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Company Overview
The Allison Brand is the Dominant Market Leader
Largest global manufacturer of fullyautomatic transmissions for mediumand heavy-duty commercial vehicles
The industry may have passed a
demand inflection point net sales
are stabilizing
Ex-NA OffHighway
5%
Aftermarket &
Other
18%
NA On-Highway
42%
Ex-NA OnHighway
15%
Defense
13%
NA Off-Highway
2%
NA Hybrid
Transit Bus
5%
Investment Rationale
Limited Downside Risk; Demand-Driven Upside Potential
#1
Long-Term
Revenue
Growth
Potential
#2
Margin
Expansion
Opportunities
#3
Returns to
Shareholders
Strong FCF generation 7.7% FCF yield and cash conversion cycle of ~35 days
Low CapEx requirements allows free cash flow to paydown debt, resulting
in multiple expansion
During 3Q13, ALSN repurchased $100mm of its common stock
ALSN currently pays a quarterly dividend of $0.12 per share increased from
$0.06 per share
North America
Ex-North America
5%
26%
74%
vs.
Fully Automatic
Other
95%
Source: Company filings, ACT Research, and Oppenheimer research as of September 4, 2012
FCF Generation
Valuation
Based on EBITDA Multiple and DCF Analysis
Assumes 0.5x multiple
expansion
2013E Implied Valuation Based on EBITDA Multiple:
2014E Adjusted EBITDA
$680.0
Enterprise Value / Adjusted EBITDA
11.0x
$7,480.5
$7,274.6
(2,731.2)
197.7
825.0
$5,772.0
(2,731.2)
197.7
825.0
$5,566.1
3.0%
10.5%
188.6
$30.60
188.6
$29.51
Price Appreciation
Dividend Yield
Total Returns to Shareholders
27.1%
2.0%
29.1%
Price Appreciation
Dividend Yield
Total Returns to Shareholders
22.6%
2.0%
24.6%
$30.06
Price Appreciation
Dividend Yield
Total Returns to Shareholders
24.9%
2.0%
26.9%
Weighting two
methodologies equally
Sensitivity Analysis
38.0%
35.5%
33.0%
30.5%
Gross Margin
Metrics implied by
the current stock
price of $24.07
EBITDA Multiple
28.0%
12.0x
11.5x
11.0x
10.5x
10.0x
50.0%
40.77
38.70
36.62
34.54
32.47
47.5%
37.49
35.55
33.61
31.67
29.73
45.0%
34.21
32.41
30.60
28.80
27.00
42.5%
30.93
29.26
27.60
25.93
24.26
40.0%
27.65
26.12
24.59
23.06
21.53
3.50%
3.25%
3.00%
2.75%
2.50%
9.5%
38.49
36.92
35.47
34.13
32.88
10.0%
34.82
33.50
32.28
31.14
30.07
10.5%
31.68
30.56
29.51
28.53
27.61
11.0%
28.96
28.00
27.09
26.24
25.44
11.5%
26.59
25.75
24.96
24.22
23.52
Gross Margin
WACC
7.5%
7.0%
6.5%
6.0%
50.0%
36.93
36.77
36.62
36.46
36.31
47.5%
33.89
33.75
33.61
33.47
33.33
45.0%
30.86
30.73
30.60
30.48
30.35
42.5%
27.82
27.71
27.60
27.48
27.37
40.0%
24.79
24.69
24.59
24.49
24.39
Ownership
NOLs
Government
Entities
The Carlyle Group and Onex Corporation each hold a ~34% equity stake in
ALSN (lock-up expired in September 2012)
Large block trades could create downward pressure on ALSN stock price
However, increased liquidity in ALSN stock could expand investor base
Acquisition by the Carlyle Group and Onex Corporation from General Motors
in August 2007 created tax shield due to a step-up in the tax basis of ALSN
assets
ALSN estimates as of 4Q12 that the present value of tax savings from both
amortization of intangibles and federal NOLs is between $825 million and
$1,020 million
Area for further due diligence
Sales of hybrid-propulsion systems in transit buses (5% of LTM net sales) are
negatively impacted as government entities do not elect to subsidize
purchases by end users
Military spending cuts by government entities (13% of LTM net sales) could
reduce ALSNs future earnings potential
Appendix
Allison Transmission Holdings, Inc. (NYSE: ALSN)
Historical Price
Source: Bloomberg
Ownership Summary
Source: Bloomberg
Management
Lawrence E. Dewey
Chairman, President,
and CEO
David S. Graziosi
EVP, CFO, and
Treasurer
David L. Parish
SVP, Operations and
Purchasing
James L. Wanaselja
VP, NA Marketing,
Sales, and Service
Market
Cap
Company
Ticker
Price
Eaton
PACCAR
Cummins
Navistar International
ETN
PCAR
CMI
NAV
$70.60 $33,500
56.84 20,127
130.70 24,488
39.82
3,202
Truck-Oriented
Manufacturers
Mean
Median
Allison Transmission
ALSN
Assumptions:
Tax Rate
Risk Free Rate
Equity Risk Premium
Market Cap. Size Premium
$24.07
38.5%
2.75%
6.62%
0.94%
$4,547
Enterprise % 52-Wk.
Debt/
EBITDA/ EV/EBITDA
Value
High
Cap EBITDA Interest 2013E 2014E
$41,899
26,865
23,988
6,877
$7,126
Eaton
PACCAR
Cummins
Pre-Tax Cost of Debt
After-Tax Cost of Debt
Debt/
Capital
17.5%
22.5%
27.5%
32.5%
37.5%
42.5%
47.5%
52.5%
57.5%
Debt/
Mkt Equity
21.2%
29.0%
37.9%
48.1%
60.0%
73.9%
90.5%
110.5%
135.3%
Mean
Unlevered
Beta
1.24
1.24
1.24
1.24
1.24
1.24
1.24
1.24
1.24
Levered
Beta
1.41
1.47
1.53
1.61
1.70
1.81
1.94
2.09
2.28
97%
95%
94%
99%
38%
60%
19%
nm
3.3x
4.1
0.9
nm
9.2x
nm
nm
-2.4x
12.6x
14.5
9.8
nm
10.9x
13.8
8.3
9.1
17.1x
17.3
17.3
nm
14.4x
15.7
14.0
43.4
10%
10%
10%
5%
1.7x
1.7
1.7
na
2.3%
1.4%
1.6%
0.0%
96%
96%
39%
38%
2.8x
3.3
3.4x
3.4
12.3x
12.6
10.5x
10.0
17.2x
17.3
21.9x
15.1
9%
10%
1.7x
1.7
1.3%
1.5%
88%
38%
4.2x
3.8x
11.2x
10.5x
12.3x
10.4x
9%
1.5x
2.0%
Levered
Beta
1.46
1.37
1.66
Company
Cost of
Equity
13.0%
13.4%
13.8%
14.4%
15.0%
15.7%
16.5%
17.5%
18.8%
P/E
LT EPS
Div.
2013E 2014E Growth PEG Yield
4.00%
2.46%
11.15%
10.93%
10.71%
10.49%
10.27%
10.05%
9.83%
9.61%
9.39%
Total
Debt
$9,693
9,570
1,793
4.50%
2.77%
Market
Debt /
Equity
Mkt. Equity
$33,500
28.9%
20,127
47.5%
24,488
7.3%
5.00%
3.08%
5.50%
3.38%
Unlevered
Beta
1.13
1.03
1.57
6.00%
3.69%
2010A
2011A
2012A
2013E
2014E
2015E
2016E
2017E
2018E
$1,926.3 $2,162.8 $2,141.8 $1,927.5 $2,062.4 $2,240.1 $2,413.7 $2,577.4 $2,755.6
1,098.1 1,208.3 1,187.5 1,077.2 1,134.3 1,226.5 1,315.5 1,398.3 1,488.0
828.2
954.5
954.3
850.3
928.1 1,013.6 1,098.2 1,179.2 1,267.6
CAGR
'13E '18E
7.4%
6.7%
8.3%
384.9
101.5
341.8
409.1
116.4
429.0
419.0
115.1
420.2
347.0
96.4
407.0
366.1
98.0
464.0
392.0
100.8
520.8
416.4
102.6
579.3
438.2
103.1
637.9
461.6
103.3
702.7
5.9%
1.4%
11.5%
3.5
(281.0)
19.0
83.3
0.9
(218.2)
(56.9)
(4.2)
150.6
0.9
(152.1)
(52.8)
216.2
0.8
(140.1)
(9.6)
258.1
0.8
(112.1)
352.8
0.8
(111.7)
410.0
0.8
(86.8)
493.3
0.8
(100.4)
538.4
0.8
(106.8)
596.6
0.0%
(5.3%)
N/A
(100.0%)
18.2%
(53.7)
$29.6
(47.6)
$103.0
298.0
$514.2
(101.5)
$156.6
(135.8)
$217.0
(157.8)
$252.1
(189.9)
$303.4
(207.3)
$331.1
(229.7)
$366.9
17.8%
18.6%
$0.16
$0.56
$2.76
$0.83
$1.15
$1.34
$1.61
$1.76
$1.95
18.6%
$0.00
$0.00
$0.18
$0.42
$0.48
$0.53
$0.55
$0.58
$0.61
7.8%
181.4
181.4
181.4
1.9
183.3
182.0
4.2
186.2
185.0
3.6
188.6
184.4
3.6
188.0
184.4
3.6
188.0
184.4
3.6
188.0
184.4
3.6
188.0
184.4
3.6
188.0
(0.1%)
0.0%
(0.1%)
Interest Income
Interest Expense
Premiums and Expenses on Tender Offer for Long-Term Debt
Other (Expense) Income, Net
Income before Income Taxes
