Let's talk about solvency and reaching inflection pointsThe discussion around near term targets for UR has everything to do with investor patience and nothing to do with the likelihood of their long term success.
The first gate is solvency. They cashed up and as of a few months ago had 38M is on the BS. Assume they’ll continue to burn $(9)M per year intangibles, and (8 )(up from 4) on tangible assets, and they continue to break even on ops. Their guidance on contracted EBITDA from Deimos is $11M. The working capital advantage is hard to handicap, but over half of their current cash is thanks to increases in unearned revenue.
So net net, even if we zero out the Deimos $11m contribution, for at least a year UR can meet its contractual requirements for ops and investing of $(17)M with cash of 38M, with a margin of error of 100%.
With no senior debt looming and a clean balance sheet, let’s all agree that this company has at least a year to reach the next inflection point.
People on this board have speculated as to what this might be. Validation of the business model with contracts for HRC data would be a sure catalyst to growth. Significant update on the web platform, release of the pepsi challenge, moving the constellation MOU to a binding and funded LOI, are all legitimate contenders to move this name.
What are the risks to UR? First is macroeconomic conditions and the fact that pre revenue venture names get hammered unfairly in volatile markets. This is neither an energy nor pharma name, yet it carries the stink of all of them. I think these are unfairly attributed to UR and may be temporary.
The second and follow on is valuation. Companies in UR’s space trade at roughly 14.5 times EV/Forward EBIDTA. Regardless of how you feel about UR, Deimos is part of that average, and their $11M contracted forecasted EBITDA should be worth 165M. UR’s market cap is 230M, and with 38M of cash it has an EV of 192M. Subtract the 165M attributable to DEIMOS and you’re left with a FV of $32.5M for the balance of UR’s assets, including the HRC.
This is where I get dizzy and light headed.
These assets were worth over $400M less than five months ago. Really? REALLY?
So the DEIMOS acquisition and related financing managed to strip over 90% of UR’s pre money value? Of course China and Greece happened, and I’m sure a duck farted somewhere, but none of that is relevant to UR’s business model.
So, if you’re not long (and by definition short) UR, it is because you believe that market uncertainty and short term impatience outweigh the benefits of reaching any of the value inflection points I listed above. You believe that the HRC is not as billed and is fairly valued (along with the two medium resolution cameras, the grounds station infrastructure, web platform, relationships, etc.) at $32.5M. Shorting UR is akin to believing the HRC and ostensibly all of UR’s work to date is while solvent, functionally useless without having any tangible evidence or reason to believe so. And you would also be contrarian to the half dozen analysts from both sides of the border with bullish 12 month targets.
Or you may believe that UR will move downward in the short term, but that you’ll be the one to correctly predict the announcement or catalyst. Well my friends, that’s a risky strategy that’s burned many former frequents to this board. God speed.
So as I see it, you have at least six catalysts, any one of which could move the name up from it’s current price, and you have at least a year to do it. But in all likely hood (based on their track record of having 3-4 big hits last year) positive updates on any or all of these projects is most likely immanent.