WorldView-3 Now OperationalCompany Completes
Integration, Realizing $120 Million Synergy TargetRaises 2014
Revenue to Top End of Prior Range
DigitalGlobe, Inc. (NYSE: DGI), a leading global provider of
commercial high-resolution earth observation and advanced
geospatial solutions, today reported financial results for the
quarter ended September 30, 2014.
Third quarter 2014 revenue was $154.6 million, a (6.2)% decrease
compared with the same period last year. Net income for the third
quarter was $0.9 million, with a net loss available to common
shareholders of $(0.1) million, or $0.00 per diluted share. In the
third quarter 2013, the company reported a net loss of $(1.8)
million, with a net loss available to common shareholders of $(2.8)
million, or a loss of $(0.04) per diluted share.
Third quarter 2014 EBITDA was $58.0 million with an EBITDA
margin of 37.5%, an increase of 440 basis points compared with
EBITDA of $54.5 million in third quarter 2013, and an associated
margin of 33.1%. Third quarter 2014 Adjusted EBITDA was $61.5
million with an Adjusted EBITDA margin of 39.8%. This compares with
Adjusted EBITDA of $65.6 million in third quarter 2013, also with
an associated margin of 39.8%. Adjusted EBITDA excludes the impact
of restructuring, integration and other costs.
On August 13, 2014, DigitalGlobe successfully launched
WorldView-3, the world’s highest resolution and most capable
commercial earth observation satellite. On October 1, 2014, the
company completed calibrations on WorldView-3 to enable it to
provide visible spectrum imagery to its customers. As a result, the
company began recognizing revenue from the EnhancedView Service
Level Agreement at a new annualized rate of approximately $337
million on October 1.
“This quarter was highlighted by the launch and commissioning of
WorldView-3, the conclusion of our 18-month GeoEye integration, and
more recently, the completion of pre-storage construction on
WorldView-4,” said Jeffrey R. Tarr, CEO of DigitalGlobe. “These
achievements mark our transition from a period of investment in
building the world’s leading earth observation capability to a new
era of profitable growth, strong free cash flow and improving
returns.”
In addition to the recent launch of WorldView-3 and
completion of both the GeoEye integration and pre-storage
construction on WorldView-4, other highlights included:
- The National Geospatial-Intelligence
Agency awarded DigitalGlobe the third year of the Global Enhanced
GEOINT Delivery (Global-EGD) contract.
- DigitalGlobe repurchased 495,870 shares
of its stock for $15 million at an average price of $30.27.
- U. S. Government revenue declined 12.9%
to $87.8, due primarily to $9 million in one-time Global-EGD
recognized revenue in the third quarter of 2013.
- Diversified Commercial revenue
increased 4.4% to $66.8 million in the quarter, driven by growth in
Direct Access, Spatial Energy, and location-based services
customers.
- DigitalGlobe has signed multi-year
agreements to support pipeline monitoring for one of the largest
gas producing companies in Asia and to enable reservoir management
in Brazil for one of the largest domestic power companies in the
world.
- The company signed agreements for its
Geospatial Big Data (GBD) platform with partners focused on
financial services and insurance.
- DigitalGlobe signed multiple agreements
with Global Developmental Organizations focused on addressing
infectious diseases in Africa.
- The company further diversified its
partner channel in China, working with a new reseller to provide
imagery to the Guangzhou Land Bureau.
2014 Outlook
For 2014, the company now expects to report revenue in a range
of $640 million to $660 million. The company continues to expect to
achieve a full-year Adjusted EBITDA margin of approximately 43%
with a fourth quarter 2014 Adjusted EBITDA margin of approximately
50% at the mid-point of the company’s annual revenue guidance. The
company also expects 2014 capital expenditures of approximately
$185 million, due to a reduction in projected year-end payables
related to satellite construction projects.
Conference Call Information
DigitalGlobe’s management will host a conference call today,
October 30, 2014 at 5 p.m. ET to discuss its 2014 third quarter
financial and operating results.
The conference call dial-in numbers are as follows: U.S./Canada
dial-in: (855) 212-2368 International dial-in: (315) 625-6886
Passcode: 22965956 A replay of the call will be available
through November 30, 2014 at the following numbers: U.S./Canada
dial-in: (855) 859-2056 International dial-in: (404) 537-3406
Passcode: 22965956
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, including conference call
slides and management scripts, are available on the Investor
Relations section of the company’s website at
www.digitalglobe.com.