CAGR
'13E '18E
2010A
2011A
2012A
2013E
2014E
2015E
2016E
2017E
2018E
$29.6
277.5
53.7
99.6
154.2
2.4
$617.0
$103.0
217.3
47.6
103.8
151.9
56.9
31.4
$711.9
$514.2
151.2
(298.0)
102.5
150.0
85.2
$705.1
$156.6
139.3
101.5
110.1
105.4
22.1
$635.0
$217.0
111.3
135.8
117.2
98.8
$680.0
$252.1
110.9
157.8
124.3
97.1
$742.2
$303.4
86.0
189.9
131.5
92.4
$803.1
$331.1
99.6
207.3
138.6
89.7
$866.2
$366.9
106.0
229.7
145.7
86.2
$934.5
(5.3%)
17.8%
5.8%
(3.9%)
N/A
(100.0%)
8.0%
$388.9
(73.8)
$315.1
$469.2
(96.9)
$372.3
$497.5
(123.9)
16.0
12.0
$401.6
$416.3
(72.3)
6.0
$350.0
$462.7
(75.0)
6.0
$393.7
$401.6
(75.0)
6.0
$332.6
$550.9
(75.0)
6.0
$481.9
$537.3
(75.0)
6.0
$468.3
$625.5
(75.0)
6.0
$556.5
8.5%
0.7%
N/A
0.0%
9.7%
Key Metrics:
Gross Profit
SG&A as % of Net Sales
R&D as % of Net Sales
Depreciation as % of Total PP&E
43.0%
20.0%
5.3%
44.1%
18.9%
5.4%
10.2%
44.6%
19.6%
5.4%
9.2%
44.1%
18.0%
5.0%
9.5%
45.0%
17.8%
4.8%
9.5%
45.3%
17.5%
4.5%
9.5%
45.5%
17.3%
4.3%
9.5%
45.8%
17.0%
4.0%
9.5%
46.0%
16.8%
3.8%
9.5%
32.0%
32.9%
4.3x
32.9%
3.9x
32.9%
4.0x
33.0%
3.3x
33.1%
2.7x
33.3%
2.0x
33.6%
1.4x
33.9%
0.8x
64.5%
31.6%
(137.8%)
39.3%
38.5%
38.5%
38.5%
38.5%
38.5%
2011A
2012A
2013E
2014E
2015E
2016E
2017E
2018E
$727
134
280
304
277
87
354
$2,163
$813
115
157
305
290
114
348
$2,142
$848
96
39
212
289
96
366
$1,928
$933
82
52
159
332
101
403
$2,062
$1,003
70
62
143
382
116
463
$2,240
$1,078
63
69
143
421
131
510
$2,414
$1,132
58
74
143
463
147
561
$2,577
$1,189
55
78
143
509
166
617
$2,756
34%
6%
13%
14%
13%
4%
16%
100%
38%
5%
7%
14%
14%
5%
16%
100%
44%
5%
2%
11%
15%
5%
19%
100%
45%
4%
3%
8%
16%
5%
20%
100%
45%
3%
3%
6%
17%
5%
21%
100%
45%
3%
3%
6%
17%
5%
21%
100%
44%
2%
3%
6%
18%
6%
22%
100%
43%
2%
3%
5%
18%
6%
22%
100%
CAGR
'13E '18E
7.0%
(10.6%)
15.0%
(7.6%)
12.0%
11.4%
11.0%
7.4%
2011A
$314.0
194.7
155.9
3.4
34.7
702.7
2012A
2015E
2016E
2017E
2018E
$349.1
193.4
182.7
54.8
31.9
811.8
$622.2
258.6
215.7
57.5
33.5
1,187.5
$983.6
224.6
208.2
59.5
34.7
1,510.6
CAGR
'13E '18E
2013E
2014E
$80.2
165.0
157.1
55.3
32.7
490.3
$197.7
198.7
165.9
56.9
33.2
652.4
$396.2
162.9
157.3
58.3
34.0
808.8
$62.3
229.9
192.1
53.6
31.3
569.2
1,015.6
(433.8)
581.8
1,111.7
(515.5)
596.2
1,158.7
(625.6)
533.1
1,233.7
(742.8)
490.9
1,308.7
(867.1)
441.6
5.8%
15.4%
(14.0%)
2,551.0
(684.9)
1,866.1
2,551.0
(834.9)
1,716.1
0.0%
8.4%
(6.5%)
0.0%
(100.0%)
2.9%
0.5%
37.8%
2.5%
4.7%
0.9%
0.9%
18.3%
CAGR
'13E '18E
2011A
2012A
2013E
2014E
2015E
2016E
2017E
2018E
$162.6
33.9
31.0
2.6
19.9
199.9
449.9
$133.1
36.2
19.5
21.6
167.4
377.8
$163.9
38.6
11.4
21.6
162.8
398.3
$131.3
38.9
21.6
165.3
357.1
$187.9
35.7
21.6
151.9
397.1
$154.5
36.5
21.6
155.2
367.8
$209.4
38.3
21.6
162.8
432.2
$177.9
39.7
21.6
168.6
407.7
1.6%
0.5%
(100.0%)
N/A
0.0%
0.7%
0.5%
81.5
40.8
3,345.0
214.2
239.5
4,370.9
73.5
42.6
2,801.3
0.1
213.8
3,509.1
53.1
41.7
2,719.8
37.0
193.5
3,443.4
60.8
43.7
2,620.0
38.9
204.1
3,324.6
55.8
40.2
2,037.5
35.7
187.7
2,754.1
57.0
41.1
1,926.3
36.5
191.7
2,620.3
59.9
43.1
1,815.1
38.3
201.2
2,589.7
62.0
44.6
1,703.9
39.7
208.3
2,466.2
3.1%
1.4%
(8.9%)
1.4%
1.5%
(6.5%)
Stockholders' Equity
Common Stock
Non-Voting Common Stock
Treasury Stock
Paid In Capital
Accumulated Deficit
Accumulated Other Comprehensive Loss, Net of Tax
Total Stockholders' Equity
1.8
(0.2)
1,560.8
(683.7)
(57.0)
821.7
1.8
(0.2)
1,601.5
(202.3)
(43.9)
1,356.9
1.8
(99.7)
1,645.2
(119.3)
(34.8)
1,393.2
1.8
(99.7)
1,659.5
9.1
(34.8)
1,535.9
1.8
(99.7)
1,673.8
172.8
(34.8)
1,713.8
1.8
(99.7)
1,688.0
387.6
(34.8)
1,942.9
1.8
(99.7)
1,702.3
630.2
(34.8)
2,199.8
1.8
(99.7)
1,716.6
908.6
(34.8)
2,492.5
0.0%
N/A
0.0%
0.9%
N/A
0.0%
12.3%
0.5%
2010A
CAGR
'13E '18E
2011A
2012A
2013E
2014E
2015E
2016E
2017E
2018E
$29.6
$103.0
$514.2
$156.6
$217.0
$252.1
$303.4
$331.1
$366.9
154.2
99.6
51.5
28.8
11.6
8.5
(3.3)
2.1
151.9
103.8
56.9
39.8
13.9
12.1
8.0
16.0
(1.4)
150.0
102.5
(303.8)
(26.2)
14.5
14.4
6.4
22.1
2.3
(5.3)
(0.2)
105.4
110.1
68.1
(2.7)
11.2
2.5
14.3
0.7
(9.3)
(4.2)
98.8
117.2
3.0
14.3
(10.6)
0.1
97.1
124.3
(3.1)
14.3
(10.6)
(1.8)
92.4
131.5
0.8
14.3
(10.6)
0.4
89.7
138.6
1.8
14.3
(10.6)
1.0
86.2
145.7
1.4
14.3
(10.6)
0.8
(3.9%)
5.8%
N/A
(54.3%)
(100.0%)
(100.0%)
(100.0%)
0.0%
(100.0%)
N/A
2.6%
N/A
23.7
(11.8)
3.2
(8.8)
388.9
(25.0)
(11.0)
24.9
(23.7)
469.2
29.9
(1.8)
(29.4)
7.9
497.5
(33.7)
(8.8)
30.8
(24.6)
416.3
35.8
8.6
(32.6)
11.1
462.7
(66.9)
(34.8)
56.5
(25.5)
401.6
36.5
9.5
(33.4)
6.2
550.9
(65.2)
(33.1)
54.9
14.7
537.3
34.0
7.5
(31.6)
11.0
625.5
N/A
N/A
N/A
N/A
8.5%
18.6%
2010A
2011A
2012A
2013E
2014E
2015E
2016E
2017E
2018E
CAGR
'13E '18E
(73.8)
(21.8)
0.3
(95.3)
(96.9)
38.6
2.4
(55.9)
(123.9)
(14.4)
(1.0)
0.6
(138.7)
(72.3)
(6.3)
1.7
0.5
(76.3)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
0.7%
(100.0%)
(100.0%)
(100.0%)
(0.4%)
(91.9)
(106.0)
(197.9)
500.0
(15.0)
(764.4)
(90.5)
(369.9)
(20.2)
(326.9)
(245.4)
(32.8)
29.0
(2.5)
5.3
(593.5)
(2.6)
(99.5)
(89.6)
(73.6)
33.5
9.3
(222.5)
(111.2)
(88.5)
10.6
(189.2)
(582.5)
(88.5)
10.6
(660.5)
(111.2)
(88.5)
10.6
(189.2)
(111.2)
(88.5)
10.6
(189.2)
(111.2)
(88.5)
10.6
(189.2)
N/A
N/A
(100.0%)
N/A
(100.0%)
4.4%
3.8%
(100.0%)
N/A
2.6%
(3.2%)
3.4
99.1
18.4
61.8
0.9
(233.8)
117.5
198.5
(333.8)
286.8
273.1
361.4
N/A
25.2%
153.1
252.2
252.2
314.0
314.0
80.2
80.2
197.7
197.7
396.2
396.2
62.3
62.3
349.1
349.1
622.2
622.2
983.6
50.6%
37.8%
$680.0
10.5x
37.5%
$0.48
1.99%
3.0%
10.5%
$7,480.5
$7,274.6
(2,731.2)
197.7
825.0
$5,772.0
(2,731.2)
197.7
825.0
$5,566.1
$24.07
182.4
0.0
6.5
188.9
$4,546.7
11.4
2,719.8
$7,277.9
(152.3)
$7,125.6
188.6
$30.60
188.6
$29.51
Price Appreciation
Dividends Yield
Total Returns to Shareholders
27.1%
2.0%
29.1%
Price Appreciation
Dividends Yield
Total Returns to Shareholders
22.6%
2.0%
24.6%
$30.06
Price Appreciation
Dividends Yield
Total Returns to Shareholders
24.9%
2.0%
26.9%
2013E
$407.0
2015E
$520.8
2016E
$579.3
2017E
$637.9
2018E
$702.7
(160.0)
39.3%
(178.7)
38.5%
(200.5)
38.5%
(223.0)
38.5%
(245.6)
38.5%
(270.5)
38.5%
110.1
105.4
(72.3)
(36.3)
117.2
98.8
(75.0)
22.9
124.3
97.1
(75.0)
(70.7)
131.5
92.4
(75.0)
18.8
138.6
89.7
(75.0)
(28.6)
145.7
86.2
(75.0)
20.9
$353.8
Discount Period
Discount Rate
Discount Factor
Discounted Free Cash Flow
Sum of Discounted FCFs (Implied Enterprise Value)
$7,274.6
(2,731.2)
197.7
825.0
$5,566.1
2014E
$464.0
$449.3
$396.0
$523.9
$517.0
$449.3
$396.0
$523.9
$517.0
$609.9
8,376.0
$8,985.9
0.5
10.5%
0.951
1.5
10.5%
0.861
2.5
10.5%
0.779
3.5
10.5%
0.705
4.5
10.5%
0.638
$427.4
$340.9
$408.2
$364.5
$5,733.6
188.6
$29.51
(1) Based on assumed terminal growth rate of 3.0% and assumed WACC of 10.5%.
