UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:                          to                          

Commission File No. 001-34299

DIGITALGLOBE, INC.

(Exact name of registrant as specified in its charter)

(303) 684-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: Not Applicable

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  ☒   No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.   Yes  ☐   No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒   No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  ☒   No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. (See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  ☐   No  ☒

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: The aggregate market value of the registrant’s common stock held by non-affiliates, computed by reference to the closing sale price of $27.79 as reported by the New York Stock Exchange on June 30, 2015 was $2.0 billion.

The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of February 18, 2016 (latest practicable date) was 64,354,046 shares.

Documents Incorporated by Reference: Portions of the registrant’s Definitive Proxy Statement for the 2016 Annual Meeting of Stockholders are incorporated by reference into Part III.

TABLE OF CONTENTS

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may appear throughout this report, including without limitation, in Item 1 “Business,” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements can generally be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will,” “would,” “could,” “can,” “may,” or the negative of these terms or other similar words, although not all forward-looking statements contain these words. These forward-looking statements are based on current expectations and assumptions of future events and are subject to risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. You are urged to carefully review the disclosures we make concerning the factors that may cause such differences which include, but are not limited to, those discussed in Part 1, Item 1A of this report under the heading “Risk Factors,” and those discussed in other documents we file with the U.S. Securities and Exchange Commission (“SEC”). We undertake no obligation to revise or update any forward-looking statements, except as required by law. Readers are cautioned not to place undue reliance on any of these forward-looking statements. References herein to “DigitalGlobe,” “Company,” “we,” “us,” and “our” refer to DigitalGlobe, Inc. and its consolidated subsidiaries.

PART I

ITEM 1.BUSINESS

Overview

DigitalGlobe is a leading global provider of high-resolution Earth-imagery products and services sourced from our own advanced satellite constellation and third-party providers. Our imagery solutions support a wide variety of users in defense and intelligence, civil agencies, mapping and analysis, environmental monitoring, oil and gas exploration, infrastructure management, Internet portals, and navigation technology. Each day users depend on us to better understand our changing planet in order to save lives, resources and time. 

We were originally incorporated as EarthWatch on September 30, 1993 under the laws of the State of Colorado and reincorporated in the State of Delaware on August 21, 1995. On August 22, 2002, we changed our name to DigitalGlobe, Inc. Our common stock has been listed on the New York Stock Exchange (“NYSE”) and traded under the symbol “DGI” since our initial public offering in May 2009. 

On January 31, 2013, we completed our acquisition of 100% of the outstanding stock of GeoEye, Inc. (“GeoEye”), a leading provider of geospatial intelligence solutions. Our acquisition of GeoEye broadened our service offerings, enabled us to optimize our satellite orbits and collection of imagery, strengthened our production and analytics capabilities, increased the scale of our existing operations and diversified our customer and product mix.

Business Strategy

Our long-term business strategy is to grow our core satellite imagery products and services, driving free cash flow growth and improving shareowner returns. Our strategy has evolved to include investment for growth in our multisource analytics platform business, which enables a wide array of customers to extract insight from our imagery. Additionally, our services business will help our strategic customers harness the power of our imagery and platform services to address key missions at scale. The key factors we believe will enable us to achieve our long-term business strategy include:

Imagery leadership. We plan to efficiently deliver the highest quality imagery, while replenishing our satellite constellation in a manner that reduces capital intensity. We expect to extend our lead as the industry-best source of imagery. As a result, we expect to protect and grow our key markets with the U.S. Government and our Diversified Commercial customers through a relentless focus on quality and ease of use, driving free cash flow growth and returns by solving our customers’ problems.

Platform leadership. We are investing to build the leading multisource analytics platform to easily unlock the power of our content. Our Platform business is built on the largest historical archive of the highest quality Earth imagery commercially available. We expect to execute with our existing customers, as well as open a path to new customers and partners, while enhancing our platform’s large scale data analytics applications and ease of use.

Services leadership. With our services business, we plan to establish our imagery and platform as an essential component of our strategic customers’ workflows. We will leverage our relationship with the U.S. Government and other key accounts to drive innovation that uniquely impacts our customers’ missions, leading to new contracts and retention of existing customers.

Industry leadership. We plan to build a brand that communicates our value and leadership through sustained proactive engagement with shareowners, customers, and influencers. We believe DigitalGlobe will become the globally recognized source of the most complete image-based information about our changing planet. We intend to build a global brand that reinforces trust with existing customers and welcomes collaboration with partners and new customers.

Culture of leadership. We believe the investments in our team and our leaders will enable us to build industry-leading businesses in imagery, platform and services, with a culture grounded in our purpose, vision and values. Our purpose is Seeing a Better World™ through which we give our customers the power to see the Earth clearly and in new ways, which enables them to make the world a better place. We are relentlessly committed to helping our customers save lives, resources and time and our vision is to become the indispensable source of information about our changing planet by 2020.

Business Organization

We have one reportable segment, in which we use common infrastructure and technology to collect, process and distribute imagery products and services to customers around the world. The Company measures performance based on consolidated operating results and achievement of individual performance goals. We sell our products and services through a combination of direct and indirect channels, consisting of a global network of resellers, strategic partners, direct enterprise sales and web services to our U.S. Government and Diversified Commercial customer groups.

Products and Services

We offer Earth-imagery products comprised of imagery from our constellation of high-resolution satellites and provide geospatial products and services in which we combine our Earth imagery, analytic expertise and innovative technology to deliver integrated solutions. We process our imagery to varying levels according to our customers’ specifications and deliver our products using the distribution method that best suits our customers’ needs. Customers can purchase images that are archived in our ImageLibrary, place custom orders to task our satellites for a specific area of interest, or as a bundle of imaging and data for a region or type of location, such as cities, ports, harbors or airports.

Imagery

We provide many customer-ready imagery products that are designed to enable customers to understand and analyze specific geographies of interest. This includes the Global Basemap product suite, which allows customers to access various imagery products that meet their specific needs. For example, these products can focus on imagery refresh that provides customers with fresh imagery over specific areas of interest, allowing them to extract new points of interest as they appear throughout time, or can also provide a visually appealing mosaic across specific geographies for our Location-based services (“LBS”) customers.

Customers specify how they want the imagery content to be produced. Types of images collected are as follows:

We deliver our satellite imagery content at the following processing levels:

In addition to offering many customer-ready products and services, certain of our customers through our Direct Access Program (“DAP”) are able to directly task and receive imagery from our satellites within local and regional geographic boundaries of interest. We sell these customers facilities, enabling them to download and process imagery directly from our satellites. The DAP is designed to meet the enhanced information and operational security needs of a select number of defense and intelligence customers and certain commercial customers.

Platform Products

In the current environment, the geospatial industry suffers from an imbalance between the proliferation of data from an expanding variety of sources, and users’ capacity to distill this data down to actionable information. Our platform products are closing this gap by assembling content and large-scale analytical tools in a single environment. This unlocks new use cases outside of traditional geospatial applications, allowing imagery analytics to be a standard part of planning for new business domains. These products include our Geospatial Big Data platform, which utilizes our industry-leading archive of high-resolution, best-in-class accuracy imagery to create new applications and insights. It also includes our Spatial on Demand platform that serves as a source-agnostic imagery provider for our energy customers, organizing large amounts of imagery and other geospatial datasets in a simple format for customers to use. 

Services

Customers are increasingly looking for analytic solutions to derive insights from imagery. With our services products, we use our geospatial and military intelligence expertise to deliver insight to our customers through the creation of analytic applications, on our Geospatial Big Data platform and outside of it, to create customer-specific solutions, including such products as geospatial risk intelligence reports. These products and services combine imagery with other sources of geospatial data (e.g., geotagged social media data) to deliver integrated intelligence solutions. We provide analytic solutions that accurately document change and enable geospatial modeling and analysis that predict where events will occur to help our customers protect lives, make resource allocation decisions and save time. We primarily support U.S. Government customers currently, but many of our capabilities also support intelligence requirements from international governments, global development organizations and commercial customers.

Product Delivery

We offer a range of on- and off-line distribution options designed to enable customers to easily access and integrate our imagery into their business operations and applications, including desktop software applications and web services that provide for direct on-line access to our ImageLibrary. For example, through our Global Enhanced GEOINT Delivery (“Global EGD”), Global Basemap and Spatial On Demand services, we provide hosted on-line access to our imagery for both commercial and government customers. Other distribution options primarily include File Transfer Protocol (“FTP”) and physical media, such as hard drives.

