DigitalGlobe, Inc. (NYSE: DGI), a leading global provider of
commercial high-resolution earth imagery products and services,
today reported financial results for the second quarter ended
June 30, 2011.
Second quarter 2011 revenue was $81.7 million, up 1%
compared with the same period last year. Included in second quarter
revenue is $6.4 million of amortized revenue related to NextView,
the predecessor to the EnhancedView contract with the U.S.
Government. Not included in second quarter revenue is $24.8 million
of deferrals related to the service level agreement (SLA) portion
of EnhancedView.
The company reported a second quarter 2011 net loss of $0.4
million, or $(0.01) per diluted share, compared with net income of
$0.5 million, or $0.01 earnings per diluted share, for the same
period last year.
Second quarter 2011 Adjusted EBITDA, a non-GAAP financial
measure, was $59.3 million, an increase of 57% compared with second
quarter 2010 Adjusted EBITDA of $37.8 million. Adjusted EBITDA
includes current-quarter deferrals related to EnhancedView and, for
both periods, excludes approximately $6.4 million of amortized
revenue related to NextView.
Cash Flow from Operations was $104.6 million for the six months
ended June 30, 2011, up 84% compared with Cash Flow from Operations
of $56.8 million for the six months ended June 30, 2010.
“During the quarter, we built our backlog, expanded our margins,
generated solid cash flow, and made progress positioning the
company for stronger revenue growth,” said Jeffrey R. Tarr,
President and Chief Executive Officer. “I’m proud of our team and
look forward to delivering to our shareowners continued improvement
in our financial performance.”
Second Quarter Business Highlights
- Defense and Intelligence segment
revenue was $63.1 million, flat compared with second quarter 2010.
This excludes $24.8 million of deferrals related to EnhancedView
SLA, and includes $6.4 million related to NextView.
- In June, the company passed the
Critical Design Review of infrastructure enhancements at its
Colorado headquarters under the terms of the EnhancedView contract
with the National Geospatial-Intelligence Agency (NGA). On July 25,
NGA provided DigitalGlobe with an amendment to the EnhancedView
contract exercising year two of the SLA for the period Sept. 1,
2011 though Aug. 31, 2012.
- The company’s Direct Access product
line grew 31%, generating $12.6 million in revenue for the
quarter.
- Commercial segment revenue was $18.6
million, up 5% compared with second quarter 2010.
- Bloomberg launched a new
DigitalGlobe-developed service that gives their clients early
insight into inventory levels at the U.S. strategic oil reserve in
Cushing, Okla., providing its users with an information edge in the
commodities market.
- The company signed a new agreement with
PEMEX, the national oil and gas company of Mexico and the fourth
largest crude oil producer in the world. The agreement gives PEMEX,
a DigitalGlobe customer since 2007, on-demand, cloud-based access
to the company’s new Global Basemap service.
- California’s Stanislaus County
contracted to use DigitalGlobe’s Precision Aerial Imagery to
monitor changes and manage government projects across the Central
Valley county’s 1,500 square-mile area.
- Magellan contracted with DigitalGlobe
for satellite- and aerial-based imagery to power a new series of
worldwide maps used in multiple Magellan handheld GPS units.
- DigitalGlobe Platinum reseller Sovzond
signed a new agreement with Roslesinforg, a division of the Federal
Forestry Agency of Russia, to use satellite imagery to monitor 1.3
million square kilometers of the country’s forest.
- The company entered into a joint
venture with China Siwei Surveying & Mapping Technology Co.,
Ltd., known as China Siwei, a China state-owned high-tech GIS
developer in China, and with Navinfo, China’s leading map and
dynamic traffic information services provider. The joint venture
entity, known as Siwei Worldview Technology (Beijing) Co., Ltd.
will serve as DigitalGlobe’s exclusive channel partner in China to
expand our presence in civil government, location-based mapping
services, and other enterprises in China.
2011 Outlook
For the full year 2011, the company expects:
- Revenue in a range of $330 million to
$355 million. This excludes any deferrals related to EnhancedView
and includes amortized revenue related to NextView.
- Diluted earnings per share of $0.10 to
$0.20, assuming an average diluted share count of approximately 47
million.
- Adjusted EBITDA of $223 million to $243
million.
- Capital expenditures for 2011 of
approximately $275 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 second quarter 2011 results.
