DigitalGlobe, Inc. (NYSE: DGI), a leading global provider of
commercial high-resolution earth imagery products and services,
today reported financial results for the third quarter ended
September 30, 2010.
Third quarter 2010 revenue was $80.5 million, an increase of 12%
compared with the same period last year. This quarter’s revenue is
lower than was anticipated due to the recent conclusion that $8.3
million of non-refundable cash payments related to the service
level agreement (SLA) portion of the EnhancedView contract with the
U.S. Government, which began on Sept. 1, 2010, were
recorded as deferred revenue. Included in third quarter revenue is
$6.4 million of amortized revenue related to NextView, the
predecessor to the EnhancedView contract. Third quarter 2010 net
income was $0.8 million, or $0.02 per diluted share, compared with
net income of $14.6 million, or $0.32 per diluted share, for
the same period last year.
Third quarter 2010 Adjusted EBITDA, a non-GAAP financial
measure, was $44.9 million, compared with third quarter 2009
Adjusted EBITDA of $37.4 million. This Adjusted EBITDA metric
is different from the company’s previous Adjusted EBITDA metric. It
now includes the current-quarter deferred revenue related to
EnhancedView and, for both periods, excludes $6.4 million of
amortized revenue related to NextView.
Under the EnhancedView contract, the company’s annual cash
payments related to the SLA portion of the contract, effective
Sept. 1, 2010, increase to $250 million from the $150 million in
payments provided for under the now-expired NextView SLA. The
company has recently concluded that it will begin accounting for
approximately $100 million of the annual EnhancedView SLA payment
as deferred revenue for the first contract year of the EnhancedView
SLA. The annual deferral amount is expected to decrease over time
as the company increases capacity available to the U.S. Government
through improvements to its regional ground terminal network and
the launch and commissioning of its next satellite, WorldView-3,
which is currently expected to be ready for launch in 2014.
“We are pleased with our third quarter operating and financial
results. We met or exceeded our performance goals in all areas of
the business,” said Jill Smith, Chairman and Chief Executive
Officer. “We are delighted to start the new EnhancedView era with
the U.S. Government, and to expanding our relationship with this
important customer.”
Third Quarter Business Highlights
- The Defense and Intelligence segment
revenue was $63.2 million, up 9% compared with the third
quarter 2009, driven primarily by the company’s Direct Access
Program (DAP). This excludes $8.3 million of deferred revenue
related to EnhancedView, and includes $6.4 million related to
NextView.
- The company’s Direct Access Program
(DAP) generated $10.5 million in revenue, driving year-over-year
growth of 260% in the International Defense and Intelligence
sector. All four of the company’s DAP customers contributed revenue
in the quarter at a full annualized run rate.
- The Commercial segment revenue was
$17.3 million, up 25% compared with the third quarter 2009,
powered primarily by growth in the consumer sector and new
opportunities in the enterprise sector. Year-to-date commercial
segment revenue of $49.7 million is up 40% compared with the third
quarter of 2009.
- The company signed or extended
contracts with several customers in the quarter, including: The
People’s Republic of China Ministry of Land Resources and Singapore
Land Authority in the International Civil sector; and NAVTEQ,
Navionics and Callaway Golf in the Consumer sector.
- The company’s ImageLibrary now holds
more than 90 percent of the earth’s landmass, of which nearly 80
percent of its imagery less than two years old.
Full-Year 2010 Outlook
The company is updating its full-year 2010 outlook:
- Full year 2010 total revenue is
expected to be between $317 and $327 million. This amount excludes
$33 million of deferred revenue related to EnhancedView and
includes amortized payments related to NextView.
- Full year 2010 EPS is expected to be in
a range of $0.06 to $0.16.
- Full year 2010 Adjusted EBITDA is
expected to be between $177 and $187 million. This amount
represents the new calculation of Adjusted EBITDA, which includes
$33 million of deferred revenue related to EnhancedView and
excludes $26 million of amortized payments related to
NextView.
- Capital expenditures for 2010 are
expected to be between $90 and $100 million.
Important factors, including those discussed in the company’s
filings with the Securities and Exchange Commission could cause
actual results to differ from the company’s expectations and those
differences may be material.
Conference Call Information
DigitalGlobe’s management will host a conference call today at 5
p.m. EDT to discuss third quarter 2010 results.