U.S. Government Customers

U.S. Government revenue is sourced from multiple U.S. Government agencies, primarily focused on defense and intelligence, with the United States National Geospatial Intelligence Agency (“NGA”) as our largest customer. The NGA serves as the primary U.S. Government procurement agency for geospatial information and purchases imagery products and services on behalf of various agencies within the U.S. Government, including defense, intelligence and law enforcement agencies. The U.S. Government, inclusive of the NGA, provided 63.7%, 60.4%, and 58.4% of our revenue for the years ended December 31, 2015, 2014, and 2013, respectively.

EnhancedView Service Level Agreement

On August 6, 2010, DigitalGlobe entered into the EnhancedView contract with the NGA (the “EnhancedView Contract”). The EnhancedView Contract has a ten-year term, inclusive of nine one-year renewal options exercisable by the NGA, and is subject to Congressional appropriations and the right of the NGA to terminate or suspend the contract at any time.    

The EnhancedView Contract contains multiple deliverables, including a Service Level Agreement, (the “EnhancedView SLA”) that totals $2.8 billion over the term of the contract, of which $250.0 million was paid per year ($20.8 million monthly) for the first four contract years commencing on September 1, 2010, and $300.0 million is payable per year ($25.0 million monthly) for the remaining six years of the contract beginning on September 1, 2014. The NGA exercised its renewal option for year six under the EnhancedView SLA through August 31, 2016. We believe it is the NGA’s intention to exercise the remaining options, subject to annual appropriation of funding and the federal budget process, which contain an inherent level of uncertainty in the current budget environment. The EnhancedView SLA represented 48.0%, 38.9%, and 37.1% of our revenue for the years ended December 31, 2015, 2014 and 2013, respectively. 

Each monthly EnhancedView SLA payment is subject to a performance penalty of up to 4% depending upon the Company’s performance against pre-defined performance criteria. A performance penalty is assessed in any month the NGA determines that not all of the performance criteria were met. The Company retains the full monthly cash payment; however, the penalty amount is applied to mutually agreed future products and services or to a pro-rated extension of the EnhancedView SLA beyond the current contract period. We have not incurred a penalty since the year ended December 31, 2012. Cumulative penalties over the life of the EnhancedView SLA total $0.4 million, or 0.03%, of our total cash receipts under the contract, all of which were applied to other products. 

EnhancedView Value-Added and Other Services

The EnhancedView Contract also provides up to $750.0 million for value added products and services,  infrastructure enhancements, and other services, including the option for the NGA to require the Company to lower the altitude of WorldView-2 from its current altitude of 770 kilometers to an altitude of 496 kilometers. Value-added products and services enable us to meet the NGA’s more advanced imagery requirements using our production and dissemination capabilities, including Global EGD which, among other things, provides for the delivery of certain orthorectified imagery and imagery-related products and services. In September 2015, the NGA executed a contract for an additional year of the Global EGD program. In 2015, we recognized $65.3 million in revenue for value-added products and services and have recognized $259.5 million cumulatively since the inception of the EnhancedView Contract.

NextView

In connection with our NextView agreement with the NGA, which was entered into in September 2003 and was the predecessor to the current EnhancedView Contract, we received $266.0 million to offset the construction costs of WorldView-1, which was recorded as deferred revenue when received. When WorldView-1 reached full operational capability (“FOC”) in November 2007, we began recognizing the deferred revenue on a straight-line basis over the estimated useful life of WorldView-1.

Based on the estimated useful life of WorldView-1, we recognized $15.1 million, $22.9 million and $25.5 million of revenue related to the pre-FOC payments for the years ended December 31, 2015, 2014 and 2013, respectively. Cumulatively, since WorldView-1 reached FOC, we have recognized $192.3 million of pre-FOC revenue, and at December 31, 2015 had deferred revenue remaining of $73.7 million, expected to be amortized through the fourth quarter of 2020.

Diversified Commercial Customers

Diversified Commercial includes customers in the DAP,  international civil government, LBS, energy,  other international defense and intelligence, and other industry verticals.

Direct Access Program

We earn revenue from sales of DAP facilities, service fees to access our satellite constellation, as well as other imagery and information product sales. As of December 31, 2015, we had DAP agreements in ten countries. For the years ended December 31, 2015, 2014, and 2013, DAP revenue represented 17.2%, 17.0% and 16.5% of our total revenue for each respective year.

Other Diversified Commercial

Other diversified commercial revenue is generated from customers in international civil government, LBS, energy, other international defense and intelligence, and other industry verticals. We sell imagery and provide services to international civil governments for use in applications such as infrastructure planning, taxation, rescue and recovery services, forestry and agriculture. Our LBS customers rely on us to create and enhance the maps and geospatial services that billions of people use every day. We sell imagery and platform services to energy customers to enable efficient discovery, security, production and development of energy resources. Our other international defense and intelligence customers include ten foreign friendly nations, many in volatile parts of the world, who rely on us to keep their nations safe. Customers in other industry verticals use our content for mapping, monitoring, analysis and planning activities.

Satellite Constellation and Ground System Operations

In-orbit Satellites

As of December 31, 2015, the Company operates a constellation of four in-orbit and fully commissioned satellites: GeoEye-1, WorldView-1, WorldView-2 and WorldView-3. In the first quarter of 2015, we retired QuickBird, as the satellite stopped capturing images in December 2014 and ceased operating in the first quarter of 2015. Additionally, the Company stopped making new IKONOS imagery commercially available in the first quarter of 2015 and decommissioned the satellite in the second quarter of 2015. The following tables summarize the primary characteristics of the in-orbit operational satellites in our constellation as of December 31, 2015:

Satellites Under Construction

In the first quarter of 2015, we removed WorldView-4 from storage to commence work on certain necessary enhancements. We currently intend to launch WorldView-4 in the third quarter of 2016 for additional capacity as a result of anticipated incremental growth opportunities. 

Satellite Insurance

We procure insurance covering risks associated with our satellite operations, including the partial or total impairment of the functional capacity of the satellite. We insure certain satellites in our constellation to the extent that insurance is available at acceptable premiums. In 2015, we did not insure the IKONOS or QuickBird satellites against functional capacity impairment, given the stage of their useful lives. We have secured coverage for our WorldView-4 satellite totaling $431.0 million, inclusive of launch insurance and 1-year, 2-year, 3-year and 5-year in-orbit insurance. As of December 31, 2015, we maintained the following insurance coverage on our in-orbit satellite constellation:

Ground Terminals and Image Processing Facilities

As of December 31, 2015, we owned or had service agreements for remote ground terminals in 8 locations throughout the world. Each ground terminal is strategically placed to optimize contact with our satellites on their orbital paths. Each of our satellites orbits the Earth approximately 15 times per day, communicating with one or more of our ground terminals. Our image processing facility in Longmont, Colorado houses the hardware and software systems and personnel required to operate and control our satellites as well as process, store and distribute our imagery.

Competition

There are significant barriers to entry in the geospatial industry, primarily related to the substantial costs involved with satellite construction, along with the amount of time required to build and develop ground systems and obtain necessary licenses. Our major existing and potential competitors for our Imagery business include commercial satellite imagery companies, state-owned imagery providers, aerial imagery companies, free sources of imagery, and unmanned aerial vehicles. 

The data intensive nature of high resolution imagery, complexity of analysis, and desire to analyze multiple data sources have driven growth in multisource analytics platforms. We are uniquely positioned to provide a platform solution because of the size and quality of our industry-leading archive and our years of experience and resulting intellectual property in creating image analysis algorithms and tools. Our Platform products face competition from aggregators of imagery and imagery-related products and services. We also provide our customers with insights from our imagery with our Intelligence Services products. Our Services products face competition from companies that provide geospatial analytic information and services to the U.S. Government, including defense primes.

We compete on the basis of the technical capabilities of our satellites, such as size of collection area, collection speed, revisit time, resolution, accuracy and spectral diversity; satellite availability for tasked orders; the size, comprehensiveness and relevance of our ImageLibrary; distribution platform and tools that enable customers to easily access and integrate imagery; value-added services, including advanced imagery production and analysis; timeliness and ready availability of imagery products and services that can be deployed quickly and cost-effectively; and price.

Regulation

Operations

The satellite operations portion of our business is highly regulated. The Department of Commerce (“DoC”), pursuant to the National and Commercial Space Programs Act of 2010 (successor legislation to the 1992 Land Remote Sensing Policy Act, as amended), has the primary regulatory authority over our industry. The DoC delegated responsibility for satellite remote sensing operations to the National Oceanic and Atmospheric Administration (“NOAA”). Each of our satellites is required to be individually licensed for operation by NOAA. We currently have licenses for all in-orbit satellites (“NOAA licenses”). Our NOAA licenses require us to obtain prior approval from NOAA for any significant and substantial foreign agreements, and generally require us to operate our satellite system in a manner that is consistent with U.S. national security and foreign policy objectives. In addition, the NOAA licenses allow the U.S. Government to suspend our imaging activities in certain cases, if deemed necessary, for national security reasons. The NOAA licenses are valid for the operational life of the satellites, provided that we comply with the licensing terms.