About DigitalGlobe
DigitalGlobe is a leading provider of commercial high-resolution
earth observation and advanced geospatial solutions that help
decision makers better understand our changing planet in order to
save lives, resources and time. Sourced from the world's leading
constellation, our imagery solutions deliver unmatched coverage and
capacity to meet our customers' most demanding mission
requirements. Each day customers in defense and intelligence,
public safety, civil agencies, map making and analysis,
environmental monitoring, oil and gas exploration, infrastructure
management, navigation technology, and providers of location-based
services depend on DigitalGlobe data, information, technology and
expertise to gain actionable insight.
DigitalGlobe is a registered trademark of DigitalGlobe.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein and in 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 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,” “continue” or “looks forward to” 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 or decisions by
customers not to exercise renewal options; 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 risk that U.S. government sanctions against
specified companies and individuals in Russia may limit our ability
to conduct business with potential or existing customers; the risk
that the anticipated benefits and synergies from the strategic
combination of the company and GeoEye, Inc. cannot be fully
realized or may take longer to realize than expected; the outcome
of pending or threatened litigation; the loss or impairment of any
of our satellites; delays in the construction and launch of any of
our satellites or our ability to achieve and maintain full
operational capacity of all our satellites; delays in
implementation of planned ground system and infrastructure
enhancements; loss or damage to the content contained in our
imagery archives; interruption or failure of our ground system and
other infrastructure, decrease in demand for our imagery products
and services; increased competition, including possibly from
companies with substantial financial and other resources and
services, that may reduce our market share or cause us to lower our
prices; our inability to fully integrate acquisitions or to achieve
planned synergies; changes in satellite imaging technology; our
failure to obtain or maintain required regulatory approvals and
licenses; changes in U.S. or 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 for the year ended December 31, 2013, as updated by
our Form 10-Q for the quarter ended March 31, 2014.
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-U.S. GAAP Financial Measures
EBITDA and Adjusted EBITDA are not recognized terms under U.S.
GAAP and may not be defined similarly by other companies. EBITDA
and Adjusted EBITDA should not be considered alternatives to net
income as indications of financial performance or as alternatives
to cash flow from operations as measures of liquidity. There are
limitations to using non-U.S. GAAP financial measures, including
the difficulty associated with comparing companies in different
industries that use similar performance measures whose calculations
may differ from ours.
EBITDA and Adjusted EBITDA are key measures used in our internal
operating reports by management and our Board of Directors to
evaluate the performance of our operations and are also used by
analysts, investment banks and lenders for the same purpose.
EBITDA, excluding certain acquisition costs, is a measure being
used as a key element of the company-wide bonus incentive plan.
We believe that the presentation of EBITDA and Adjusted EBITDA
enables a more consistent measurement of period to period
performance of our operations and facilitates comparison of our
operating performance to companies in our industry. We believe that
EBITDA and Adjusted EBITDA measures are 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 to 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 became fully depreciated during 2014, cost
significantly less than our WorldView-1 and WorldView-2 satellites.
Current depreciation expense is not indicative of the revenue
generating potential of the satellites.
EBITDA excludes interest income, interest expense and income
taxes because these items are associated with our capitalization
and tax structures. 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 further adjusts EBITDA to exclude the loss on
the early extinguishment of debt and the loss on abandonment of
asset because these are not related to our primary operations.
Additionally, it excludes restructuring costs, acquisition costs
and integration costs as these are non-core items. Restructuring
costs are costs incurred to realize efficiencies from the
acquisition with GeoEye, such as reducing excess workforce,
consolidating facilities and systems, and relocating ground
terminals. Acquisition costs are costs incurred to effect the
acquisition, such as advisory, legal, accounting, consulting and
other professional fees. Integration costs consist primarily of
professional fees incurred to assist us with system and process
improvements associated with integrating operations. Loss on early
extinguishment of debt is related to entering into the 2013 Credit
Facility and Senior Notes, the proceeds of which were used to
refinance our $500.0 million senior secured term loan and $100.0
million senior secured revolving credit facility, and to fund the
discharge and redemption of GeoEye’s $525.0 million senior secured
notes that we assumed in the acquisition.
We use EBITDA and Adjusted EBITDA in conjunction with
traditional U.S. GAAP operating performance measures as part of our
overall assessment of our performance and we do not place undue
reliance on these non-U.S. GAAP measures as our only measures of
operating performance. EBITDA and Adjusted EBITDA should not be
considered as substitutes for other measures of financial
performance reported in accordance with U.S. GAAP.
