DigitalGlobe reports sharp increase in revenue from non-U.S. government customers
PARIS—Geospatial imagery provider DigitalGlobe Inc. on April 27 reported a sharp increase in business from its 10 Direct Access Partner (DAP) governments in the three months ending March 31 and signed an initial agreement for an 11th DAP customer.
While Westminster, Colorado-based DigitalGlobe warned investors not to expect DAP increases to continue at the pace of the first quarter – to $33.2 million, up 35 percent from a year ago – the company said the coming launch of the WorldView-4 satellite will add capacity reserved for DAP and other non-U.S. government business.
WorldView-4 carries a 30-centimeter-resolution imager similar to the existing WorldView-3 satellite, for which the U.S. National Geospatial-Intelligence Agency (NGA) has reserved a substantial amount of capacity.
With DAP and other customers seeking similar high-resolution imagery, DigitalGlobe moved forward the launch of WorldView-4, now expected to occur this summer.
In a conference call with investors, DigitalGlobe Chief Executive Jeffrey R. Tarr said NGA’s preferential access to WorldView-3, purchased through the EnhancedView contract, a series of one-year agreements beginning in August 2010 and likely to last for 10 years, does not extend to WorldView-4.
“If the U.S. government, our largest customer, wanted it, we’d do our best, provided it does not undermine other commitments to other customers,” Tarr said.
Geopolitical tensions in the Middle East and the Asia-Pacific have caused some DAP customers to exceed their imagery quotas, and any supplemental imagery is billed at rates that are highly profitable to DigitalGlobe.
“The flow-through on that could be almost 100 percent when it’s incremental like that,” DigitalGlobe Chief Financial Officer Gary W. Ferrara said during the conference call.
The DAP success early this year was a big factor behind the 30.5 percent increase in the company’s adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization. The EBITDA margin for the three months ending March 31 was 54.4 percent of revenue, against 43.2 percent a year ago.
DAP customers have local control of the DigitalGlobe satellites through their own ground stations and guaranteed access and data-distribution rights in their assigned geographic regions.
In addition to the four DigitalGlobe satellites, DAP customers may have access to Canada’s Radarsat 2 radar imagery via a DigitalGlobe agreement MDA Corp. of Canada.
With 10 DAP customers now, and an 11th on the way, DigitalGlobe may be nearing the limit of its capacity, even with WorldView-4, in certain high-demand regions, Tarr said. But the company remains confident it can accommodate up to 15 DAP partners if they are not overly concentrated in high-demand regions.
DigitalGlobe’s WorldView-3 is the only commercial satellite with 30-centimeter-resolution imagery, a market advantage the company has sought to protect by refusing to provide the data at commoditized prices to large location-based-services providers such as Google Maps.
“We are commanding a premium price for that satellite,” Tarr said, without detailing the relative pricing power of 30-centimeter versus lower-resolution images.
Among the new customers DigitalGlobe put under contract this year is Internet social media giant Facebook, which is using satellite imagery to track population density.
The increased DAP and ongoing commercial business has not changed the fact that the U.S. government, especially the NGA, is DigitalGlobe’s dominant customer. The NGA EnhancedView contract alone accounted for $84.3 million of DigitalGlobe’s $175.4 million in revenue for the three months ending March 31.
DigitalGlobe has said neither its U.S. government business nor its broader global market share is threatened by the huge increase in commercial and government Earth observation satellite launches.
In the United States, the commercial Earth observation industry is characterized by several low-orbiting constellations that cannot compete with DigitalGlobe’s archive or its high resolution but can offer more-frequent visits of a given area of interest.
DigitalGlobe earlier this year announced a partnership with the government of Saudi Arabia on a constellation of at least six satellites, each with a resolution sharper than 1 meter, to complement the DigitalGlobe portfolio. Saudi Arabia is one of DigitalGlobe’s DAP partners.
“While we question the value of stand-alone smallsat constellations, we believe that by integrating smallsat imagery with our constellation, we’ll be able to efficiently unlock the potential of this technology,” Tarr said.
NGA Director Robert Cardillo told the U.S. House Armed Services Committee in March that his agency “is taking steps to harness the unprecedented bow wave of GeoInt offerings from established and emerging commercial providers.
“The small satellite revolution is both intriguing and inspiring, and we are approaching this as an opportunity to expand global coverage,” Cardillo said. “We are engaging with emerging commercial GeoInt providers to learn how the industry is maturing, what products and capabilities they are building, and what information they need from us as they develop their satellite constellations and analytic algorithms.”