PARIS — U.S. satellite imagery products and services provider DigitalGlobe reported July 31 double-digit increases in revenue and backlog, with both government and commercial business contributing to a record total of $101.8 million for the three months ending June 30.
Longmont, Colo.-based DigitalGlobe, which expects U.S. regulators to approve the company’s proposed purchase of rival GeoEye of Dulles, Va., late this year or early in 2013, raised its forecast for 2012 revenue to $393.8 million.
That would be a 16 percent increase from 2011. The company’s earlier forecast was for a 14 percent increase.
The DigitalGlobe contract backlog stood at $355 million June 30, a 32 percent increase from where it was a year ago.
In a July 31 conference call with investors, DigitalGlobe Chief Executive Jeffrey R. Tarr reiterated the company’s estimate that the combined DigitalGlobe and GeoEye would generate savings of $1.5 billion over 10 years compared with what the two rivals would spend separately.
Most of the savings would come from reducing the current two-company fleet of five Earth observation satellites to three. The two companies have high-resolution satellites under construction — GeoEye-2 for GeoEye and WorldView-3 for DigitalGlobe — and scheduled for launch in 2013 and 2014, respectively.
One of these two satellites will be held on the ground as a spare, resulting in an immediate savings on launch costs.
DigitalGlobe Chief Financial Officer Yancey L. Spruill said the $1.5 billion in savings would include eliminating overlapping ground facilities owned and operated by the two companies.
The combined DigitalGlobe and GeoEye would have had estimated revenue of $610 million in 2012.
DigitalGlobe and GeoEye have taken a worst-case assumption as they assess the prospects of the combined company. Most importantly, they assume that GeoEye’s single largest source of revenue, a Service Level Agreement with the U.S. National Geospatial-Intelligence Agency (NGA) under the EnhancedView program, will drop to zero in 2013 and not be renewed.
DigitalGlobe, which like GeoEye counts NGA, primarily through the EnhancedView program, as its biggest customer, would continue receiving Service Level Agreement payments under its EnhancedView contract.
In the conference call, Tarr said that in the week since the proposed GeoEye acquisition was announced July 23, no regulatory obstacles have appeared that would scuttle or delay the merger’s conclusion by early 2013.
Tarr declined to address whether the U.S. government budget crisis, which led to the proposed EnhancedView cuts that pushed the two companies into merger talks, would force reductions to the NGA’s imagery purchasing program beyond what GeoEye was already facing.
Similarly, he did not address any possible opposition to the merger in the U.S. Congress.
Tarr did reiterate that if the two companies’ assessment of GeoEye’s Service Level Agreement proves correct, that will free up capacity on GeoEye satellites that could be sold to commercial customers.
Both DigitalGlobe and GeoEye have tailored their satellites and ground infrastructure to the EnhancedView contract. The merged company will be free to coordinate the orbits of the satellites to speed imagery delivery, and to widen its appeal to commercial and international customers.
For the three months ending June 30, DigitalGlobe reported commercial revenue of $20.4 million, a 10 percent increase from the same period a year earlier. About 58 percent of this came from international commercial customers, with the rest from U.S. contracts.
DigitalGlobe and GeoEye officials —both companies have approved the merger — have said the combined company would have a revenue base that is 50 percent non-U.S. government.
Defense and intelligence revenue, at $81.4 million, was up 27 percent from the same period a year ago, mainly on the strength of additional revenue from the EnhancedView contract’s Service Level Agreement.
Spruill said DigitalGlobe recently completed deployment of the last of seven remote ground stations whose operation is a condition of the EnhancedView contract.
The combined DigitalGlobe/GeoEye faces a competitive landscape that is becoming more complicated. Astrium Geo-Information Services of Europe, after two decades of focusing on medium-resolution markets worldwide, is now entering the high-resolution market with the two-satellite Pleiades system. The first Pleiades satellite is in orbit; the second is scheduled for launch in 2013.
Also, e-Geos of Italy and France is organizing itself to stretch beyond its radar satellite heritage to include optical satellites.
Numerous nations in Asia and South America have taken advantage of the falling costs of Earth observation satellite technologies to launch their own systems, even without a clear commercial strategy.
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