CAGR
'13E '18E
7.4%
6.7%
8.3%
2010A
$1,926.3
1,098.1
828.2
2011A
$2,162.8
1,208.3
954.5
2012A
$2,141.8
1,187.5
954.3
2013E
$1,927.5
1,077.2
850.3
2014E
$2,062.4
1,134.3
928.1
2015E
$2,240.1
1,226.5
1,013.6
2016E
$2,413.7
1,315.5
1,098.2
2017E
$2,577.4
1,398.3
1,179.2
2018E
$2,755.6
1,488.0
1,267.6
384.9
101.5
341.8
409.1
116.4
429.0
419.0
115.1
420.2
347.0
96.4
407.0
366.1
98.0
464.0
392.0
100.8
520.8
416.4
102.6
579.3
438.2
103.1
637.9
461.6
103.3
702.7
5.9%
1.4%
11.5%
Interest Income
Interest Expense
Premiums and Expenses on Tender Offer for Long-Term Debt
Other (Expense) Income, Net
Income before Income Taxes
3.5
(281.0)
19.0
83.3
0.9
(218.2)
(56.9)
(4.2)
150.6
0.9
(152.1)
(52.8)
216.2
0.8
(140.1)
(9.6)
258.1
0.8
(112.1)
352.8
0.8
(111.7)
410.0
0.8
(86.8)
493.3
0.8
(100.4)
538.4
0.8
(106.8)
596.6
0.0%
(5.3%)
N/A
(100.0%)
18.2%
(53.7)
$29.6
(47.6)
$103.0
298.0
$514.2
(101.5)
$156.6
(135.8)
$217.0
(157.8)
$252.1
(189.9)
$303.4
(207.3)
$331.1
(229.7)
$366.9
17.8%
18.6%
$0.16
$0.56
$2.76
$0.83
$1.15
$1.34
$1.61
$1.76
$1.95
18.6%
$0.00
$0.00
$0.18
$0.42
$0.48
$0.53
$0.55
$0.58
$0.61
7.8%
181.4
181.4
181.4
1.9
183.3
182.0
4.2
186.2
185.0
3.6
188.6
184.4
3.6
188.0
184.4
3.6
188.0
184.4
3.6
188.0
184.4
3.6
188.0
184.4
3.6
188.0
(0.1%)
0.0%
(0.1%)
Adjusted Metrics:
Net Income
Interest Expense, Net
Income Tax (Benefit) Expense
Depreciation of Property, Plant and Equipment
Amortization of Intangible Assets
Premiums and Expenses on Tender Offer for Long-Term Debt
Others
Adjusted EBITDA
$29.6
277.5
53.7
99.6
154.2
2.4
$617.0
$103.0
217.3
47.6
103.8
151.9
56.9
31.4
$711.9
$514.2
151.2
(298.0)
102.5
150.0
85.2
$705.1
$156.6
139.3
101.5
110.1
105.4
22.1
$635.0
$217.0
111.3
135.8
117.2
98.8
$680.0
$252.1
110.9
157.8
124.3
97.1
$742.2
$303.4
86.0
189.9
131.5
92.4
$803.1
$331.1
99.6
207.3
138.6
89.7
$866.2
$366.9
106.0
229.7
145.7
86.2
$934.5
(5.3%)
17.8%
5.8%
(3.9%)
N/A
(100.0%)
8.0%
$388.9
(73.8)
$315.1
$469.2
(96.9)
$372.3
$497.5
(123.9)
16.0
12.0
$401.6
$416.3
(72.3)
6.0
$350.0
$462.7
(75.0)
6.0
$393.7
$401.6
(75.0)
6.0
$332.6
$550.9
(75.0)
6.0
$481.9
$537.3
(75.0)
6.0
$468.3
$625.5
(75.0)
6.0
$556.5
8.5%
0.7%
N/A
0.0%
9.7%
43.0%
20.0%
5.3%
44.1%
18.9%
5.4%
10.2%
44.6%
19.6%
5.4%
9.2%
44.1%
18.0%
5.0%
9.5%
45.0%
17.8%
4.8%
9.5%
45.3%
17.5%
4.5%
9.5%
45.5%
17.3%
4.3%
9.5%
45.8%
17.0%
4.0%
9.5%
46.0%
16.8%
3.8%
9.5%
32.0%
32.9%
4.3x
32.9%
3.9x
32.9%
4.0x
33.0%
3.3x
33.1%
2.7x
33.3%
2.0x
33.6%
1.4x
33.9%
0.8x
64.5%
31.6%
(137.8%)
39.3%
38.5%
38.5%
38.5%
38.5%
38.5%
Key Metrics:
Gross Profit
SG&A as % of Net Sales
R&D as % of Net Sales
Depreciation as % of Total PP&E
2011A
$314.0
194.7
155.9
3.4
34.7
702.7
2012A
2013E
2014E
$80.2
165.0
157.1
55.3
32.7
490.3
$197.7
198.7
165.9
56.9
33.2
652.4
$396.2
162.9
157.3
58.3
34.0
808.8
1,015.6
(433.8)
581.8
1,111.7
(515.5)
596.2
1,158.7
(625.6)
533.1
2,551.0
(684.9)
1,866.1
2,551.0
(834.9)
1,716.1
2,576.3
(940.3)
1,636.0
2015E
CAGR
'13E '18E
2016E
2017E
2018E
$62.3
229.9
192.1
53.6
31.3
569.2
$349.1
193.4
182.7
54.8
31.9
811.8
$622.2
258.6
215.7
57.5
33.5
1,187.5
$983.6
224.6
208.2
59.5
34.7
1,510.6
37.8%
2.5%
4.7%
0.9%
0.9%
18.3%
1,233.7
(742.8)
490.9
1,308.7
(867.1)
441.6
1,383.7
(998.6)
385.1
1,458.7
(1,137.1)
321.6
1,533.7
(1,282.8)
250.9
5.8%
15.4%
(14.0%)
2,576.3
(1,039.1)
1,537.2
2,576.3
(1,136.2)
1,440.1
2,576.3
(1,228.6)
1,347.7
2,576.3
(1,318.3)
1,258.0
2,576.3
(1,404.5)
1,171.8
0.0%
8.4%
(6.5%)
1,941.0
0.8
100.2
$5,192.6
1,941.0
32.3
90.1
$4,866.0
1,941.0
1.1
73.0
$4,836.6
1,941.0
82.6
$4,860.5
1,941.0
76.0
$4,467.9
1,941.0
77.6
$4,563.3
1,941.0
81.4
$4,789.5
1,941.0
84.3
$4,958.6
0.0%
(100.0%)
2.9%
0.5%
Liabilities
Current Liabilities
Accounts Payable
Product Warranty Liability
Current Portion of Long-Term Debt
Notes Payable
Deferred Revenue
Other Current Liabilities
Total Current Liabilities
$162.6
33.9
31.0
2.6
19.9
199.9
449.9
$133.1
36.2
19.5
21.6
167.4
377.8
$163.9
38.6
11.4
21.6
162.8
398.3
$131.3
38.9
21.6
165.3
357.1
$187.9
35.7
21.6
151.9
397.1
$154.5
36.5
21.6
155.2
367.8
$209.4
38.3
21.6
162.8
432.2
$177.9
39.7
21.6
168.6
407.7
1.6%
0.5%
(100.0%)
N/A
0.0%
0.7%
0.5%
81.5
40.8
3,345.0
214.2
239.5
4,370.9
73.5
42.6
2,801.3
0.1
213.8
3,509.1
53.1
41.7
2,719.8
37.0
193.5
3,443.4
60.8
43.7
2,620.0
38.9
204.1
3,324.6
55.8
40.2
2,037.5
35.7
187.7
2,754.1
57.0
41.1
1,926.3
36.5
191.7
2,620.3
59.9
43.1
1,815.1
38.3
201.2
2,589.7
62.0
44.6
1,703.9
39.7
208.3
2,466.2
3.1%
1.4%
(8.9%)
1.4%
1.5%
(6.5%)
Stockholders' Equity
Common Stock
Non-Voting Common Stock
Treasury Stock
Paid In Capital
Accumulated Deficit
Accumulated Other Comprehensive Loss, Net of Tax
Total Stockholders' Equity
1.8
(0.2)
1,560.8
(683.7)
(57.0)
821.7
1.8
(0.2)
1,601.5
(202.3)
(43.9)
1,356.9
1.8
(99.7)
1,645.2
(119.3)
(34.8)
1,393.2
1.8
(99.7)
1,659.5
9.1
(34.8)
1,535.9
1.8
(99.7)
1,673.8
172.8
(34.8)
1,713.8
1.8
(99.7)
1,688.0
387.6
(34.8)
1,942.9
1.8
(99.7)
1,702.3
630.2
(34.8)
2,199.8
1.8
(99.7)
1,716.6
908.6
(34.8)
2,492.5
0.0%
N/A
0.0%
0.9%
N/A
0.0%
12.3%
$5,192.6
Key Metrics:
Days Sales Outstanding
Days Inventories Outstanding
Days Payable Outstanding
Cash Conversion Cycle
Deferred Income Taxes (Current Asset) as % of Total Assets
Other Current Assets as % of Total Assets
Deferred Income Taxes (Asset) as % of Total Assets
Other Non-Current Assets as % of Total Assets
Product Warranty Liability (Current Asset) as % of Total Assets
Other Current Liabilities as % of Total Assets
Product Warranty Liability as % of Total Assets
Deferred Revenue as % of Total Assets
Deferred Income Taxes (Liability) as % of Total Assets
Other Non-Current Liabilities as % of Total Assets
0.1%
0.7%
0.0%
1.9%
0.7%
3.8%
1.6%
0.8%
4.1%
4.6%
$4,866.0
$4,836.6
$4,860.5
$4,467.9
$4,563.3
$4,789.5
$4,958.6
30.6
48.1
45.4
33.3
34.4
54.7
50.3
38.8
32.0
52.0
47.5
36.5
32.0
52.0
47.5
36.5
32.0
52.0
47.5
36.5
32.0
52.0
47.5
36.5
32.0
52.0
47.5
36.5
1.1%
0.7%
0.7%
1.9%
0.7%
3.4%
1.5%
0.9%
0.0%
4.4%
1.2%
0.7%
0.0%
1.5%
0.8%
3.4%
1.1%
0.9%
0.8%
4.0%
1.2%
0.7%
0.0%
1.7%
0.8%
3.4%
1.3%
0.9%
0.8%
4.2%
1.2%
0.7%
0.0%
1.7%
0.8%
3.4%
1.3%
0.9%
0.8%
4.2%
1.2%
0.7%
0.0%
1.7%
0.8%
3.4%
1.3%
0.9%
0.8%
4.2%
1.2%
0.7%
0.0%
1.7%
0.8%
3.4%
1.3%
0.9%
0.8%
4.2%
1.2%
0.7%
0.0%
1.7%
0.8%
3.4%
1.3%
0.9%
0.8%
4.2%
0.5%
2010A
$29.6
2011A
$103.0
2012A
$514.2
2013E
2014E
2015E
2016E
2017E
2018E
$156.6
$217.0
$252.1
$303.4
$331.1
$366.9
CAGR
'13E '18E
18.6%
154.2
99.6
51.5
28.8
11.6
8.5
(3.3)
2.1
151.9
103.8
56.9
39.8
13.9
12.1
8.0
16.0
(1.4)
150.0
102.5
(303.8)
(26.2)
14.5
14.4
6.4
22.1
2.3
(5.3)
(0.2)
105.4
110.1