The launch of our satellites and the communication links, both uplink and downlink, are regulated by the U.S. Federal Communications Commission (“FCC”). FCC licenses must be obtained for each individual satellite. The FCC is the governmental agency with primary authority in the United States over the commercial use of the satellite frequency spectrum. We currently have the requisite licensing authority from the FCC to operate all in-orbit satellites. The FCC has also granted licenses to operate ground terminals for our satellites. The FCC’s rules and regulations and terms of our licenses require that we comply with various operating conditions and requirements. Failure to comply with these or other conditions or requirements could lead to sanctions, up to and including revocation, cancellation or non-renewal of our licenses. In addition to the FCC’s requirements, our satellites must undergo the frequency coordination and registration process of the International Telecommunications Union (“ITU”), as well as a variety of other federal and international regulations.

Sales

Satellite imagery does not require an export license in order to be sold internationally. Our ability to sell certain imagery products and value added services may be subject to sanctions or embargoes imposed by the U.S. Government against particular entities or individuals, against other countries or by foreign government regulation.

Direct access to the satellites under the DAP constitutes significant and substantial foreign agreements under our NOAA licenses and requires approval from NOAA under the terms of our NOAA licenses. In addition, we or our suppliers must obtain export licenses from the Department of State (“DoS”) for the export of certain equipment and related technology necessary to enable the DAP access. The ground terminal equipment and related technology necessary to allow access to the satellites are controlled under the International Traffic in Arms Regulations (“ITAR”). The approval process for these sales usually takes approximately two to three months, and there is no obligation on the part of either NOAA or the DoS to approve any transaction. In addition to required U.S. Government approvals, the export of equipment from Canada by our DAP equipment supplier, MacDonald Dettwiler & Associated Ltd., is subject to Canadian export license requirements. Our DAP customers may also be required to obtain additional approvals from the government of the country in which the ground terminal is to be operated.

Ownership

We are obligated under our NOAA licenses to monitor and report increases in foreign ownership of common stock of the Company and any agreement for ownership of 20% or greater of our common stock is subject to NOAA approval. We are also required to report certain common stock foreign ownership levels to the Defense Security Service and to comply with certain rules and regulations to mitigate foreign influence as part of maintaining our facility security clearances. Our facility security clearance allows us to perform work on U.S. Government classified contracts. A transfer to foreign ownership also could trigger other requirements including filings with, and review by, the Committee on Foreign Investment in the United States pursuant to the Exon-Florio provision. Depending on the country of origin and identity of foreign owners, other restrictions and requirements may also arise.

Environmental

Our operations are regulated under various federal, state, local and international laws governing the environment, including laws governing the discharge of pollutants into the soil, air and water, the management and disposal of hazardous substances and wastes, and the cleanup of contaminated sites. We have infrastructures in place to ensure that our operations are in compliance with all applicable environmental regulations. We do not believe that the costs of compliance with these laws and regulations will have a material adverse effect on our capital expenditures, operating results or competitive position. The imposition of more stringent standards or requirements under environmental laws or regulations or a determination that we are responsible for the release of hazardous substances at our sites could result in expenditures in excess of amounts currently estimated to be required for such matters. While no material exposures have been identified to date that we are aware of, there can be no assurance that additional environmental matters will not arise in the future, or that costs will not be incurred with respect to sites as to which no problem is currently known.

Intellectual Property

“DigitalGlobe,” “GeoEye,” and other trademarks of ours appearing in this annual report are our property. Trade names and trademarks of other companies used in this annual report are for informational purposes only. We rely on licenses of certain intellectual property to conduct our business operations, including certain proprietary rights from third parties to enable us to operate our satellites, ground terminals, collection systems and other various components of our systems. In addition, we actively pursue internal development of intellectual property. We have registered, and applied for the registration of, U.S. and international trademarks, service marks, domain names and copyrights. Additionally, we have been issued and have filed for U.S. and international patent applications covering certain of our proprietary technology and processes.

Business Seasonality

We have historically experienced higher revenues in the fourth quarter of the year due in part to the procurement cycles of U.S. and international governments as well as increased demand from commercial customers. However, historical seasonal patterns should not be considered a reliable indicator of our future revenues or financial performance.

Foreign and Domestic Operations

During 2015, the Company’s domestic and international revenue accounted for 71.1% and 28.9%, respectively, of total revenue. A summary of our domestic and international revenue is set forth in Note 17, “Significant Customers and Geographic Information” to the Consolidated Financial Statements in Item 8 of this Form 10-K.

Backlog

A summary of our backlog is set forth under the subheading “Backlog” within Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7, which is incorporated herein by reference.

Employees

As of December 31, 2015, we had 1,189 full-time employees.

Additional Information

Our website can be accessed at http://www.digitalglobe.com.   The website contains information about us and our operations. Through a link on the Investor Relations section of our website, copies of our filings with the SEC on Forms 8-K, 10-Q and 10-K and amendments to those reports can be viewed and downloaded free of charge as soon as reasonably practicable after the reports have been filed or furnished with the SEC. The information on our website is not incorporated by reference and is not a part of this Annual Report on Form 10-K. Additionally, our reports, proxy and information statements, and other information filed with the SEC are available on the SEC’s web site, http://www.sec.gov or at the SEC Public Reference Room in Washington, D.C. Information regarding the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

ITEM 1A.RISK FACTORS

Risks

Our business is subject to many risks. The occurrence of any of the following risks could materially and adversely affect our business, financial condition, prospects, results of operations and cash flows. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition, results of operations and cash flows.

Risks Related to Our Business

The loss or reduction in scope of any one of our primary contracts will materially reduce our revenue. The majority of our revenue is currently derived from a single contract with a U.S. Government agency that can be terminated at any time.

We generated 63.7% of our revenue from the U.S. Government and 48.0% from the EnhancedView SLA in 2015. Our contracts with U.S. Government agencies are subject to risks of termination or reduction in scope due to changes in U.S. Government policies, priorities or funding level commitments to various agencies. Under the EnhancedView SLA, we are obligated to make a portion of the image tasking capacity of the WorldView constellation available to the NGA, including specified priority access rights. Beginning September 1, 2013, the NGA has the option to require us to lower the altitude of WorldView-2 from its current altitude of 770 kilometers to an altitude of 496 kilometers, subject to receipt of all required regulatory approvals. The lowering of the orbital altitude could result in a decrease in the amount of square kilometers collected by WorldView-2. While we believe the decrease in collection capability would be offset by improved data capture capabilities on the ground, there can be no assurance that our current collection capability will be maintained. Our ability to service other customers could be negatively impacted if we are unable to maintain our current collection capacity. In addition, any inability on our part to meet the performance requirements of the EnhancedView Contract could result in a breach of our contract with the NGA. A breach of our contract with the NGA or reduction in service to our other customers could have a material adverse effect on our business, financial condition and results of operations.

The NGA may also terminate or suspend our contracts, including the EnhancedView Contract, at any time with or without cause. If the EnhancedView Contract was terminated early, recognition of revenue currently classified as deferred would be accelerated.  If the contract was extended, the time period over which certain deferred revenue balances are currently expected to be recognized could be extended, resulting in lower revenue recognition than currently anticipated. Additionally, any changes in the size, scope or term of the EnhancedView Contract could impact our satellite replenishment strategy and our ability to repay or refinance our long-term debt. Although our NGA contracts generally involve fixed annual minimum commitments, such commitments are subject to annual Congressional appropriations and the federal budget process, and as a result, the NGA may not continue to fund these contracts at current or anticipated levels. In addition, the sequestration process under the Budget Control Act of 2011 (PL 112-25) could have an adverse impact on the timing and amount of appropriations available for defense programs, including EnhancedView. Under the terms of the Budget Control Act, discretionary spending is capped, and any breach of the caps would result in automatic, across-the-board spending cuts, known as sequestration. The Budget Control Act assumed that spending cap recommendations would be recommended to Congress by the Joint Select Committee on Deficit Reduction. This Committee failed to come to agreement, and accordingly sequestration was implemented during 2014. Sequestration did not have a material effect on our financial position or results of operations during 2014. However, future reductions in the current EnhancedView program or other current or future business with the Department of Defense resulting from sequestration could have a material adverse effect on our business, financial condition and results of operations.

Any program delays in required support of the EnhancedView Contract, may affect our ability to meet our obligations under the EnhancedView Contract resulting in a reduction of scope or termination of the contract, and may otherwise require us to increase our reliance on our existing satellites to meet our business needs, which could have a material adverse effect on our business, financial condition and results of operations.

