UrtheCast: 3 Steps Forward, 2 Steps Back

Summary

• UrtheCast had a middling financial year, though it made strides in improving the capitalization of its business.
• Some substantial progress was made on both its next generation satellite arrays, which the market discounted due to the uneven manner it was made.
• UrtheCast is in the final stages of obtaining project financing for UrtheDaily which will be a game changer for the company in growing its revenues exponentially within three years.

Please note all amounts in this article are in Canadian dollars, UrtheCast's reporting currency.

It has been a very volatile year for shareholders of UrtheCast (LFDEF), as the stock has swung violently in both directions:

As a refresher, UrtheCast is a company specializing in the provision of geospatial data which it obtains through the access to earth observation (EO) imagery derived from satellites it operates. UrtheCast has steadily improved its business stability throughout its corporate history. It began business in 2014 with a partnership to obtain data from cameras mounted on the International Space Station through a partnership with Roscosmos. UrtheCast levered this into the purchase of Deimos imaging in 2015. This was a good move for UrtheCast to diversify its revenue base that was wholly dependent on the ISS. This proved very prescient since that relationship has broken down, with no further revenue expected from the ISS going forward.

The Deimos business has been somewhat mixed, with revenues down year over year, though this is largely due to no ISS-derived business. EBITDA is close to break even, but is down from last year and projected to be negative for the year based on management's recent guidance.

Source: November 14, 2017, Press Release

The development of the ISS cameras and the Deimos purchase have been stepping stone transactions for the company, as it has established itself as a proven operator in the satellite business. The real goal for the company has been to establish its two next generation constellations, UrtheDaily and OptiSar. UrtheDaily is a set of satellites to produce daily imagery recorded at the same time and height each day:

Source: Investor Presentation

OptiSar is an integrated satellite array that will integrate 16 multi-spectral optical and SAR satellites.

Source: Investor Presentation, 2016

UrtheCast made some significant progress on both

Analyst’s Disclosure: I am/we are long LFDEF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am long through the more liquid TSX ticker UR.TO.