68.1
(2.7)
11.2
2.5
14.3
0.7
(9.3)
(4.2)
98.8
117.2
3.0
14.3
(10.6)
0.1
97.1
124.3
(3.1)
14.3
(10.6)
(1.8)
92.4
131.5
0.8
14.3
(10.6)
0.4
89.7
138.6
1.8
14.3
(10.6)
1.0
86.2
145.7
1.4
14.3
(10.6)
0.8
(3.9%)
5.8%
N/A
(54.3%)
(100.0%)
(100.0%)
(100.0%)
0.0%
(100.0%)
N/A
2.6%
N/A
23.7
(11.8)
3.2
(8.8)
388.9
(25.0)
(11.0)
24.9
(23.7)
469.2
29.9
(1.8)
(29.4)
7.9
497.5
(33.7)
(8.8)
30.8
(24.6)
416.3
35.8
8.6
(32.6)
11.1
462.7
(66.9)
(34.8)
56.5
(25.5)
401.6
36.5
9.5
(33.4)
6.2
550.9
(65.2)
(33.1)
54.9
14.7
537.3
34.0
7.5
(31.6)
11.0
625.5
N/A
N/A
N/A
N/A
8.5%
(73.8)
(21.8)
0.3
(95.3)
(96.9)
38.6
2.4
(55.9)
(123.9)
(14.4)
(1.0)
0.6
(138.7)
(72.3)
(6.3)
1.7
0.5
(76.3)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
(75.0)
0.7%
(100.0%)
(100.0%)
(100.0%)
(0.4%)
(91.9)
(106.0)
(197.9)
500.0
(15.0)
(764.4)
(90.5)
(369.9)
(20.2)
(326.9)
(245.4)
(32.8)
29.0
(2.5)
5.3
(593.5)
(2.6)
(99.5)
(89.6)
(73.6)
33.5
9.3
(222.5)
(111.2)
(88.5)
10.6
(189.2)
(582.5)
(88.5)
10.6
(660.5)
(111.2)
(88.5)
10.6
(189.2)
(111.2)
(88.5)
10.6
(189.2)
(111.2)
(88.5)
10.6
(189.2)
N/A
N/A
(100.0%)
N/A
(100.0%)
4.4%
3.8%
(100.0%)
N/A
2.6%
(3.2%)
3.4
99.1
18.4
61.8
0.9
(233.8)
117.5
198.5
(333.8)
286.8
273.1
361.4
N/A
25.2%
153.1
252.2
252.2
314.0
314.0
80.2
80.2
197.7
197.7
396.2
396.2
62.3
62.3
349.1
349.1
622.2
622.2
983.6
50.6%
37.8%
2011A
2012A
2013E
2014E
2015E
2016E
2017E
2018E
$727
134
280
304
277
87
354
$2,163
$813
115
157
305
290
114
348
$2,142
$848
96
39
212
289
96
366
$1,928
$933
82
52
159
332
101
403
$2,062
$1,003
70
62
143
382
116
463
$2,240
$1,078
63
69
143
421
131
510
$2,414
$1,132
58
74
143
463
147
561
$2,577
$1,189
55
78
143
509
166
617
$2,756
34%
6%
13%
14%
13%
4%
16%
100%
38%
5%
7%
14%
14%
5%
16%
100%
44%
5%
2%
11%
15%
5%
19%
100%
45%
4%
3%
8%
16%
5%
20%
100%
45%
3%
3%
6%
17%
5%
21%
100%
45%
3%
3%
6%
17%
5%
21%
100%
44%
2%
3%
6%
18%
6%
22%
100%
43%
2%
3%
5%
18%
6%
22%
100%
$1,411.0
67.3
133.1
49.0
33.7
33.9
24.6
173.7
$1,926.3
$1,532.7
93.3
165.6
58.2
46.5
42.9
7.9
215.7
$2,162.8
$1,509.6
136.4
123.0
74.1
52.0
39.1
6.9
200.7
$2,141.8
73%
3%
7%
3%
2%
2%
1%
9%
100%
71%
4%
8%
3%
2%
2%
0%
10%
100%
70%
6%
6%
3%
2%
2%
0%
9%
100%
CAGR
'13E '18E
7.0%
(10.6%)
15.0%
(7.6%)
12.0%
11.4%
11.0%
7.4%
2010A
2012A
2013E
2014E
2015E
2016E
2017E
2018E
$2,594.9
471.3
309.8
$3,376.0
$411.4
793.1
1,145.0
471.3
$2,820.8
$0.0
1,123.5
1,136.4
471.3
$2,731.2
$0.0
1,023.5
1,125.2
471.3
$2,620.0
$0.0
923.5
1,114.0
$2,037.5
$0.0
823.5
1,102.8
$1,926.3
$0.0
723.5
1,091.6
$1,815.1
$0.0
623.5
1,080.4
$1,703.9
N/A
(11.1%)
(1.0%)
(100.0%)
N/A
(9.0%)
31.0
$3,345.0
19.5
$2,801.3
11.4
$2,719.8
$2,620.0
$2,037.5
$1,926.3
$1,815.1
$1,703.9
(100.0%)
(8.9%)
$1,123.5
$1,123.5 $1,023.5
(100.0)
(100.0)
$1,023.5
$923.5
$923.5
(100.0)
$823.5
$823.5
(100.0)
$723.5
$723.5
(100.0)
$623.5
$1,073.5
$973.5
$873.5
$773.5
$673.5
3.36%
$36.1
3.71%
$36.1
4.52%
$39.5
5.51%
$42.6
6.23%
$41.9
Average Balance
Interest Rate (LIBOR + 3.00%)
Interest Expense
3.00%
Senior Secured Credit Facility Term B-3 Loan, Variable, Due 2019
Beginning Balance
Principal Payment
Retirement
Ending Balance
$1,136.4
Average Balance
Interest Rate (LIBOR + 2.75%)
Interest Expense
7.125%
Key Metrics:
Interst Expense
Debt Principal Payment + Debt Retirement
CAGR
'13E '18E
2011A
$471.3
$1,119.6
$1,108.4
$1,097.2
$1,086.0
3.75%
$42.4
3.75%
$42.0
4.27%
$47.3
5.26%
$57.7
5.98%
$64.9
$471.3
$471.3
$471.3
(471.3)
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0
$471.3
$471.3
$0.0
$0.0
$0.0
7.125%
$33.6
7.125%
$33.6
7.125%
$0.0
7.125%
$0.0
7.125%
$0.0
$112.1
111.2
$111.7
582.5
$86.8
111.2
$100.4
111.2
$106.8
111.2
N/A
N/A
(11.1%)
N/A
N/A
N/A
(1.0%)
N/A
N/A
(100.0%)
Short Recommendation
DigitalGlobe, Inc. (NYSE: DGI)
Company Overview
Global Provider of Earth Imagery Solutions
US market leader in
Earth Observation (EO)
image services
Exclusive commercial provider of
satellite imaging to
US government
Actively integrating GeoEye, its
recently acquired
primary competitor
Commercial
41%
US
Government
59%
By Customer Domicile
International
31%
US
69%
Investment Rationale
Current Valuation Implies Perfect Execution by Management
#1
Competition is
Overlooked
#2
Highly
Concentrated
Customer Base
#3
Growing Pains
Established
Competitors are
Well Positioned
PostIntegration
Pricing
Concerns
Multiple Growth Drivers and High Barriers to Entry: DigitalGlobe and GeoEye represent a
domestic duopoly serving the need for high-resolution Earth imagery from space.
Morgan Stanley (8/17/09)
Recent equity research has not reflected this inaccuracy, but the current
environment is hardly a land grab with public and private competitors
With potential increased competition for commercial sales, there is no
certainty that DGI can maintain high margins or its dominant market share
Location Based
Services is
Old News
DGIs Customers
Can Capture
Value
Aerial Imagery
Satellite Imagery
Why hasnt Google updated its satellite image of One World Trade Center?
Why is management making broad generalizations about LBS rather than talking in specifics?
Where do you think the growth in LBS is more likely to be?
Source: Google (accessed 11/7/2013)
NGA can
Renegotiate
Each Year
Streets Bull
Case Ignores
Budget Realities
Operating
Leverage Cuts
Both Ways
Market is
Receptive to
Managements
Mixed Message
The high fixed costs and long build times for satellites makes DGIs
constellation of satellites difficult to forecast and budget
While operating leverage enables margin improvement if new opportunities
are available, incorrectly forecasting the need for new satellites can create
significant challenges:
Newest satellite in storage indefinitely
Downside case reflects 300bps reduction in EBITDA margin to reflect
adverse affect from high operating leverage
DGI must grow into its current valuation, but is struggling to meet
managements revenue guidance
Management is currently targeting the low end of their original 2013
revenue guidance of $635mm-$660mm, and on October 31 warned they may
not even get to the guidance range
Commercial revenue growth missed analysts estimates in 3Q13
The market reacted positively to the Oct. 31 earnings announcement and the
price has increased 14% since
2 out of 3 aint bad. [] Better than expected government revenue growth (up 53% y/y vs.
our 37%E), but a miss on commercial revenues (up 47% vs. our 87%E). [] we acknowledge
that better growth here will be key to demonstrating to investors that DGI is truly evolving
from an aerospace/defense firm into an information services business.
