Matthew O'Connell, ORBIMAGE's President and Chief Executive Officer, issued the following statement in connection with today's announcement: "In an effort to assist our investors in monitoring the future progress of the Company, we are initiating annual guidance for the Company. Although the Company has not historically provided guidance of this type, given the completion of a number of significant initiatives - such as our recent equity financing as well as the positive reception from our current customers and other participants in the international imagery markets to our award of the NextView Second Vendor contract and the positive industry dynamics that have resulted from our receipt of that award - we believe that initiating guidance is appropriate at this time. In addition, because of the significant impact that the NextView Second Vendor Award has and will continue to have on our Company, we are also providing estimates of the Company's future performance following the launch of OrbView-5, our next-generation satellite currently under construction. This longer term guidance is our current expectation of the Company's results for the first full year of normal operations following the check out of OrbView-5. OrbView-5 is currently under construction and scheduled to launch in early 2007 and enter operating service in mid-2007. The design life for OrbView-5 is 7 years with an expected commercial life of approximately 10 years. At this time, we believe providing annual guidance is the most meaningful disclosure that the Company can provide, but we will continue to evaluate this decision as well as our ability to provide future guidance."
The Company expects revenue for 2005 to be between $50 million and $60 million, which represents an increase of between 62% and 93% over 2004 revenues, and operating loss of between ($12.0) million and ($2.0) million (including approximately $24 million of depreciation and amortization expenses). Longer term, for the first full twelve months of normal operations following the in-orbit completion of check out of OrbView-5, the Company expects revenue to be between $350 million and $370 million (including approximately $158 million of deferred revenue recognized over the same period associated with the NGA cost reimbursement under the NextView Program) and operating profit to be between $198 million and $218 million (including approximately $158 million of deferred revenue and approximately $61 million of depreciation and amortization expenses). In addition, the Company expects capital expenditures on the OrbView-5 program through the expected launch in 2007 (including estimated costs for launch insurance) to be approximately $474 million for which NGA is providing reimbursement of $237 million. Since the award of the NextView contract in September 2004, the Company has raised approximately $107.6 million in new cash equity.
ORBIMAGE is a leading global provider of Earth imagery products and services, with digital remote sensing satellites and an integrated worldwide image receiving, processing and distribution network. In addition to the high-resolution OrbView-3 satellite, ORBIMAGE operates the OrbView-2 ocean and land multispectral imaging satellite and the SeaStar Fisheries Information Service, which provides maps derived from essential oceanographic information to aid in commercial fishing. ORBIMAGE also produces value-added imagery products and provides advanced photogrammetric engineering services at its St. Louis facility. The company distributes its products directly to the U.S. government for national security and related mapping applications. Commercial sales are handled through a worldwide network of value-added resellers, regional distributors, sales agents, and select strategic partners. The company is currently building a next-generation satellite, OrbView-5, to support the National Geospatial-Intelligence Agency's NextView image acquisition program. OrbView-5 is planned to be operational early in 2007.
For more information about ORBIMAGE, please see our web site at http://www.orbimage.com/.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Securities Exchange Act of 1934, as amended. These forward-looking statements involve known and unknown risks and uncertainties. ORBIMAGE's actual financial and operational results could differ materially from those anticipated. Risks related to our Company include:
Given our limited operating history, our future prospects are uncertain.
Our business plan depends upon our ability to develop a customer base, distribution channels and value-added enhancements for our imagery products and services. We have entered into regional distribution agreements with three ground station customers in Asia, and our business model depends on our entering into additional regional distribution agreements to increase our revenues. Given our limited operating history, and in light of the risks, expenses and difficulties, we cannot provide assurances that we will be able to develop a sufficiently large revenue-generating customer base to compete successfully in the remote imaging industry.
We depend on contracts with U.S. government agencies for a substantial portion of our revenues. These government agencies can terminate their contracts at any time.
Revenues from U.S. government contracts accounted for approximately 49%, 34% and 80% of our revenues for the years ended December 31, 2004, 2003 and 2002, respectively. U.S. government agencies may terminate or suspend their contracts at any time, with or without cause, or may change their policies, priorities or funding levels by reducing agency or program budgets or by imposing budgetary constraints. In addition, one or more of these government agencies may not continue to fund these contracts at current levels. Under the NextView imagery contract, for the six quarter period beginning on the date on which OrbView-5 becomes fully operational, which period we expect will end in September 2008, the U.S. government has agreed to order approximately $197 million in imagery sales from OrbView-5. Although we anticipate that the U.S. government will purchase imagery under this contract, we cannot assure you that they will order or purchase imagery up to the full level specified in the contract or at all. In addition, although we anticipate that these government agencies will continue to purchase imagery and imagery products from us after the termination of the contracts under the ClearView and NextView programs, we cannot assure you that they will continue to purchase at pre-termination levels or at all. If a U.S. government agency terminates or suspends any of its contracts with ORBIMAGE, or changes its policies, priorities, or funding levels, these actions would have a material adverse effect on our business, financial condition and results of operations.
Our NextView imagery purchasing contract is a firm fixed-price contract which could subject us to losses in the event that we have cost overruns.
We have entered into the imagery purchasing portion of the NextView contract with the NGA on a firm fixed-price basis. This allows us to benefit from cost savings, but we carry the burden of cost overruns. If our initial cost estimates are incorrect, we may lose money on this contract. In addition, this contract has provisions relating to cost controls and audit rights, and if we fail to meet the terms specified in those contracts then we may not realize the full benefits of the NextView contract. Our financial condition is dependent on our ability to maximize our earnings from our NextView contract. Lower earnings caused by cost overruns and cost controls would have a negative impact on our financial results.
We may encounter program delays in connection with the construction and launch of OrbView-5.
The NextView contract is subject to a set schedule of milestones culminating in the planned launch of OrbView-5 in early 2007. The construction of the OrbView-5 satellite and related ground system requires a large amount of advanced technical and engineering work to be done in a relatively short period of time. Because different areas of the program are interconnected with other areas of the program, a delay in one area of the program could cause delays in other areas of the program. The failure to launch OrbView-5 on time or to achieve system check-out on time or at all could affect our ability to provide the full amount of anticipated imagery and imagery products to the NGA during the post-launch period under the NextView contract and could cause ORBIMAGE to receive less in revenues for imagery under the NextView imagery contract, which could cause a material adverse effect on our business, financial condition and results of operations.