Maxar Technologies Inc.

David Banks - Vice President of Investor Relations Jeffrey R. Tarr - Chief Executive Officer, President and Director Yancey L.

Spruill - Chief Financial Officer, Executive Vice President and Treasurer

Howard A. Rubel - Jefferies LLC, Research Division Peter P.

Appert - Piper Jaffray Companies, Research Division Andrea James - Dougherty & Company LLC, Research Division Chris Quilty - Raymond James & Associates, Inc., Research Division Mark W. Strouse - JP Morgan Chase & Co, Research Division Jonathan Raviv James Patrick McIlree - Chardan Capital Markets, LLC, Research Division

Thank you, Tina. Good afternoon, everyone, and thanks for joining our call today.

With me are Jeff Tarr, President and CEO; and Yancey Spruill, CFO. Our remarks today will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended.

Any forward-looking statements are based upon our historical performance and our current plans, estimates and expectations. We may make forward-looking statements about, among other matters, revenue and revenue growth, adjusted EBITDA and adjusted EBITDA margin, earnings per share, cash flow, sales pipelines and strategic initiatives.

Inclusion of this forward-looking information should not be regarded as representation by us that we will achieve future plans, estimates or expectations. Such forward-looking statements are subject to various risks and uncertainties and assumptions.

A number of important factors could cause our actual results or performance to differ materially from those indicated by such forward-looking statements. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect occurrence of unanticipated events.

Please refer to our earnings release, which can be found at our website at www.digitalglobe.com, for a discussion of these risk factors. You should also refer to our earnings release for an explanation of the non-GAAP financial measures discussed during this call and for a reconciliation of those measures to the nearest applicable GAAP measures.

These non-GAAP measures are indicators that management uses to provide additional, meaningful comparisons between current results and prior reported results, and as a basis for planning and forecasting for future periods. For your convenience, we have posted slides on the Investor Relations section of our website to give you an overview of the information we will cover today.

[Operator Instructions] With that, I'll turn the call over to Jeff.

Thanks, David. Good afternoon, and thank you all for joining us.

I am pleased to report another successful quarter for DigitalGlobe in the first full quarter that includes GeoEye in our results. Today, I'll focus my comments on our success executing our integration plan and driving profitable growth and how our progress is positioning us to achieve our vision and create shareowner value.

After my comments, I'll hand the call over to Yancey, who will discuss our financial results in detail. We'll then open the call for your questions.

First, the combination. The most tangible measure of our progress to date is our success in reducing our expense base.

However, our integration plan is also designed to broaden our product offerings, expand our capacity, enhance our ability to scale our business and improve our service to customers. As of the end of Q2, we remain well ahead of schedule.

Just 5 months into our 18-month integration plan, we have removed nearly $100 million of annualized expense, including $70 million of operating expense and $26 million of financing cost. Some of our more significant achievements include the consolidation of Remote Ground Terminals, integration of satellite operations, rationalization of our real estate footprint and conversion of financial and other reporting systems onto common platforms.

Let me take a few minutes to highlight some of our efforts and key milestones. With our Remote Ground Terminal or RGT network, we are improving timeliness and imaging capacity, while eliminating significant cost.

We've already exited 4 RGTs. By the end of the year, we expect to have 12 RGTs, down from the 19 we were operating on day 1 of our combination.

When this aspect of our integration is complete, all of our satellites will leverage what has long been the industry's leading ground infrastructure, enabling us to deliver better service to all customers. Within space operations, effective August 1, we are now operating GeoEye-1 out of our Mission Control facility in Longmont, Colorado, well ahead of our originally planned cutover.

We expect to complete the consolidation of our 3 space operations facilities in the second half of the year. Like our RGT consolidation, this optimizes our constellation and increases our effective capacity, allowing us to better serve customers, accelerate the delivery of revenue and reduce cost.

We've made progress consolidating our real estate footprint, bringing together people, equipment and capabilities in fewer locations. This is already enabling better collaboration and going forward, will enhance our ability to meet the needs of our customers and again, drive significant cost out of the business.