Piper Jaffray (10/31/13)
GeoEye
Acquisition
Source: Company earnings call transcripts, Company filings, Equity research, Citi
$2,990.8
$2,657.2
(1,142.2)
404.1
$2,252.7
(1,142.2)
404.1
$1,919.1
3.0%
9.0%
76.4
$29.49
76.4
$25.12
Price Appreciation/(Depreciation)
(15.0%)
15.0%
Price Appreciation/(Depreciation)
(27.6%)
27.6%
(1)
$27.31
Price Appreciation/(Depreciation)
Projected Total Returns
(1)
(1)
(21.3%)
21.3%
Weighting two
methodologies equally
Competition
Stumbles
Short squeeze could occur if results exceed expectations and the resulting
operating leverage boosts DGI stock price
US federal budget issues are permanently resolved and there is more clarity
into long-term contracts
DGI may use CapEx holiday if GeoEye-2 continues to be mothballed and uses
free cash flow to de-lever or pursue bolt-on acquisitions
If value-added services grows faster than current estimates, DGI has excess
capacity to meet demand by launching GeoEye-2
Risks to Valuation
Miscellaneous
Appendix
DigitalGlobe, Inc. (NYSE: DGI)
Historical Price
Source: Bloomberg
Ownership Summary
Source: Bloomberg
Short Interest
Source: Bloomberg
Management
Jeffrey Tarr
President and CEO
Yancey Spruill
EVP, CFO and
Treasurer
Timothy Hascall
EVP Operations and
Customer Experience
Walter Scott
EVP Chief Technical
Officer and Founder
Source: Company website
Company
Ticker
Price
Satellite Communication
Intelsat
Macdonald Dettwiler
I
TSX:MDA
$19.01
75.30
Satellite
Communication
Mean
Median
$138.11
85.36
110.73
64.92
22.72
5.45
Market
Cap
$2,006
2,713
$43,989
27,270
24,581
2,950
1,374
418
Enterprise % 52-Wk.
Debt/
EBITDA/ EV/EBITDA
Value
High
Cap EBITDA Interest 2013E 2014E
$17,263
3,291
$47,484
28,276
25,565
3,464
1,277
1,084
P/E
LT EPS
Div.
2013E 2014E Growth PEG Yield
71% 107%
93% 52%
8.0x
3.0
1.6x
5.9x
8.7x
11.2
8.5x
9.5
nm
15.3
6.7x
13.0
2%
6%
na
2.5
0.0%
0.8%
82%
82%
80%
80%
5.5x
5.5
3.8x
3.8
10.0x
10.0
9.0x
9.0
15.3x
15.3
9.9x
9.9
4%
4%
2.5x
2.5
0.4%
0.4%
100%
100%
100%
88%
95%
59%
83%
34%
39%
39%
16%
50%
1.2x
1.4
1.6
3.9
0.9
5.0
14.7x
15.8x
15.5x
3.6x
nm
nm
8.3x
8.5
7.2
16.5
8.3
5.3
7.9x
8.2
7.4
11.7
8.0
5.0
14.2x
14.7
13.6
nm
20.1
7.5
13.6x
13.8
13.3
50.0
19.5
5.8
7%
8%
6%
32%
13%
12%
2.2x
1.8
2.3
na
1.6
0.6
3.3%
2.5%
2.1%
0.0%
0.0%
0.0%
Mean
Median
90%
97%
43%
39%
2.3x
1.5
12.4x
15.1
9.0x
8.3
8.0x
8.0
14.0x
14.2
19.3x
13.7
13%
10%
1.7x
1.8
1.3%
1.0%
Total Comparable
Universe
Mean
Median
88%
94%
53%
45%
3.1x
2.3
9.5x
10.3
9.2x
8.4
8.3x
8.1
14.2x
14.5
17.0x
13.4
11%
7%
1.8x
2.0
1.1%
0.4%
95%
46%
4.7x
nm
18.5x
10.5x
nm
56.2x
16%
na
0.0%
18.5x
9.9x
nm
43.0x
$34.70
$2,610
$3,498
WACC Analysis
35.0% Company
2.75% Lockheed Martin
6.62% Raytheon
1.17% Northrop Grumman
ViaSat
Orbital Sciences
Pre-Tax Cost of Debt
After-Tax Cost of Debt
Debt/
Capital
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
Debt/
Mkt Equity
33.3%
42.9%
53.8%
66.7%
81.8%
100.0%
122.2%
150.0%
185.7%
Historical
Unlevered
Beta
0.94
0.94
0.94
0.94
0.94
0.94
0.94
0.94
0.94
Levered
Beta
1.14
1.20
1.27
1.34
1.44
1.55
1.68
1.85
2.07
Cost of
Equity
11.5%
11.9%
12.3%
12.8%
13.4%
14.2%
15.1%
16.2%
17.6%
Levered
Beta
0.88
0.80
1.10
1.07
1.32
3.25%
2.11%
9.13%
8.93%
8.74%
8.54%
8.34%
8.14%
7.94%
7.74%
7.54%
Total
Debt
$6,156
$4,733
$5,928
$588
$145
4.25%
2.76%
Market
Debt /
Equity
Mkt. Equity
$43,989
14.0%
$27,270
17.4%
$24,581
24.1%
$2,950
19.9%
$1,374
10.6%
5.25%
3.41%
6.25%
4.06%
Unlevered
Beta
0.80
0.72
0.95
0.99
1.23
7.25%
4.71%
2014E
$722.4
183.5
538.9
2015E
$814.1
202.7
611.4
2016E
$880.1
217.4
662.7
252.6
252.6
206.6
206.6
228.8
228.8
245.5
245.5
264.5
264.5
286.0
286.0
2.5%
N/A
2.5%
EBITDA
189.4
332.3
382.6
417.2
456.5
501.3
21.5%
215.4
(25.9)
293.1
39.2
337.0
45.6
308.2
109.0
313.3
143.2
277.9
223.5
5.2%
N/A
29.7
3.8
33.3
72.5
37.1
82.7
48.4
157.4
61.2
204.4
66.3
289.8
17.4%
N/A
138.2%
(1.2)
2.5
(25.4)
47.1
(28.9)
53.7
(55.1)
102.3
(71.5)
132.8
(101.4)
188.3
141.0%
136.7%
$0.03
$0.62
$0.70
$1.34
$1.74
$2.47
41.3%
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
% Net Sales
COGS
SG&A
EBITDA
30.0%
40.0%
30.0%
25.4%
28.6%
46.0%
24.9%
28.1%
47.0%
24.7%
27.9%
47.4%
24.5%
27.7%
47.8%
24.3%
27.5%
48.2%
Margin
Gross Profit
EBITDA
Net
70.0%
30.0%
0.4%
74.6%
46.0%
6.5%
75.1%
47.0%
6.6%
75.3%
47.4%
11.6%
75.5%
47.8%
13.9%
75.7%
48.2%
18.1%
Other
Tax Rate
33.0%
35.0%
35.0%
35.0%
35.0%
35.0%
2017E
2018E
$955.0 $1,040.1
234.0
252.7
721.0
787.4
CAGR
'13E '18E
10.5%
5.9%
12.2%
2013E
$631.4
189.4
442.0
2013E
2014E
2015E
2016E
2017E
2018E
CAGR
'13E '18E
$266.4
158.3
$424.7
$300.0
171.8
$471.8
$300.0
186.4
$486.4
$300.0
202.2
$502.2
$300.0
219.4
$519.4
$300.0
238.0
$538.0
2.4%
8.5%
4.8%
297.7
$722.4
342.4
$814.1
393.7
$880.1
452.8
$955.0
520.7
$1,040.1
598.8
$1,136.9
15.0%
9.5%
na
na
na
12.6%
8.5%
11.1%
0.0%
8.5%
3.1%
0.0%
8.5%
3.3%
0.0%
8.5%
3.4%
0.0%
8.5%
3.6%
Commercial
Net Sales
na
na
15.0%
12.7%
15.0%
8.1%
15.0%
8.5%
15.0%
8.9%
15.0%
9.3%
Commercial
Net Sales
2013E
$404.1
118.0
50.8
30.3
603.3
83.3
(41.0)
42.3
2014E
2015E
$626.4
135.0
50.8
34.7
846.9
83.3
(50.1)
33.2
83.3
(58.3)
25.0
2016E
83.3
(64.5)
18.8
2017E
83.3
(70.6)
12.7
2018E
83.3
(77.2)
6.1
382.6
382.6
382.6
382.6
382.6
382.6
98.4
112.5
126.8
137.1
148.8
162.0
$3,338.2 $3,431.6 $3,639.3 $3,996.8 $4,174.6 $4,411.3
CAGR
'13E '18E
34.6%
10.5%
0.0%
10.5%
28.1%
6.0%
20.9%
(4.3%)
0.0%
13.5%
(32.1%)
0.0%
10.5%
5.7%
2013E
$23.2
5.5
60.8
134.2
223.7
$22.4
5.5
68.5
153.6
250.0
$24.8
5.5
74.0
173.1
277.4
$26.6
5.5
80.3
187.1
299.5
$28.6
5.5
87.5
203.0
324.6
$30.9
5.5
95.6
221.1
353.1
5.9%
0.0%
9.5%
10.5%
9.6%
Deferred Revenue
Long-Term Debt
Deferred Tax Liability
Other Non-Current Liabilities
Total Liabilities
388.8
1,136.7
189.0
3.0
1,941.2
388.8
1,131.1
189.0
3.5
1,962.4
388.8
1,232.3
189.0
3.9
2,091.4
388.8
1,440.1
189.0
4.2
2,321.6
388.8
1,434.6
189.0
4.6
2,341.6
388.8
1,429.0
189.0
5.0
2,365.0
0.0%
4.7%
0.0%
10.5%
4.0%
Stockholders' Equity
Common Stock
Treasury Stock
Additional Paid In Capital
Retained Earnings (Accumulated Deficit)
Total Stockholders' Equity
0.2
(2.0)
1,426.9
(28.1)
1,397.0
0.2
(2.0)
1,451.9
19.0
1,469.1
0.2
(2.0)
1,476.9
72.8
1,547.9
0.2
(2.0)
1,501.9
175.1
1,675.2
0.2
(2.0)
1,526.9
307.9
1,833.0
0.2
(2.0)
1,551.9
496.3
2,046.4
0.0%
0.0%
1.7%
N/A
7.9%
5.7%
2014E
2015E
2016E
2017E
2018E
CAGR
'13E '18E
2013E
2014E
2015E
2016E
2017E
2018E
CAGR
'13E '18E
$2.5
$47.1
$53.7
$102.3
$132.8
$188.3
7.6
207.8
25.0
(7.9)
9.1
284.0
25.0
(14.2)
8.2
328.8
25.0
(14.3)
6.2
302.0
25.0
(10.3)
