Pat McKeough recently replied to an Inner Circlememberinterested in this company, which offers detailed images of earth from outer space. While UrtheCast’s revenue has jumped, says Pat, it remains dependent on a specific pool of clients.
Q: Hello Pat and team: I would be interested in your thoughts on UrtheCast Corp (UR). Thanks.
A: URTHECAST CORP. (symbol UR on Toronto; www.urthecast.com) is a Vancouver-based technology company that serves the rapidly evolving geospatial and geoanalytics markets.
The company operates Earth Observation sensors in space, including two satellites, Deimos-1 and Deimos-2. They produce imagery data that is displayed on UrtheCast’s web platform. The company also operates two cameras aboard the International Space Station.
UrtheCast’s customers include governments and businesses that can use imagery to track the movement of cargo shipments and the development of crops and weather patterns, for example. With the technology, clients can see ships leaving ports in China and use that information to help determine trends in the movement of goods. Other clients use the technology to monitor farmers’ fields in the U.S. or the development of regional weather conditions.
Through its subsidiary, Deimos Imaging, UrtheCast also processes and distributes imagery data and other products on behalf of the PanGeo Alliance. This is a network of eight satellite operators with a combined 15 medium- and high-resolution Earth Observation sensors.
UrtheCast continues to develop two Earth Observation satellite constellations. The company says they will offer the world’s first fully integrated constellation of 16 multispectral optical and SAR (three-dimensional) satellites, called OptiSAR. The system will also make use of an eight-satellite constellation designed to capture high-quality, medium-resolution optical images of the Earth’s entire landmass (excluding Antarctica). Those images will be updated daily.
Those new satellite constellations will see through clouds and tree cover, even at night, using both optical sensors and radar. The company believes they will “revolutionize monitoring of our planet” with high-resolution and expansive imagery in all weather conditions.
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UrtheCast’s revenue in 2016 jumped 204.6%, to $111.3 million from $36.5 million in 2015. It makes all of its revenue outside of Canada. The company reported positive cash flow of $5.7 million, or $0.05 a share, in 2016. In 2015, it has negative cash flow of $19.7 million, or 0.23% a share.
In the three months ended March 31, 2017, UrtheCast’s revenue rose 37.8%, to $9.4 million from $6.8 million a year earlier. Cash flow improved to negative $1.9 million, or $0.02 a share, compared to negative $6.1 million, or $0.06 a share.
In early March 2017, the company sold 13.0 million shares at $1.50 each to raise $18.2 million. As of March 31, 2017, it held cash of $20.8 million, or $0.20 a share. Its long-term debt of $25.5 million is a low 17% of its $150.9 million market cap.
UrtheCast operates in a highly competitive market and needs government clients in particular to keep buying its imagery. Still, the company’s outlook is positive and it has pre-sold under long-term contracts much of the new OptiSAR satellite time and data.
Inner Circle recommendation: UrtheCast Corp. is okay to hold, but only for highly aggressive investors.
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