The manufacturing, testing, launching and operation of satellites involves complex processes and technology. We rely on third-party contractors for the manufacturing, testing, and launch of our satellites, as well as solutions for any anomalies encountered while in orbit. Many factors, including, but not limited to, availability of parts, subcontractor and supplier delays and anomalies discovered in orbit, may result in significant challenges to our business. For example, during orbit, satellites may experience technical difficulties communicating with the ground terminals or collecting imagery in the same quality or volume that was intended. The failure to mitigate any technical difficulties could affect our ability to meet our obligations under the EnhancedView Contract and may otherwise limit the anticipated volume of imagery products and services available to meet our business needs, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, the EnhancedView Contract obligates us to meet certain capacity and timeliness of delivery requirements. To meet these requirements, we have expanded our network of ground terminals around the world. Our ground terminals are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. The occurrence of any of the foregoing could result in lengthy interruptions in our services and/or damage our reputation, which could have a material adverse effect on our financial condition and results of operations.

Interruption or failure of our infrastructure could hurt our ability to effectively perform our daily operations and provide our products and services, which could damage our reputation and harm our operating results.

The availability of our products and services depends on the continuing operation of our satellite operations infrastructure, information technology and communications systems. Any downtime, damage to or failure of our systems could result in interruptions in our service, which could reduce our revenue and profits. Our systems are vulnerable to damage or interruption from floods, fires, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our systems. We do not currently maintain a back-up production facility from which we can continue to collect, process and deliver imagery in the event of the loss of our primary facility. In the event we are unable to collect, process and deliver imagery from our facility in Longmont, Colorado, our daily operations and operating results would be materially and adversely affected. In addition, our ground terminal centers are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. The occurrence of any of the foregoing could result in lengthy interruptions in our services and/or damage our reputation, which could have a material adverse effect on our financial condition and results of operations.

We face competition that may cause us to have to reduce our prices or to lose market share.

Our products and services compete with satellite and aerial imagery and related products and services offered by a range of private and government providers. Our current or future competitors may have disruptive technologies or greater financial, personnel and other resources than we have. The value of our imagery may also be diluted by Earth imagery that is available free of charge.

The U.S. Government and foreign governments may develop, construct, launch and operate their own imagery satellites, which could reduce their need to rely on commercial suppliers. In addition, such governments could sell or provide free of charge Earth imagery from their satellites in the commercial market and thereby compete with our imagery products and services. Also, governments may at times make our imagery freely available for humanitarian purposes, which could impair our revenue growth with non-governmental organizations. These governments could also subsidize the development, launch and operation of imagery satellites by our current or future competitors.

Our competitors or potential competitors could, in the future, offer satellite-based imagery or other products and services with more attractive features than our products and services. The emergence of new remote imaging technologies or the continued growth of low-cost imaging satellites, could negatively affect our marketing efforts. More importantly, if competitors develop and launch satellites or other imagery content sources with more advanced capabilities and technologies than ours, or offer services at lower prices than ours, our business and results of operations could be harmed. Due to competitive pricing pressures, new product introductions by us or our competitors or other factors, the selling price of our products and services may further decrease. If we are unable to offset decreases in our average selling prices by increasing our sales volumes or by adjusting our product mix, our revenue and operating margins may decline and our financial position may be harmed.

We are dependent on resellers of our imagery for a portion of our revenue. If these resellers fail to market or sell our products and services successfully, our business would be harmed.

In 2015, we generated $68.6 million, or 9.8%, of our total revenue from foreign and domestic resellers. We rely on foreign resellers and partners to market and sell the majority of our products and services in the international market. We have intensified our efforts to further develop our operations in overseas markets, however, our foreign resellers and partners may not have the skill or experience to develop regional commercial markets for our imagery products and services, or may have competing interests that negatively affect their sales of our products and services. If we fail to enter into reseller agreements on a timely basis or if our resellers and partners fail to market and sell our imagery products and services successfully, these failures could negatively impact our business, financial condition and results of operations.

We rely on a single vendor or a limited number of vendors to provide certain key products or services to us and the inability of these key vendors to meet our needs could have a material adverse effect on our business.

Historically, we have contracted with a single vendor or a limited number of vendors to provide certain key products or services to us such as construction of our satellites and launch vehicles, and management of certain remote ground terminals and DAP facilities. If these vendors are unable to meet our needs because they fail to perform adequately, are unable to match new technological requirements or problems, or are unable to dedicate engineering and other resources necessary to provide the services contracted for, our business, financial position and results of operations may be adversely affected. While alternative sources for these products and services exist, we may not be able to develop these alternative sources quickly and cost-effectively, which could materially impair our ability to operate our business. Furthermore, our vendors may request changes in pricing, payment terms or other contractual obligations, which could cause us to make substantial additional investments.

Breach of our system security measures or loss of our secure facility clearance and accreditation could result in interruption, delay or suspension of our ability to provide our products and services, and could result in loss of current and future business, including our U.S. Government contracts.

Our business and our reputation could be negatively impacted by cyber attacks, other security breaches and other disruptions. Our business involves the transmission and storage of large quantities of electronic data, including the imagery comprising our ImageLibrary. In addition, our business is becoming increasingly web-based, allowing our customers to access and take delivery of imagery from our ImageLibrary over the Internet. From time to time, we have experienced computer viruses and other forms of third party attacks on our systems that, to date, have not had a material adverse effect on our business. We cannot assure you, however, that future attacks will not materially adversely affect our business. Despite the implementation and continued upgrading of security measures, our network infrastructure may be vulnerable to computer viruses, unauthorized third party access or other problems caused by third parties. Because the techniques used to obtain unauthorized access, or to otherwise infect or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

We may also need to expend significant resources to protect against security breaches. If unauthorized parties gain access to our information or our systems, they may be able to misappropriate assets or sensitive information (e.g., customer information), cause interruption in our operations, cause the loss of imagery from our Image Library, corrupt data or computers, or otherwise damage our reputation and business. In addition, a security breach that involves classified or other sensitive government information or certain controlled technical information, could subject us to civil or criminal penalties and could result in loss of our secure facility clearance and other accreditations, loss of our government contracts, loss of access to classified information, loss of export privileges or debarment as a government contractor. The risk that these types of events could seriously harm our business is likely to increase as we expand the number of web based products and services we offer as well as increase the number of countries within which we do business.

Changes in U.S. Government policy regarding use of commercial data providers, or material delay or cancellation of planned U.S. Government EnhancedView programs may have a material adverse effect on our revenue and our ability to achieve our growth objectives.

Current U.S. Government policy encourages the U.S. Government’s use of commercial data providers to support U.S. national security objectives. We are considered by the U.S. Government to be a commercial data provider. U.S. Government policy is subject to change and any change in policy away from supporting the use of commercial data providers to meet U.S. Government imagery needs could materially affect our revenue and our ability to achieve our growth objectives.

If our satellites fail to operate as intended, it could have a material adverse effect on our business, financial condition and results of operations.

Our satellites employ advanced technologies and sensors that are exposed to severe environmental stresses in space that could affect our satellites’ performance. Hardware component problems in space could lead to deterioration in performance or loss of functionality of a satellite. In addition, human operators may execute improper implementation commands that may negatively impact a satellite’s performance. Exposure of our satellites to an unanticipated catastrophic event, such as a meteor shower or a collision with space debris, could reduce the performance of, or completely destroy, the affected satellite. We cannot assure you that our satellites will continue to operate successfully in space throughout their expected operational lives. Even if a satellite is operated properly, technical flaws in that satellite’s sensors or other technical deficiencies or anomalies could significantly hinder its performance, which could materially affect our ability to collect imagery and market our products and services successfully. While some anomalies are covered by insurance policies, others are not or may not be covered, or may be subject to large deductibles.

If we suffer a partial or total loss of a deployed satellite, we would need a significant amount of time and would incur substantial expense to replace that satellite. We may experience other problems with our satellites that may reduce their performance. During any period of time in which a satellite is not fully operational, we may lose most or all of the revenue that otherwise would have been derived from that satellite. In addition, we may not have on hand, or be able to obtain in a timely manner, the necessary funds to cover the cost of any necessary satellite replacement. Our inability to repair or replace a defective satellite or correct any other technical problem in a timely manner could result in a significant loss of revenue. If a satellite experiences a significant anomaly such that it becomes impaired or is no longer functional, it would significantly impact our business, prospects and profitability.

Loss of, or damage to, a satellite may require us to seek additional financing from outside sources, which we may be unable to obtain on favorable terms, if at all.

