Longer Use Lives will Drive Free Cash Flow and Reduce Long-Term Capital Requirements
Company Reiterates Full Year 2014 Guidance
LONGMONT, Colo. — (BUSINESS WIRE) — December 18, 2014 —
DigitalGlobe, Inc. (NYSE: DGI), a leading global provider of commercial high-resolution earth observation and advanced geospatial solutions, today reported that, as a result of its annual satellite life review, it will extend the useful lives of two of its satellites: WorldView-1 and WorldView-2. The company has also assigned an initial useful life to its newest satellite, WorldView-3 that is slightly longer than the original use lives assigned to WorldView-1 and WorldView-2.
The extended use lives will drive improved capital efficiency, lower capital expenditures, and better cash flows for DigitalGlobe. WorldView-1 will be extended by 2.5 years to 13 years, a 24% lifespan improvement, and WorldView-2 will be extended two years to 13 years, an 18% lifespan improvement.
“We have now completed an extended period of investment in building out the world’s leading earth observation capability,” said Jeffrey R. Tarr, CEO of DigitalGlobe. “Extending the useful lives of our satellites will further reduce the capital required to sustain this unmatched capability over the long term. We expect this to result in a less capital intensive business model, improved free cash flow and returns, and improving shareholder value.”
In addition, the use-life extensions will result in non-cash reductions to revenue and depreciation expense effective October 1, 2014.
WorldView-1, which was originally expected to reach its end of life in the second quarter of 2018, is now expected to reach end of life in the fourth quarter of 2020. As previously disclosed, the period of recognition of deferred revenue related to the NextView contract will be extended to reflect the new longer use life of WorldView-1. Beginning in the fourth quarter of 2014, this change will reduce the non-cash amortization of NextView deferred revenue by $10.4 million annually and $2.6 million per quarter – from $25.5 million to $15.1 million per year, and from $6.4 million to $3.8 million per quarter. Depreciation expense on WorldView-1 will decrease by $18.4 million per year and $4.6 million per quarter.
WorldView-2, which was originally expected to reach its end of life in the fourth quarter of 2020, is now expected to reach end of life in the fourth quarter of 2022. This change reduces non-cash amortization of deferred revenue related to certain Direct Access contracts by $1.4 million annually and $0.3 million per quarter. Depreciation expense on WorldView-2 will decrease by $10.2 million per year and $2.6 million per quarter.
These changes are summarized in the following chart:
|Effect on the 3 Months Ended December 31, 2014|
|(in $ millions)|
|Decrease in Revenue||(0.3)||(2.6)|
Decrease in Depreciation
|Effect on the 12 Months Ended December 31, 2015|
|(in $ millions)|
|Decrease in Revenue||(1.4)||(10.4)|
Decrease in Depreciation
WorldView-3, which was launched in August 2014, has been assigned an initial use life of 11.5 years through the first quarter of 2026, leading to depreciation expense of $56.5 million annually beginning on Oct. 1, 2014.
The company continues to expect to report revenue for the full year 2014 in a range of $640 million to $660 million. EBITDA, Adjusted EBITDA and capital expenditure estimates also remain unchanged from expectations provided on the company’s third quarter earnings announcement on October 30, 2014.
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.