Revenue of $157.8 Million Up 5%Net Income of
$5.0 Million Up $26 MillionBoard Authorizes $75 Million Share
Repurchase
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 June 30, 2014.
Second quarter 2014 revenue was $157.8 million, a 5% increase
compared with the same period last year. Net income for the second
quarter was $5.0 million, with net income available to common
shareholders of $3.9 million, or $0.05 per diluted share. In the
second quarter 2013, the company reported a net loss of $(21.0)
million, with a net loss available to common shareholders of
$(22.0) million, or a loss of $(0.30) per diluted share.
Second quarter 2014 Adjusted EBITDA was $63.9 million with an
Adjusted EBITDA margin of 40.5%. This compares with Adjusted EBITDA
of $45.9 million in second quarter 2013, with an associated margin
of 30.5%, a 1,000 basis point increase year over year. Adjusted
EBITDA excludes the impact of restructuring, integration and other
costs.
With the imminent conclusion of the integration of GeoEye and
spending for WorldView-3, DigitalGlobe’s Board of Directors has
authorized a $75 million share repurchase, which is expected to be
executed in the next 18 months. The company may repurchase shares
in the open market or in privately negotiated transactions,
including under a Rule 10b5-1 plan, at the discretion of
management.
“We are pleased to report top-line growth, strong margin
expansion and free cash flow in line with expectations," said
Jeffrey R. Tarr, CEO of DigitalGlobe. “We are looking forward to
the launch of WorldView-3 in mid-August -- further extending our
commanding lead in all aspects of quality that matter to customers.
We are also pleased to introduce a $75 million share repurchase
that reflects our confidence in our future and our commitment to
balancing organic growth, M&A and return of capital in a
fashion intended to create shareowner value over time.”
Recent Business Highlights
- On July 23, the National
Geospatial-Intelligence Agency exercised its option to extend the
Service Level Agreement (SLA) portion of DigitalGlobe’s
EnhancedView contract for the period of September 1, 2014 through
August 31, 2015, including the increase of $50 million per year for
the SLA in connection with the launch of WorldView-3.
- Second quarter 2014 revenue from the U.
S. Government grew 15.5% to $95.5 million compared with second
quarter 2013, including a 66% increase in value-added services to
$32.3 million, driven by continued growth in analytics and the
Global Enhanced GEOINT Delivery (G-EGD) program.
- Diversified Commercial revenue declined
8% to $62.3 million in the quarter compared with second quarter
2013. The year-over-year decline was driven by two significant
customer deliveries in the prior year, which did not recur in the
current quarter, as well as ongoing weakness in Russia related to
the geopolitical situation in that country.
- DigitalGlobe was awarded a multi-year,
sole-source contract through the Department of Homeland Security to
help build a geospatial analytic solution that predicts
transportation risk.
- In July, DigitalGlobe agreed to provide
imagery to a large location-based services customer under a
multi-year, multi-million dollar contract.
- A major oil & gas company has
renewed its multi-year agreement with DigitalGlobe, upsizing its
relationship by approximately 30%.
- DigitalGlobe signed an agreement with
the World Resources Institute (WRI) to support its new Global
Forest Watch-Fires platform. The company will provide
high-resolution imagery of recent and active fires and leverage its
Tomnod crowdsourcing platform to enable volunteers to identify and
tag burned areas.
- The company agreed to provide archived
imagery of the entire country to the United Arab Emirates under a
multi-year, multi-million dollar contract.
- The company renewed multiple Direct
Access Program (DAP) agreements and the Australian
Geospatial-Intelligence Organization (AGO) signed a separate
multi-year, multi-million dollar imagery agreement.
2014 Outlook
For 2014, the company continues to expect to report revenue in a
range of $630 million to $660 million. The company expects to
achieve a full-year Adjusted EBITDA margin of approximately 43%
with a fourth quarter 2014 Adjusted EBITDA margin of 50%. The
company also expects 2014 capital expenditures of approximately
$170 million.