As a final highlight, we're making preparations to raise the orbit of GeoEye-1, an effort we expect to complete in the fourth quarter. The orbit raise will increase our total capacity by 5% and returned for a modest reduction in resolution, while still delivering imagery at better than the 50 centimeters, which we are permitted to distribute commercially.

Our profits on these and many other integration-related projects enabled us to improve the quarter's adjusted EBITDA margin by 240 basis points sequentially to 30.3%. With our execution against our OPEC synergies now 70% complete, we believe we are well positioned to deliver additional sequential improvement in Q3 and Q4, and we continue to expect to return to 50% margin when we complete our 18-month integration plan in the second half of next year.

Going forward, the investments we are making in the integration today will position us for profitable growth that propels us towards our near-term aspiration of achieving more than $1 billion of revenue. Turning now to top line growth and the diversification of our revenue base.

We grew second quarter revenue by 48% versus prior year to a record $150.6 million through both strong organic growth and acquired revenue. This was driven by Diversified Commercial growth of 82% and U.S.

government growth of 28%. As a result, we generated fully 45% of our revenue from Diversified Commercial sources beyond the U.S.

government, an increase of more than 800 basis points year-over-year and nearly 600 basis points sequentially. Importantly, we also grew our 12-month backlog by 37% and our Diversified Commercial backlog by 91%, giving us good visibility into the balance of the year and the first half of next year.

Chief among the Diversified Commercial successes this quarter is the strong growth in our Direct Access Program or DAP. We more than doubled revenue from this line of business compared to prior year.

We renewed 2 DAP contracts in the quarter and brought our newest DAP customer into service in July. Among international civil customers, we continue to diversify our business and expand our presence in emerging markets, where large land masses and economic change are fueling strong demand, and where the scale of our constellation and ground infrastructure give us a competitive advantage.

In China, we renewed a large program with an important civil government agency focused on mapping and resource management that will be delivered in the second half of Q3 and Q4. In South America, we signed a new deal with the National Department of Defense to deliver both archived and task imagery.

In Australia, we sold our Global Basemap and related services to a civil government agency to better integrate our imagery within its operations. As a result of our larger constellation and archive, as well as our recent investments in innovation and quality, we are extending our lead within our Location Based Services customer base.

As providers of web-based maps around the globe seek to deliver the highest quality experience in new geospatial applications to their users, we are finding new opportunities to grow existing customer relationships and establish new ones. Among Other Industry Verticals, we continue to build and diversify our business across a variety of end markets.

We signed a deal in Russia for a new pipeline monitoring effort. We signed 2 new telecom deals, one in Japan and another in Africa.

We won a contract with a large international oil and gas company that will use our unique multi-spectral capabilities to support offshore exploration and production. And we expanded our strategic relationship with Esri, with a new offering that will enable us to reach more customers and better integrate into their workflows.

Across these Other Industry Verticals, new applications are driving demand in what are very large end markets for information and insight. Turning to our U.S.

government revenue, this too grew at a healthy rate, up 28% year-over-year. We drove growth by continued strong execution against our EnhancedView service level agreement, through growth in our Global-EGD offering and through our analytics business, where we continue to advance our capabilities and win new contracts in the rapidly growing field of Big Data and predictive analytics.

In the quarter, we more than doubled the revenue from U.S. government value-added services through a number of key initiatives.

We became fully operational on our new enhanced infrastructure. This multi-year program has enabled us to further improve service levels and link our operations more closely to our largest customer in order to support more of their mission.

We also won a new analytics award under the EnhancedView value-added services contract. I'm proud of the work our teams are doing in support of our men and women in uniform, with predictive analytics and our vast collection of geospatial data and information.

When I look back at the last quarter, I'm proud of the progress our team has made only 6 months into the 18-month integration of a transformative combination. While we still have much work to do, we are better positioned than ever to achieve our vision of becoming the indispensable source of information about our changing planet.