The expected operational lives of our satellites are affected by a number of factors, including the quality of design and construction, the supply of fuel, the expected gradual environmental degradation of solar panels, the durability of various satellite components and the orbits and space environments in which the satellites are placed and operated. The failure of satellite components could cause damage to or loss of the use of a satellite before the end of its expected operational life. Electrostatic storms or collisions with other objects could also damage our satellites. We cannot assure you that each satellite will remain in operation until the end of its expected operational life. 

Additionally, our review of satellite lives could extend or shorten the depreciable lives of our satellites, which would have an impact on the depreciation we recognize, as well as certain deferred revenue, which is tied to the life of the satellites. Furthermore, we expect the performance of each satellite to decline gradually near the end of its expected operational life. We can offer no assurance that our satellites will maintain their prescribed orbits or remain operational.

We anticipate using funds generated from operations to fund the construction and launch of any future satellites, including WorldView-4. If we do not generate sufficient funds from operations, we may need to obtain additional financing from outside sources to deploy any future satellites. If we do not generate sufficient funds from operations and cannot obtain financing, we will not be able to deploy any future satellites or be able to replace any of our operating satellites at the end of their operational lives. We cannot assure that we will be able to generate sufficient funds from operations or raise additional capital on favorable terms or on a timely basis, if at all, to develop or deploy additional high-resolution satellites.

New satellites are subject to construction and launch delays, launch failures,  damage or destruction during launch, the occurrence of which can materially and adversely affect our operations.

Delays in the construction of WorldView-4 and other future satellites and the procurement of requisite components and launch vehicles, limited availability of appropriate launch windows, possible delays in obtaining regulatory approvals, satellite damage or destruction during launch, launch failures, or incorrect orbital placement could have a material adverse effect on our business, financial condition and results of operations. The loss of, or damage to, a satellite due to a launch failure could result in significant delays in anticipated revenue to be generated by that satellite. Any significant delay in the commencement of service of a satellite due to a launch failure would delay and potentially permanently reduce the revenue anticipated to be generated by that satellite. In addition, we may not be able to accommodate affected customers with our other satellites until a replacement satellite is available, and we may not have on hand, or be able to obtain in a timely manner, the necessary funds to cover the cost of any necessary satellite replacement. Any launch delay, launch failure, underperformance, delay or perceived delay could have a material adverse effect on our results of operations, business prospects and financial condition.

Limited insurance coverage, pricing and availability may prevent us from obtaining insurance to cover all risks of loss.

We intend to insure certain satellites in our constellation to the extent that insurance remains available at acceptable premiums. The insurance proceeds received in connection with a partial or total impairment of the functional capacity of any of our satellites would not be sufficient to cover the replacement cost, if we choose to do so, of an equivalent high-resolution satellite. In addition, this insurance will not protect us against all losses to our satellites due to specified exclusions, deductibles and material change limitations and it may be difficult to insure against certain risks, including a partial deterioration in satellite performance and satellite re-entry. As of December 31, 2015, we maintained an aggregate of  $730.0 million of insurance coverage on our WorldView-1, WorldView-2, WorldView-3, and GeoEye-1 satellites for the policy period from October 2015 to October 2016. In 2015, we did not insure our IKONOS or QuickBird satellites against functional capacity impairment, given the stage of their useful lives. We maintained $431.0 million of insurance for our WorldView-4 satellite, which is currently under construction, for the policy period from May 2015 to May 2018.

The price and availability of insurance have fluctuated significantly since we began offering commercial services in 2001. Although we have historically been able to obtain insurance coverage for our in-orbit satellites, we cannot guarantee that we will be able to do so in the future. We intend to maintain insurance for our operating satellites, however, any determination we make as to whether to obtain insurance coverage will depend on a variety of factors, including the availability of insurance in the market, the cost of available insurance and the redundancy of our operating satellites. Insurance market conditions or factors outside our control at the time we are in the market for the required insurance, such as failure of a satellite using similar components, could cause premiums to be significantly higher than current estimates and could reduce amounts of available coverage. Higher premiums on insurance policies will increase our costs and consequently reduce our operating income by the amount of such increased premiums. If the terms of in-orbit insurance policies become less favorable than those currently available, there may be limits on the amount of coverage that we can obtain or we may not be able to obtain insurance at all. Even if obtained, our in-orbit operations insurance will not cover any loss in revenue incurred as a result of a partial or total satellite loss.

We are highly dependent upon our ImageLibrary and our failure or inability to protect and maintain the Earth- imagery content stored in our ImageLibrary could have a material adverse effect on our business, financial condition and results of operations.

Our operations depend upon our ability to maintain and protect our Earth-imagery content and our ImageLibrary against damage that may be caused by fire and other natural disasters, power failures, telecommunications failures, terrorist attacks, unauthorized intrusion, computer viruses, equipment malfunction or inadequacy, firewall breach or other events. The satellite imagery content we collect is downloaded directly to our facilities and then stored in our ImageLibrary for sale to customers. We back up our imagery and permanently store it with a third party data storage provider. Notwithstanding precautions we have taken to protect our ImageLibrary, there can be no assurance that a natural disaster or other event would not result in a prolonged interruption in our ability to provide access to or deliver imagery from our ImageLibrary to our customers. The temporary or permanent loss or disruption of access to our ImageLibrary could impair our ability to supply current and future customers with imagery content, have a negative impact on our revenue and cause harm to our reputation. Any impairment in our ability to supply our customers with imagery content could affect our ability to retain or attract customers, which would have a material adverse effect on our business, financial condition and results of operations.

The market may not accept our imagery products and services. You should not rely upon our historic growth rates as an indicator of future growth.

We cannot accurately predict whether our products and services will achieve significant market acceptance or whether there will be a market for our products and services on terms we find acceptable. Market acceptance of our commercial high-resolution Earth imagery and related products and services depends on a number of factors, including the quality, scope, timeliness, sophistication, price and the availability of substitute products and services. Lack of significant market acceptance of our offerings, or other products and services that utilize our imagery, delays in acceptance, failure of certain markets to develop or our need to make significant investments to achieve acceptance by the market would negatively affect our business, financial condition and results of operations. We may not continue to grow in line with historical rates or at all. If we are unable to achieve sustained growth, we may be unable to execute our business strategy, expand our business or fund other liquidity needs and our prospects, financial condition and results of operations could be materially and adversely affected.

Uncertain global macro-economic and political conditions could materially adversely affect our results of operations and financial condition.

Our results of operations are materially affected by conditions in the global capital markets and the economy, both in the U.S. and internationally. The Company’s business may be materially and adversely impacted by changes in United States or global economic conditions including inflation, deflation, interest rates, availability of capital, energy and commodity prices, trade laws, and the effects of governmental initiatives to manage economic conditions. Current or potential customers may delay or decrease spending on our products and services as their business and/or budgets are impacted by economic conditions. The inability of current and potential customers to pay us for our products and services may adversely affect our earnings and cash flows.

Our international business exposes us to risks relating to increased regulation, currency fluctuations, and political or economic instability in foreign markets, which could adversely affect our revenue.

In 2015, approximately 28.9% of our revenue was derived from international sales, and we intend to continue to pursue international contracts. International operations are subject to certain risks, such as: changes in domestic and foreign governmental regulations and licensing requirements; deterioration of relations between the United States and a particular foreign country; increases in tariffs and taxes and other trade barriers; changes in political and economic stability, including fluctuations in the value of foreign currencies, which may make payment in U.S. dollars, as provided for under our existing contracts, more expensive for foreign customers and affect their budgets; effects of austerity programs or similar significant budget reduction programs; potential preferences by prospective customers to purchase from local (non-U.S.) sources; and difficulties in obtaining or enforcing judgments in foreign jurisdictions. These risks are beyond our control and could have a material and adverse effect on our business. 

We depend upon our ability to attract, train and retain employees. Our inability to do so, or the loss of key personnel, would seriously harm our business.

Because of the specialized nature of our business, we rely heavily on our ability to attract and retain qualified scientific, technical, sales, marketing and managerial personnel. The loss of one or more of our senior management personnel could result in the loss of knowledge, experience and technical expertise within the satellite imagery sector, which would be detrimental to us if we cannot recruit suitable replacements in a timely manner. The competition for qualified personnel in the commercial high-resolution Earth imagery industry is intense. Due to this intense competition, we may be unable to continue to attract and retain the qualified personnel necessary for the development of our business or to recruit suitable replacement personnel. The loss of the services of any member of our senior management or the inability to hire or retain experienced management personnel could adversely affect our ability to execute our business plan and harm our operating results. Additionally, our ability to effectively manage change of people and/or processes within the organization could negatively impact our ability to deliver on the objectives and plans of the Company.

