Third quarter 2013 revenue was $164.8 million, a 54% increase compared with the same period last year. The company reported a net loss for the third quarter of 2013 of $(1.8) million, and a net loss available to common shareholders of $(2.8) million, including $1.0 million of preferred stock dividends, or $(0.04) per diluted share, compared with net income available to common stockholders of $8.5 million or $0.18 per diluted share in the third quarter of 2012. Included in this quarter's result is $11.1 million of restructuring and integration expenses related to the combination with GeoEye.
Third quarter 2013 EBITDA was $54.5 million. Not including $11.1 million of restructuring and integration related to the combination with GeoEye yields Adjusted EBITDA of $65.6 million, with an associated margin of approximately 40%.
"We built significant momentum in the business during the third quarter -- accelerating growth, expanding margins and generating positive free cash flow," said Jeffrey R. Tarr, Chief Executive Officer. "I'm proud of our team's outstanding execution, achieving more than $100 million of synergy savings related to our combination with GeoEye. We remain confident in our ability to drive double-digit growth and to return to 50 percent EBITDA margin after we complete our 18 month integration process in the second half of 2014."
Third Quarter Business Highlights
- U. S. Government revenue grew 53% to $100.8 million compared with third quarter 2012, including a 353% increase in value-added services to $37.6 million.
- Diversified Commercial revenue grew 55% to $64 million in the quarter compared with third quarter 2012.
- Next 12-month backlog was $515.8 million, up 41% year over year, as the company continues to build improved revenue visibility across its customer relationships.
- Among U. S. Government customers, the Company renewed and expanded the Global Enhanced GEOINT Delivery (G-EGD) program with the National Geospatial-Intelligence Agency (NGA).
- The company received multiple awards serving government customers in Russia and Latin America to deliver environmental monitoring and base mapping services.
- The company signed an agreement with a Non-Government Organization (NGO) to monitor oil theft activity in an African country and renewed a contract with the Satellite Sentinel Project to monitor human rights atrocities in the Sudan.
2013 Outlook
The company expects adjusted EBITDA of at least $228 million and an adjusted EBITDA margin of at least 36%. The company is targeting revenue at the bottom of its original range of $635 million to $660 million. Capital expenditures for the year are expected to be approximately $240 million.
"We are targeting $635 million in revenue, and have high confidence in our ability to deliver upon our original EBITDA margin guidance of 36% across a range of revenue scenarios," said Yancey Spruill, Chief Financial Officer.
Conference Call Information
DigitalGlobe's management will host a conference call today, October 31, 2013 at 12 p.m. ET to discuss its third quarter 2013 financial and operating results.
The conference call dial-in numbers are as follows:
U.S./Canada dial-in: (866) 863-0053
International dial-in: (706) 758-7563
Passcode: 84201237
A replay of the call will be available through November 29, 2013 at the following numbers:
U.S./Canada dial-in: (855) 859-2056
International dial-in: (404) 537-3406
Passcode: 84201237
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 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
This document 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 and generally can be identified by the use of 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; 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 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; adjustments to the fair value of certain of the Company's assets and liabilities, including estimates made in connection with the strategic combination of the Company and GeoEye, Inc.; the outcome of pending or threatened litigation; the loss or impairment of our satellites; delays in the construction and launch of any of 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 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 U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2012.
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. In 2013, 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 net revenue generating potential of the satellite.
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 restructuring costs, acquisition costs and integration costs as these are non-core items. Restructuring costs are costs incurred to realize efficiencies from the GeoEye acquisition, 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. Adjusted EBITDA margin is calculated by divided Adjusted EBITDA by U.S. GAAP net revenue.
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 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
September 30,
----------------------------
(in millions, except per share data) 2013 2012
---------------------------------------------- ------------- -------------
Revenue $ 164.8 $ 107.2
Costs and expenses:
Cost of revenue, excluding depreciation and
amortization 46.7 21.5
Selling, general and administrative 60.6 40.1
Depreciation and amortization 59.4 28.9
Restructuring charges 3.1 -
------------- -------------
(Loss) income from operations (5.0) 16.7
Loss from early extinguishment of debt - -
Other income (expense), net 0.1 (0.7)
Interest expense, net (0.7) (1.9)
------------- -------------
(Loss) income before income taxes (5.6) 14.1
Income tax benefit (expense) 3.8 (5.6)
------------- -------------
Net (loss) income (1.8) 8.5
Preferred stock dividends (1.0) --
------------- -------------
Net (loss) income less preferred stock
dividends (2.8) 8.5
Income allocated to participating securities -- --
------------- -------------
Net (loss) income available to common
stockholders $ (2.8) $ 8.5
============= =============
(Loss) earnings per share:
Basic (loss) earnings per share $ (0.04) $ 0.18
============= =============
Diluted (loss) earnings per share $ (0.04) $ 0.18
============= =============
Weighted average common shares outstanding:
Basic 74.5 46.2
============= =============
Diluted 74.5 46.5
============= =============
DigitalGlobe, Inc.