Near term, the growth in our backlog and pipeline, combined with our success in removing cost from our business, positions us for significant sequential improvement in our second half financial results. Importantly, many of our integration efforts are designed to improve the quality of our service and expand our capacity in time to realize the full potential of our peak imagery season toward the end of Q3 and into Q4.

Beyond this year, we remain on track to return to 50% EBITDA margins after the completion of our 18-month integration plan and to deliver strong positive free cash flow, once we've completed both our integration efforts and the launch of WorldView-3 in the back half of next year. With that, let me turn it over to Yancey for a discussion of our financial results.

Thanks, Jeff. Our first half results have us well positioned for a strong second half of the year.

Our team is managing the combination well as evidenced by the milestones we have achieved to date. We expect to realize increasing financial benefits from those activities in the second half of this year, and we are well on our way to delivering on our long-term growth, margin and free cash flow targets.

You will find additional detail on the quarter in our earnings supplement on the Investor Relations section of our website that will help with your review of Q2. Revenue for the quarter was $150.6 million, up 48% year-over-year, driven by continued organic growth, as well as our first full quarter of contribution from GeoEye.

U.S. government revenue in the quarter was $82.7 million, up 28% over Q2 2012.

That includes $56.8 million from our EnhancedView service level agreement, up 17%, and $19.5 million from value-added services, more than double the amount compared with Q2 of last year. Value-added services revenue was driven by growth from Global-EGD, as well as the contribution from our analytics business.

Diversified Commercial generated revenue of $67.9 million in the quarter, up 82%, and represented 45% of our total revenue, an increase in contribution of more than 800 basis points compared with the year-ago period. This improvement is a clear demonstration of our progress in generating profitable revenue growth and diversification beyond the U.S.

government. Direct Access more than doubled in the quarter to $28.7 million as we continue to drive growth from many of our existing customers.

Revenue from the balance of our Diversified Commercial business was $39.2 million, up 65% year-over-year and driven by growth among customers in Location Based Services and Other Industry Verticals. Our next 12-month revenue backlog increased 37% to $485.8 million, reflecting continued strong momentum across our business and providing us with solid visibility into a large portion of our revenue over the coming year.

In Q2, we generated $45.7 million of adjusted EBITDA, which includes -- excludes $20.6 million of combination-related expenses, resulting in a margin of 30.3%. We continue to expect sequential margin expansion in the second half as we see the benefits from revenue growth and synergy realization.

Through the end of June, we achieved milestones representing approximately 70% of the projected $100 million in total annualized expense savings from the combination, driven by labor savings, facility closures and the consolidation of IT systems and certain contracts. We realized $10.5 million of benefit from synergies in Q2 and we expect the savings to accelerate in the second half.

Depreciation and amortization was $59 million in the quarter, up $30.5 million year-over-year. This reflects a full quarter of depreciation from acquired assets and should be at roughly this level until WorldView-3 is operational in the second half of 2014.

Net interest expense was $1.4 million in the quarter. This reflects capitalization of approximately 89% of our $13 million in quarterly interest on our debt.

We will capitalize interest at current levels for the second half of the year as we expect to complete testing on the GeoEye-2 satellite towards the end of this year. Once GeoEye-2 is complete, future capitalized interest will be based largely upon the growing WorldView-3 asset balance until WorldView-3 is launched and operational in the second half of 2014.

The tax benefit in the quarter was $14.1 million with an effective tax rate of 40%. For the second half of 2013, we expect an effective tax rate of approximately 37%, and we do not expect to pay material cash taxes in 2013.

Net income and EPS in the quarter were impacted by restructuring and other integrated-related expenses of $20.6 million. Restructuring and integration-related spending now total $55.3 million for the year, of which 89% has been expensed and 11% has been capitalized.

We had approximately 74 million fully diluted shares in the quarter. To summarize, items related to the combination accounted for $0.17 of after-tax impact to the quarter's reported loss of $0.30 per share.

Free cash flow improved significantly from Q1 to negative $43 million in the quarter. This $54 million sequential improvement resulted principally from no transaction costs in Q1 and revenue growth in margin expansion.