Our restructuring activities and cost saving initiatives may not achieve the results we anticipate.

We have undertaken cost reduction initiatives and organizational restructurings to improve operating efficiencies, optimize our asset base and generate cost savings. For example, we have recently undertaken restructuring plans intended to reduce global headcount, rationalize our real estate footprint, realize efficiencies from re-engineering processes and enhancing system workflows, and implement other efficiency initiatives. We cannot be certain that we will be able to complete these initiatives as planned or without business interruption, or that the estimated operating efficiencies or cost savings from such activities will be fully realized or maintained over time.

Risks Related to Acquisitions

Acquisitions could result in adverse impacts on our operations and in unanticipated liabilities and we may be unable to successfully integrate acquired companies.

To integrate acquired businesses we must implement our management information systems, operating systems and internal controls and assimilate and manage the personnel of the acquired operations. The integration of acquired businesses may not be successful and could result in disruption to other parts of our business. Also, the integration of acquired businesses may require that we incur significant restructuring charges. Acquisitions involve numerous risks and challenges, including: diversion of management’s attention from the normal operation of our business; potential loss of key employees and customers of the acquired companies; disruption of business relationships with current customers; uncertainties that may impair our ability to attract, retain and motivate key personnel; difficulties managing and integrating operations; the potential for deficiencies in internal controls at acquired companies; increases in our expenses and working capital requirements; and exposure to unanticipated liabilities of acquired companies.

Any future acquisitions may require additional equity financing, which could be dilutive to our existing stockholders, or additional debt financing, which could increase our leverage and potentially affect our credit ratings. Any downgrades in our credit ratings associated with an acquisition could adversely affect our ability to borrow by resulting in more restrictive borrowing terms. As a result of the foregoing, we also may not be able to complete acquisitions in the future. These and other factors may harm our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition, and could adversely affect our business and operating results.

If our goodwill or amortizable intangible assets become impaired we may be required to record a significant charge to earnings.    

We have acquired other companies and may not realize all the economic benefit from those acquisitions, which could cause an impairment of our goodwill or intangible assets. We review goodwill and our amortizable intangible assets for impairment annually or when events or changes in circumstances indicate the carrying value may not be recoverable. We may be required to record a significant non-cash charge in our consolidated financial statements in the period in which any impairment of our goodwill or amortizable intangible assets is determined, negatively affecting our results of operations. 

Risks Related to Legal and Regulatory Matters

Changes in U.S. or foreign laws and regulations could have a material adverse effect on our operations and financial condition.

Our industry is highly regulated due to the sensitive nature of satellite technology. We cannot assure you that the laws and regulations governing our business and operations, including the distribution of satellite imagery, will not change in the future. Our business and operating results may be materially and adversely affected if we are required to alter our business operations to comply with such changes or if our ability to sell our products and services on a global basis is reduced or restricted due to increased U.S. or foreign government regulation.

Our international operations are subject to the U.S. Foreign Corrupt Practices Act (“FCPA”), which generally prohibits U.S. companies and their intermediaries from making corrupt payments to foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment, and requires companies to maintain adequate record-keeping and internal accounting practices to accurately reflect the transactions of the company. The FCPA applies to companies, individual directors, officers, employees and agents. Under the FCPA, U.S. companies may be held liable for actions taken by strategic or local partners or representatives. If we or our agents fail to comply with the requirements of the FCPA, or similar anti-bribery laws in other jurisdictions, governmental authorities in the United States or elsewhere, as applicable, could seek to impose civil and/or criminal penalties, which could have a material adverse effect on our business, financial condition and results of operations.

Failure to obtain or maintain regulatory approvals could result in service interruptions or could impede us from executing our business plan.

NOAA Approvals. Our business requires licenses from NOAA. Under our NOAA licenses, the U.S. Government reserves the right to interrupt service or limit our ability to distribute satellite images when foreign policy or U.S. national security interests are affected. In addition, NOAA has the right to review and approve the terms of certain of our agreements with international customers, including our DAP customers. We currently have the necessary approvals for our existing international customers. However, such reviews in the future could delay or prohibit us from executing new international agreements. The inability to get approvals for DAP customers could materially affect our ability to establish and grow our DAP business. In addition, should we not get approvals in a timely manner, our products and services may not be competitive.

Export Approvals. The ground station equipment and related technology that is purchased by certain of our DAP customers is controlled under the ITAR. We, or our suppliers, must obtain export licenses from the Department of State, and in some cases from foreign government agencies, in order to export ground station equipment and related technology to our DAP customers. Export licenses can take up to three months or longer to be processed and neither the Department of State nor any corresponding foreign government agency are obligated to approve any license application. Our inability or the inability of our suppliers to get required export approvals for equipment and technology supporting the DAP could materially affect our ability to establish and grow our DAP business.

FCC Approvals. Our operation of satellites and ground terminals also requires licenses from the FCC. The FCC regulates the construction, launch and operation of our satellites, the use of satellite frequency spectrum and the licensing of our ground terminals located within the United States. We are also subject to the FCC’s rules and regulations and the terms of our licenses, which require us to comply with various operating conditions and requirements. The current licenses of our satellites expire between 2023 and 2024 and those of our ground terminals expire between 2019 and 2024.  While the FCC generally renews licenses routinely, there can be no assurance that our licenses will be renewed at their expiration dates on favorable terms or without adverse conditions. Failure to renew these licenses could have a material and adverse effect on our ability to generate revenue and conduct our business as currently expected.

International Registration and Approvals. The use of the satellite frequency spectrum internationally is subject to the rules and requirements of the ITU. Additionally, satellite operators must abide by the specific laws of the countries in which downlink services are provided from the satellite to ground terminals within such countries. The FCC has coordinated the operations for each of our satellites pursuant to the ITU requirements. Coordination of our satellites with other satellite systems is required by the ITU to help prevent harmful frequency interference from or into existing or planned satellite operations. We do not expect significant issues relating to the coordination of our satellites due to the nature of satellite imaging operations.

Our foreign DAP customers are responsible for securing necessary licenses and operational authority to use the required spectrum in each country into which we will downlink high resolution commercial Earth imagery. If such customers are not successful in obtaining the necessary approvals, we will not be able to distribute real-time imagery to those customers. Our inability to offer real-time access service in a significant number of foreign countries could negatively affect our business. In addition, regulatory provisions in countries where we wish to operate may impose unduly burdensome restrictions on our operations. Our business may also be adversely affected if the national authorities where we plan to operate adopt treaties, regulations or legislation unfavorable to foreign companies.

Government audits of our contracts could result in a decrease in our earnings and/or have a negative effect on our cash position following an audit adjustment.

Our government contracts are subject to cost audits, which may occur several years after the period to which the audit relates. If an audit identifies significant unallowable costs, we could incur a material charge to our earnings or reduction in our cash position.

Risks Related to Our Indebtedness and Investment in Our Common Stock

We have a substantial amount of indebtedness, which may adversely affect our cash flow and our ability to operate our business, including our ability to incur additional indebtedness.

In connection with our acquisition of GeoEye, on January 31, 2013, we entered into a seven-year $550.0 million senior secured term loan facility due February 1, 2020 (the “Term Loan”), a five-year $150.0 million senior secured revolving credit facility due February 1, 2018 (“Revolving Credit Facility” and, together with the Term Loan, the “2013 Credit Facility”) and issued $600.0 million of 5.25% senior notes due February 1, 2021 (the “Senior Notes”), the proceeds of which, along with cash on hand, were used to pay the cash consideration under the merger agreement, to refinance certain of our debt and GeoEye’s outstanding debt assumed in the business combination and pay fees and expenses related to the transactions. Our indebtedness could have several consequences, including: increasing our vulnerability to adverse economic, industry or competitive developments; requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, return of capital to shareholders through our share repurchase program, and future business opportunities; restricting us from making strategic acquisitions;  limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; and limiting our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate, placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting.

Our 2013 Credit Facility and Senior Notes contain a number of restrictions and covenants that, among other things, limit our ability to incur additional indebtedness, make investments, pay dividends or make distributions to our stockholders, grant liens on our assets, sell assets, enter into a new or different line of business, enter into transactions with our affiliates, merge or consolidate with other entities or transfer all or substantially all of our assets and enter into sale and leaseback transactions.

