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In reading the second quarter financial results from UrtheCast you can see how bad the situation is. Listening to their investor call is what truly gives you a sense as to how bad this company performed, but that maybe, better times might be in sight.
Unacceptable results
Chief Financial Officer (CFO) Sai Chu said that the second quarter financial results “are unacceptable.” That comment was part of his remarks on the investors call where he said “while we’re disappointed in our operating results, they are unacceptable for the quarter, it’s our view the company is taking appropriate steps to face these challenges and is beginning to turn the corner.”
Earlier this year UrtheCast faced the possibility of being insolvent which resulted in a major shakeup that saw founder and CEO Wade Larson resign.
After interim CEO Greg Nordal guided the company through a very rough stretch the company began a search for a new CEO, and in late June former MDA Information Systems Group President Don Osborne was selected. Bringing in an industry veteran from one of Canada’s largest aerospace companies may be just what saves UrtheCast.
In his first investor call, and as he noted, being on the job for only five weeks, Osborne said that when he joined the company “I began a detailed review of the company and its operations. I’ve been impressed by what I’ve seen so far and think there are a number of opportunities to bring the company’s capabilities together to improve our service offerings in order to more fully realize our potential. I’m also looking at processes and areas throughout the company that can be adjusted in order to strengthen and stabilize our operation. Once I have completed my review, I look forward to discussing these initiatives with you in greater depth and specificity.”
Osborne also said that Q3 and Q4 “will see a significant focus on restructuring the business and its operations.”
Key initiatives
Key initiatives the company is currently focusing on are;
- Getting the first draw on UrtheDaily financing
- Expansion into analytics
- OptiSAR’s next-phase
- Operational improvements
With respect to being able to draw from the UrtheDaily financing the company said it is “actively negotiating with several customers whose combined contract values exceeds first and second minimum draw requirements as defined in loan agreement with senior secured lender.” Osborne reiterated this in the call saying “We are pleased with how things are progressing and we’re confident that the first draw is within reach. However, these are complicated negotiations and final terms and timing cannot be certain until negotiations are concluded.”
Perhaps surprisingly, and so soon into Osborne’s term at the company, it made an acquisition which it feels will help their expansion into analytics. The company acquired Geosys Technology Holding LLC, a subsidiary of Land O’Lakes, for $20M. Geosys bills itself as “the first global digital agriculture company founded by agronomists.”
Osborne said of the deal “Geosys works with leading agribusinesses across the globe from retailers and input manufacturers to insurance and banks to commodity trading houses, expanding the reach of UrtheCast across the agriculture value chain. This landmark deal bring unprecedented value to agribusinesses worldwide by closing the gap between data provider and solution platforms, which will streamline services and help reduce operational costs. While other companies that form strategic partnerships this will be one of the first unified businesses of its kind within the agricultural industry.”
Osborne also discussed the next-phase of OptiSAR. OptiSAR is UrtheCast’s planned constellation of sixteen multispectral optical and synthetic aperture radar (SAR) satellites. He said “UrtheCast is continuing to develop its world leading digital SAR technology. We have deep in-house engineering talent with expertise in this proprietary technology” including he noted, multiple patent filings.
He further said “this development has been done to ultimately bring a best-in-class Synthetic Aperture service offering in conjunction with our UrtheDaily Constellation. We have derisked and underwrote some of the cost of the development of the ultimate deployment by working with external partners, something I believe it has been prudent to do. We are working hard to continue this effort until such time that we can finance the full constellation buildout.”
However, he also stressed that UrtheCast is “not in the engineering services business and I think this has been a misnomer. We are a services business and this is simply, this will simply be another service offering to the marketplace.”
Forward guidance
Later in the Q&A an institutional investor asked about company guidance going forward. With the business in restructuring mode CFO Sai Chu said that “in terms of guidance, given the significant transition that’s currently underway, we will not be providing financial guidance at this time.”
That is both troubling and reassuring. Troubling in that it shows the magnitude of the work ahead, reassuring, if you take Osborne’s leadership as a positive, that the company has an initial plan and is taking the steps towards being cash flow positive with long-term viability.
For UrtheCast the business premise and promise still exist. Now it’s a matter of execution.