Q2 included CapEx of $73.7 million, of which $5.1 million was related to the combination and $13.7 million was capitalized interest. We expect free cash flow to continue to improve in the second half of the year as margins expand and we ramp down spending to achieve synergies and make additional progress on completing construction of GeoEye-2 and WorldView-3.

Finally, our 2013 outlook remains unchanged. We expect revenue to be at the low end of our $635 million to $660 million range.

We expect second half and, in particular, fourth quarter revenue will be somewhat higher weighted on a percentage basis than has been our normal historical pattern due to missing a month of GeoEye in the first quarter, the timing of realizing the growing combined sales pipeline opportunities, normal seasonality in our peak second half, especially Q4 imaging season, and the impact of steps we are taking to optimize our combined operations. We've included a chart on Page 11 in our supplement to provide detail into our historic quarterly revenue progression.

We expect adjusted EBITDA margins, which exclude combination-related expenses of approximately 36% for the year, with sequential margin improvement through the second half and second half margins higher than the full year target. We expect $230 million in capital spending for 2013.

And with that, I will now turn the call back to Jeff.

Thanks, Yancey. As a final note, I'd like to extend my deep gratitude to our team members, whose hard work has made our success possible.

Our combined organization has rallied around our purpose, vision and values, and tirelessly executed against our 4 strategic focus areas and our comprehensive integration plan. This is an incredible team, doing incredible things to deliver on the promise of our vision and our purpose of seeing a better world.

It's evident in our success executing our integration plan. It's evident in the growth and diversification of our revenue base and it's beginning to become evident in our financial results.

Yet despite our progress, in so many ways, we are still just getting started. Before we take questions, I'd to announce that we've set a date for our 2013 Investor Conference to be held the morning of November 20 in downtown Denver.

During the event, we will share our plans for the future, demonstrate new capabilities, introduce you to many members of our management team and offer tours of our facility. With that, operator, we can open the call for questions.

Jeff, just for a moment, if you could step back and give us a little more color on how you're able to put some of these very attractive growth numbers together? What have you been able to do with some of your customers that have opened their eyes to what's happened because, more or less, you've hit some very attractive growth numbers.

Thank you. Thanks.

I really appreciate that. I think the best way to think about this is outside-in by each customer segment.

Within the U.S. government, a number of things have taken place.

First of all, the growth in the SLA as we've continued to ramp the capacity that we deliver to this important customer. The value-added services.

Global-EGD has been a very significant success for us, where we're essentially hosting rapidly ortho-ed imagery for our customers, for the end-users in the -- across the military and the intelligence community, which is a change from the way things used to be, where we used to ship all of our imagery to NGA, and NGA would do all of the hosting and delivery. So that's more deeply integrated us into workflow.

And the breadth of contracts that we have across our analytics business, which we -- which we brought together through the combination, which has been accelerated as we've been able to put in the hands of our analysts, the larger archive and tasking capability of the constellation. Foreign governments continue to be a source of success.

The DAP business has been very strong. We've been able to give customers access to the capabilities across the larger constellation.

And also benefit from the fact that we no longer had the GeoEye SLA to serve, so we've been able to deliver more capacity to GeoEye's -- the former GeoEye's DAP customers. We've also continued to see growth in the civil business, civil governments.

Emerging markets have an increasing need for mapping, and we've been winning contracts because we do have the industry-leading constellation. Turning to other verticals, we've had growth in a wide range of other verticals.

Oil, gas and mining has been especially robust for us, but we've had growth in other areas, financial services and telecommunications, to name a few. And that larger archive really helps in the fact that we have more capacity.

And then Location Based Services, we can -- the hypergrowth that we're seeing for geospatial services. Every time you open up your iPad and you see every time you open up an application and it says, "Will you share your location?"

Even for applications you can't imagine why they would want to know. Well, GPS is part of that.

That tells you where you are, but we are the rest of it. We tell you where everything else is, and we're integral to so many of those applications.

