DigitalGlobe, Inc. (NYSE: DGI), a leading global provider of
commercial high-resolution earth imagery products and services,
today reported financial results for the fourth quarter and year
ended December 31, 2011.
Fourth quarter 2011 revenue was $97.7 million, up 17% compared
with the same period last year. Included in fourth quarter revenue
is $6.4 million of amortized revenue related to NextView, the
predecessor to the EnhancedView contract with the National
Geospatial-Intelligence Agency (NGA). Not included in fourth
quarter revenue is $20.3 million of deferrals related to the
service level agreement (SLA) portion of EnhancedView. Full-year
2011 revenue was $339.5 million, up 5% compared with 2010. Included
in full-year revenue is $25.5 million of amortized revenue related
to NextView. Not included in full-year revenue is $93.1 million of
deferrals related to the EnhancedView SLA.
"We finished the year with a strong fourth quarter, driven by
solid growth in both our commercial and defense and intelligence
segments," said Jeffrey R. Tarr, President and Chief Executive
Officer. "Our continued growth is the result of consistently
superior operating performance and capability. We believe our
satellite capacity represents a substantial majority of the total
commercial capacity provided to the NGA under the EnhancedView
program, and that we have firmly established DigitalGlobe as the
clear performance leader.
"We believe that a more restrictive government funding
environment, while not desirable, will serve to highlight our
competitive advantages," Tarr added. "Our superior satellite
constellation and other capabilities are critical to a wide range
of customers and as a result, we expect revenue growth in 2012 to
outpace our performance in 2011."
On a GAAP basis, the company reported a fourth quarter 2011 net
loss of $27.0 million, or $(0.58) per diluted share, compared with
net income of $0.6 million, or $0.01 earnings per diluted share,
for the same period last year. The current quarter's results
include a non-recurring, pre-tax charge of $51.8 million or $0.68
per share related to the early retirement of debt and associated
financing expenses. During the quarter, the company successfully
refinanced its debt, entering into a senior secured credit
agreement that provides for a $500 million term loan facility and a
$100 million revolving credit facility. The company used these
funds to repay the principal and premium related to its 10.5%
Senior Secured Notes, 100% of which were redeemed and which have
been retired. The revolving credit facility remains undrawn.
In connection with the preparation of the 2011 10-K, certain
accounting errors were identified relating to the fiscal year 2010
and the first three quarters of 2011, in the aggregate pre-tax
amounts of $2.7 million for 2010 and $2.0 million for the first
three quarters of 2011. These errors were related primarily to
accounting for equipment sold as part of the direct access program
(DAP). While the impact of the errors was not material to any
previously issued financial statements, the company elected to
revise affected prior period financial statements to facilitate
prospective comparisons among reporting periods. The impact of
those adjustments are reflected in tables included in the company's
2011 10-K filing and in supplemental earnings materials that are
found on the company's website at www.digitalglobe.com. As a result
of the errors, we identified two material weaknesses in our
internal controls. We are actively remediating these weaknesses to
ensure accuracy in our financial reporting.
For the full year, the company reported a GAAP net loss of $28.1
million, or $(0.61) per diluted share, compared with net income of
$2.5 million, or $0.05 per diluted share for 2010. The 2011 pre-tax
impact of the previously mentioned accounting errors was
approximately $2.0 million, or $0.02 per share affecting the first
three quarters of 2011.
Fourth Quarter Business Highlights
- The company met all of the performance requirements under its
EnhancedView contract, resulting in no monetary holdback for the
third straight quarter. Additionally, the company completed its
infrastructure enhancement critical design review for NGA on
schedule.
- Defense & Intelligence segment revenue grew 11% to $70.0
million compared with the prior-year period. Performance was driven
by increased revenue related to the EnhancedView SLA and growth of
23% in our DAP business, which contributed $11.7 million in the
quarter.
- Commercial segment revenue grew 36% to $27.7 million in the
fourth quarter compared with the prior-year period. Results were
driven primarily by international civil government customers in
China and Russia, as well as a ramp-up of service to its
location-based services customers.
- The company's 12-month backlog increased to $307 million, up
19% year over year, indicative of both broad-based growth and of
the company's success in shifting its revenue mix to a more visible
recurring model.
2012 Outlook For the full year, the
company expects to report GAAP revenue growth of approximately 10
percent compared with 2011. The company expects to achieve a
full-year EBITDA margin of approximately 43% and an adjusted EBITDA
margin of approximately 50%. Also for the full year, the Company
expects capital expenditures of approximately $200 million.
"We believe that we are distinguishing ourselves as a clear
leader," said Tarr. "We will maintain a sharp customer focus and
have set disciplined targets for our financial performance that we
consider to be both prudent and reflective of our opportunity. We
look forward to the year ahead and expect to make continued,
significant improvement to all areas of our business."