The conference call dial-in numbers are as follows:U.S./Canada
dial-in: 866-921-3936International dial-in: 706-679-9623Passcode:
7935-3714
A replay of the call will be available through Sept. 2, 2011 at
the following numbers:U.S./Canada dial-in:
800-642-1687International dial-in: 706-645-9291Passcode:
7935-3714
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
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 and intelligence,
civil agencies, 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 one 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, visit
www.digitalglobe.com.
DigitalGlobe is a registered trademark of DigitalGlobe.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein 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, loss on
derivative instruments, non-cash stock compensation expense,
EnhancedView deferred revenue and EnhancedView outstanding invoices
not yet paid by NGA, and amortization of pre-FOC payments related
to NextView. EnhancedView outstanding invoices not yet paid by NGA
represent an irrevocable right to be paid in cash by NGA.
Adjusted EBITDA is not a recognized term under generally
accepted accounting principles (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 in different industries 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 also a key driver of the company-wide bonus incentive plan.
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 and
EnhancedView outstanding invoices not yet paid by NGA, and
excluding the amortization of pre-FOC payments related to our
NextView contract.
We believe that the elimination of material 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 deferred revenue and EnhancedView
outstanding invoices not yet paid by NGA, as well as amortization
of pre-FOC payments related to NextView 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
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 non-cash stock
compensation expense, because these items are non-cash expenses and
loss on derivative instrument and disposal of assets because these
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.
Unaudited Condensed Consolidated
Statements of Operations
For the Three MonthsEnded June 30,
For the Six MonthsEnded June 30,
(in millions, except share and per share data) 2010
2011 2010
2011 Revenue $ 81.0 $ 81.7 $ 158.1
$ 158.8 Costs and expenses: Cost of revenue, excluding
depreciation and amortization 10.1 14.4 20.2 26.2 Selling, general
and administrative 28.2 33.7 53.0 63.8 Depreciation and
amortization 31.0 29.2
60.1 58.4 Income from
operations 11.7 4.4 24.8 10.4 Other income (expense), net – – – 0.1
Interest income (expense), net (10.7 ) (5.5 )
(20.6 ) (13.2 ) Income (loss)
before income taxes 1.0 (1.1 ) 4.2 (2.7 ) Income tax (expense)
benefit (0.5 ) 0.7
(2.2 ) 1.6 Net income (loss) $ 0.5
$ (0.4 ) $ 2.0 $ (1.1 ) Earnings
(loss) per share: Basic earnings (loss) per share $ 0.01
$ (0.01 ) $ 0.05 $ (0.02 )
Diluted earnings (loss) per share $ 0.01 $ (0.01 )
$ 0.04 $ (0.02 ) Weighted average
common shares outstanding: Basic 44.0
46.3 43.9 46.2
Diluted 46.1 46.3
46.1 46.2
DigitalGlobe, Inc.
Reconciliation of GAAP Net Income to
Adjusted EBITDA
(unaudited)
Three months ended
June 30,
Six months ended
June 30,
(in millions) 2010 2011
2010 2011 Net
income (loss) $ 0.5 $ (0.4 ) $ 2.0 $ (1.1 )
Depreciation and amortization 31.0 29.2 60.1 58.4 Interest (income)
expense, net 10.7 5.5 20.6 13.2 Income tax expense (benefit) 0.5
(0.7 ) 2.2 (1.6 ) Non-cash stock compensation expense 1.5 7.3 2.9
9.0 EnhancedView deferred revenue – 16.5 – 41.4 EnhancedView
outstanding invoices not yet paid by NGA – 8.3 – 8.3 Amortization
of pre-FOC payment related to NextView (6.4 )
(6.4 ) (12.8 ) (12.8 ) Adjusted
EBITDA $ 37.8 $ 59.3 $ 75.0
$ 114.8
Adjusted EBITDA is not a recognized term under generally
accepted accounting principles (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.
Second quarter EnhancedView deferred revenue includes $8.3
million invoiced in the first quarter of 2011 for which cash was
received in the second quarter of 2011.
DigitalGlobe, Inc.