So really proud of what's happening and like I said before, we're just getting started and just really building the pipeline for the future.

And then just to go on cost for a moment or in cash flow, could you sort of give us a sense of how the construction of both of the 2 satellites are going? I did notice in the Q, there were some modifications, I think, to WorldView-3.

WorldView-3 or GeoEye-2?

I think -- I think the WorldView-3, I'm sorry.

Yancey?

Well, the progress on WorldView-3 is very good. We remain on track for launch this time next year, a little -- or actually a little earlier than this time next year, and the same with GeoEye-2.

Yes. So with GeoEye-2, the one change that you might be seeing is because we no longer were under a constraint with regard to trying to hit a launch window.

We took a step back and decided to run some additional testing, which is part of the historic DigitalGlobe protocols. So we've run those additional tests and we're also taking advantage of the time to make some minor modifications to the satellite to enhance its capability.

So that doesn't change the capital expenditures that you've seen. Those are behind us and we are just taking advantage of a little additional time.

So just, Jeff, if you could expand a bit on what Howard was asking about in terms of the revenue trends within the commercial segment. I'm trying to better understand the underlying organic revenue trends, right.

I see the reported number is up dramatically. On a pro forma basis, the number is sort of flattish year-to-year, down a little bit.

I understand you have that GE contract that went out. But can you talk a little bit about just sort of the drivers of organic revenue growth?

Sure. So on organic revenue growth, first, it's becoming increasingly difficult to break out organic from the acquired business other than some places where we have some discrete changes, such as the contract that you mentioned.

We are really seeing across-the-board growth in our Diversified Commercial revenue. As I said, we're seeing strong growth in both foreign governments and in Location Based Services and other verticals.

Yancey, do you have some additional metrics that we might share to...

Well, our backlog growth has been very robust and then our pipeline, which we don't quote, but it's our universe of opportunities, I think reflecting the power of the combination. We have more capability to deliver to all customers, which is something we've said since we announced the combination, and we're seeing that reflected in the opportunities and the growth.

And so again, it's not -- we don't really think it's appropriate to look at pro forma because of a number of factors. We are focused on integrating the companies and delivering more value to customers, and we're seeing that in terms of revenue trajectory in each segment, customer grouping, and that's reflected in our backlog growth and the pipeline of opportunities.

Okay. I mean, looked at another way, you can think about it -- if we think across customers, we are seeing pricing opportunities, especially in areas of the world where we're sold out, and we still are sold out in parts of the world, and that represents an opportunity to optimize our pricing, where there's that disequilibrium between supply and demand.

We've launched some initiatives to drive growth in areas of the world where we're undersold. And those have been some sales and marketing initiatives in certain parts of the world where we're endeavoring to compete more aggressively on price with aerial in those areas.

We've won new accounts, we've highlighted those in our call, and we're selling more to existing accounts. We've got a broader suite of offerings.

Good growth, for example, in our Global Basemap product, where essentially we're selling more from our archive. And within Location Based Services, we've been innovating on quality.

We launched a new -- not a new customer, but an existing customer, who's purchasing more from us because we are able to deliver a industry-leading, unprecedented level of quality in terms of how that -- how the images look to the end user. So those are some areas that are driving growth for us.

This is -- the end markets are growing, which makes this particularly exciting.

All right. That's very helpful.

Jeff, and then just one other thing the -- I understand thinking about the backlog number up dramatically year-to-year, down a little bit sequentially. I understand some of that is just about the timing of the runoff of contracts, but anything to take note of in terms of the sequential trend in backlog?

Well, let me just start. Year-over-year, the important thing to think about in backlog, because we have a combination, last quarter -- if you think about the backlog giving 4 months of forward visibility.

Last quarter's backlog was giving a forward look into 3 quarters of acquired revenue and 1 quarter of purely organic. Now a quarter later, the backlog is giving visibility into 2 quarters of acquired revenue and 2 quarters of what will be purely organic.

