DigitalGlobe Reports Second Quarter 2017 Results

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 six months ended
	June 30,						June 30,
(in millions, except per share data)	2017			2016			2017			2016
Revenue	$	225.7		$	175.5		$	435.4		$	350.9
Costs and expenses:
Cost of revenue, excluding depreciation and amortization		69.7			38.1			131.0			72.6
Selling, general and administrative		54.0			42.8			117.1			89.2
Depreciation and amortization		86.3			66.9			165.8			137.9
Restructuring charges		0.3			1.6			0.6			4.5
Income from operations		15.4			26.1			20.9			46.7
Interest expense, net		(13.3	)		(4.7	)		(22.8	)		(9.8	)
Loss from early extinguishment of debt		—			—			(0.5	)		—
Income (loss) before income taxes		2.1			21.4			(2.4	)		36.9
Income tax (expense) benefit		(0.2	)		(7.9	)		2.1			(13.9	)
Equity in earnings from joint ventures, net of tax		0.8			(1.3	)		0.8			(2.2	)
Net income		2.7			12.2			0.5			20.8
Preferred stock dividends		(1.0	)		(1.0	)		(2.0	)		(2.0	)
Net income less preferred stock dividends		1.7			11.2			(1.5	)		18.8
Income allocated to participating securities		(0.1	)		(0.5	)		—			(0.9	)
Net income (loss) available to common stockholders	$	1.6		$	10.7		$	(1.5	)	$	17.9

Earnings (loss) per share:
Basic earnings (loss) per share	$	0.03		$	0.17		$	(0.02	)	$	0.28
Diluted earnings (loss) per share	$	0.03		$	0.17		$	(0.02	)	$	0.28
Weighted average common shares outstanding:
Basic		62.1			62.9			61.9			63.9
Diluted		63.3			63.4			61.9			64.2

DigitalGlobe, Inc. Reconciliation of Net Income to EBITDA and Adjusted EBITDA

	For the three months ended					For the six months ended
	June 30,					June 30,
(in millions)	2017			2016		2017			2016
Net income	$	2.7		$	12.2	$	0.5		$	20.8
Depreciation and amortization		86.3			66.9		165.8			137.9
Interest expense, net		13.3			4.7		22.8			9.8
Income tax expense (benefit)		0.2			7.9		(2.1	)		13.9
EBITDA		102.5			91.7		187.0			182.4
Merger and integration costs		2.1			—		12.3			—
Restructuring charges		0.3			1.6		0.6			4.5
Other re-engineering charges		—			0.7		—			1.6
Equity in earnings from joint ventures, net of tax		(0.8	)		1.3		(0.8	)		2.2
Loss from early extinguishment of debt		—			—		0.5			—
Adjusted EBITDA	$	104.1		$	95.3	$	199.6		$	190.7

DigitalGlobe, Inc. Reconciliation of Net Cash Flows Provided by Operating Activities to Free Cash Flow
	For the six months ended
	June 30,
(in millions)	2017			2016
Net cash flows provided by operating activities	$	85.4		$	150.7
Capital expenditures (1)		(35.8	)		(85.8	)
Free cash flow (2)	$	49.6		$	64.9

(1)		Note that capital expenditures includes capitalized interest and capital expenditures.
(2)		We modified our definition of free cash flow in the fourth quarter of fiscal year 2016. Prior period amounts have been revised to conform to the current definition.

DigitalGlobe, Inc. Consolidated Balance Sheets

	June 30,			December 31,
(in millions, except par value)	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	107.3		$	109.3
Restricted cash		3.4			2.4
Accounts receivable, net of allowance for doubtful accounts of $1.7 and $1.6, respectively		147.5			114.6
Deferred contract costs		12.5			10.3
Prepaid and other current assets		19.9			23.8
Total current assets		290.6			260.4
Property and equipment, net of accumulated depreciation of $1,544.7 and $1,387.8, respectively		1,885.6			2,002.5
Goodwill		578.1			578.1
Intangible assets, net of accumulated amortization of $47.6 and $39.0, respectively		78.4			87.0
Long-term restricted cash		8.6			4.8
Long-term deferred contract costs		48.8			49.3
Other assets		32.1			27.8
Total assets	$	2,922.2		$	3,009.9
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11.2		$	15.0
Current portion of long-term debt		12.8			47.2
Deferred revenue		85.9			86.3
Other accrued liabilities		50.8			70.7
Total current liabilities		160.7			219.2
Long-term debt, net of discount and debt issuance costs		1,237.7			1,242.1
Deferred revenue, non-current		181.9			216.9
Deferred income taxes, net, non-current		119.8			124.0
Other liabilities		37.0			34.8
Total liabilities	$	1,737.1		$	1,837.0
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Stockholders’ equity:
Series A convertible preferred stock, $0.001 par value; 0.08 shares authorized; 0.08 shares issued and outstanding at June 30, 2017 and December 31, 2016		—			—
Common stock; $0.001 par value; 250.0 shares authorized; 77.9 shares issued and 62.3 shares outstanding at June 30, 2017 and 77.0 shares issued and 61.4 shares outstanding at December 31, 2016		0.2			0.2
Treasury stock, at cost; 15.6 shares at June 30, 2017 and December 31, 2016		(342.0	)		(342.0	)
Additional paid-in capital		1,527.9			1,518.3
Accumulated deficit		(1.0	)		(3.6	)
Total stockholders’ equity		1,185.1			1,172.9
Total liabilities and stockholders’ equity	$	2,922.2		$	3,009.9

DigitalGlobe, Inc. Consolidated Statements of Cash Flows

	For the six months ended
	June 30,
(in millions)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	0.5		$	20.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		165.8			137.9
Stock-based compensation expense, net of capitalized stock-based compensation expense		12.3			8.3
Amortization of aerial image library, deferred contract costs and lease incentive		6.1			8.4
Deferred income taxes		(2.1	)		14.0
Amortization of debt issuance costs, accretion of debt discount, and other		1.6			6.0
Changes in working capital:
Accounts receivable, net		(32.9	)		(8.5	)
Deferred contract costs		(9.1	)		(8.0	)
Other current and non-current assets		(0.1	)		(2.4	)
Accounts payable		(3.8	)		5.7
Accrued liabilities		(17.5	)		(4.1	)
Deferred revenue		(35.4	)		(27.4	)
Net cash flows provided by operating activities		85.4			150.7
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(35.8	)		(85.8	)
Investment in joint venture		—			(7.5	)
Net cash flows used in investing activities		(35.8	)		(93.3	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt and capital lease obligations		(42.7	)		(3.9	)
Repurchase of common stock		—			(76.8	)
Value of shares surrendered to satisfy employee tax obligations		(7.4	)		(2.0	)
Proceeds from exercise of stock options and other		3.3			(0.8	)
Net cash flows used in financing activities		(46.8	)		(83.5	)
Net increase (decrease) in cash, cash equivalents and restricted cash		2.8			(26.1	)
Cash, cash equivalents and restricted cash, beginning of period		116.5			134.0
Cash, cash equivalents and restricted cash, end of period	$	119.3		$	107.9

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest, net of capitalized amounts of $5.1 and $21.8, respectively		21.0			7.4
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Changes to accruals for capital expenditures, including interest, and additions to capital lease obligations		(4.0	)		0.4
Non-cash preferred stock dividend accrual		(1.0	)		(1.0	)

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