DigitalGlobe, Inc.Unaudited
Condensed Consolidated Statements of Operations
For the three months ended For the nine months
ended September 30, September 30, (in
millions, except per share data) 2014 2013
2014 2013 Revenue $ 154.6 $
164.8 $ 468.9 $ 443.0 Costs and expenses: Cost of revenue,
excluding depreciation and amortization 40.9 46.7 121.5 134.9
Selling, general and administrative 55.8 60.6 167.2 204.9
Depreciation and amortization 57.7 59.4 172.9 165.7 Restructuring
charges — 3.1 1.1 37.0 Loss on abandonment of asset —
— 1.2 — Income (loss)
from operations 0.2 (5.0 ) 5.0 (99.5 ) Loss from early
extinguishment of debt — — — (17.8 ) Other income, net 0.1 0.1 0.2
0.5 Interest expense, net — (0.7 ) —
(3.5 ) Income (loss) before income taxes 0.3 (5.6 )
5.2 (120.3 ) Income tax benefit 0.6 3.8
1.1 36.9 Net income (loss) 0.9 (1.8 )
6.3 (83.4 ) Preferred stock dividends (1.0 ) (1.0 )
(3.0 ) (2.6 ) Net (loss) income less preferred stock
dividends (0.1 ) (2.8 ) 3.3 (86.0 ) Income allocated to
participating securities — —
(0.1 ) —
Net (loss) income available to common
stockholders $ (0.1 ) $ (2.8 ) $ 3.2 $ (86.0 )
(Loss) earnings per share: Basic (loss) earnings per share $ 0.00
$ (0.04 ) $ 0.04 $ (1.21 ) Diluted (loss) earnings
per share $ 0.00 $ (0.04 ) $ 0.04 $ (1.21 ) Weighted
average common shares outstanding: Basic 75.1
74.5 75.1 70.8 Diluted
75.1 74.5 76.1 70.8
DigitalGlobe, Inc.Reconciliation of
Net Income (Loss) to EBITDA and Adjusted EBITDA
For the three months ended For the nine
months ended September 30, September 30, (in
millions) 2014 2013
2014 2013 Net income (loss) $
0.9 $ (1.8 ) $ 6.3 $ (83.4 ) Depreciation and amortization 57.7
59.4 172.9 165.7 Interest expense, net — 0.7 — 3.5 Income tax
benefit (0.6 ) (3.8 ) (1.1 ) (36.9 )
EBITDA 58.0 54.5 178.1 48.9 Loss from early extinguishment
of debt — — — 17.8 Loss on abandonment of asset — — 1.2 —
Restructuring charges (1) — 3.1 1.1 37.0 Acquisition costs (1) — —
— 20.6 Integration costs (1) 3.5 8.0
12.9 23.1
Adjusted EBITDA $ 61.5
$ 65.6 $ 193.3 $ 147.4
_______________________________
(1) Restructuring, acquisition and integration costs consist of
non-recurring charges related to the combination with GeoEye.
EBITDA margin of 37.5% for third quarter 2014 and 33.1% for
third quarter 2013 is calculated by dividing EBITDA by U.S. GAAP
revenue. Adjusted EBITDA margin of 39.8% for third quarter 2014 and
39.8% for third quarter 2013 is calculated by dividing Adjusted
EBITDA by U.S. GAAP revenue. We have not provided a reconciliation
of our Adjusted EBITDA or Adjusted EBITDA margin outlook to the
comparable forward-looking U.S. GAAP financial measures because we
are unable to provide a forward-looking estimate of the reconciling
items between such non-U.S. GAAP forward-looking measures and the
comparable forward-looking U.S. GAAP measures. Certain factors that
are materially significant to our ability to estimate these items
are out of our control and/or cannot be reasonably predicted.
Accordingly, a reconciliation to the comparable forward-looking
U.S. GAAP measures is not available without unreasonable
effort.
