LONGMONT, Colo. — (BUSINESS WIRE) — May 3, 2011 — DigitalGlobe, Inc. (NYSE: DGI), a leading global provider of commercial high-resolution earth imagery products and services, today reported financial results for the first quarter ended March 31, 2011.
First quarter 2011 revenue was $77.1 million, flat compared with the same period last year. Included in first 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 first quarter revenue is $24.8 million of deferrals related to the service level agreement (SLA) portion of EnhancedView.
The company reported a first quarter 2011 net loss of $(0.7) million, or $(0.02) per diluted share, compared with net income of $1.5 million, or $0.03 earnings per diluted share, for the same period last year.
First quarter 2011 Adjusted EBITDA, a non-GAAP financial measure, was $55.4 million, an increase of 49% compared with first quarter 2010 Adjusted EBITDA of $37.2 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 $60.5 million in the first quarter, up 37% compared with first quarter 2010. In the quarter, the company signed its fifth direct access program (DAP) customer and expects to bring that customer into service in early 2012.
“We are generating significant cash flow as evidenced by the strong growth in adjusted EBITDA, and are focused on improving revenue growth," said Jeff Tarr, the company’s new President and Chief Executive Officer. "Looking toward the future, we were pleased to sign our fifth direct access customer. This multi-year agreement is expected to come on line in early 2012 and to drive revenue from this important product line up to approximately $50 million annually.”
First Quarter Business Highlights
- Defense and Intelligence segment revenue was $61.7 million, down 1.4% compared with first quarter 2010. This excludes $24.8 million of deferrals related to EnhancedView SLA, and includes $6.4 million related to NextView.
- The company’s DAP product line generated $9.4 million in revenue for the first quarter.
- Commercial segment revenue was $15.4 million, up 6.2% compared with first quarter 2010.
- The company signed a five-year agreement with Turksat, the leading communications provider in Turkey. Turksat will re-sell imagery to both government and commercial customers in that country.
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 at least $275 million, with all but approximately $35 million related to the company’s construction of WorldView-3 and other EnhancedView-related infrastructure investments.
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 first 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
A replay of the call will be available through June 3, 2011 at the
U.S./Canada dial-in: 800-642-1687
International dial-in: 706-645-9291
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.
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
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.
Unaudited Condensed Consolidated Statements of Operations
|Three Months Ended|
|(in millions, except share and per share data)||2010||2011|
|Defense and Intelligence revenue||$ 62.6||$ 61.7|
|Cost of revenue excluding depreciation and amortization||10.1||11.8|
|Selling, general and administrative||24.8||30.1|
|Depreciation and amortization||29.1||29.2|
|Income from operations||13.1||6.0|
|Other income (expense), net||-||0.1|
|Interest income (expense), net||(9.9)||(7.7)|
|Income (loss) before income taxes||3.2||(1.6)|
|Income tax (expense) benefit||(1.7)||0.9|
|Net income (loss)||$ 1.5||$ (0.7)|
|Earnings (loss) per share:|
|Basic earnings (loss) per share||$ 0.03||$ (0.02)|
|Diluted earnings (loss) per share||$ 0.03||$ (0.02)|
|Weighted average common shares outstanding:|
Reconciliation of GAAP Net Income to Adjusted EBITDA
Three months ended
|(in millions, except per share data)||2010||2011|
|Net income (loss)||$||1.5||$||(0.7||)|
|Depreciation and amortization||29.1||29.2|
|Income tax expense (benefit)||1.7||(0.9||)|
|Amortization of Pre-FOC payment related to NextView||(6.4||)||(6.4||)|
|EnhancedView deferred revenue(1)||–||16.5|
|EnhancedView outstanding invoices not yet paid by NGA||–||8.3|
|Stock compensation expense||1.4||1.7|
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.
(1) First quarter EnhancedView deferred revenue includes $8.3 million invoiced in the fourth quarter of 2010 for which cash was received in the first quarter of 2011.