Unaudited Condensed Consolidated
Balance Sheets
(in millions, except share and per share data) December 31,
2010
June 30,
2011
ASSETS CURRENT ASSETS: Cash and cash equivalents $
179.3 $ 147.2 Restricted cash 6.7 3.8
Accounts receivable, net of allowance for
doubtful accounts of $1.0 and $1.2, respectively
45.3 39.4 Prepaid and current assets 19.4 18.9 Deferred taxes
62.7 49.9 Total current
assets 313.4 259.2
Property and equipment, net of accumulated
depreciation of $478.2 and $536.6, respectively
879.1 967.1 Goodwill 8.7 8.7 Intangibles, net of accumulated
amortization of $7.7 and $7.8, respectively 0.3 0.2 Aerial image
library, net of accumulated amortization of $21.1 and $22.7,
respectively 1.9 4.2 Long-term restricted cash 13.6 11.5 Long-term
deferred contract costs 42.1 43.7 Other assets, net 7.2
6.4 Total assets $ 1,266.3
$ 1,301.0
LIABILITIES AND
STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts
payable $ 15.0 $ 17.0 Accrued interest 6.2 6.2 Other accrued
liabilities 26.3 31.8 Current portion of deferred revenue
38.9 36.0 Total current
liabilities 86.4 91.0 Long-term accrued liability 6.0 1.4 Deferred
rev
enue 246.2 284.8 Deferred lease incentive 4.6 3.9
Long-term debt, net of discount 346.1 347.4 Long-term deferred tax
liability 76.7 62.5 Total
liabilities $ 766.0 $ 791.0
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value;
24,000,000 shares authorized; no shares issued
and outstanding at December 31, 2010 and June 30,
2011
– –
Common stock; $0.001 par value;
250,000,000 shares authorized; 46,073,691 shares issued
and outstanding at December 31, 2010 and 46,285,702 shares issued
and outstanding at June 30, 2011
0.2 0.2
Treasury stock, at cost; 44,039 shares at
December 31, 2010 and 50,395 shares at June 30, 2011
(0.7 ) (0.9 ) Additional paid-in capital 512.7 523.7 Accumulated
deficit (11.9 ) (13.0 ) Total
stockholders’ equity 500.3 510.0
Total liabilities and stockholders’ equity $ 1,266.3
$ 1,301.0
DigitalGlobe, Inc.
Condensed Consolidated Statements of
Cash Flows
(in millions)
For the Six Months EndedJune 30,
2010 2011
CASH
FLOWS FROM OPERATING ACTIVITIES: Net income
(loss) $ 2.0 $ (1.1 ) Adjustments to reconcile net income (loss) to
net cash provided by operating activities: Depreciation and
amortization expense 60.1 58.4 EnhancedView deferred revenue
– 49.7 Recognition of pre-FOC payments (12.8 ) (12.8 )
Amortization of aerial image library, deferred contract costs and
lease incentive 2.2 3.6 Non-cash stock compensation expense 2.9 9.0
Amortization of debt issuance costs and debt discount 2.3 2.2
Deferred income taxes 1.4 (1.4 ) Changes in working capital, net of
investing activities: Accounts receivable, net (5.3 ) 5.9 Prepaids
and other assets (0.5 ) (3.2 ) Accounts payable – 1.9 Accrued
liabilities 5.8 (2.0 ) Deferred contract costs (11.2 ) (4.4 )
Deferred revenue 9.9 (1.2 ) Net
cash flows provided by operating activities 56.8
104.6
CASH FLOWS FROM INVESTING
ACTIVITIES: Construction in progress additions (16.1 ) (138.8 )
Other property, equipment and intangible additions (3.3 ) (4.0 )
Change in restricted cash 0.9
5.0 Net cash flows used in investing activities (18.5
) (137.8 )
CASH FLOWS FROM FINANCING
ACTIVITIES: Costs associated with initial public offering (0.3
) – Proceeds from exercise of stock options 7.8 1.3 Cash paid for
treasury stock – (0.2 ) Net cash
flows provided by financing activities 7.5
1.1 Net increase (decrease) in cash and cash
equivalents 45.8 (32.1 ) Cash and cash equivalents, beginning of
period 97.0 179.3 Cash
and cash equivalents, end of period $ 142.8 $
147.2
SUPPLEMENTAL CASH FLOW INFORMATION: Cash
received (paid) for income taxes $ 0.1 $ – Cash paid for interest,
net of capitalized amounts $6.8 and $6.0, respectively 11.8 12.6
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Changes to non-cash construction in
progress and property, equipment and intangibles
accruals, including interest
$ (5.8 ) $ (3.5 )
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