Conference Call Information
DigitalGlobe’s management will host a conference call today,
July 31, 2014 at 5 p.m. ET to discuss its 2014 second 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: 75283458 A
replay of the call will be available through August 31, 2014 at the
following numbers: U.S./Canada dial-in: (855) 859-2056
International dial-in: (404) 537-3406 Passcode: 75283458
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.
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 we are currently depreciating, 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
June 30,
(in millions, except per share data)
2014
2013 Revenue $ 157.8 $ 150.6 Costs and expenses: Cost of
revenue, excluding depreciation and amortization 41.1 47.3 Selling,
general and administrative 58.4 64.5 Depreciation and amortization
57.6 59.0 Restructuring charges - 13.6
Income (loss) from operations 0.7 (33.8 ) Other income, net - 0.1
Interest expense, net - (1.4 ) Income (loss)
before income taxes 0.7 (35.1 ) Income tax benefit 4.3
14.1 Net income (loss) 5.0 (21.0 ) Preferred
stock dividends (1.0 ) (1.0 ) Net income (loss) less
preferred stock dividends 4.0 (22.0 ) Income allocated to
participating securities (0.1 ) —
Net
income (loss) available to common stockholders $ 3.9 $
(22.0 ) Earnings (loss) per share: Basic earnings (loss) per
share $ 0.05 $ (0.30 ) Diluted earnings (loss) per share $
0.05 $ (0.30 ) Weighted average common shares outstanding:
Basic 75.1 74.0 Diluted 76.0
74.0
DigitalGlobe, Inc.
Reconciliation of Net Income (Loss) to
EBITDA and Adjusted EBITDA
For the three months ended
June 30,
(in millions)
2014 2013 Net income
(loss) $ 5.0 $ (21.0 ) Depreciation and amortization 57.6 59.0
Interest expense, net — 1.4 Income tax benefit (4.3 )
(14.1 )
EBITDA 58.3 25.3 Restructuring charges (1) — 13.6
Acquisition costs (1) — (0.2 ) Integration costs (1) 5.6
7.2
Adjusted EBITDA $ 63.9 $
45.9 (1) Restructuring, acquisition and integration
costs consist of non-recurring charges related to the combination
with GeoEye.
EBITDA margin of 36.9% for second quarter 2014 and 16.8% for
second quarter 2013 is calculated by dividing EBITDA by U.S. GAAP
revenue. Adjusted EBITDA margin of 40.5% for second quarter 2014
and 30.5% for second 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
(in millions, except par value)
June 30,
2014
December 31,
2013
ASSETS CURRENT ASSETS: Cash and cash equivalents $
177.8 $ 229.1 Restricted cash 4.6 6.9 Accounts receivable, net of
allowance for doubtful accounts of $0.7 and $2.4, respectively
117.3 116.3 Prepaid and current assets 24.9 33.8 Deferred taxes
5.5 5.9 Total current assets 330.1
392.0 Property and equipment, net of accumulated depreciation of
$990.0 and $880.6, respectively 2,188.2 2,177.5 Goodwill 485.1
459.3 Intangible assets, net of accumulated amortization of $14.0
and $8.7, respectively 48.5 39.9 Aerial image library, net of
accumulated amortization of $44.2 and $41.3, respectively 6.2 9.1
Long-term restricted cash 4.0 4.5 Long-term deferred contract costs
41.7 44.9 Other assets 36.7 38.6 Total
assets $ 3,140.5 $ 3,165.8
LIABILITIES AND
STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts
payable $ 17.5 $ 20.9 Current portion of long-term debt 5.5 5.5
Other accrued liabilities 65.6 80.3 Current portion of deferred
revenue 83.7 81.3 Total current
liabilities 172.3 188.0 Deferred rev
enue 350.7 374.6
Long-term debt, net of discount 1,134.6 1,137.1 Long-term deferred
tax liability, net 79.3 80.0 Other liabilities 6.1
2.8 Total liabilities $ 1,743.0 $ 1,782.5
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’
EQUITY DigitalGlobe, Inc. stockholders’ equity:
Series A convertible preferred stock,
$0.001 par value; 0.08 shares authorized; 0.08
shares issued and outstanding at June 30, 2014 and
December 31, 2013
-
-
Common stock; $0.001 par value; 250.0
shares authorized; 75.7 shares issued and 75.5
shares outstanding at June 30, 2014; and 75.5 shares
issued and 75.3 shares outstanding at December 31,
2013
0.2
0.2
Treasury stock, at cost; 0.2 shares at June 30, 2014 and December
31, 2013 (4.6 ) (3.5 ) Additional paid-in capital 1,465.5 1,457.5
Accumulated deficit (65.5 ) (70.9 ) Total
DigitalGlobe, Inc. stockholders’ equity 1,395.6 1,383.3
Non-controlling interest 1.9 - Total
stockholders’ equity 1,397.5 1,383.3
Total liabilities and stockholders’ equity $ 3,140.5 $
3,165.8
DigitalGlobe, Inc.