So one would expect the, sequentially, the backlog to decline quarter-over-quarter until at the end of the 4 quarters, when we lap the acquisition, it should be a good indicator of the organic growth of the business. Yancey, anything more to give insight into backlog?

No. I think backlog for us is a great story, both in terms of the headline number but also, to your point, Peter, if you sort of normalize out high renewal rates of contracts where there is some runoff and timing differences, we would have fairly robust sequential growth.

So we feel very good of -- and that's reflected in the pipeline metrics that I mentioned earlier. So I think we feel very good about the outlook going forward across all areas of the business.

And I think if you look in the Q disclosure, and you look at backlog, it's strong everywhere: U.S. government, value-added, SLA and Diversified Commercial DAP and other areas.

So we feel very good about where we're heading as we move forward.

I have one more thing. We do have new products in the pipeline as well, and when we get together for our Investor Day, we'll share some of those.

Not that I would count on those for significant near-term revenue, but I think it will paint a picture of where we're going.

There's all kinds of talk about new satellites coming online. I'm sure you guys heard about Skybox Imaging and then there's foreign government launches in the UAE.

And I guess, my question to you is what effect do you expect that to have on your business? And then specifically, maybe could you comment on any DAP contracts that may come up for renegotiation or renewal in the near term?

Certainly. Thanks, Andrea.

First of all, we have and continue to compete vigorously in the marketplace with a wide range of competitors. And we find that time and time again, we win within those customer segments that value the quality of our imagery.

We offer superior quality measured against what we call A3C [ph]: accuracy, completeness, currency and consistency. And we're able to do that because we have the industry-leading constellation in terms of capability across virtually any measure of capability that matters to customers.

Because we've got the largest and most temporally deep archive, and that also is a competitive advantage. And now, especially with the combination, we have a suite of production and analytic capabilities that we believe is unmatched.

That's how we win, and we feel very good about how we're positioned both with regard to satellites that are on orbit and satellites that should be launched in the near future.

Just for my follow up, and then I'll hop in the queue. I was wondering if you could talk about the LBS opportunity and whether you think you're close to full penetration or there's a lot more to come.

And just really quickly why I'm asking it, just thinking about Google, for example, is talking about their driverless car. And I have to think that they're going to need better maps than what they build now, which is based on the archive.

And so I'm just kind of getting excited, but I just wanted to see if you could put some of that into context for us.

Sure, and I also don't want to forget your question on DAP renewals, which I almost did forget. And we -- our DAP renewal history and GeoEye's ROC renewal history has essentially been 100%.

And what we've seen is very strong demand amongst DAPs regardless of whether they have their own satellites because in high-conflict areas of the world, Middle East, Africa, Asia Pacific, one can almost never have enough coverage. And so when we have more capacity in those parts of the world, we find demand and we find that we are able to renew those accounts.

So we feel very good about how we're positioned there. Within Location Based Services, it's an interesting competitive battle today between all those firms, companies that are offering Internet maps, whether it's the navigation you see in your car or on your GPS or on a wide range of devices.

And when it comes to creating those or delivering those, the quality of the imagery seems to be -- is a differentiator. And that comes down to the currency of the imagery, the completeness of coverage of the imagery, the consistency of the imagery of being able to deliver it in a color-balanced way without seam lines and the accuracy of the imagery, especially when you start to put -- use that imagery in ways that impact the navigation of cars, as you referenced.

So we believe we have something unique to offer and between our continued innovation and continued demand on the end-user side, we feel good about how we're positioned.

Jeff, could you talk with us about -- you, specifically, how much time are you now spending on the acquisition-related activities? Has that started to fall off for you -- and the rejoinder there is, are you starting to spend any more time looking at potential acquisitions?

I appreciate the question. First of all, I am blessed with a fantastic team.

This is a team, almost every member of the leadership team has led their function in companies or organizations that are far larger than we are today and have a collective -- are deeply aligned to where we're going and have a great roadmap. So I have never had to spend personally a lot of time on the details.

