GeoEye Management Discusses Q2 2012 Results - Earnings Call Transcript

Aug. 7.12 | About: GeoEye, Inc. (GEOY)

GeoEye (NASDAQ:GEOY)

Q2 2012 Earnings Call

August 07, 2012 8:30 am ET

Executives

Randall J. Scherago - Vice President of Investor Relations

Matthew O'Connell - Chief Executive Officer, President and Director

Joseph F. Greeves - Chief Financial Officer and Executive Vice President

Analysts

Andrea James - Dougherty & Company LLC, Research Division

Paul Coster - JP Morgan Chase & Co, Research Division

James Patrick McIlree - Dominick and Dominick Securities Inc., Research Division

Chris Quilty - Raymond James & Associates, Inc., Research Division

Brian W. Ruttenbur - CRT Capital Group LLC, Research Division

Josephine Lin Millward - The Benchmark Company, LLC, Research Division

Operator

Good day, ladies and gentlemen. Welcome to GeoEye, Inc.'s Second Quarter 2012 Investor Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to introduce your host for this conference call, Mr. Randy Scherago. You may begin, sir.

Randall J. Scherago

Thank you. Good morning. This is Randy Scherago. Thank you for joining us today as we discuss GeoEye's second quarter 2012 financial results. Speaking today will be Mr. Matt O'Connell, our Chief Executive Officer and President; and Mr. Joe Greeves, our Chief Financial Officer. After our remarks, we'll take questions and answers from analysts and investors. This call is being recorded.

Before we begin the business portion of this morning's call, we'd like to inform you that we expect to make forward-looking statements during today's call. Statements including words such as believe, anticipate, estimate or expect are conditional statements and statements in the future tense and are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on management's current views and assumptions regarding future events and operating performance.

A number of factors could cause our actual future results to differ materially from our current expectations. Examples of these factors include, but are not limited to, conditions in the remote sensing industry, levels of government spending, competitive pricing pressures, the level of new commercial imaging orders, production rates for advanced imaging processing, start-up costs or overruns on new contracts and technology development risks and uncertainties.

Listeners are encouraged to read the risk factors in our filings with the Securities and Exchange Commission for a discussion of the various factors which could cause our actual performance to differ from our forward-looking statements. We assume no obligation to publicly update or revise our forward-looking statements.

In addition, for your convenience today, we have posted slides on our Investor Relations section of our website that can be referenced during today's call. Please go to our company's website, www.geoeye.com, to access these slides.

At this time, I would like to turn the call over to our company's Chief Executive Officer and President, Mr. Matt O'Connell.

Matthew O'Connell

Thanks, Randy, and I'd like to thank everyone for joining us on this call. As you saw from the results that we released last night, we had a good quarter that was in line with our revenue and earnings expectations. As you all know by now, GeoEye and DigitalGlobe have agreed to combine. We believe this is great news for all of our shareholders and customers. It comes after months of discussions between our respective management teams and boards. This is a very positive development in the growing field of Earth imagery and geospatial analysis. It obviously took a lot of time and effort by the senior teams of GeoEye and DigitalGlobe to reach agreement.

Now that we have reached an agreement, we have several months of work ahead of us to complete this combination successfully either late this year or early next year we believe that the many positive merits of the combination of these 2 companies will benefit our government and commercial customers, the U.S. taxpayers, our employees and our combined shareholder base. I'll talk about these merits in more detail later.

After I give a brief overview of our second quarter results and discuss some other positive developments in our business, including the combination, I'll turn the call over to our Chief Financial Officer, Joe Greeves. After that, we'll take your questions.

Now I'll give you some key operating and financial highlights. We reported second quarter revenues of $88.4 million. Our second quarter revenues were near the high end of our guidance range of $84 million to $90 million. Our adjusted EBITDA margins were over 50%. Operating margins were 25%. We continue to generate healthy cash flow from our operations, and we ended the quarter with approximately $240 million of cash and cash equivalents.

We were pleased with our second quarter results. Our business continues to have good momentum, particularly in areas like Analytics, Information Services and the international markets.

In the second quarter, the international business grew 9% year-over-year. Our international growth continues to be driven by more demand for imagery. The Middle East and Asia continue to show strong demand. European demand is holding up well, especially given the economic difficulties in Southern Europe. We've added a few additional European resellers now that we have a physical presence in Europe with our Amsterdam office. Domestically, our sales were up sequentially for the quarter due to our GE Aviation contract and our Analytics operations.

Following the news about the combination, we've had a number of meetings and discussions with our major customers and resellers to assure them that the quality of our service will remain high during this process. I'm pleased to tell you that during the second quarter, we continue to meet all the performance metrics under our Service Level Agreement with the National Geospatial-Intelligence Agency or NGA. We've met all the performance metrics since October of last year.

