DigitalGlobe: NGA Confirmed EnhancedView Funded Through 2012

[Satellite TODAY Insider 05-03-12] The National Geospatial-Intelligence Agency’s (NGA) 2012 EnhancedView budget is fully funded, said satellite imagery provider DigitalGlobe, which indicated that expectations of a 40 percent cut to NGA contracts are likely overdone.

   During a May 2 conference call to announce its latest financial results, DigitalGlobe management said the NGA informed the company earlier this week that its EnhancedView contract was fully funded for the 2012 full-year, or through Aug. 31.
   Raymond James Analyst Chris Quilty, however, said the long-term outlook for EnhancedView remains up in the air, “pending the outcome of a White House directed study, congressional budget negotiations and quite possibly the November elections,” he said in a May 2 research note.
   Regardless of the uncertainties, Quilty reiterated his firm’s “strong buy” rating on DigitalGlobe based on the size and strength of its contracts. “Prior to its communication with the NGA, DigitalGlobe increased its 2012 service level agreement (SLA) revenue forecast by $21 million and its 2013 forecast by $27 million. However, cash payments from the NGA remain unchanged at $250 million per year.”
   DigitalGlobe also reported impressive fiscal growth in its 2012 first quarter that was driven by its successful location based services (LBS), expanding DAP channels and accelerated SLA payments.
   The imaging company eclipsed analysts’ first-quarter revenue forecasts, leaping 12 percent over the 2011 first quarter mark to reach $87 million. Though DigitalGlobe’s adjusted EBITDA was essentially flat at $53 million, it still beat its own estimate of $48 million. DigitalGlobe generated $12.5 million of free cash flow during the quarter and grew its backlog 34 percent year-over-year to $338 million.
   Quilty added that DigitalGlobe’s commercial business is experiencing a hot streak. “The company’s commercial business is on a tear. Revenues from commercial customers increased 22 percent to $18.6 million, driven by a 45 percent increase to LBS providers and a 35 percent increase in other verticals, such as financial, telecom and oil and gas.”
DigitalGlobe’s DAP revenue grew 31 percent to $12.8 million, driven by increased capacity requirements, or “minutes used,” from all four of the company’s existing DAP customers. DigitalGlobe management said it expects to bring a fifth DAP customer online in the second quarter of this year and is on track to add a sixth DAP customer within the next year.
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