The conference call dial-in numbers are as follows: U.S./Canada
dial-in: 866.921.3936 International dial-in: 706.679.9623 Passcode:
1604-7032 A replay of the call will be available through
December 2, 2010 at the following numbers: U.S./Canada dial-in:
800-642-1687 International dial-in: 706-645-9291 Passcode:
1604-7032
DigitalGlobe will also sponsor a live and archived webcast of
the conference call on its website, www.digitalglobe.com.
Supplemental earnings materials are also available at this
website.
About DigitalGlobe
Longmont, Colorado-based DigitalGlobe is a leading global
provider of commercial high-resolution earth imagery products and
services. Sourced from our own advanced satellite constellation,
our imagery solutions support a wide variety of uses within
defense, intelligence, and homeland security applications, mapping
and analysis, environmental monitoring, oil and gas exploration,
infrastructure management, Internet portals and navigation
technology. With our collection sources and comprehensive
ImageLibrary (containing more than 1 billion square kilometers
of earth imagery and imagery products) we offer a range of on- and
off-line products and services designed to enable customers to
easily access and integrate our imagery into their business
operations and applications. For more information, please visit
www.digitalglobe.com.
DigitalGlobe is a registered trademark of DigitalGlobe.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This presentation and other of our reports, filings, and public
announcements may contain or incorporate forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, as amended. Forward-looking statements relate to future
events or our future financial performance. We generally identify
forward-looking statements by terminology such as “may,” “will,”
“should,” “expects,” “plans,” “anticipates,” “could,” “intends,”
“target,” “projects,” “contemplates,” “believes,” “estimates,”
“predicts,” “potential” or “continue” or the negative of these
terms or other similar words, although not all forward-looking
statements contain these words.
Any forward-looking statements are based upon our historical
performance and on our current plans, estimates and expectations.
The inclusion of this forward-looking information should not be
regarded as a representation by us that the future plans, estimates
or expectations will be achieved. Such forward-looking statements
are subject to various risks and uncertainties and assumptions. A
number of important factors could cause our actual results or
performance to differ materially from those indicated by such
forward looking statements, including: the loss, reduction or
change in terms of any of our primary contracts; the loss or
impairment of our satellites; delays in the construction and launch
of WorldView-3; delays in implementation of planned ground system
and infrastructure enhancements; loss or damage to the content
contained in our ImageLibrary; interruption or failure of our
ground system and other infrastructure, decrease in demand for our
imagery products and services; increased competition that may
reduce our market share or cause us to lower our prices; our
failure to obtain or maintain required regulatory approvals and
licenses; changes in U.S. foreign law or regulation that may limit
our ability to distribute our imagery products and services; the
costs associated with being a public company; and other important
factors, all as described more fully in our filings with the
Securities and Exchange Commission, including our Annual Report on
Form 10-K.
We undertake no obligation to update any forward-looking
statement to reflect events or circumstances after the date on
which the statement is made or to reflect the occurrence of
unanticipated events. Readers are cautioned not to place undue
reliance on any of these forward looking statements.
Non-GAAP Financial Measures
Adjusted EBITDA is defined as net income or loss adjusted for
depreciation and amortization, net interest income or expense,
income tax expense (benefit), loss on disposal of assets,
restructuring, loss on early extinguishment of debt and, non-cash
stock compensation expense, EnhancedView deferred revenue and
amortization of pre-FOC payments related to NextView.
Adjusted EBITDA is not a recognized term under generally
accepted accounting principles, or GAAP, in the United States and
may not be defined similarly by other companies. Adjusted EBITDA
should not be considered an alternative to net income, as an
indication of financial performance, or as an alternative to cash
flow from operations as a measure of liquidity. There are
limitations to using non-GAAP financial measures, including the
difficulty associated with comparing companies that use similar
performance measures whose calculations may differ from ours.
Adjusted EBITDA is a key measure used in internal operating
reports by management and the board of directors to evaluate the
performance of our operations and is also used by analysts,
investment banks and lenders for the same purpose. Adjusted EBITDA
is a measure of our current period operating performance, excluding
charges for capital, depreciation related to prior period capital
expenditures and items which are generally non-core in nature and
including EnhancedView deferred revenue.