Our GeoEye Analytics professional services business continued to grow in the second quarter. We continue to concentrate on expanding our Analytics presence in growth markets like the U.S. government -- within the U.S. government, like the U.S. Special Operations Command and in new commercial areas. We expect continued growth and customer diversification in this area.

Production and services for the second quarter was up over last year, primarily due to orders under the program that the NGA refers to as Enhanced GEOINT Delivery or EGD and under our GE Aviation contract for the commercial side of our 3D airport business.

On another positive note for our Production business, the NGA recently released an RFP for the new Production program that they refer to as GDS. We believe we are well-positioned for this new multi-year contract because we're teamed with several large primes. The GDS contract is scheduled to be awarded in January '13, although that date is uncertain.

Another achievement in the quarter is that we are now collecting GeoEye-1 imagery for our commercial customers using Enhanced Line Rate or ELR capability. ELR is a software enhancement that allows us to collect imagery at a faster rate. The advantage of ELR is that we should be able to collect about 20% more imagery from GeoEye-1. ELR is already built into GeoEye-2.

Now for the federal budget. The President's budget for fiscal year 2013 that was submitted to Congress back in February recommended cuts to the EnhancedView program. GeoEye mounted a comprehensive and aggressive campaign to persuade key committees, senators and members of Congress that maintaining full funding to the EnhancedView program for the fiscal year 2013 is in the best interests of the U.S. government.

Investors should keep in mind that we believe it will be months before we see a final Defense and Intelligence Authorization Act to fund Department of Defense and intelligence programs, including the EnhancedView program. Congress is currently discussing a 6-month continuing resolution that would fund the federal government from October 1 to March of next year. We're not sure what effect this would have on our existing EnhancedView program. Our Service Level Agreement with NGA is funded through the end of August, and we're currently in discussions with the NGA regarding the agreement.

Next I'll give you a quick update on our GeoEye-2 program. The GeoEye-2 program remains on time and on budget. We received our first cost share payment of $111 million in the second quarter from NGA, as expected. This payment was triggered because we began the integration test phase of the program. In another significant milestone in the quarter, our 2 new ground stations in Dungaree, Australia and Mauritius have been completed and checked out successfully. We continue to receive a high volume of inquiries regarding GeoEye-2's capacity from all our customers.

Now regarding the combination with DigitalGlobe, I'd like to repeat what I said at the beginning of the call. By combining GeoEye and DigitalGlobe, we're creating a compelling solution and delivering more value for all our customers. Our customers will benefit from an optimized satellite constellation with a robust ground infrastructure that is better integrated with advanced image processing capabilities and predictive analytics. This combination will reduce the time it takes for customers to receive imagery, enhance the persistence of constellation over imagery targets and deliver significantly higher value for all customers.

The value of this combination to our largest customer, the NGA, is substantial, and it's specifically tailored to their requirements. The combined entity will be better positioned to succeed in a federal budget-constrained environment. It will deliver to the U.S. government the commercial collection capacity that is within their funding limits. In addition, the combined company will be better equipped to compete in the growing international arena. As we said a few weeks ago, we expect to close the transaction in the last quarter of 2012 or in the first quarter of 2013, depending on the timing of regulatory and shareholder approvals. We'll keep you updated on our progress on the regulatory approvals.

Now for our financial outlook. Throughout the process with DigitalGlobe, we will continue to execute on our existing business plan. We remain focused on providing our geospatial services to our existing customers while adding new customers. We're not going to confirm our full year guidance, because we hope to close this deal before year end. For third quarter, we anticipate revenues in the range of $86 million to $93 million.

Now I'll turn the call over to our Chief Financial Officer, Joe Greeves, so he can talk about our second quarter results in more detail.

Joseph F. Greeves

Thank you, Matt. Good morning, everyone. Before I get into the details for this quarter and our updated guidance for the third quarter of 2012, let me summarize the highlights.

As you know, we had a couple major developments this quarter. First, we received 2 letters from the NGA, which we published in an 8-K filing, regarding the NGA's contract renewal intentions and their funding limitations for our cost share program. We are currently in an active dialogue with the NGA in regard to both of these letters. We expect to be able to wrap those discussions up in the next couple of weeks, and we'll announce the results of those discussions then.

Second, we recently announced the signing of our agreement to combine with DigitalGlobe. We view this combination as a positive development for our government and commercial customers, as well as our shareholders and employees.