Unaudited Condensed Consolidated Balance Sheets
|(in millions, except share and per share data)||
|Cash and cash equivalents||$||179.3||$||163.7|
|Accounts receivable, net of allowance for doubtful accounts of $1.0 and $2.6, respectively||45.3||36.8|
|Prepaid and current assets||19.4||16.3|
|Total current assets||313.4||277.5|
|Property and equipment, net of accumulated depreciation of $478.2 and $507.4, respectively||879.1||920.2|
|Intangibles, net of accumulated amortization of $8.7 and $8.7, respectively||0.3||0.3|
|Aerial image library, net of accumulated amortization of $21.1 and $21.7, respectively||1.9||2.2|
|Long-term restricted cash||13.6||12.5|
|Long-term deferred contract costs||42.1||43.2|
|Other assets, net||7.2||6.9|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Other accrued liabilities||26.3||20.3|
|Current portion of deferred revenue||38.9||40.3|
|Total current liabilities||86.4||85.3|
|Long-term accrued liability||6.0||1.8|
|Deferred lease incentive||4.6||4.3|
|Long-term debt, net of discount||346.1||346.7|
|Long-term deferred tax liability, net||76.7||69.1|
|COMMITMENTS AND CONTINGENCIES|
Preferred stock, $0.001 par value; 24,000,000 shares authorized;
Common stock; $0.001 par value; 250,000,000 shares authorized;
|Treasury stock, at cost; 44,039 shares at December 31, 2010 and 50,395 shares March 31, 2011||(0.7||)||(0.9||)|
|Additional paid-in capital||512.7||515.1|
|Total stockholders’ equity||500.3||501.8|
|Total liabilities and stockholders’ equity||$||1,266.3||$||1,271.5|
Condensed Consolidated Statements of Cash Flows
|(in millions)||For the Three Months Ended March 31,|
|CASH FLOWS FROM OPERATING ACTIVITIES:|
|Net income (loss)||$||1.5||$||(0.7||)|
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:|
|Depreciation and amortization expense||29.1||29.2|
|EnhancedView deferred revenue||–||24.8|
|Recognition of pre-FOC payments||(6.4||)||(6.4||)|
|Amortization of aerial image library, deferred contract costs and lease incentive||1.2||1.7|
|Non-cash stock compensation expense||1.4||1.7|
|Amortization of debt issuance costs and debt discount||1.1||1.0|
|Deferred income taxes||1.6||(1.0||)|
|Changes in working capital, net of investing activities:|
|Accounts receivable, net||7.3||8.5|
|Aerial image library||(0.1||)||–|
|Prepaids and other assets||2.3||1.9|
|Deferred contract costs||(5.3||)||(2.4||)|
|Net cash flows provided by operating activities||44.1||60.5|
|CASH FLOWS FROM INVESTING ACTIVITIES:|
|Construction in progress additions||(3.3||)||(78.3||)|
|Other property, equipment and intangible additions||(1.0||)||(1.3||)|
|Decrease in restricted cash||0.6||3.1|
|Net cash flows used in investing activities||(3.7||)||(76.5||)|
|CASH FLOWS FROM FINANCING ACTIVITIES:|
|Proceeds from initial public offering, net of issuance costs||(0.3||)||–|
|Proceeds from exercise of stock options||5.2||0.6|
|Cash paid for treasury stock||–||(0.2||)|
|Net cash flows provided by financing activities||4.9||0.4|
|Net increase (decrease) in cash and cash equivalents||45.3||(15.6||)|
|Cash and cash equivalents, beginning of period||97.0||179.3|
|Cash and cash equivalents, end of period||142.3||163.7|
|SUPPLEMENTAL CASH FLOW INFORMATION:|
|Cash paid for income taxes||0.1||0.8|
|NON-CASH INVESTING AND FINANCING ACTIVITIES:|
|Changes to non-cash construction in progress accruals, including interest||14.3||9.3|