We believe that the elimination of certain non-cash,
non-operating items enables a more consistent measurement of period
to period performance of our operations. In addition, we believe
that elimination of these items in combination with the addition of
the non-refundable EnhancedView SLA payments from NGA facilitate
comparison of our operating performance to companies in our
industry. We believe this Adjusted EBITDA measure is particularly
important in a capital intensive industry such as ours, in which
our current period depreciation is not a good indication of our
current or future period capital expenditures. The cost to
construct and launch a satellite and build the related ground
infrastructure may vary greatly from one satellite to another,
depending on the satellite’s size, type and capabilities. For
example, our QuickBird satellite, which we are currently
depreciating, cost significantly less than our WorldView-1 and
WorldView-2 satellites. Current depreciation expense is not
indicative of the revenue generating potential of the
satellite.
Adjusted EBITDA excludes interest income, interest expense,
income taxes and loss on early extinguishment of debt because these
items are associated with our capitalization and tax structures.
Adjusted EBITDA also excludes depreciation and amortization expense
because these non-cash expenses reflect the impact of prior capital
expenditure decisions which are not indicative of future capital
expenditure requirements. Adjusted EBITDA excludes other income
(expense), net, because these items are not related to our primary
operations.
We use Adjusted EBITDA in conjunction with traditional GAAP
operating performance measures as part of our overall assessment of
our performance and we do not place undue reliance on this measure
as our only measure of operating performance. Adjusted EBITDA
should not be considered a substitute for other measures of
financial performance reported in accordance with GAAP.
DigitalGlobe, Inc. Condensed Consolidated Statements of
Operations
(unaudited)
For the Three Months
For the Nine Months
(in millions, except share and per share
data)
Ended
Ended
September 30, September 30, 2009 2010 2009 2010
Revenue $ 71.8 $ 80.5 $ 209.0 $ 238.6 Costs and expenses: Cost of
revenue, excluding depreciation and amortization presented below
7.8 11.0 22.2 31.2 Selling, general and administrative 21.5 28.2
65.6 81.2 Depreciation and amortization 18.6
29.2 56.2 89.3 Income from
operations 23.9 12.1 65.0 36.9 Loss from early extinguishment of
debt - - (7.7 ) - Loss on derivative instruments - - (1.8 ) -
Interest income (expense), net - (10.0 )
0.1 (30.6 ) Income before income taxes 23.9
2.1 55.6 6.3 Income tax expense (9.3 ) (1.3 )
(22.0 ) (3.5 ) Net income $ 14.6 $ 0.8 $ 33.6
$ 2.8 Earnings per share: Basic earnings per share $
0.33 $ 0.02 $ 0.76 $ 0.06 Diluted
earnings per share $ 0.32 $ 0.02 $ 0.75 $ 0.06
Weighted average common shares outstanding: Basic
44,679,714 43,592,795 44,152,352
44,190,324 Diluted 45,397,989
46,290,933
44,740,004
46,306,120
DigitalGlobe, Inc.
Reconciliation of GAAP Net Income to Adjusted EBITDA
(unaudited)
($ in millions)
Three months ended Nine months ended September 30, September 30,
2009 2010 2009 2010 Net income $ 14.6 $ 0.8 $ 33.6 $
2.8 Depreciation and amortization 18.6 29.2 56.2 89.3 Loss from
early extinguishment of debt - - 7.7 - Loss on derivative
instrument - - 1.8 - Interest (income) expense, net - 10.0 (0.1 )
30.6 Income tax expense 9.3 1.3 22.0 3.5 Non-cash stock
compensation expense 1.3 1.7 5.5 4.6 EnhancedView deferred revenue
- 8.3 - 8.3 Amortization of Pre-FOC payments related to NextView
(6.4 ) (6.4 ) (19.1 ) (19.1 ) Adjusted
EBITDA $ 37.4 $ 44.9 $ 107.6 $ 120.0
Adjusted EBITDA is not a recognized term under generally
accepted accounting principles, or GAAP, in the United States and
may not be defined similarly by other companies. Adjusted EBITDA
should not be considered an alternative to net income, as an
indication of financial performance, or as an alternative to cash
flow from operations as a measure of liquidity. There are
limitations to using non-GAAP financial measures, including the
difficulty associated with comparing companies that use similar
performance measures whose calculations may differ from ours.
