Imagery collected by DigitalGlobe's various satellites. Image source: DigitalGlobe.
Shares of DigitalGlobe (DGI +0.00%) may have fallen around 4% Friday after it announced decent fourth-quarter 2015 results. But with last quarter's harrowing more than 30% post-earnings plunge still fresh after it reduced guidance for the year, shareholders should be happy to see the satellite imagery and geospatial solutions company moving forward after an otherwise difficult 2015.
Let's dig in to see what DigitalGlobe achieved in its latest quarter.
DigitalGlobe results: The raw numbers
| Metric |
Q4 2015 Actuals |
Q4 2014 Actuals |
Growth (YOY) |
|---|---|---|---|
|
Revenue |
$181.7 million |
$185.7 million |
-2.2% |
|
Net Income (Available to Common Shareholders) |
$9.2 million |
$10.7 million |
-14% |
|
Earnings Per Share |
$0.13 |
$0.14 |
-7.1% |
Data source: DigitalGlobe.
What happened with DigitalGlobe this quarter?
- U.S. government revenue fell 5% year over year to $108.7 million, due to both an expected decline in USG value-added revenue and expected flat revenue from DigitalGlobe's EnhancedView Service Level Agreement with the National GeoSpatial-Intelligence Agency. Recall on the latter that DigitalGlobe fully recognized the $50 million increase to the SLA's annualized rate in last year's fourth quarter.
- Diversified commercial revenue climbed 31% year over year to $335.5 million, driven by a combination of additional usage by several customers and additional deliveries and access minutes associated with multiple crises in the Middle East.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 10.2% year over year, to $102.4 million.
- Adjusted EBITDA margin expanded 633 basis points to 56.4%
- For the full year 2015, revenue climbed 7% $702.4 million, and adjusted EBITDA rose 24% to $355.7 million. Both came in at the low end of DigitalGlobe's original guidance for the year, but also arrived above the high ends of DigitalGlobe's latest guidance ranges provided last quarter, which called for revenue of $685 million to $700 million and adjusted EBITDA of $330 million to $345 million.
- Cash flow from operations rose 20.8% year over year, to $90.2 million.
- Free cash flow was $28.6 million, down from $49.5 million in the same year-ago period, primarily due to timing of milestone payments related to its WorldView-4 satellite, which is scheduled to launch in Sept. 2016.
- Earlier this month, announced an agreement with Saudi Arabia-based KACST and their affiliate, TAQNIA Space, to develop and launch at least six sub-meter small satellites. KACST and TAQNIA will build and fund the satellites, and DigitalGlobe with provide support through ground infrastructure, operations, and production, sales, and distribution capabilities.
- Four weeks ago, announced early contractual agreements and letters of intent for direct access capacity from international defense and intelligence customers for WorldView-4.
- This brought the value of contracts and letters of intent from these customers for both WorldView-3 and Worldview-4 to a total of $335 million, representing $38 million in incremental annual revenue starting in 2017.
- Amended a credit agreement to both increase the threshold for certain debt repayments and allow flexibility on timing of share repurchases.
- Repurchased 2,660,202 shares of common stock for $44 million, or an average price per share of $16.54 per share.
- Subsequent to the end of the fourth quarter, repurchased another 3,105,912 shares for $44.1 million, or $14.20 per share.
- That leaves around $71.6 million remaining under DigitalGlobe's original $335 million repurchase authorization.
What management had to say
CEO Jeffrey Tarr said:
We are pleased to report solid Adjusted EBITDA margin expansion and strong free cash flow growth resulting from our continued focus on operational excellence. We are also encouraged by the performance of our International Defense and Intelligence business, highlighted by strong growth in the quarter, unprecedented early demand for WorldView-4, and our expanded partnership with KACST, a long time direct access customer.
Looking forward
For the full fiscal-year 2016, DigitalGlobe anticipates revenue of $670 million to $700 million (a decline from 2015 in the range of 4.6% to 0.3%), and adjusted EBITDA of $330 million to $355 million (down 7.2% to 0.2% from 2015).
During the subsequent conference call, CFO Gary W. Ferrera noted this is consistent with DigitalGlobe's comments last quarter regarding their expectation the company will generate "flattish top-line growth in the near term," especially as diversified commercial customers feel the impact of currency devaluations and commodity price declines. Ferrera elaborated, "While we have built some downside into our 2016 guidance range, the range does not contemplate any extension in satellite lives and assumes the commissioning of WorldView-4 in the first quarter of 2017."
In the end, while not overwhelmingly positive, DigitalGlobe's latest quarter contained no big surprises as the company moves forward to the new year in the face of broader market headwinds. Assuming DigitalGlobe can continue focusing on operational efficiency as it gears up to get new satellites in the air and capitalize on new partnerships, it appears its promising long-term growth story remains firmly intact.