Where I spend time on within the combination is on the cultural side of things and helping -- bring the team along and bring everyone together around our purpose, vision, values, our 4 strategic focus areas and where we're going beyond that, and that hasn't changed. With regard to our M&A pipeline, right now, you're right in saying -- pointing out or suggesting, we are very focused on the combination.

We are, as of today, about 6 months in to a very detailed 18-month integration plan. And while we've had a lot of success, it's too soon to put a bow on it and declare victory.

We have 12 more months of work ahead of us. Now with that said, we do have a pipeline of acquisition opportunities.

We continue to work that pipeline and you can rest assured we will be very disciplined and we will weigh any opportunity against alternative uses of capital.

Got you. And I have to ask the question, though, presumably it's already embedded in your guidance, DoD budget, I guess, more appropriately, NGA budget, which we have less visibility on and sequestration-related impacts.

I know you did say last quarter that you got an all-clear indication from NGA relative to this round of sequestration. But there's also a question of whether if and how sequestration hits FY '14, and I don't know whether you've got the that all-clear there also.

Well, in terms of -- there's no absolute all-clears because this is the U.S. government.

But with that said, we are very well positioned with regard to the SLA. NGA has executed Year 4, you see that in our filings.

We are delivering tremendous value to the taxpayer. We just completed a very expensive, 3-year, and I say expensive, the U.S.

government invested in bringing our infrastructure together in a more integrated fashion. And with the launch of WorldView-3, the tremendous value we're delivering only increases.

So we feel extremely well positioned there. And as we've always said, it's our value-added business that to the extent there are fluctuations in spending, one way or the other, that's the area of our business that has greater sensitivity.

But even there, we're seeing more visibility. For example, you can see in our 12-month backlog for value-added, that 12-month backlog is at $38 million, which is up from $7 million this time last year.

And we now have a much more diversified value-added customer base. We have 8 customers within the U.S.

government beyond NGA that generate more than $1 million of revenue and many more of that generate more than $100,000, all of which represent growth opportunity because of the value proposition that we have. So look, we've got risk.

Everyone who sells to the U.S. government has risk, but we also feel we are far better positioned than most.

Got you. And that improvement in the value-added services, is there something specific you would attribute to either the greater pool of services that you now offer or do you have visibility into the customer and is the customer actually reducing headcount and hence, doing more outsourcing or is it a combination of the two?

Well, I think the biggest drivers -- Global-EGD, as we mentioned, is a huge change. And we're delivering value directly to those who are on the front lines of a wide range of missions.

And that is -- that's driving growth. And we're investing in innovation, in order to deliver a higher level of service, faster time lines, more imagery, giving the customer what they need, where they need it.

And that's a source of growth. Then within the business we acquired, especially in analytics, there is a tremendous need for predictive analytics in the area of Big Data.

And that's what we do. And we're really good at it, and we're finding more and more opportunities to serve the U.S.

government, which in turn serves to all of us. So there's a lot of excitement around serving that mission.

Got you. And 2 boring questions or Yancey questions.

Does the fact that you're raising GeoEye-1 increase the life of the satellite and can you give us what we should expect for depreciation changes? And secondly, when you launch or -- excuse me, complete GeoEye-2, there's no change in the interest cost -- cash interest cost on the P&L, correct, until that satellite's launched?

The second first. Yes, the cash interest cost that we have would be unaffected by the -- whether GeoEye-2 is in storage or not.

What would be impacted is how much interest we capitalize with -- the amount of interest we capitalize would roughly drop by 50% once that goes into storage, until WorldView-3 is operational and then we'd obviously expense the lion’s share of our interest, so that's the second. But the cash cost of our debt is -- would be the same.

As it relates to raising the orbit altitude, we don't anticipate it impacting the useful life of the satellite and obviously, we'll have more to say about that when it's at a different altitude and operational at that different altitude. But at this point in time, given the relative change in altitude, we don't expect it to materially change the useful life.

And so, therefore, depreciation would stay the same.

It's actually Mark Strouse on for Paul. And so I think most of our questions have been answered.