DigitalGlobe, Inc. Condensed Consolidated Balance
Sheets
(unaudited)
(in millions, except share and per share
data)
ASSETS
December 31, September 30, 2009 2010
CURRENT ASSETS: Cash
and cash equivalents $ 97.0 $ 187.8 Restricted cash 7.3 6.7
Accounts receivable, net of allowance for doubtful accounts of $1.2
and $1.3, respectively 49.7 46.8 Prepaid and current assets 12.0
12.8 Income tax receivable 3.9 3.8 Deferred taxes 1.7
62.4 Total current assets 171.6 320.3 Property and
equipment, net of accumulated depreciation of $361.1 and $449.3,
respectively 891.0 856.7 Goodwill 8.7 8.7 Intangibles, net of
accumulated amortization of $7.2 and $7.4, respectively 1.8 0.5
Aerial image library 5.4 2.1 Long-term restricted cash 16.7 14.5
Long-term deferred contract costs 36.2 47.5 Other assets, net
9.1 7.8 Total assets $ 1,140.5 $
1,258.1
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES: Accounts payable $ 4.3 $ 4.2 Accrued
interest 6.2 15.5 Other accrued liabilities 17.9 44.2 Current
portion of deferred revenue 32.8 36.3
Total current liabilities 61.2 100.2 Long-term accrued liability -
6.5 Deferred revenue 239.6 231.3 Deferred lease incentive 5.4 4.3
Long-term debt 343.5 345.4 Long-term deferred tax liability
11.3 74.3 Total liabilities $ 661.0 $ 762.0
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY: Preferred stock, $0.001 par value;
24,000,000 shares authorized; no shares issued and outstanding at
December 31, 2009 and September 30, 2010 $ - $ - Common stock;
$0.001 par value; 250,000,000 shares authorized; 45,122,593 shares
issued and outstanding at December 31, 2009 and 45,869,030 shares
issued and outstanding at September 30, 2010 0.2 0.2 Treasury
stock, at cost; 44,039 shares at December 31, 2009 and at September
30, 2010 (0.7 ) (0.7 ) Additional paid-in capital 496.0 509.8
Accumulated deficit (16.0 ) (13.2 ) Total
stockholders’ equity 479.5 496.1 Total
liabilities and stockholders’ equity $ 1,140.5 $ 1,258.1
DigitalGlobe, Inc. Condensed Consolidated
Statements of Cash Flows
(unaudited)
($ in millions)
For the Nine Months Ended September 30, 2009 2010
CASH
FLOWS FROM OPERATING ACTIVITIES: Net income $ 33.6 $ 2.8
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization expense 56.2
89.3 Recognition of pre-FOC payments (19.1 ) (19.1 ) Non-cash
amortization 4.0 5.5 Non-cash stock compensation expense 5.5 4.6
Amortization of debt issuance costs - 3.4 Non-cash portion of loss
on extinguishment of debt 5.3 - Deferred income taxes 20.5 2.3
Changes in: Accounts receivable, net 6.1 2.9 Accounts receivable
from related party (0.2 ) - Aerial image library (4.7 ) - Other
assets (4.6 ) (1.0 ) Accounts payable (0.8 ) 0.3 Accounts payable
and accrued liabilities to related parties 3.5 - Accrued
liabilities (0.4 ) 20.7 Deferred contract costs from related party
(11.7 ) - Deferred contract costs - (14.2 ) Deferred revenue 11.7
14.3 Deferred revenue related party 2.1 -
Net cash flows provided by operating activities 107.0
111.8
CASH FLOWS FROM INVESTING
ACTIVITIES: Construction in progress additions (121.4 ) (25.6 )
Other property, equipment and intangible additions (7.2 ) (7.5 )
Settlements from derivative instrument (22.8 ) - Change in
restricted cash (2.8 ) 2.8 Net cash flows used
in investing activities (154.2 ) (30.3 )
CASH
FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of
debt, net of issuance costs 330.9 - Proceeds from initial public
offering, net of issuance costs 21.7 (0.3 ) Repayment of notes
(270.0 ) - Payments for repurchase of common stock (0.4 ) -
Proceeds from exercise of stock options 0.3
9.6 Net cash flows provided by financing activities
82.5 9.3 Net increase in cash and cash
equivalents 35.3 90.8 Cash and cash equivalents, beginning of
period 60.8 97.0 Cash and cash
equivalents, end of period $ 96.1 $ 187.8
SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for income
taxes, net of refunds $ 2.4 $ (2.1 ) Cash paid for interest
payments, net of amounts capitalized $ - $ 11.0
NON-CASH
INVESTING AND FINANCING ACTIVITIES: Changes to non-cash
property and equipment accruals, including interest $ 8.1 $ (20.7 )
Non-cash items capitalized in construction in progress 5.5 0.1
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