Our ability to comply with these restrictions and covenants in the future is uncertain and will be affected by the levels of cash flow from our operations and events or circumstances beyond our control. Our failure to comply with any of the restrictions and covenants under our 2013 Credit Facility and Senior Notes could cause all of our existing indebtedness to be immediately due and payable. If our indebtedness is accelerated, we may not be able to repay our indebtedness or borrow sufficient funds to refinance it. If our indebtedness is in default for any reason, our business, financial condition and results of operations could be materially and adversely affected. As of December 31, 2015, our total indebtedness was $1,134.9 million. Our balance as of December 31, 2015 was $1,109.9 million which was net of discounts and issuance costs of $25.0 million and represented 47.1% of our total capitalization. Our indebtedness increases the possibility that we may be unable to generate sufficient cash to pay, when due, the principal, interest or other amounts due with respect to our indebtedness.

We expect that the price of our common stock will fluctuate substantially.

The market price of our common stock has been, and is likely to continue to be, volatile. Factors that could contribute to the volatility of our stock include, but are not limited to: termination or expiration of one or more of our key contracts, or a change in scope or purchasing levels under one or more of our contracts, including the EnhancedView Contract, our DAP contracts or other large contracts; unfounded rumors and leaks of information, or formal announcements regarding federal budget cuts, including, but not limited to, reduction in budgets affecting the Department of Defense; failure of our satellites to operate as designed; loss or damage to any of our satellites; changes in U.S. or foreign governmental regulations or in the status of our regulatory approvals, clearances or future applications; our announcements or our competitors’ announcements regarding new products or services, enhancements, significant contracts, acquisitions or strategic investments; changes in the availability of insurance; changes in earnings estimates or recommendations by securities analysts, if any, who cover our common stock; changes in our published forecast of future results of operations; fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; success of competitive products and services; changes in our capital structure, such as future issuances or repurchases of securities, sales of large blocks of common stock by our stockholders or the incurrence of additional debt; investors’ general perception of us, including any perception of misuse of sensitive information; changes in general global economic and market conditions; changes in industry conditions; business disruptions, costs and future events related to shareholder activism, and changes in regulatory and other dynamics.

In addition, in recent years, the stock market has experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of many companies in the technology sector, which have often been unrelated to their operating performance or prospects for future operations. These broad fluctuations may adversely impact the market price of our common stock. Future market movements may materially and adversely affect the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated by-laws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Provisions of our amended and restated certificate of incorporation and amended and restated by-laws and Delaware law may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include: the existence of a classified board of directors; limitations on the removal of directors; advance notice requirements for stockholder proposals and director nominations; the inability of stockholders to act by written consent or to call special meetings; the ability of our board of directors to make, alter or repeal our by-laws; and provisions that permit the redemption of stock from foreign stockholders where necessary, in the judgment of our board of directors, to protect our licenses and registrations.

If we are unable to repurchase our stock at intended levels, our reputation and stock price may be harmed.

In the second half of 2014, the Company’s Board of Directors authorized a program to repurchase up to $205.0 million of the Company’s outstanding common stock through December 31, 2015. In October 2015, the Company’s Board of Directors approved an additional $130.0 million of authorized share repurchases of the Company’s outstanding common stock through December 31, 2016. The approval increased the total authorized amount under the program to $335.0 million. The stock repurchase program may require the use of a significant portion of our cash earnings. As a result, we may not retain a sufficient amount of cash to fund our operations or finance future growth opportunities, new product development initiatives and unanticipated capital expenditures which could adversely affect our financial performance. Our ability to repurchase stock will depend on our ability to generate sufficient cash flows from operations in the future. This ability may be subject to certain economic, financial, competitive and other factors that are beyond our control. The stock repurchase program does not obligate the Company to acquire any stock, and it may be limited or terminated at any time without notice. Any failure to repurchase stock after we have announced our intention to do so may negatively impact our reputation and investor confidence in us, and may negatively impact our stock price.

ITEM 1B.UNRESOLVED STAFF COMMENTS

None.

ITEM 2.PROPERTIES

The properties used in our operations consist principally of production facilities, administrative and executive offices, and remote ground terminals. As of December 31, 2015, we leased or owned approximately 790,000 square feet of office and operations space. This space includes our principal production facilities, administrative and executive offices in Westminster, Colorado; Longmont, Colorado; Thornton, Colorado; and Herndon, Virginia. We also lease a data center and have smaller administrative offices and sales offices located in the United States and internationally.

ITEM 3.LEGAL PROCEEDINGS

From time to time, we are a party to various litigation matters incidental to the conduct of our business. We are not presently party to any legal proceedings the resolution of which, we believe, would have a material adverse effect on our business, operating results, financial condition or cash flows.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock has been listed on the NYSE and traded under the symbol “DGI” since our initial public offering in May 2009. The following table sets forth, for the periods indicated, the high and low sales prices in dollars on the NYSE for our common stock based on daily trading prices.

At February 18, 2016, there were approximately 243 stockholders of record of our common stock. Because many shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Performance Measurement Comparison of Stockholder Return

The graph below compares the yearly percentage change in our cumulative total stockholder return on our common stock with the cumulative total return of the S&P Composite 500 Stock Index, the Russell 2000, and our peer group for the period from December 31, 2010 through December 31, 2015. It assumes $100 was invested at market close on December 31, 2010 and that any dividends have been reinvested.

Our peer group in 2015 and 2014 consisted of Acxiom Corporation, Advisory Board Company, comScore, Inc., Corporate Executive Board Company, CoStar Group Inc., FactSet Research Systems, Inc., Fair Isaac Corporation, FLIR Systems, Inc., Forrester Research, Inc., Gartner, Inc., IHS, Inc., Iridium Communications, Inc., KEYW Holding Corporation, Kratos Defense & Security Solutions, NeuStar, Inc., Orbital Sciences Corporation (included through February 9, 2015 when it was acquired by Alliant Techsystems), Qlik Technologies, Inc., Trimble Navigation Limited, Verisk Analytics, Inc., and ViaSat, Inc.

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”), or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into any filing of DigitalGlobe, Inc. under the Securities Act of 1933, as amended, or the Exchange Act.

Dividends

Since inception, we have not declared or paid any cash dividends on our common stock and do not currently anticipate paying cash dividends on our common stock. We anticipate that we will retain all of our future earnings, if any, for use in the development and expansion of our business, for our stock repurchase program and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will be subject to restrictive covenants contained in our financing facilities and dependent on then-existing conditions, including our financial condition and results of operations, contractual restrictions, capital requirements and other factors. For detail concerning dividends declared or paid on our Series A convertible preferred stock,  please see Note 13 of the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Issuer Purchases of Equity Securities

In the second half of 2014, the Company’s Board of Directors authorized a program to repurchase up to $205.0 million of the Company’s outstanding common stock through December 31, 2015. In October 2015, the Company’s Board of Directors approved an additional $130.0 million of authorized share repurchases of the Company’s outstanding common stock through December 31, 2016. The approval increased the total authorized amount under the program to $335.0 million. As of December 31, 2015, we have repurchased 8,962,786 shares, or $219.6 million, at an average purchase price of $24.50 per share. The amount purchased to date and the average share price for repurchases includes broker transaction fees. The Company may repurchase shares through open market purchases, privately negotiated transactions, structured or derivative transactions such as puts, calls, options, forwards, collars, accelerated share repurchase transactions (with or without collars), other equity contracts or other methods of acquiring shares and pursuant to Rule 10b5-1, in each case on such terms and at such times as shall be permitted by applicable securities laws and determined by management. The stock repurchase program does not obligate the Company to acquire any stock, and it may be limited or terminated at any time without notice. 

The Company amended its 2013 Credit Facility on December 21, 2015 for additional flexibility to continue its share repurchase program and to increase the threshold for certain mandatory debt repayments. Refer to Note 6 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for further detail.

Share repurchase activity during the quarter ended December 31, 2015 was as follows:

ITEM 6.SELECTED FINANCIAL DATA

The selected consolidated financial information set forth below for each of the years ended December 31, 2015, 2014, 2013, 2012 and 2011 has been derived from our audited Consolidated Financial Statements. The information below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto in Items 7 and 8, respectively, of this report.

Summary Financial Data

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

DigitalGlobe is a leading global provider of high-resolution Earth-imagery products and services sourced from our own advanced satellite constellation and third-party providers. Our imagery solutions support a wide variety of users in defense and intelligence, civil agencies, mapping and analysis, environmental monitoring, oil and gas exploration, infrastructure management, Internet portals, and navigation technology. Each day users depend on us to better understand our changing planet in order to save lives, resources and time. 

Our principal customers include U.S. and foreign governments, LBS providers, and those in energy and other industry verticals. The imagery that forms the foundation of our products, services and analysis is collected daily from our constellation of high-resolution imaging satellites and maintained in our ImageLibrary. We believe that our ImageLibrary is the largest, most up-to-date and comprehensive archive of high-resolution Earth imagery commercially available, containing more than 6.4 billion square kilometers of imagery, an area the equivalent of 43 times the landmass of the Earth, accumulated since 1999. As of December 31, 2015, our collection capacity capability was approximately 1.37 billion square kilometers of imagery per year, or the equivalent of roughly 9 times the Earth’s land surface area, and offers intraday revisit around the globe.