But with regards to the GeoEye-1 orbit increase, can you just remind us, was that part of the original EnhancedView plan or was that more of a move on your part to kind increase your capacity for the commercial market?

It's important, GeoEye-1 is not encumbered by EnhancedView. It's entirely being used to serve Diversified Commercial customers.

Because of that, we no longer had a requirement to capture imagery at better than 50 centimeters because we can't sell the 50-centimeter imagery commercially, which -- so therefore, there's no reason to fly it now at an altitude that captures imagery that we can't sell commercially. If we raise the orbit, when we raise the orbit, we give up resolutions, but we get area coverage.

And so that's a trade that has only upside for us at this point in time. So that's why we're raising the orbit.

Right. Makes sense.

Okay. And then just a real simple one with DAP.

When the new customers come on board, can you just remind us, it pretty immediately at a full run rate or is there a quarter or 2 of transition there?

When they come on board, they immediately go to full run rate. What then tends to happen is we are often able to sell more minutes when we have more minutes available to those customers over time.

Jon Raviv on for Jason. Quick question, you guys are certainly running ahead of your integration plan, so well done there, still maintaining the 50% adjusted EBITDA margin target for second half '14 obviously.

Can you just talk about kind of the upside or downside, or what the gating factors are in getting to that and maybe what would enable you to meet that goal or perhaps exceed that goal going forward?

Look, that is our best view of the future. And there are 2 driving factors, revenue growth and expense base.

So again it's our best view of the future and we're working to drive both the revenue and take cost out.

Okay. And then just one more for me.

On the Diversified Commercial, had some good growth there certainly, on orders, could you just characterize that $68 million piece or run rate of $300 million to $400 million annually as to what the biggest fits are outside of DAP and where you see the most growth?

Well, I guess, the best way to think about this is -- and I'll give Yancey an opportunity if he's got something to add on it. 55% of our revenue is U.S.

government. About 30% of our revenue is foreign governments and the remaining 15% is split roughly 50-50 between Location Based Services and other verticals.

That mix hasn't changed dramatically recently except for U.S. government relative to Diversified Commercial.

The Diversified Commercial pie has grown at a faster rate than the U.S. government.

But within Diversified Commercial, the mix has been pretty consistent, and that's indicative of the fact that we have very broad-based double-digit growth across all of those categories.

Is it reasonable to expect another DAP customer in 2014?

Look, it's interesting you should -- the way we're thinking about DAP right now is we've got 10 countries. Some of those countries have multiple DAP customers and multiple facilities, reaching out to multiple -- connecting with multiple satellites.

And some of our growth recently has been within those 10 countries. In fact, that's been a significant growth driver.

We've always said we think approximately there are maybe 15 potential customers out there for DAPs, and so there is potential to add more, but we never count on it. They're very long lead times.

Areas where there is the greatest demand is our -- often areas where we have the least supply. So there's a tradeoff there between supply and demand.

WorldView-3, we're out there aggressively marketing WorldView-3. So you might see something with the launch of WorldView-3.

But we're not counting on it to drive the kind of growth that we've indicated for our future.

Great. And just one more.

When -- in 2014, how much will you have left on the construction launch and insurance of WorldView-3?

Jim, the spend for WorldView-3 will be substantially done by the end of this year. The last remaining sort of major payments are going to be insurance and launch insurance.

And a couple minor payments on the launch vehicle, but we will be substantially done. And so we haven't provided -- we are not providing at this time specific 2014 guidance.

But we'll have a lot of that spend behind us, really, as we get through Q4. And the satellite is making very good progress in terms of beginning to get into the final phase here of get to integration and testing.

So spending will be behind us, and that will be a big contributor to the free cash flow growth that you'll see as we move into next year.

Especially after launch.

Yes.

No -- there sure are. So just very briefly, I just want to thank everyone for joining the call and your interest, especially on a summer day.

If you have further questions, please don't hesitate to reach out to David or anyone in our Investor Relations team. And I wish you all a great rest of summer.