6.1
307.2
25.0
(11.7)
6.6
271.3
25.0
(13.3)
(2.7%)
5.5%
0.0%
11.0%
(9.4)
7.9
16.2
249.7
(17.0)
(0.7)
23.1
356.5
(17.1)
2.4
21.1
407.8
(12.3)
1.8
17.5
432.1
(14.0)
2.0
19.8
467.4
(15.9)
2.3
22.6
486.9
11.0%
(21.8%)
6.8%
14.3%
(185.0)
(31.6)
(216.6)
(92.5)
(36.1)
(128.6)
(106.7)
(40.7)
(147.4)
(213.4)
(44.0)
(257.4)
(213.4)
(47.7)
(261.1)
(213.4)
(52.0)
(265.4)
2.9%
10.5%
4.1%
1.0
(5.1)
(4.1)
(5.5)
(5.5)
101.1
101.1
207.8
207.8
(5.5)
(5.5)
(5.5)
(5.5)
NA
1.8%
6.3%
$29.0
$222.3
$361.5
$382.6
$200.8
$216.0
49.4%
375.1
404.1
404.1
626.4
626.4
987.9
987.9
1,370.5
1,370.5
1,571.3
1,571.3
1,787.3
33.2%
34.6%
136.7%
2014E
$723.7
166.5
557.3
2015E
$859.1
193.3
665.8
252.6
252.6
202.6
202.6
236.3
236.3
265.8
265.8
291.5
291.5
313.7
313.7
4.4%
N/A
4.4%
EBITDA
189.4
354.6
429.6
490.8
546.5
597.0
25.8%
215.4
(25.9)
293.2
61.4
340.2
89.4
314.7
176.0
321.8
224.7
286.7
310.3
5.9%
N/A
29.7
3.8
33.3
94.7
37.1
126.4
48.4
224.4
61.2
285.9
66.3
376.6
17.4%
N/A
151.0%
(1.2)
2.5
(33.2)
61.6
(44.3)
82.2
(78.5)
145.9
(100.1)
185.9
(131.8)
244.8
154.0%
149.5%
$0.03
$0.81
$1.08
$1.91
$2.43
$3.21
44.5%
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
% Net Sales
COGS
SG&A
EBITDA
30.0%
40.0%
30.0%
23.0%
28.0%
49.0%
22.5%
27.5%
50.0%
22.3%
27.3%
50.4%
22.1%
27.1%
50.8%
21.9%
26.9%
51.2%
Margin
Gross Profit
EBITDA
Net
70.0%
30.0%
0.4%
77.0%
49.0%
8.5%
77.5%
50.0%
9.6%
77.7%
50.4%
15.0%
77.9%
50.8%
17.3%
78.1%
51.2%
21.0%
Other
Tax Rate
33.0%
35.0%
35.0%
35.0%
35.0%
35.0%
2016E
2017E
2018E
$973.7 $1,075.8 $1,166.1
217.1
237.7
255.4
756.6
838.0
910.7
CAGR
'13E '18E
13.1%
6.2%
15.6%
2013E
$631.4
189.4
442.0
2013E
2014E
2015E
2016E
2017E
2018E
CAGR
'13E '18E
$266.4
158.3
$424.7
$300.0
200.3
$500.3
$300.0
250.3
$550.3
$300.0
288.9
$588.9
$300.0
318.3
$618.3
$300.0
336.8
$636.8
2.4%
16.3%
8.4%
299.0
$723.7
358.8
$859.1
423.4
$973.7
486.9
$1,075.8
547.8
$1,166.1
602.6
$1,239.4
15.0%
11.4%
na
na
na
12.6%
26.5%
17.8%
0.0%
25.0%
10.0%
0.0%
15.4%
7.0%
0.0%
10.2%
5.0%
0.0%
5.8%
3.0%
Commercial
Net Sales
na
na
20.0%
18.7%
18.0%
13.3%
15.0%
10.5%
12.5%
8.4%
10.0%
6.3%
Commercial
Net Sales
2013E
$404.2
118.0
50.8
30.3
603.4
83.3
(41.0)
42.3
2014E
2015E
2016E
2017E
2018E
83.3
(50.1)
33.2
83.3
(58.3)
25.0
83.3
(64.5)
18.8
83.3
(70.6)
12.7
83.3
(77.2)
6.1
382.6
382.6
382.6
382.6
382.6
382.6
98.4
112.7
133.8
151.7
167.6
181.6
$3,338.3 $3,448.0 $3,698.7 $4,113.8 $4,351.4 $4,643.6
CAGR
'13E '18E
37.4%
13.1%
0.0%
13.1%
30.7%
6.1%
21.1%
(4.4%)
0.0%
13.5%
(32.1%)
0.0%
13.1%
6.8%
2013E
$23.2
5.5
60.9
134.2
223.8
$20.4
5.5
72.2
153.8
252.0
$23.6
5.5
81.9
182.6
293.7
$26.6
5.5
90.5
207.0
329.5
$29.1
5.5
98.1
228.7
361.3
$31.2
5.5
104.2
247.9
388.9
6.2%
0.0%
11.4%
13.1%
11.7%
Deferred Revenue
Long-Term Debt
Deferred Tax Liability
Other Non-Current Liabilities
Total Liabilities
388.8
1,136.7
189.0
3.0
1,941.3
388.8
1,131.1
189.0
3.5
1,964.4
388.8
1,232.3
189.0
4.1
2,107.9
388.8
1,440.1
189.0
4.7
2,352.1
388.8
1,434.6
189.0
5.2
2,378.9
388.8
1,429.0
189.0
5.6
2,401.3
0.0%
4.7%
0.0%
13.1%
4.3%
Stockholders' Equity
Common Stock
Treasury Stock
Additional Paid In Capital
Retained Earnings (Accumulated Deficit)
Total Stockholders' Equity
0.2
(2.0)
1,426.9
(28.1)
1,397.0
0.2
(2.0)
1,451.9
33.5
1,483.6
0.2
(2.0)
1,476.9
115.7
1,590.8
0.2
(2.0)
1,501.9
261.5
1,761.6
0.2
(2.0)
1,526.9
447.4
1,972.5
0.2
(2.0)
1,551.9
692.2
2,242.3
0.0%
0.0%
1.7%
N/A
9.9%
6.8%
2014E
2015E
2016E
2017E
2018E
CAGR
'13E '18E
2013E
2014E
2015E
2016E
2017E
2018E
CAGR
'13E '18E
$2.5
$61.6
$82.2
$145.9
$185.9
$244.8
7.6
207.8
25.0
(7.9)
9.1
284.1
25.0
(14.4)
8.2
332.0
25.0
(21.1)
6.2
308.5
25.0
(17.9)
6.1
315.7
25.0
(15.9)
6.6
280.1
25.0
(14.1)
(2.7%)
6.2%
0.0%
12.4%
(9.4)
7.9
16.3
249.8
(17.2)
(2.8)
27.0
372.4
(25.3)
3.3
32.6
436.8
(21.4)
2.9
28.0
477.2
(19.1)
2.5
24.9
525.1
(16.9)
2.2
21.5
549.2
12.4%
(22.8%)
5.7%
17.1%
(185.0)
(31.6)
(216.6)
(92.5)
(36.2)
(128.7)
(106.7)
(43.0)
(149.6)
(213.4)
(48.7)
(262.0)
(213.4)
(53.8)
(267.1)
(213.4)
(58.3)
(271.7)
2.9%
13.1%
4.6%
1.0
(5.1)
(4.1)
(5.5)
(5.5)
101.1
101.1
207.8
207.8
(5.5)
(5.5)
(5.5)
(5.5)
NA
1.8%
6.3%
$29.1
$238.1
$388.3
$423.0
$252.4
$272.0
56.3%
375.1
404.2
404.2
642.4
642.4
1,030.7
1,030.7
1,453.7
1,453.7
1,706.1
1,706.1
1,978.1
35.4%
37.4%
149.5%
DigitalGlobe, Inc.
Valuation Summary - Base Case
$34.70
75.2
1.2
76.4
$2,650
Plus: Debt
Total Market Capitalization
1,143.9
3,794.4
$332.3
10.2x
30.1%
(404.1)
$3,390.3
$2,990.8
$2,657.2
(1,142.2)
404.1
$2,252.7
(1,142.2)
404.1
$1,919.1
3.0%
9.0%
76.4
$29.49
76.4
$25.12
Price Appreciation/(Depreciation)
(15.0%)
15.0%
Price Appreciation/(Depreciation)
(27.6%)
27.6%
(1)
$27.31
Price Appreciation/(Depreciation)
(21.3%)
21.3%
(1)
DigitalGlobe, Inc.
Discounted Cash Flow Analysis
Base Case
($mm, except as noted)
Operating Income (EBIT)
2013E
($25.9)
2014E
$39.2
2015E
$45.6
2016E
$109.0
2017E
$143.2
2018E
$223.5
8.6
33.0%
(13.7)
35.0%
(16.0)
35.0%
(38.1)
35.0%
(50.1)
35.0%
(78.2)
35.0%
207.8
7.6
(216.6)
14.6
284.0
9.1
(128.6)
5.4
328.8
8.2
(147.4)
6.3
302.0
6.2
(257.4)
6.9
307.2
6.1
(261.1)
7.9
271.3
6.6
(265.4)
8.9
$195.4
$225.6
$128.6
$153.2
$195.4
$225.6
$128.6
$153.2
$166.7
2,861.7
$3,028.4
0.5
9.0%
0.958
1.5
9.0%
0.879
2.5
9.0%
0.806
3.5
9.0%
0.740
4.5
9.0%
0.679
$187.1
$198.2
$103.7
$113.3
$2,054.9
$2,657.2
(1,142.2)
404.1
$1,919.1
76.4
$25.12
(1) Based on assumed terminal growth rate of 3.0% and assumed WACC of 9.0%.
DigitalGlobe, Inc.
Income Statement
Base Case
2013E
$631.4
189.4
442.0
2014E
$722.4
183.5
538.9
2015E
$814.1
202.7
611.4
2016E
$880.1
217.4
662.7
2017E
$955.0
234.0
721.0
2018E
$1,040.1
252.7
787.4
CAGR
'13E '18E
10.5%
5.9%
12.2%
252.6
252.6
206.6
206.6
228.8
228.8
245.5
245.5
264.5
264.5
286.0
286.0
2.5%
N/A
2.5%
EBITDA
189.4
332.3
382.6
417.2
456.5
501.3
21.5%
215.4
(25.9)
293.1
39.2
337.0
45.6
308.2
109.0
313.3
143.2
277.9
223.5
5.2%
N/A
29.7
3.8
33.3
72.5
37.1
82.7
48.4
157.4
61.2
204.4
66.3
289.8
17.4%
N/A
138.2%
(1.2)
2.5
(25.4)
47.1
(28.9)
53.7
(55.1)
102.3
(71.5)
132.8
(101.4)
188.3
141.0%
136.7%
$0.03
$0.62
$0.70
$1.34
$1.74
$2.47
41.3%
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
% Net Sales
COGS
SG&A
EBITDA
30.0%
40.0%
30.0%
25.4%
28.6%
46.0%
24.9%
28.1%
47.0%
24.7%
27.9%
47.4%
24.5%
27.7%
47.8%
24.3%
27.5%
48.2%
Margin
Gross Profit
EBITDA
Net
70.0%
30.0%
0.4%
74.6%
46.0%
6.5%
75.1%
47.0%
6.6%
75.3%
47.4%
11.6%
75.5%
47.8%
13.9%
75.7%
48.2%
18.1%
Other
Tax Rate
33.0%
35.0%
35.0%
35.0%
35.0%
35.0%
DigitalGlobe, Inc.