2015 Highlights

Share Repurchase Program

In October 2015, the Company’s Board of Directors increased authorized share repurchases of the Company’s outstanding common stock to $335.0 million through December 31, 2016. As of December 31, 2015, we have repurchased a total of 8,962,786 shares at an average purchase price of $24.50 per share, for a total of $219.6 million under the program. Refer to “Issuer Purchases of Equity Securities” in Item 5 of this Form 10-K for further detail.

Re-engineering and Restructuring Plans

In February 2015, the Company initiated a re-engineering and restructuring plan intended to improve our operational efficiency. The Company expects to incur approximately $12.0 million of the originally anticipated $15.0 million as a result of these efforts, which include restructuring charges to reduce global headcount and rationalize our real estate footprint, and other re-engineering charges to realize efficiencies from reducing headcount, such as re-engineering processes and enhancing system workflows, as well as costs related to the decision to proactively decommission IKONOS. The decrease in expected spend results primarily from lower than anticipated lease termination fees associated with the consolidation of our real estate footprint. We expect to complete this plan and realize the benefits resulting from our efforts by the end of the first quarter of 2016.

In October 2015, the Company initiated a separate re-engineering and restructuring plan, in which the Company may incur up to an additional $18.0 million in an effort to further reduce global headcount, rationalize its real estate footprint, realize efficiencies from re-engineering processes and enhancing system workflows, and undertake other efficiency initiatives. We expect to complete this plan and realize the benefits resulting from our efforts by the end of the fourth quarter of 2016.

The benefits realized from these plans may be partially offset by higher operating costs associated with growth in our business. The following table summarizes costs incurred and those that we expect to incur under each plan as of December 31, 2015:

Recent Satellite Developments

We continue to make certain necessary enhancements to our WorldView-4 satellite, and intend to launch the satellite in the third quarter of 2016 for additional capacity as a result of anticipated incremental growth opportunities. We continue to receive early contractual agreements and letters of intent for direct access capacity from international defense and intelligence customers. We anticipate that these pre-launch commitments will generate incremental revenue in 2017, when the satellite is expected to begin commercial operations.

Results of Operations

We operate in a single segment in which we use common infrastructure and technology to collect, process and distribute imagery products and services to customers around the world. The following tables summarize our results of operations:

The following table summarizes our results of operations as a percentage of total revenue:

Revenue

Our principal source of revenue is the licensing of Earth-imagery products and provision of other services to end users, resellers and partners. We have organized our sales leadership and marketing efforts around U.S. Government and Diversified Commercial customer groups. 

U.S. Government

U.S. Government revenue consists primarily of the EnhancedView SLA, other revenue and value-added services, and amortization of pre-FOC payments related to the NextView agreement with the NGA. The NGA purchases our imagery products and services on behalf of various U.S. Government entities, including the military and other agencies. Other U.S. defense and intelligence customers, including contractors, purchase value-added services with our imagery. Our U.S. Government customers focus on image quality, including resolution, accuracy, spectral diversity, frequency of area revisit, coverage, and availability of certain amounts of our capacity, as they integrate our products and services into their operational planning. Revenue is generated largely from service level agreements, tasking orders and sales of imagery from our ImageLibrary, in addition to sales of geospatial analytic products and expert services that obtain insight from our imagery. We sell to the U.S. Government primarily through direct sales.

U.S. Government revenue increased $52.3 million, or 13.2%,  from 2014 to 2015. EnhancedView SLA revenue increased as a result of WorldView-3 becoming fully operational on October 1, 2014, which increased constellation capacity made available to the NGA. Other revenue and value-added services declined primarily due to a decrease in non-cash amortization of Global EGD deferred revenue. The decrease in the non-cash amortization of pre-FOC payments related to NextView resulted from the extension of the period over which these payments are amortized to reflect the fourth quarter of 2014 extension of the useful life of WorldView-1. 

U.S. Government revenue increased $37.2 million, or 10.4%,  from 2013 to 2014. EnhancedView SLA revenue increased as a result of WorldView-3 becoming fully operational on October 1, 2014, which increased constellation capacity made available to the NGA. Other revenue and value-added services increased primarily due to expanded services under Global EGD. The decrease in the non-cash amortization of pre-FOC payments related to NextView resulted from the extension of the period over which these payments are amortized to reflect the fourth quarter of 2014 extension of the useful life of WorldView-1.

Diversified Commercial

Diversified Commercial consists of the following types of customers: DAP, international civil government, LBS, energy, other international defense and intelligence, and other industry verticals. We sell products and services to these customers throughout the world both directly and through resellers. We have DAP agreements in 10 countries, earning revenue from sales of DAP facilities and from service fees to access our satellite constellation. Other diversified commercial customers use our content for mapping, monitoring, analysis and planning activities.

Diversified Commercial revenue decreased $4.5 million, or 1.7%, from 2014 to 2015. DAP revenue increased from additional image deliveries and access minutes to meet customer demands, primarily driven by multiple crises in the Middle East. Other diversified commercial decreased as a result of lower LBS revenue and the impact of the strong U.S. dollar on certain of our non-U.S. customers.

Diversified Commercial revenue increased $4.7 million, or 1.8%, from 2013 to 2014. DAP revenue increased primarily due to the impact of activating additional direct access customers. Other diversified commercial decreased primarily due to lower revenue from customers in Russia of $14.5 million and a one-time data delivery in 2013 totaling $5.9 million, partially offset by growth within our energy vertical.

Expenses

Cost of Revenue

The following table summarizes our cost of revenue, excluding depreciation and amortization:

There is not a significant direct relationship between our cost of revenue and changes in our revenue. Our cost of revenue consists primarily of the cost of personnel, as well as the costs of operating our satellites, retrieving information from the satellites and processing the data retrieved.

Cost of revenue decreased $15.5 million, or 9.7%, from 2014 to 2015. Labor and labor-related costs decreased primarily from lower headcount in connection with our restructuring efforts and a reduction in incentive compensation due to lower than expected revenue growth. Facilities, subcontracting and equipment costs decreased primarily as a result of our re-engineering and restructuring efforts and a net decrease in remote ground terminal service fees impacted by negotiation of lower contract rates, which were partially offset by an increase in fees following the launch and commissioning of WorldView-3. The decrease in other direct costs was impacted by aerial imagery, which is amortized on an accelerated basis and consists of costs associated with previously purchased aerial imagery.    

Cost of revenue decreased $14.9 million, or 8.5%, from 2013 to 2014. Labor and labor-related costs decreased primarily as a result of our restructuring efforts, partially offset by an additional month of expenses for employees assumed in connection with the GeoEye acquisition totaling $3.2 million. Facilities, subcontracting and equipment costs decreased primarily due to the consolidation of ground terminals and related telecommunication contracts in connection with the GeoEye acquisition, partially offset by an additional month of expense associated with the remaining ground terminals acquired totaling $2.0 million. Consulting and professional fees decreased primarily due to reduced services needed to support the integration of GeoEye.

Selling, General and Administrative Expenses

The following table summarizes our selling, general and administrative expenses:

* Not meaningful

Selling, general and administrative expenses decreased $14.5 million, or 6.5%, from 2014 to 2015. Labor and labor-related costs decreased primarily from lower headcount in connection with our restructuring efforts and a reduction in incentive compensation due to lower than expected revenue growth. Consulting and professional fees decreased primarily from our re-engineering and restructuring efforts. The increase in rent and facilities represents costs associated with our new headquarters. Satellite insurance increased as a result of a full year of WorldView-3 insurance, partially offset by a decrease in premiums to insure our other in-orbit satellites.

Selling, general and administrative expenses decreased $35.8 million, or 13.9%, from 2013 to 2014. Acquisition costs were incurred in 2013 as part of the GeoEye acquisition. Labor and labor-related costs increased primarily due to $3.4 million in non-combination related severance expenses,  an additional month of expenses for employees assumed in connection with the GeoEye acquisition totaling $2.5 million, and higher headcount, including contractor conversions, to support growth in our business. Consulting and professional fees decreased primarily due to reduced services needed to support the integration of GeoEye. Rent and facilities decreased primarily due to the consolidation of facilities and related telecommunication contracts following our acquisition of GeoEye. Computer hardware and software increased primarily from an additional month of expenses associated with the GeoEye acquisition. The decrease in satellite insurance is primarily due to a reduction in rates to insure our in-orbit satellites, partially offset by WorldView-3 launch insurance expense.

Depreciation and Amortization