Unaudited Condensed Consolidated
Statements of Cash Flows
For the six months ended
June 30,
(in millions)
2014 2013 CASH FLOWS
FROM OPERATING ACTIVITIES: Net income (loss) $ 5.4 $ (81.6 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization expense 115.2
105.8 Amortization of aerial image library, deferred contract costs
and lease incentive 8.1 8.1 Non-cash stock-based compensation
expense, net of capitalized stock-based compensation expense 8.0
16.0 Loss on abandonment of asset 1.2 - Amortization of debt
issuance costs and accretion of debt discount, net of capitalized
interest - 3.1 Write-off of debt issuance costs and debt discount -
12.8 Deferred income taxes (0.7 ) (33.9 ) Changes in working
capital, net of assets acquired and liabilities assumed in business
combinations: Accounts receivable, net 1.9 4.6 Other current and
non-current assets 6.5 (5.8 ) Accounts payable (12.1 ) (1.7 )
Accrued liabilities (7.8 ) (31.5 ) Deferred revenue (24.5 ) 19.5
Cash fees paid for early extinguishment of long-term debt and debt
discount – (13.8 ) Net cash flows provided by
operating activities 101.2 1.6
CASH
FLOWS FROM INVESTING ACTIVITIES: Construction in progress
additions (111.9 ) (135.0 ) Acquisition of businesses, net of cash
acquired (35.7 ) (524.0 ) Other property and equipment additions
(5.2 ) (9.0 ) Decrease in restricted cash 2.8
2.7 Net cash flows used in investing activities
(150.0 ) (665.3 )
CASH FLOWS FROM FINANCING
ACTIVITIES: Proceeds from issuance of debt – 1,150.0 Repayment
of debt (2.8 ) (482.6 ) Payment of debt issuance costs – (36.2 )
Proceeds from exercise of stock options 3.1 28.7 Preferred stock
dividend payment (2.0 ) (1.0 ) Principal payments on capital lease
obligations (0.8 ) - Net cash flows (used in)
provided by financing activities (2.5 ) 658.9
Net decrease in cash and cash equivalents (51.3 ) (4.8 ) Cash and
cash equivalents, beginning of period 229.1
246.2 Cash and cash equivalents, end of period $ 177.8
$ 241.4
SUPPLEMENTAL CASH FLOW
INFORMATION: Changes to non-cash property, equipment and
construction in progress accruals, including interest 2.2 (13.3 )
Changes to non-cash deferred contract cost accruals (0.6 ) (9.0 )
Capital lease obligations (3.1 ) – Issuance of shares of common and
convertible preferred stock for acquisition of business – 836.5
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 )
DigitalGlobeInvestor Contact:David Banks,
303-684-4210ir@digitalglobe.comorMedia Contact:Nancy
Coleman, 303-684-1674nancy.coleman@digitalglobe.com
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