Balance Sheet
Base Case
($mm, except as noted)
Assets
Current Assets
Cash and Cash Equivalents
Accounts Receivable
Deferred Income Taxes
Prepaid and Other Current Assets
Total Current Assets
2013E
3,156.6
3,285.2
3,432.6
3,690.0
3,951.1
4,216.4
(945.0) (1,229.0) (1,557.8) (1,859.8) (2,167.0) (2,438.3)
2,211.7
2,056.3
1,874.8
1,830.2
1,784.1
1,778.1
$404.1
118.0
50.8
30.3
603.3
2014E
2015E
2016E
2017E
2018E
$626.4
135.0
50.8
34.7
846.9
$987.9
152.2
50.8
39.1
1,230.0
$1,370.5
164.5
50.8
42.3
1,628.1
$1,571.3
178.5
50.8
45.9
1,846.5
$1,787.3
194.4
50.8
49.9
2,082.4
CAGR
'13E '18E
34.6%
10.5%
0.0%
10.5%
28.1%
6.0%
20.9%
(4.3%)
83.3
(41.0)
42.3
83.3
(50.1)
33.2
83.3
(58.3)
25.0
83.3
(64.5)
18.8
83.3
(70.6)
12.7
83.3
(77.2)
6.1
382.6
98.4
$3,338.2
382.6
112.5
$3,431.6
382.6
126.8
$3,639.3
382.6
137.1
$3,996.8
382.6
148.8
$4,174.6
382.6
162.0
$4,411.3
0.0%
10.5%
5.7%
$23.2
5.5
60.8
134.2
223.7
$22.4
5.5
68.5
153.6
250.0
$24.8
5.5
74.0
173.1
277.4
$26.6
5.5
80.3
187.1
299.5
$28.6
5.5
87.5
203.0
324.6
$30.9
5.5
95.6
221.1
353.1
5.9%
0.0%
9.5%
10.5%
9.6%
Deferred Revenue
Long-Term Debt
Deferred Tax Liability
Other Non-Current Liabilities
Total Liabilities
388.8
1,136.7
189.0
3.0
1,941.2
388.8
1,131.1
189.0
3.5
1,962.4
388.8
1,232.3
189.0
3.9
2,091.4
388.8
1,440.1
189.0
4.2
2,321.6
388.8
1,434.6
189.0
4.6
2,341.6
388.8
1,429.0
189.0
5.0
2,365.0
0.0%
4.7%
0.0%
10.5%
4.0%
Stockholders' Equity
Common Stock
Treasury Stock
Additional Paid In Capital
Retained Earnings (Accumulated Deficit)
Total Stockholders' Equity
0.2
(2.0)
1,426.9
(28.1)
1,397.0
0.2
(2.0)
1,451.9
19.0
1,469.1
0.2
(2.0)
1,476.9
72.8
1,547.9
0.2
(2.0)
1,501.9
175.1
1,675.2
0.2
(2.0)
1,526.9
307.9
1,833.0
0.2
(2.0)
1,551.9
496.3
2,046.4
0.0%
0.0%
1.7%
N/A
7.9%
Goodwill
Other Non-Current Assets
Total Assets
Liabilities
Current Liabilities
Accounts Payable
Current Portion of Long-Term Debt
Deferred Revenue
Other Current Liabilities
Total Current Liabilities
$3,338.2
$3,431.6
$3,639.3
$3,996.8
$4,174.6
$4,411.3
68.2
4.8%
44.6
21.3%
68.2
4.8%
44.6
21.3%
68.2
4.8%
44.6
21.3%
68.2
4.8%
44.6
21.3%
68.2
4.8%
44.6
21.3%
68.2
4.8%
44.6
21.3%
Key Metrics:
A/R Days
Prepaid and Other Current Assets as % of Sales
A/P Days
Other Current Liabilities as % of Sales
0.0%
13.5%
(32.1%)
5.7%
DigitalGlobe, Inc.
Cash Flow Statement
Base Case
($mm, except as noted)
Cash Flows from Operating Activities:
Net Income
Add (Deduct) Items:
Amortization of Intangible Assets
Depreciation of Long-Lived Assets
Stock-Based Compensation
Other
Changes in Assets and Liabilities:
Accounts Receivable
Accounts Payable
Other Assets and Liabilities
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Capital Expenditures for Satellites
Additions of Long-Lived Assets
Net Cash Used for Investing Activities
Cash Flows from Financing Activities:
Adjustment to Debt, net of discounts
Mandatory Payments on Long-Term Debt
Net Cash Used for Financing Activities
2013E
2014E
2015E
2016E
2017E
2018E
$102.3
$132.8
$188.3
CAGR
'13E '18E
$2.5
$47.1
$53.7
136.7%
7.6
207.8
25.0
(7.9)
9.1
284.0
25.0
(14.2)
8.2
328.8
25.0
(14.3)
6.2
302.0
25.0
(10.3)
6.1
307.2
25.0
(11.7)
6.6
271.3
25.0
(13.3)
(2.7%)
5.5%
0.0%
11.0%
(9.4)
7.9
16.2
249.7
(17.0)
(0.7)
23.1
356.5
(17.1)
2.4
21.1
407.8
(12.3)
1.8
17.5
432.1
(14.0)
2.0
19.8
467.4
(15.9)
2.3
22.6
486.9
11.0%
(21.8%)
6.8%
14.3%
(185.0)
(31.6)
(216.6)
(92.5)
(36.1)
(128.6)
(106.7)
(40.7)
(147.4)
(213.4)
(44.0)
(257.4)
(213.4)
(47.7)
(261.1)
(213.4)
(52.0)
(265.4)
2.9%
10.5%
4.1%
1.0
(5.1)
(4.1)
(5.5)
(5.5)
101.1
101.1
207.8
207.8
(5.5)
(5.5)
(5.5)
(5.5)
NA
1.8%
6.3%
$29.0
$222.3
$361.5
$382.6
$200.8
$216.0
49.4%
375.1
404.1
404.1
626.4
626.4
987.9
987.9
1,370.5
1,370.5
1,571.3
1,571.3
1,787.3
33.2%
34.6%
DigitalGlobe, Inc.
Revenue Model
Base Case
($mm, except as noted)
Net Sales
US Government NGA (contractual)
Other US Government
Total US Government
Commercial
Net Sales
2013E
2014E
2015E
2016E
2017E
2018E
CAGR
'13E '18E
$266.4
158.3
$424.7
$300.0
171.8
$471.8
$300.0
186.4
$486.4
$300.0
202.2
$502.2
$300.0
219.4
$519.4
$300.0
238.0
$538.0
2.4%
8.5%
4.8%
297.7
$722.4
342.4
$814.1
393.7
$880.1
452.8
$955.0
520.7
$1,040.1
598.8
$1,136.9
15.0%
9.5%
na
na
na
12.6%
8.5%
11.1%
0.0%
8.5%
3.1%
0.0%
8.5%
3.3%
0.0%
8.5%
3.4%
0.0%
8.5%
3.6%
Commercial
Net Sales
na
na
15.0%
12.7%
15.0%
8.1%
15.0%
8.5%
15.0%
8.9%
15.0%
9.3%
DigitalGlobe, Inc.
Debt
Base Case
($mm, except as noted)
Long-Term Debt:
Senior Secured Term Loan Facility, Variable, Due 2020, Mand. Amort.
Senior Secured Revolving Credit Facility, $150mm, Due 2018 (Currently Unused)
Senior Notes, Fixed, Due 2021, Mand. Amort.
Total Long-Term Debt
2013E
2014E
2015E
2016E
2017E
2018E
$544.0
598.2
$1,142.2
$540.5
596.2
$1,136.7
$536.9
106.7
594.2
$1,237.8
$533.4
320.0
592.2
$1,445.6
$529.8
320.0
590.3
$1,440.1
$526.3
320.0
588.3
$1,434.6
5.5
$1,136.7
5.5
$1,131.1
5.5
$1,232.3
5.5
$1,440.1
5.5
$1,434.6
5.5
$1,429.0
Interest Expense:
Senior Secured Term Loan Facility, Variable, Due 2020, Mand. Amort.
Beginning Balance
Issuance, net of discount
Mandatory Amortization
0.7%
Ending Balance
Average Balance
Interest Rate (LIBOR + 0.00%)
Interest Expense
0.00%
Senior Secured Revolving Credit Facility, $150mm, Due 2018 (Currently Unused)
Beginning Balance
Drawdown
Retirement
Ending Balance
$0.0
$547.3
($3.3)
$544.0
$544.0
($3.6)
$540.5
$540.5
($3.6)
$536.9
$536.9
($3.6)
$533.4
$533.4
($3.6)
$529.8
$529.8
($3.6)
$526.3
$545.7
$542.3
$538.7
$535.1
$531.6
$528.0
0.17%
$0.9
0.36%
$2.0
0.71%
$3.8
1.52%
$8.1
2.51%
$13.4
3.23%
$17.0
$0.0
$0.0
$0.0
$0.0
$0.0
106.7
$106.7
$106.7
213.4
$320.0
$320.0
$320.0
$320.0
$320.0
$0.0
$53.3
$213.4
$320.0
$320.0
3.75%
3.4
3.75%
3.2
4.27%
3.5
5.26%
3.2
5.73%
2.9
$0.0
$2.0
$9.1
$16.8
$18.3
Average Balance
Interest Rate (LIBOR + 2.75%)
Leverage (Debt/EBITDA)
Commitment Fee
Interest Expense
Key Metrics:
Interest Expense
Implied Cost of Debt
Mandatory Amortization
5.25%
$0.0
$600.0
($1.8)
$598.2
$598.2
($2.0)
$596.2
$596.2
($2.0)
$594.2
$594.2
($2.0)
$592.2
$592.2
($2.0)
$590.3
$590.3
($2.0)
$588.3
$599.1
$597.2
$595.2
$593.2
$591.3
$589.3
5.25%
$28.8
5.25%
$31.4
5.25%
$31.2
5.25%
$31.1
5.25%
$31.0
5.25%
$30.9
$29.7
2.60%
$5.1
$33.3
2.93%
$5.5
$37.1
2.99%
$5.5
$48.4
3.35%
$5.5
$61.2
4.25%
$5.5
$66.3
4.62%
$5.5
DigitalGlobe, Inc.