DigitalGlobe, Inc.Unaudited
Condensed Consolidated Balance Sheets
September 30, December 31, (in
millions, except par value) 2014 2013
ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 127.4 $ 229.1 Restricted cash 4.8 6.9 Accounts
receivable, net of allowance for doubtful accounts of $0.6 and
$2.4, respectively 127.3 116.3 Short-term deferred contract costs
10.6 10.0 Prepaid and current assets 20.6 23.8 Deferred taxes (Note
12) 5.5 5.9 Total current assets 296.2
392.0 Property and equipment, net of accumulated depreciation of
$1,044.2 and $880.6, respectively 2,209.6 2,177.5 Goodwill 484.2
459.3 Intangible assets, net of accumulated amortization of $16.7
and $8.7, respectively 45.8 39.9 Aerial image library, net of
accumulated amortization of $45.2 and $41.3, respectively 5.2 9.1
Long-term restricted cash 2.7 4.5 Long-term deferred contract costs
42.6 44.9 Other assets 34.4 38.6 Total
assets $ 3,120.7 $ 3,165.8
LIABILITIES AND
STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts
payable $ 10.5 $ 20.9 Current portion of long-term debt 5.5 5.5
Other accrued liabilities 60.5 80.3 Current portion of deferred
revenue 103.8 81.3 Total current
liabilities 180.3 188.0 Deferred rev
enue 329.4 374.6
Long-term debt, net of discount 1,133.4 1,137.1 Long-term deferred
tax liability, net (Note 12) 76.8 80.0 Other liabilities 6.5
2.8 Total liabilities $ 1,726.4 $
1,782.5
COMMITMENTS AND CONTINGENCIES (Note 16)
STOCKHOLDERS’ EQUITY DigitalGlobe, Inc. stockholders’
equity:
Series A convertible preferred stock,
$0.001 par value; 0.08 shares authorized; 0.08 sharesissued and
outstanding at September 30, 2014; and 0.08 shares issued and
outstanding atDecember 31, 2013
— —
Common stock; $0.001 par value; 250.0
shares authorized; 75.9 shares issued and 75.2shares outstanding at
September 30, 2014 and 75.5 shares issued and 75.3
sharesoutstanding at December 31, 2013
0.2 0.2 Treasury stock, at cost; 0.7 shares at September 30, 2014
and 0.2 shares at December 31, 2013 (19.8 ) (3.5 ) Additional
paid-in capital 1,476.6 1,457.5 Accumulated deficit (64.6 )
(70.9 ) Total DigitalGlobe, Inc. stockholders’ equity
1,392.4 1,383.3 Noncontrolling interest 1.9 —
Total stockholders’ equity 1,394.3
1,383.3 Total liabilities and stockholders’ equity $ 3,120.7
$ 3,165.8
DigitalGlobe, Inc.Unaudited
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30,
(in millions) 2014 2013 CASH
FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 6.3 $
(83.4 ) Adjustments to reconcile net income (loss) to net cash
provided by operating activities: Depreciation and amortization
expense 172.9 165.7 Amortization of aerial image library, deferred
contract costs and lease incentive 11.6 12.6 Non-cash stock-based
compensation expense, net of capitalized stock-based compensation
expense 13.3 19.9 Excess tax benefit from share-based compensation
(1.9 ) — Amortization of debt issuance costs and accretion of debt
discount, net of capitalized interest — 3.6 Write-off of debt
issuance costs and debt discount — 12.8 Deferred income taxes (1.3
) (38.1 ) Loss on disposal of assets and other 1.4 (0.3 ) Changes
in working capital, net of assets acquired and liabilities assumed
in business combinations: Accounts receivable, net (8.1 ) 15.8
Deferred contract costs (6.4 ) (16.5 ) Other current and
non-current assets 4.5 3.1 Accounts payable (16.0 ) (3.4 ) Accrued
liabilities (2.0 ) (37.4 ) Deferred revenue (25.7 ) 35.3 Cash fees
paid for early extinguishment of long-term debt and debt discount
— (13.8 ) Net cash flows provided by operating
activities 148.6 75.9
CASH FLOWS
FROM INVESTING ACTIVITIES: Construction in progress additions
(193.9 ) (198.9 ) Acquisition of businesses, net of cash acquired
(35.7 ) (524.0 ) Other property and equipment additions (12.0 )
(12.7 ) Decrease in restricted cash 3.8 4.7
Net cash flows used in investing activities (237.8 )
(730.9 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt — 1,150.0 Repayment of debt (4.1 )
(483.9 ) Payment of debt issuance costs — (36.2 ) Proceeds from
exercise of stock options 8.6 36.9 Excess tax benefit from
share-based compensation 1.9 — Preferred stock dividend payment
(3.0 ) (2.0 ) Repurchase of common stock (15.0 ) — Principal
payments on capital lease obligations (0.9 ) —
Net cash flows (used in) provided by financing activities
(12.5 ) 664.8 Net (decrease) increase in cash and
cash equivalents (101.7 ) 9.8 Cash and cash equivalents, beginning
of period 229.1 246.2 Cash and cash
equivalents, end of period $ 127.4 $ 256.0
SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest,
net of capitalized amounts of $47.6 million and $32.6 million,
respectively — —
NON-CASH INVESTING AND FINANCING
ACTIVITIES: Changes to non-cash property, equipment and
construction in progress accruals, including interest 16.3 (5.0 )
Changes to non-cash deferred contract cost accruals (0.3 ) (2.4 )
Additions to capital lease obligations (3.1 ) — Issuance of shares
of common and convertible preferred stock for acquisition of
business — 837.8 Stock-based compensation awards issued in
acquisition of business, net of income taxes — 13.4 Non-cash
preferred stock dividend accrual (1.0 ) (1.0 )
DigitalGlobe, Inc.Investor Contact:David Banks,
303-684-4210ir@digitalglobe.comorMedia Contact:Nancy Coleman,
303-684-1674nancy.coleman@digitalglobe.com
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