Reconciliation Net Income (Loss) EBITDA and Adjusted EBITDA
For the three months ended
September 30,
----------------------------
(in millions) 2013 2012
------------- -------------
Net (loss) income $ (1.8) $ 8.5
Depreciation and amortization 59.4 28.9
Interest expense, net 0.7 1.9
Income tax expense (benefit) (3.8) 5.6
------------- -------------
EBITDA 54.5 44.9
Loss from early extinguishment of debt -- --
Restructuring charges (1) 3.1 --
Acquisition costs (1) -- 7.5
Integration costs (1) 8.0 --
------------- -------------
Adjusted EBITDA $ 65.6 $ 52.4
============= =============
(1) Restructuring, acquisition and integration costs consist of charges
related to the combination with GeoEye.
DigitalGlobe, Inc.
Unaudited Condensed Consolidated Balance Sheets
September 30, December 31,
(in millions, except par value) 2013 2012
-------------------------------------------- -------------- --------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 256.0 $ 246.2
Restricted cash 16.6 3.8
Accounts receivable, net of allowance for
doubtful accounts of $3.2 and $2.9,
respectively 90.3 67.0
Prepaid and current assets 27.6 18.6
Deferred taxes 70.7 43.9
-------------- --------------
Total current assets 461.2 379.5
Property and equipment, net of accumulated
depreciation of $831.2 and $676.2,
respectively 2,162.2 1,115.2
Goodwill 453.1 8.7
Intangible assets, net of accumulated
amortization of $6.1 and $0, respectively 38.5 -
Aerial image library, net of accumulated
amortization of $39.3 and $33.4,
respectively 11.0 16.4
Long-term restricted cash 6.7 8.3
Long-term deferred contract costs 46.8 37.3
Other assets 41.0 12.1
-------------- --------------
Total assets $ 3,220.5 $ 1,577.5
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 16.3 $ 10.2
Current portion of long-term debt 5.5 5.0
Other accrued liabilities 74.3 56.3
Current portion of deferred revenue 101.2 42.9
-------------- --------------
Total current liabilities 197.3 114.4
Deferred revenue 375.9 386.8
Long-term debt, net of discount 1,138.4 478.6
Long-term deferred tax liability, net 142.4 55.6
Other liabilities 2.3 2.7
-------------- --------------
Total liabilities $ 1,856.3 $ 1,038.1
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value; 24.0
shares authorized; no shares issued and
outstanding at September 30, 2013 and
December 31, 2012 - -
Series A convertible preferred stock, $0.001
par value, 0.08 shares authorized; 0.08
issued and outstanding at September 30,
2013; and no shares authorized, issued and
outstanding at December 31, 2012 - -
Common stock; $0.001 par value; 250.0 shares
authorized; 75.4 shares issued and 75.2
shares outstanding at September 30, 2013;
and 47.2 shares issued and 47.1 outstanding
at December 31, 2012 0.2 0.2
Treasury stock, at cost; 0.2 shares at
September 30, 2013 and 0.1 shares at
December 31, 2012 (3.2) (2.0)
Additional paid-in capital 1,453.2 543.8
Accumulated deficit (86.0) (2.6)
-------------- --------------
Total stockholders' equity 1,364.2 539.4
-------------- --------------
Total liabilities and stockholders' equity $ 3,220.5 $ 1,577.5
============== ==============
DigitalGlobe, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
For the nine months ended
September 30,
----------------------------
(in millions) 2013 2012
---------------------------------------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (83.4) $ 21.9
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization expense 165.7 86.5
Amortization of aerial image library,
deferred contract costs and lease incentive 12.6 15.1
Non-cash stock compensation expense 19.9 7.2
Amortization of debt issuance costs and
accretion of debt discount 3.6 2.8
Deferred income taxes (38.1) 15.0
Write-off of debt issuance costs and debt
discounts 12.8 -
Other (0.3) 1.1
Changes in working capital, net of assets
acquired and liabilities assumed in business
combinations:
Accounts receivable, net 15.8 (9.1)
Other current and non-current assets 3.1 (9.5)
Accounts payable (3.4) (3.1)
Accrued liabilities (37.4) (0.5)
Deferred revenue 35.3 63.2
Deferred contract costs (16.5) (0.5)
Payment of 2011 Senior Secured debt discount (13.8) -
------------- -------------
Net cash flows provided by operating
activities 75.9 190.1
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction in progress additions (198.9) (152.8)
Acquisition of businesses, net of cash
acquired (524.0) -
Other property and equipment additions (12.7) (7.8)
Investment in joint venture - (0.3)
Decrease in restricted cash 4.7 6.9
------------- -------------
Net cash flows used in investing activities (730.9) (154.0)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 1,150.0 -
Repayment of debt (483.9) (3.8)
Preferred stock dividend payment (2.0) -
Proceeds from exercise of stock options 36.9 2.5
Tax benefit from the exercise of stock
options - 0.5
Payment of debt issuance costs (36.2) -
------------- -------------
Net cash flows provided by (used in) financing
activities 664.8 (0.8)
------------- -------------
Net increase in cash and cash equivalents 9.8 35.3
Cash and cash equivalents, beginning of period 246.2 198.5
------------- -------------
Cash and cash equivalents, end of period $ 256.0 $ 233.8
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of capitalized
amounts of $32.6 and $17.3, respectively $ - $ 4.8
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Changes to non-cash property, equipment and
construction in progress accruals, including
interest (5.0) 10.1
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) -
Contacts Investor Contact: David Banks (303) 684-4210 ir@digitalglobe.com Media Contact: Nancy Coleman (303) 684-1674 nancy.coleman@digitalglobe.com