Raises Full Year Revenue and Adjusted EBITDA
OutlookRevenue up 4.9% to $181.8 MillionNet income up
56.3% to $15.0 MillionAdjusted EBITDA up 6.2% to $97.6
Million
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, 2016.
Third Quarter Financial Summary:
- Diversified Commercial revenue grew
8.0% due to new commercial contracts and timing of deliveries.
- U.S. Government revenue grew 3.2%
driven by demand for analytic value-added products and
services.
- Net income increased 56.3% to $15.0
million, or $0.21 per diluted share.
- Net income margin improved 280 bps to
8.3%.
- Adjusted EBITDA increased 6.2% to $97.6
million.
- Adjusted EBITDA margin improved 70 bps
to 53.7%.
- Net cash flows from operations
decreased 22.8% to $66.1 million due to timing of collections.
- Free cash flow was $0.1 million due to
timing of collections and launch payments for WorldView-4.
Recent Highlights:
- On October 7, 2016, entered into a
definitive agreement to acquire The Radiant Group, Inc., a leading
provider of geospatial solutions to the U.S. intelligence
community.
- The National Geospatial-Intelligence
Agency awarded the fifth year of the Global Enhanced GEOINT
Delivery platform (Global-EGD).
- Repurchased 364,226 shares of common
stock for $9.6 million at an average price of $26.30 during the
third quarter and repurchased 14,326,091 shares of common stock for
$306.0 million since initiation of the program in July 2014.
- Prepared for the launch of WorldView-4
in early November 2016.
“We are pleased to report that solid execution of our strategy
is delivering better than expected results," said Jeffrey R. Tarr,
DigitalGlobe CEO. "With the upcoming launch of WorldView-4 and our
acquisition of Radiant Group, we will be even better positioned to
support our customers as the leading commercial source of earth
imagery and geospatial analytics.”
Revised 2016 Revenue and Adjusted EBITDA Outlook:
- Revenue in a range of $700 million to
$710 million.
- Adjusted EBITDA in a range of $365
million to $375 million.
- Capital expenditures of approximately
$135 million.(1)
_________________________________
(1) Excludes capitalized interest
We have not provided a reconciliation of our Adjusted EBITDA
outlook to forward-looking net income, the comparable U.S. GAAP
financial measure, because it is difficult to reasonably provide a
forward-looking estimate of the reconciling items between such
non-U.S. GAAP forward-looking measure and the comparable
forward-looking U.S. GAAP measure. Certain factors that are
materially significant to our ability to estimate these items are
out of our control and/or cannot be reasonably predicted. The
nature of the assets under construction, timing of capital
expenditures and uncertainty of timing of placing assets in service
impact certain components of net income and our ability to
reasonably predict net income. These items include income tax
expense, interest expense and depreciation. Accordingly, a
reconciliation to the comparable forward-looking U.S. GAAP measure
is not available within a reasonable range of predictability.
Conference Call Information:
DigitalGlobe’s management will host a conference call today,
October 25, 2016 at 5 p.m. ET to discuss its 2016 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: 97915625 A replay of the call will be available
through November 25, 2016 at the following numbers: U.S./Canada
dial-in: (855) 859-2056 International dial-in: (404) 537-3406
Passcode: 97915625
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, are available on the Investor Relations section of the
company’s website at www.digitalglobe.com.
About DigitalGlobe
DigitalGlobe is a leading global provider of high-resolution
Earth-imagery products and services sourced from our own advanced
satellite constellation and third-party providers. Our imagery
solutions support a wide variety of users in defense and
intelligence, civil agencies, mapping and analysis, environmental
monitoring, oil and gas exploration, infrastructure management,
Internet portals, and navigation technology. Each day users depend
on us to better understand our changing planet in order to save
lives, resources and time.
DigitalGlobe is a registered trademark of DigitalGlobe.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein, including statements about
our 2016 outlook, in the management quotation and about our planned
acquisition of The Radiant Group, contain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. 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.