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. EST to
discuss fourth quarter 2011 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: 47280650
A replay of the call will be available through March 30, 2012 at
the following numbers: U.S./Canada dial-in: (855) 859-2056
International dial-in: (404) 537-3406 Passcode: 47280650
DigitalGlobe will also sponsor a live and archived webcast of
the conference call on the Investor Relations portion of its
website. Click here to directly access the live webcast.
Supplemental earnings materials are available on the company's
website at www.digitalglobe.com.
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 availability
of government funding for our products and services both
domestically and internationally; changes in government and
customer priorities and requirements (including cost-cutting
initiatives, the potential deferral of awards, terminations or
reduction of expenditures to respond to the priorities of congress
and the administration, or budgetary cuts resulting from
congressional committee recommendations or automatic sequestration
under the Budget Control Act of 2011); 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 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.
FINANCIAL TABLES TO FOLLOW
DigitalGlobe, Inc.
Consolidated Statements of Operations
Three Months Ended Year Ended
December 31, December 31,
-------------------- --------------------
2010 2010
Revised 2011 Revised 2011
--------- --------- --------- ---------
(in millions, except per share
data)
Historical results of
operations:
Defense and intelligence revenue $ 63.3 $ 70.0 $ 252.4 $ 261.4
Commercial revenue 20.4 27.7 70.1 78.1
--------- --------- --------- ---------
Total revenue 83.7 97.7 322.5 339.5
Cost of revenue excluding
depreciation and amortization 11.6 17.9 44.2 64.9
Selling, general and
administrative 31.2 35.0 112.2 130.2
Depreciation and amortization 29.5 29.6 118.9 117.1
--------- --------- --------- ---------
Income from operations 11.4 15.2 47.2 27.3
Loss from early extinguishment
of debt - (51.8) - (51.8)
Other (expense) income, net (0.1) - - 0.2
Interest income (expense), net (9.2) (4.0) (40.4) (21.7)
--------- --------- --------- ---------
Income (loss) before income
taxes 2.1 (40.6) 6.8 (46.0)
Income tax (expense) benefit (1.5) 13.6 (4.3) 17.9
--------- --------- --------- ---------
Net income (loss) $ 0.6 $ (27.0) $ 2.5 $ (28.1)
========= ========= ========= =========
Earnings (loss) per share:
Basic earnings (loss) per
share $ 0.01 $ (0.58) $ 0.05 $ (0.61)
Diluted earnings (loss) per
share $ 0.01 $ (0.58) $ 0.05 $ (0.61)
Weighted average common shares
outstanding
Basic earnings (loss) per
share 45.9 46.0 45.7 45.9
Diluted earnings (loss) per
share 46.4 46.0 46.1 45.9
DigitalGlobe, Inc.
Reconciliation of GAAP Net Income (loss) to Adjusted EBITDA
Year Ended December 31,
-------------------------------------------
2007 2008 2009 2010 2011
------- ------- ------- ------- -------
Revised
------- ------- ------- ------- -------
(in millions, except per share
data)
Net income (loss) $ 95.8 $ 53.8 $ 47.4 $ 2.5 $ (28.1)
Depreciation and amortization 46.8 75.7 74.4 118.9 117.1
Interest (income) expense, net (4.1) 3.0 (0.1) 40.4 21.7
Loss on derivative instrument - - 1.8 - -
Loss from early extinguishment
of debt - - 7.7 - 51.8
Income tax expense (benefit) (57.9) 38.1 31.0 4.3 (17.9)
Non-cash stock compensation
expense 2.6 4.2 7.2 6.6 14.4
EnhancedView deferred revenue - - - 24.8 86.4
EnhancedView outstanding
invoices not yet paid by NGA 8.3 6.7
Amortization of pre-FOC payment
related to NextView (3.2) (25.5) (25.5) (25.5) (25.5)
------- ------- ------- ------- -------
Adjusted EBITDA $ 80.0 $ 149.3 $ 143.9 $ 180.3 $ 226.6
======= ======= ======= ======= =======
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.
DigitalGlobe, Inc.
