 3,145,000 2,508,454 2,381,923 2,162,856 2,144,874 2,099,240 1,984,264 11.25 6.42 4.44 4.23 4.19 2.38 1.87 1.61 1.47 1.01 0.93 0.87 0.74 0.69 0.55 0.52 0.48 0.47 0.46 0.44 204,531,018 45.03 The substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are: NAME 1. Ross Norgard (E) VOTING RIGHTS NO OF SHARES % OF SHARES 27,423,537 6.04% All ordinary shares carry one vote per share without restriction. No voting rights are attached to options. (F) ON-MARKET PURCHASES During the 2020 financial year, 193,535 ordinary shares at average price of $2.07 per share were purchased on market under the Company’s Matching Share Rights Plan. (G) SECURITIES EXCHANGE QUOTATION The Company’s ordinary shares are listed on the Australian Securities Exchange (Code: NEA). The Home Exchange is Sydney. (H) ON-MARKET BUY BACK There is no current on-market buy back. (I) CORPORATE GOVERNANCE STATEMENT The Company’s 2020 Corporate Governance Statement can be accessed at: http://static.nearmap.com/investors/governance/statement/Corporate_Governance_Statement.pdf 116 SHAREHOLDER INFORMATION SHAREHOLDER INFORMATION 117 CORPORATE INFORMATION 118 CORPORATE INFORMATION CORPORATE INFORMATION NEARMAP LTD ABN 37 083 702 907 DIRECTORS Peter James (Non- executive Chairman) Rob Newman (Chief Executive Officer & Managing Director) Tracey Horton (Non-executive Director) Sue Klose (Non-executive Director) Ross Norgard (Non-executive Director) Cliff Rosenberg (Non-executive Director) COMPANY SECRETARY Shannon Coates REGISTERED OFFICE Level 4, Tower One International Towers 100 Barangaroo Avenue Barangaroo NSW 2000 WEBSITE www.nearmap.com SOLICITORS DLA Piper BANKERS Commonwealth Bank of Australia Wells Fargo SHARE REGISTRY Computershare Investor Services Pty Ltd Level 3, 60 Carrington Street Sydney NSW 2000 AUDITORS KPMG Australia Tower Three International Towers Sydney 300 Barangaroo Avenue Sydney NSW 2000 CAPTURED: 1 JUNE 2020 SYDNEY NSW AUSTRALIA CORPORATE INFORMATION 119 COVER IMAGE CAPTURED: 15 SEPTEMBER 2019 GOLD COAST QLD AUSTRALIA © Nearmap Ltd 2020 Produced by 121 Creative Printed by Kwik Kopy Circular Quay nearmap.com 

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