Forward-looking statements are based upon our current
expectations and assumptions of future events and are subject to
risks and uncertainties that could cause our actual results or
performance to differ materially from those indicated by such
forward-looking statements. Some of the risks and uncertainties
that could cause actual results to differ include, but are not
limited to: the loss or reduction in scope 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; our ability to
meet our obligations under the EnhancedView contract; our reliance
on a limited number of vendors to provide certain key products or
services to us; breach of our system security measures or loss of
our secure facility clearance and accreditation; the loss or damage
to 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; loss or damage to the
content contained in our ImageLibrary; interruption or failure of
our ground systems 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; changes in
political or economic conditions, including fluctuations in the
value of foreign currencies, interest rates, energy and commodity
prices, trade laws and the effects of governmental initiatives to
manage economic conditions; our ability to recruit, hire or retain
key employees or a highly skilled and diverse workforce; failure to
obtain or maintain required regulatory approvals and licenses; and,
changes in U.S. or foreign law or regulation that may limit our
ability to distribute our imagery products and services. Additional
risks and uncertainties related to the Radiant Group acquisition
include the possibility that satisfaction of the closing conditions
to the planned acquisition may be delayed or may not be satisfied
or waived; potential loss of key employees and customers of the
acquired business; difficulties managing and integrating
operations; exposure to unanticipated costs or liabilities
resulting from the acquisition; and any changes in general economic
and/or industry-specific conditions. Additional information
concerning these and other risk factors can be found in our filings
with the Securities and Exchange Commission, including Item 1A of
our Annual Report on Form 10-K for the year ended December 31,
2015.
We undertake no obligation to revise or update any
forward-looking statements, except as required by law. 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. 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 (loss) 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.
Adjusted EBITDA 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 EBITDA 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. Current depreciation expense is also 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 restructuring and other
re-engineering costs, related to specific restructuring and
re-engineering actions the Company previously initiated because the
Company does not believe these costs are indicative of the
underlying operating performance of our business and its ongoing
operations. The amount and timing of these restructuring and other
re-engineering costs are dependent on the size, type and status of
the specific actions undertaken as part of our restructuring or
re-engineering plans. Additionally, Adjusted EBITDA further adjusts
EBITDA to exclude joint venture gains and losses and the gain on
subsidiary disposition because these are non-core items that are
not related to our primary operations.
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-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.
Free Cash Flow. Free cash flow is defined as net cash flows
provided by operating activities less net cash flows used in
investing activities (excluding acquisition of businesses, net of
cash acquired and excluding other strategic investments). Free cash
flow is not a recognized term under U.S. GAAP and may not be
defined similarly by other companies. Free cash flow should not be
considered an alternative to “operating income (loss),” “net income
(loss),” “net cash flows provided by (used in) operating
activities” or any other measure determined in accordance with U.S.
GAAP. Since free cash flow includes investments in operating
assets, we believe this non-GAAP liquidity measure is useful in
addition to the most comparable U.S. GAAP measure — “net cash flows
provided by (used in) operating activities” because it provides
information about the amount of cash generated before acquisitions
of businesses that is then available to repay debt obligations,
make investments, fund acquisitions, and for certain other
activities. 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.
Performance against key metrics:
For the three months ended September 30, ($
in millions) 2016 2015 Revenue $
181.8 $ 173.3 Net income $ 15.0 $ 9.6 Net income margin 8.3
% 5.5 % Adjusted EBITDA $ 97.6 $ 91.9 Adjusted EBITDA margin 53.7 %
53.0 % Net cash flows provided by operating activities $ 66.1 $
85.6 Free cash flow $ 0.1 $ 51.5
Net income margin is calculated by dividing net income by U.S.
GAAP revenue. Adjusted EBITDA margin is calculated by dividing
Adjusted EBITDA by U.S. GAAP revenue.