Consolidated Balance Sheets
As of December 31,
--------------------
2010
Revised 2011
--------- ---------
(in millions)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 179.3 $ 198.5
Restricted cash 6.7 7.7
Accounts receivable, net of allowance for doubtful
accounts of $1.0 and $3.6, respectively 45.3 50.7
Prepaid and current assets 21.4 19.6
Deferred taxes 62.7 65.1
--------- ---------
Total current assets 315.4 341.6
Property and equipment, net of accumulated
depreciation of $478.2 and $563.9, respectively 878.6 1,019.8
Goodwill 8.7 8.7
Intangibles, net of accumulated amortization of $8.9
and $7.4, respectively 0.3 -
Aerial image library, net of accumulated amortization
of $21.1 and $25.1, respectively 1.9 13.0
Long-term restricted cash 13.6 9.8
Long-term deferred contract costs 42.4 44.7
Other assets, net 7.2 14.0
--------- ---------
Total assets $ 1,268.1 $ 1,451.6
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 15.0 $ 19.7
Accrued interest 6.2 0.2
Current note payable - 5.0
Other accrued liabilities 27.2 37.5
Current portion of deferred revenue 39.1 36.6
--------- ---------
Total current liabilities 87.5 99.0
Long-term accrued liability 8.7 1.4
Deferred revenue 246.7 319.3
Deferred lease incentive 4.6 3.3
Long-term debt, net of discount 346.1 481.6
Long-term deferred tax liability, net 75.6 59.6
--------- ---------
Total liabilities $ 769.2 $ 964.2
--------- ---------
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 December 31, 2011 - -
Common stock; $0.001 par value; 250,000,000 shares
authorized; 46,029,652 shares issued and outstanding
at December 31, 2010 and 46,320,471 shares issued and
outstanding at December 31, 2011 0.2 0.2
Treasury stock, at cost; 44,039 shares at December 31,
2010 and 66,175 shares at December 31, 2011 (0.7) (1.2)
Additional paid-in capital 512.9 530.0
Accumulated deficit (13.5) (41.6)
--------- ---------
Total stockholders' equity 498.9 487.4
--------- ---------
Total liabilities and stockholders' equity $ 1,268.1 $ 1,451.6
--------- ---------
DigitalGlobe, Inc.
Consolidated Statements of Cash Flows
For the Year Ended December 31,
-------------------------------
2010
2009 Revised 2011
---------- --------- ---------
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 47.4 $ 2.5 $ (28.1)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense 74.4 118.9 117.1
EnhancedView deferred revenue - 24.8 94.6
Recognition of pre-FOC payments (25.5) (25.5) (25.5)
Amortization of aerial image library,
deferred contract costs and lease
incentive 5.3 8.7 10.2
Non-cash stock compensation expense 7.2 6.6 14.4
Amortization of debt issuance costs - 4.4 4.4
Write off of debt financing fees 5.3 - 12.0
Gain on Sale of Asset - - (0.5)
Deferred income taxes 33.6 3.3 (18.5)
Changes in working capital, net of
investing activities:
Accounts receivable, net (2.6) 4.3 (5.4)
Accounts receivable from related party (0.3) - -
Income tax receivable (3.9) 3.9 -
Prepaids and other assets (12.4) (3.9) (14.7)
Accounts payable 1.5 (1.8) 5.5
Accounts payable and accrued liabilities
to related parties 3.5 - -
Accrued liabilities (5.0) 14.3 (4.2)
Deferred contract costs from related
party (15.3) - -
Deferred contract costs - (18.0) (9.0)
Deferred revenue 28.0 10.6 4.5
Deferred revenue related party 2.1 - -
Deferred lease incentive - 0.2 -
Payment of Senior Secured Note discount - - (13.2)
Premium payment on senior secured notes - - (0.8)
---------- --------- ---------
Net cash flows provided by operating
activities 143.3 153.3 142.8
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction in progress additions (155.9) (74.1) (255.6)
Other property, equipment and intangible
additions (10.9) (10.6) (6.6)
Decrease (increase) in restricted cash (21.5) 3.8 2.7
Settlements from derivative instrument (2.8) - -
---------- --------- ---------
Net cash flows used in investing
activities (191.1) (80.9) (259.5)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt, net of
issuance costs 341.8 - 487.0
Proceeds from initial public offering,
net of issuance costs 21.7 (0.3) -
Repayment of notes (270.0) - (341.8)
Payment of debt issuance cost (10.9) - (11.1)
Repurchase of common stock (0.5) - -
Proceeds from exercise of stock options 1.9 10.2 1.8
---------- --------- ---------
Net cash flows provided by financing
activities 84.0 9.9 135.9
---------- --------- ---------
Net increase (decrease) in cash and cash
equivalents 36.2 82.3 19.2
Cash and cash equivalents, beginning of
period 60.8 97.0 179.3
---------- --------- ---------
Cash and cash equivalents, end of period $ 97.0 $ 179.3 $ 198.5
---------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of capitalized
amounts of $37.4, $7.7 and $18.6,
respectively $ - $ 30.2 $ 23.2
Cash received (paid) for income taxes $ (2.4) $ 4.2 $ (1.7)
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Changes to non-cash construction in
progress accruals, including interest $ 9.7 $ 16.9 $ (0.5)
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