Valuation Summary - Street Case
$34.70
75.2
1.2
76.4
$2,650
Plus: Debt
Total Market Capitalization
1,143.9
3,794.4
$354.6
9.6x
30.1%
(404.2)
$3,390.2
$3,368.9
$3,482.2
(1,142.2)
404.2
$2,630.9
(1,142.2)
404.2
$2,744.2
(1)
76.4
$34.44
(0.7%)
0.7%
Implied Share Price
Price Appreciation/(Depreciation)
Projected Total Returns(1)
(1)
3.0%
9.0%
76.4
$35.93
3.5%
(3.5%)
DigitalGlobe, Inc.
Discounted Cash Flow Analysis
Street Case
($mm, except as noted)
Operating Income (EBIT)
2013E
($25.9)
2014E
$61.4
2015E
$89.4
2016E
$176.0
2017E
$224.7
2018E
$310.3
8.6
33.0%
(21.5)
35.0%
(31.3)
35.0%
(61.6)
35.0%
(78.6)
35.0%
(108.6)
35.0%
207.8
7.6
(216.6)
14.7
284.1
9.1
(128.7)
7.0
332.0
8.2
(149.6)
10.5
308.5
6.2
(262.0)
9.5
315.7
6.1
(267.1)
8.3
280.1
6.6
(271.7)
6.7
$211.4
$259.2
$176.6
$209.0
$211.4
$259.2
$176.6
$209.0
$223.5
3,836.6
$4,060.1
0.5
9.0%
0.958
1.5
9.0%
0.879
2.5
9.0%
0.806
3.5
9.0%
0.740
4.5
9.0%
0.679
$202.5
$227.8
$142.4
$154.6
$2,755.0
$3,482.2
(1,142.2)
404.2
$2,744.2
76.4
$35.93
(1) Based on assumed terminal growth rate of 3.0% and assumed WACC of 9.0%.
DigitalGlobe, Inc.
Income Statement
Street Case
2013E
$631.4
189.4
442.0
2014E
$723.7
166.5
557.3
2015E
$859.1
193.3
665.8
2016E
$973.7
217.1
756.6
2017E
$1,075.8
237.7
838.0
2018E
$1,166.1
255.4
910.7
CAGR
'13E '18E
13.1%
6.2%
15.6%
252.6
252.6
202.6
202.6
236.3
236.3
265.8
265.8
291.5
291.5
313.7
313.7
4.4%
N/A
4.4%
EBITDA
189.4
354.6
429.6
490.8
546.5
597.0
25.8%
215.4
(25.9)
293.2
61.4
340.2
89.4
314.7
176.0
321.8
224.7
286.7
310.3
5.9%
N/A
29.7
3.8
33.3
94.7
37.1
126.4
48.4
224.4
61.2
285.9
66.3
376.6
17.4%
N/A
151.0%
(1.2)
2.5
(33.2)
61.6
(44.3)
82.2
(78.5)
145.9
(100.1)
185.9
(131.8)
244.8
154.0%
149.5%
$0.03
$0.81
$1.08
$1.91
$2.43
$3.21
44.5%
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
75.2
1.2
76.4
% Net Sales
COGS
SG&A
EBITDA
30.0%
40.0%
30.0%
23.0%
28.0%
49.0%
22.5%
27.5%
50.0%
22.3%
27.3%
50.4%
22.1%
27.1%
50.8%
21.9%
26.9%
51.2%
Margin
Gross Profit
EBITDA
Net
70.0%
30.0%
0.4%
77.0%
49.0%
8.5%
77.5%
50.0%
9.6%
77.7%
50.4%
15.0%
77.9%
50.8%
17.3%
78.1%
51.2%
21.0%
Other
Tax Rate
33.0%
35.0%
35.0%
35.0%
35.0%
35.0%
DigitalGlobe, Inc.
Balance Sheet
Street Case
($mm, except as noted)
Assets
Current Assets
Cash and Cash Equivalents
Accounts Receivable
Deferred Income Taxes
Prepaid and Other Current Assets
Total Current Assets
2013E
3,156.6
3,285.3
3,434.9
3,697.0
3,964.1
4,235.8
(945.0) (1,229.1) (1,561.0) (1,869.6) (2,185.3) (2,465.4)
2,211.7
2,056.3
1,873.9
1,827.4
1,778.9
1,770.4
$404.2
118.0
50.8
30.3
603.4
2014E
$642.4
135.3
50.8
34.8
863.2
2015E
2016E
2017E
2018E
$1,030.7
160.6
50.8
41.3
1,283.3
$1,453.7
182.0
50.8
46.8
1,733.3
$1,706.1
201.1
50.8
51.7
2,009.6
$1,978.1
218.0
50.8
56.0
2,302.8
CAGR
'13E '18E
37.4%
13.1%
0.0%
13.1%
30.7%
6.1%
21.1%
(4.4%)
83.3
(41.0)
42.3
83.3
(50.1)
33.2
83.3
(58.3)
25.0
83.3
(64.5)
18.8
83.3
(70.6)
12.7
83.3
(77.2)
6.1
382.6
98.4
$3,338.3
382.6
112.7
$3,448.0
382.6
133.8
$3,698.7
382.6
151.7
$4,113.8
382.6
167.6
$4,351.4
382.6
181.6
$4,643.6
0.0%
13.1%
6.8%
$23.2
5.5
60.9
134.2
223.8
$20.4
5.5
72.2
153.8
252.0
$23.6
5.5
81.9
182.6
293.7
$26.6
5.5
90.5
207.0
329.5
$29.1
5.5
98.1
228.7
361.3
$31.2
5.5
104.2
247.9
388.9
6.2%
0.0%
11.4%
13.1%
11.7%
Deferred Revenue
Long-Term Debt
Deferred Tax Liability
Other Non-Current Liabilities
Total Liabilities
388.8
1,136.7
189.0
3.0
1,941.3
388.8
1,131.1
189.0
3.5
1,964.4
388.8
1,232.3
189.0
4.1
2,107.9
388.8
1,440.1
189.0
4.7
2,352.1
388.8
1,434.6
189.0
5.2
2,378.9
388.8
1,429.0
189.0
5.6
2,401.3
0.0%
4.7%
0.0%
13.1%
4.3%
Stockholders' Equity
Common Stock
Treasury Stock
Additional Paid In Capital
Retained Earnings (Accumulated Deficit)
Total Stockholders' Equity
0.2
(2.0)
1,426.9
(28.1)
1,397.0
0.2
(2.0)
1,451.9
33.5
1,483.6
0.2
(2.0)
1,476.9
115.7
1,590.8
0.2
(2.0)
1,501.9
261.5
1,761.6
0.2
(2.0)
1,526.9
447.4
1,972.5
0.2
(2.0)
1,551.9
692.2
2,242.3
0.0%
0.0%
1.7%
N/A
9.9%
Goodwill
Other Non-Current Assets
Total Assets
Liabilities
Current Liabilities
Accounts Payable
Current Portion of Long-Term Debt
Deferred Revenue
Other Current Liabilities
Total Current Liabilities
$3,338.3
$3,448.0
$3,698.7
$4,113.8
$4,351.4
$4,643.6
68.2
4.8%
44.6
21.3%
68.2
4.8%
44.6
21.3%
68.2
4.8%
44.6
21.3%
68.2
4.8%
44.6
21.3%
68.2
4.8%
44.6
21.3%
68.2
4.8%
44.6
21.3%
Key Metrics:
A/R Days
Prepaid and Other Current Assets as % of Sales
A/P Days
Other Current Liabilities as % of Sales
0.0%
13.5%
(32.1%)
6.8%
DigitalGlobe, Inc.
Cash Flow Statement
Street Case
($mm, except as noted)
Cash Flows from Operating Activities:
Net Income
Add (Deduct) Items:
Amortization of Intangible Assets
Depreciation of Long-Lived Assets
Stock-Based Compensation
Other
Changes in Assets and Liabilities:
Accounts Receivable
Accounts Payable
Other Assets and Liabilities
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Capital Expenditures for Satellites
Additions of Long-Lived Assets
Net Cash Used for Investing Activities
Cash Flows from Financing Activities:
Adjustment to Debt, net of discounts
Mandatory Payments on Long-Term Debt
Net Cash Used for Financing Activities
2013E
2014E
2015E
2016E
2017E
2018E
$145.9
$185.9
$244.8
CAGR
'13E '18E
$2.5
$61.6
$82.2
149.5%
7.6
207.8
25.0
(7.9)
9.1
284.1
25.0
(14.4)
8.2
332.0
25.0
(21.1)
6.2
308.5
25.0
(17.9)
6.1
315.7
25.0
(15.9)
6.6
280.1
25.0
(14.1)
(2.7%)
6.2%
0.0%
12.4%
(9.4)
7.9
16.3
249.8
(17.2)
(2.8)
27.0
372.4
(25.3)
3.3
32.6
436.8
(21.4)
2.9
28.0
477.2
(19.1)
2.5
24.9
525.1
(16.9)
2.2
21.5
549.2
12.4%
(22.8%)
5.7%
17.1%
(185.0)
(31.6)
(216.6)
(92.5)
(36.2)
(128.7)
(106.7)
(43.0)
(149.6)
(213.4)
(48.7)
(262.0)
(213.4)
(53.8)
(267.1)
(213.4)
(58.3)
(271.7)
2.9%
13.1%
4.6%
1.0
(5.1)
(4.1)
(5.5)
(5.5)
101.1
101.1
207.8
207.8
(5.5)
(5.5)
(5.5)
(5.5)
NA
1.8%
6.3%
$29.1
$238.1
$388.3
$423.0
$252.4
$272.0
56.3%
375.1
404.2
404.2
642.4
642.4
1,030.7
1,030.7
1,453.7
1,453.7
1,706.1
1,706.1
1,978.1
35.4%
37.4%
DigitalGlobe, Inc.
Revenue Model
Street Case
($mm, except as noted)
Net Sales
US Government NGA (contractual)
Other US Government
Total US Government
Commercial
Net Sales
2013E
2014E
2015E
2016E
2017E
2018E
CAGR
'13E '18E
$266.4
158.3
$424.7
$300.0
200.3
$500.3
$300.0
250.3
$550.3
$300.0
288.9
$588.9
$300.0
318.3
$618.3
$300.0
336.8
$636.8
2.4%
16.3%
8.4%
299.0
$723.7
358.8
$859.1
423.4
$973.7
486.9
$1,075.8
547.8
$1,166.1
602.6
$1,239.4
15.0%
11.4%
na
na
na
12.6%
26.5%
17.8%
0.0%
25.0%
10.0%
0.0%
15.4%
7.0%
0.0%
10.2%
5.0%
0.0%
5.8%
3.0%
Commercial
Net Sales
na
na
20.0%
18.7%
18.0%
13.3%
15.0%
10.5%
12.5%
8.4%
10.0%
6.3%