DigitalGlobe, Inc.Consolidated
Statements of Operations
For the three months ended For the nine months
ended September 30, September 30, (in
millions, except per share data) 2016 2015
2016 2015 Revenue $ 181.8 $
173.3 $ 532.7 $ 520.7 Costs and expenses: Cost of revenue,
excluding depreciation and amortization 39.9 34.3 112.5 110.8
Selling, general and administrative 46.5 49.6 135.7 159.5
Depreciation and amortization 64.6 70.4 202.5 206.4 Restructuring
charges 1.0 0.4 5.5
3.0 Income from operations 29.8 18.6 76.5 41.0
Interest expense, net (4.0 ) (5.6 ) (13.8 ) (23.7 ) Other income,
net — 1.6 — 1.6
Income before income taxes 25.8 14.6 62.7 18.9 Income tax
expense (9.5 ) (4.6 ) (23.4 ) (5.8 ) Equity in earnings from joint
ventures, net of tax (1.3 ) (0.4 ) (3.5 )
(0.4 ) Net income 15.0 9.6 35.8 12.7 Preferred stock
dividends (1.0 ) (1.0 ) (3.0 ) (3.0 )
Net income less preferred stock dividends 14.0 8.6 32.8 9.7 Income
allocated to participating securities (0.7 ) (0.4 )
(1.5 ) (0.4 ) Net income available to common
stockholders $ 13.3 $ 8.2 $ 31.3 $ 9.3
Earnings per share: Basic earnings per share $ 0.21 $
0.12 $ 0.49 $ 0.13 Diluted earnings per share
$ 0.21 $ 0.12 $ 0.49 $ 0.13 Weighted
average common shares outstanding: Basic 62.6
70.5 63.5 71.7 Diluted
63.4 70.9 64.0 72.4
DigitalGlobe, Inc.Reconciliation of
Net Income to EBITDA and Adjusted EBITDA
For the three months ended
For the nine months ended September 30, September
30, (in millions) 2016 2015
2016 2015 Net income $ 15.0 $ 9.6 $ 35.8 $
12.7 Depreciation and amortization 64.6 70.4 202.5 206.4 Interest
expense, net 4.0 5.6 13.8 23.7 Income tax expense 9.5
4.6 23.4 5.8 EBITDA 93.1 90.2 275.5
248.6 Restructuring charges 1.0 0.4 5.5 3.0 Other re-engineering
charges 2.2 2.5 3.8 2.9 Joint venture losses, net 1.3 0.4 3.5 0.4
Gain on disposition of subsidiary — (1.6 ) —
(1.6 ) Adjusted EBITDA $ 97.6 $ 91.9 $ 288.3 $ 253.3
DigitalGlobe, Inc.Reconciliation of
Net Cash Flows Provided by Operating Activities to Free Cash
Flow
For the three months ended For the nine
months ended September 30, September 30, (in
millions) 2016
2015
2016 2015 Net cash flows
provided by operating activities $ 66.1 $ 85.6 $ 214.7 $ 237.5 Net
cash flows used in investing activities (68.5 ) (34.1 ) (161.3 )
(106.3 ) Investment in joint venture 2.5 —
10.0 5.0 Free cash flow $ 0.1
$ 51.5 $ 63.4 $ 136.2
DigitalGlobe, Inc.Consolidated
Balance Sheets
September 30, December 31, (in
millions, except par value) 2016 2015
ASSETS Current Assets: Cash and cash equivalents $
87.9 $ 126.1 Restricted cash 2.4 3.6 Accounts receivable, net of
allowance for doubtful accounts of $1.7 and $2.8, respectively
104.5 90.8 Deferred contract costs 12.1 13.5 Prepaid and other
current assets 20.7 17.4 Total current
assets 227.6 251.4 Property and equipment, net of accumulated
depreciation of $1,334.3 and $1,179.4, respectively 2,027.3 2,080.2
Goodwill 484.1 484.1 Intangible assets, net of accumulated
amortization of $35.8 and $29.6, respectively 26.7 32.9 Long-term
restricted cash 5.0 4.3 Long-term deferred contract costs 49.7 47.1
Other assets 23.5 13.2
Total
assets $ 2,843.9 $ 2,913.2
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $
8.3 $ 3.9 Current portion of long-term debt 5.5 5.5 Deferred
revenue 86.0 80.3 Other accrued liabilities 53.4
64.4 Total current liabilities 153.2 154.1 Long-term
