Rising Climate Risk Analytics Demand Will Challenge Margins Yet Eventually Support Stronger Long-Term Position

Catalysts

About Intermap Technologies

Intermap Technologies provides high precision global 3D geospatial data, analytics and AI driven software to support government, insurance and other enterprise customers in mapping, risk assessment and decision making.

What are the underlying business or industry changes driving this perspective?

• Although the company is benefiting from rising global demand for climate and catastrophe risk analytics in insurance, revenue concentration in a still maturing Elevation as a Service and IRAS subscription base leaves growth and earnings exposed if usage growth slows or incentive fee structures fail to materialize as expected, which could cap long term revenue scale and pressure margins.
• Despite structurally increasing government and defense investment in multi domain geospatial intelligence across earth, air, sea and space, Intermap remains heavily dependent on lumpy tender driven awards in Indonesia, NOAA and other programs, so delays or smaller than anticipated task orders could create extended periods of depressed revenue and negative EBITDA.
• While the expansion of the global private flood market and widening protection gap are driving sustained demand for its proprietary global flood models, the need to continuously reinvest in AI, GPUs and aircraft to maintain technical leadership may outpace near term contract wins, dampening free cash flow and delaying operating margin expansion.
• Although global digital infrastructure rollouts in navigation, logistics and telecom increasingly require high resolution 3D mapping, Intermap’s strategy of going deep in selected verticals with a small organization could limit its ability to capture larger multi region contracts at scale, constraining long run revenue growth and operating leverage.
• Despite a strengthened balance sheet, removal of the going concern qualification and plans to uplift its U.S. listing, the time and cost to implement PCAOB grade controls and support worldwide operations may absorb a meaningful share of capital, reducing the near term earnings benefit from larger government and commercial geospatial programs.

Assumptions

This narrative explores a more pessimistic perspective on Intermap Technologies compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Intermap Technologies's revenue will grow by 70.0% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -11.6% today to 33.6% in 3 years time.
• The bearish analysts expect earnings to reach $27.1 million (and earnings per share of $0.58) by about December 2028, up from $-1.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 8.8x on those 2028 earnings, up from -55.7x today. This future PE is lower than the current PE for the CA Software industry at 49.5x.
• The bearish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.94%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Intermap remains heavily exposed to the timing of large government contracts in Indonesia, NOAA and other U.S. programs. Any delays, cancellations or smaller than expected task orders in these long cycle tenders could depress top line growth and keep earnings volatile, undermining sustained revenue and EBITDA expansion.
• The business model requires ongoing heavy reinvestment in AI, GPUs, aircraft and sensor kits to maintain technical leadership in GEOINT and insurance analytics. If contract wins and subscription growth do not keep pace with this rising cost base, margin expansion could stall and net income could remain negative for longer than expected, pressuring earnings growth.
• While commercial SaaS and insurance analytics revenues are growing, they are still a smaller part of a portfolio dominated by project based Acquisition Services and value added data. A prolonged downturn or funding disruption in defense, climate or infrastructure budgets could offset secular tailwinds in insurance and constrain overall revenue and cash flow growth.
• The strategy of pursuing global scale with relatively small teams and complex multi domain operations across earth, air, sea and space increases execution and control risk. Any setbacks in uplifting audits to PCAOB standards or supporting worldwide operations could drive higher compliance and overhead costs, compressing operating margins and free cash flow.
• Although the company highlights strong working capital, improved liquidity and credit support, its recent shift from prior period profitability to a net loss and negative adjusted EBITDA, combined with reliance on equity financings, suggests that any shortfall versus guidance for 30 million to 35 million revenue and 28 percent adjusted EBITDA margin could damage investor confidence and put downward pressure on the share price through weaker earnings and potential future dilution.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Intermap Technologies is CA$3.0, which represents up to two standard deviations below the consensus price target of CA$4.01. This valuation is based on what can be assumed as the expectations of Intermap Technologies's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$5.01, and the most bearish reporting a price target of just CA$3.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2028, revenues will be $80.6 million, earnings will come to $27.1 million, and it would be trading on a PE ratio of 8.8x, assuming you use a discount rate of 7.9%.
  
• Given the current share price of CA$2.05, the analyst price target of CA$3.0 is 31.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.