PARIS — Earth imagery services provider DigitalGlobe on Nov. 1 reported flat revenue for the first nine months of 2011 compared with a year ago but said a scheduled pickup in U.S. government revenue and increased use of its system by commercial and international partners will assure a revenue increase of at least 10 percent in 2012.

The company said it recently signed a second large company that provides location-based services to a multiyear contract that provides a recurring revenue stream over several years.

In a conference call with investors, DigitalGlobe Chief Executive Jeffrey R. Tarr said these contracts, whose customers he declined to identify, exemplify the way DigitalGlobe is moving away from one-time deals with sharply varying revenue levels to a more stable business model.

Tarr said Longmont, Colo.-based DigitalGlobe now derives 83 percent of its revenue from contracts that call for regular deliveries of imagery over longer periods.

That is the model used by DigitalGlobe’s core customer, the U.S. National Geospatial-Intelligence Agency (NGA), which in August 2010 signed a contract calling for DigitalGlobe to provide imagery for 10 years through a series of one-year contracts that are renewed.

The NGA contract, called EnhancedView, provides for up to $2.8 billion in payments over the 10-year period assuming DigitalGlobe meets performance milestones. If it does not, some of these monthly payments may be withheld until the performance metrics are satisfied. Additional payments are available under the contract as part of a separate category of value-added services.

The performance metrics include the quality, amount and timeliness of optical imagery and will force DigitalGlobe to augment its in-orbit satellite fleet, possibly lower the orbit of one of its satellites, and build and install seven remote Earth stations to speed delivery of data to NGA.

Four of the seven remote ground stations have been built, with the remaining three to be in place in 2012, Tarr said. The WorldView-3 satellite, which is also a part of EnhancedView, is scheduled for launch in mid-2014.

Tarr said that for the three months ending Sept. 30, as in the previous three-month period, DigitalGlobe successfully met all of the EnhancedView performance targets and thus received full payment under the EnhancedView contract.

NGA cash payments in 2012 will remain at the same $250 million level of 2011, but DigitalGlobe expects to defer a lesser amount of this revenue in 2012. The company expects to recognize NGA revenue of $180 million in 2012, compared with $155 million in 2011.

But that increase alone will not be sufficient to assure the 10 percent revenue increase over this year’s forecasted $342.5 million that DigitalGlobe has promised investors. DigitalGlobe Chief Financial Officer Yancey L. Spruill said during the conference call that the growth will not come at the expense of profitability. The company has said that over time its earnings before interest, taxes, depreciation and amortization should average between 55 percent and 60 percent of revenue, a figure Spruill said should hold for 2012.

In addition to the NGA payment increase, DigitalGlobe is counting on increased revenue from its Direct Access Partner program, which permits customers approved by the U.S. government to task the DigitalGlobe satellites on their own, and take down imagery within their approved geographic area.

DigitalGlobe currently has four Direct Access Program customers, with a fifth scheduled to begin producing revenue in early 2012. The four existing customers accounted for $11.6 million in revenue for the three months ending Sept. 30, an 11 percent increase over the same period last year.

Adding new Direct Access Program customers requires that DigitalGlobe invest in ground infrastructure in advance of receiving the revenue.

It is unclear how many of these customers the company can accommodate without bumping into its obligations under EnhancedView. Tarr said DigitalGlobe has recently “taken the constraints off” its Direct Access Program, allowing these governments to book more time on DigitalGlobe satellites than had been permitted previously.

“About six months ago we made a decision … to take the cap off of that,” Tarr said. “We have added minutes beyond our contractual commitments. … Some of these we are able to capture given the evolution of our business rules.” He said it takes between one and three years between the time when a decision is made to change how the Direct Access Program — adding new customers or modifying existing customers’ contracts — and when the revenue is booked at DigitalGlobe.

In a Nov. 3 interview, DigitalGlobe Investor Relations Vice President David Banks said the company has modified the Direct Access Program policy to remove the former self-imposed limit of five customers.

Adding the two location-based services customers will also help revenue grow in 2012, as neither contract has yet generated revenue.

DigitalGlobe and its U.S. competitor, GeoEye of Dulles, Va., will be facing new competition in 2012 from Astrium Services of Europe, whose two Pleiades high-resolution optical satellites are scheduled for launch, with the first set for a mid-December liftoff.

Both satellites have a ground sampling distance of 70 centimeters that, after treatment, can provide imagery that is equivalent to a 50-centimeter resolution. Astrium Services will be adding the Pleiades spacecraft to its current portfolio, which includes the Spot 5 optical satellite and its successors, the Spot 6 and Spot 7 spacecraft under development.

Tarr said DigitalGlobe has room to improve its service |offering.

“The competitive market may evolve,” Tarr said. “By better execution on our end we can offset those competitive pressures. I don’t think that we have fully optimized the allocation and pricing of our existing capacity.”



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Peter B. de Selding was the Paris bureau chief for SpaceNews.