Imagery collected by DigitalGlobe's various satellites. Image source: DigitalGlobe.
DigitalGlobe (DGI +0.00%) has skyrocketed more than 16% since reporting stronger-than-expected second-quarter 2016 results late last week, extending the streak that began with last quarter's surprise return to growth and profitability. Let's zoom in on how the satellite imagery specialist finished the first half of the year.
DigitalGlobe results: The raw numbers
| Metric |
Q2 2016 Actuals |
Q2 2015 Actuals |
Growth (YOY) |
|---|---|---|---|
|
Revenue |
$175.5 million |
$178.0 million |
(1.4%) |
|
Net income (available to common shareholders) |
$10.7 million |
$6.7 million |
59.7% |
|
Earnings per share |
$0.17 |
$0.09 |
88.9% |
Data source: DigitalGlobe.
What happened with DigitalGlobe this quarter?
- U.S. government revenue fell 1.1% year over year, to $111.9 million, as expected; DigitalGlobe realized the deferred revenue earn-out on prior Global-EGD awards in the second quarter of last year.
- Diversified commercial revenue rose fell 2% year over year, to $63.6 million, also as expected given an unusually strong Direct Access Program (DAP) performance from a single large customer in last year's second quarter.
- DAP revenue declined 9.8% year over year, to $28.5 million.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 7.9% year over year, to $95.3 million.
- Adjusted EBITDA margin expanded 470 basis points year over year, to 54.3%.
- Cash flow from operations fell 4.2%, to $91 million.
- Free cash flow was $45.5 million, down from $59.1 million in last year's Q2. Keep in mind FCF in last year's Q2 benefited from a one-time $25 million payment received from the U.S. government based on contractual terms.
- DigitalGlobe now receives 12 monthly payments per year on this contract. Adjusting out this additional payment for comparison, free cash flow would have increased 33% year over year.
- The company announced the National Geospatial-Intelligence Agency (NGA) exercised its option for the seventh year of DigitalGlobe's EnhancedView service level agreement.
- It signed a letter of intent with what should become DigitalGlobe's 12th DAF customer for multiyear access to the new WorldView-4 satellite as well as DigitalGlobe's current satellite constellation.
- The company repurchased 882,808 shares of common stock for $15.9 million, at an average price of $18 per share. That left roughly $39 million remaining under DigitalGlobe's original $335 million repurchase authorization.
What management had to say
DigitalGlobe CEO Jeffrey Tarr stated, "We are pleased that the execution of our strategy is delivering better than expected results. We are encouraged by the strong demand we are seeing for WorldView-4 and look forward to extending our industry lead with our upcoming launch."
Looking forward
As a result, DigitalGlobe increased its full-year guidance to call for 2016 revenue of $680 million to $705 million (up from $670 million to $700 million previously), and adjusted EBITDA of $345 million to $365 million (up from $330 million to $355 million previously).
During the subsequent conference call, CFO Gary Ferrera elaborated that the new guidance reflects DigitalGlobe's "slightly stronger-than-anticipated revenue" in the first half, as well as its efforts to drive greater operational efficiency.
"As a reminder," Ferrera added, "we do anticipate higher costs in the second half due to disciplined investments in our platform business and the costs related to launching and operating Worldview-4."
Similar to last quarter, it's difficult to find anything not to like about these strong results. So assuming all goes well with the launch of WorldView-4, which is currently slated for Sept. 15, 2016 from Vandenberg Air Force Base, I see no reason DigitalGlobe stock can't continue its impressive ascent from here.