debt, net of discount and debt issuance costs 1,104.4 1,104.4
Deferred revenue, non-current 233.2 284.0 Deferred income taxes,
net, non-current 112.8 86.4 Other liabilities 35.1
36.2
Total liabilities $ 1,638.7 $
1,665.1
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 September 30, 2016 and December 31,2015
— —
Common stock; $0.001 par value; 250.0
shares authorized; 76.9 shares issuedand 62.4 shares outstanding at
September 30, 2016 and 76.6 shares issued and67.4 shares
outstanding at December 31, 2015
0.2 0.2
Treasury stock, at cost; 14.5 shares at
September 30, 2016 and 9.2 shares atDecember 31, 2015
(312.5 ) (225.8 ) Additional paid-in capital 1,511.8 1,502.8
Retained earnings (accumulated deficit) 5.7
(29.1 )
Total stockholders’ equity 1,205.2
1,248.1
Total liabilities and stockholders’
equity $ 2,843.9 $ 2,913.2
DigitalGlobe, Inc.Consolidated
Statements of Cash Flows
For the nine months ended September 30,
(in millions) 2016 2015 CASH FLOWS FROM
OPERATING ACTIVITIES: Net income $ 35.8 $ 12.7 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 202.5 206.4
Stock-based compensation expense, net of
capitalized stock-based compensationexpense
12.9 14.2
Amortization of aerial image library,
deferred contract costs and lease incentive
12.3 12.3 Deferred income taxes 23.4 5.1 Excess tax benefit from
share-based compensation (0.2) (1.3) Amortization of debt issuance
costs, accretion of debt discount, and other 10.2 3.8 Changes in
working capital: Accounts receivable, net (13.7) 46.2 Deferred
contract costs (13.1) (13.1) Other current and non-current assets
(10.2) 2.5 Accounts payable 2.3 (1.8) Accrued liabilities (2.4) 5.8
Deferred revenue (45.1) (55.3) Net cash flows
provided by operating activities 214.7 237.5
CASH
FLOWS FROM INVESTING ACTIVITIES: Construction in progress
additions (154.6) (97.9) Property and equipment additions (0.2)
(2.5) Proceeds from sale of property 3.0 — Decrease (increase) in
restricted cash 0.5 (0.9) Investment in joint venture (10.0)
(5.0) Net cash flows used in investing activities
(161.3) (106.3)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt and capital lease obligations (4.7) (4.6)
Repurchase of common stock (86.4) (100.5) Proceeds from exercise of
stock options 2.3 5.4 Preferred stock dividend payment (3.0) (3.0)
Excess tax benefit from share-based compensation 0.2
1.3 Net cash flows used in financing activities (91.6)
(101.4) Net (decrease) increase in cash and cash equivalents
(38.2) 29.8 Cash and cash equivalents, beginning of period
126.1 117.8 Cash and cash equivalents, end of period $ 87.9
$ 147.6
SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid
for interest, net of capitalized amounts of $40.1 and $28.2,
respectively 11.5 22.6
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Changes to non-cash property, equipment
and construction in progress accruals,including interest
9.4 1.3 Non-cash preferred stock dividend accrual (1.0) (1.0)
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version on businesswire.com: http://www.businesswire.com/news/home/20161025006568/en/
DigitalGlobeMedia ContactEdelman for
DigitalGlobeDigitalGlobe@edelman.comorInvestor Relations
ContactFred Graffam, 303-684-1692Senior Vice President,
Investor Relations and Corporate Developmentir@digitalglobe.com
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