Some of the other highlights of the second quarter include the following. Revenues were $88.4 million, up $1.2 million over last year. These results were in line with our prior guidance of $84 million to $90 million for the second quarter. We continue to meet all of our NGA service level metrics again this quarter. We reported $44.7 million or 50.6% of revenues and adjusted EBITDA. In terms of cash flow, we met the NGA cost criteria for the first major milestone payment and collected the full $111 million this quarter.

Our GeoEye-2 satellite build has continued to go well, and the cost continues to be within our prior guidance. Finally, we sold our MJ Harden aerial operations to a major player in the aerial business in late June. Our second quarter revenues included $1.4 million from our MJ Harden operations.

Now moving on to the details. In the second quarter, domestic revenues were $67.9 million or accounted for approximately 77% of total revenues. Domestic revenues were up $2 million sequentially. The sequential increase was primarily due to the additions of the new GE Aviation work in our production operations and some growth in our Analytics services business.

In the year-ago quarter, we had a onetime -- we had a $4 million onetime commercial imagery order. In the second quarter, our international revenues were $20.5 million and accounted for over 23% of total revenues. This represents a $3 million sequential decline, which is primarily due to the fact that we completed recognizing the revenue under an equipment contract of $2 million per quarter, as I highlighted in our last quarterly call, and a reduction in the level of imagery we delivered to our Russian reseller this quarter as a result of a stronger-than-expected deliveries last quarter. The year-over-year growth of $1.7 million is primarily due to the expansion of our imagery revenue in Latin America.

Total imagery revenues were $59.7 million and accounted for approximately 67% of total revenues. The revenues from the NGA Service Level Agreement were $37.8 million in this quarter or 43% of total revenues. Production and other service revenues were at $22.7 million or about 26% of revenues. These revenues were up 8% sequentially. Our NextView cost share revenues associated with GeoEye-1 have continued to be $6 million or about 7% of total revenues for the quarter.

In terms of our customer base, the U.S. government’s many agencies accounted for $60.6 million or 68.5% of total revenues for the quarter. The SLA and cost share accounted for 49.5% of revenues, and the rest were service and production contracts for numerous federal agencies.

Moving on to operating expenses. Direct expenses were $30.3 million or 34% of total revenues. This is comparable to last quarter and down from the prior year, primarily due to a higher level of engineering support being devoted to the EnhancedView capital program and reduced subcontractor expenses this quarter. As Matt mentioned, we have recently added 2 new ground stations to our capability. As a result of adding this capability and the anticipated expansion of some of our service contracts, you should expect to see some growth in direct expenses going forward.

Selling, general and administrative expenses were $18.2 million, up significantly from last quarter and last year. This increase was primarily due to transaction costs associated with the process of combining with DigitalGlobe and the sale of our MJ Harden operations. We also increased our sales and marketing efforts.

Depreciation and amortization expense was up a little from last year and comparable to last quarter. As a result of all these factors, our income from operations for the second quarter of 2012 was $22.1 million or 25% of total revenues.

Now let's discuss some other financial metrics. Our adjusted EBITDA, which includes an adjustment for $2.4 million in transaction cost this quarter, was $44.7 million or 50.6% of revenues, which is in line with our prior guidance. Our effective tax rate was 39.3%, which is in line with our prior guidance and matches our current expectations for the full year.

In accordance with Generally Accepted Accounting Principles, all of our interest expense costs are being capitalized as a part of the GeoEye-2 capital program. The $1.3 million in interest income we reported this -- it was primarily associated with the federal income tax refund we collected this quarter.

For the second quarter, our net income available to common shareholders was $11.7 million or $0.51 per diluted share. After adjusting for the $2.4 million in transaction costs related -- in transaction-related costs this quarter, we reported $13 million in net income or $0.57 per diluted share.

Our balance sheet continues to be very strong. We ended the second quarter with unrestricted cash and short-term investments of $240 million. Our cash and deferred revenue balances increased substantially this quarter due to the receipt of the $111 million cost share payment. We plan to start recognizing the $111 million cost share balance into revenue when we meet the NGA's final contractual milestones and GeoEye-2 becomes operational. Our accounts receivable were $45.2 million, which represents 46 days of sales outstanding, which is generally in line with our target of 45 days.

In regards to capital expenditures, we invested almost $89 million during the second quarter, of which $79.2 million was invested in GeoEye-2 program. The investment includes $13.4 million in capitalized interest. Our total capital investment for the first half was $156 million, which included $16.4 million for general capital maintenance expenditures. We're on track to invest approximately $320 million in our 2012 capital program. This estimate includes approximately $230 million before capitalized interest for the development of our GeoEye-2 program.

To date, we have invested $718 million in our GeoEye-2 program, which includes $90 million of capitalized interest. We are reconfirming our estimate of approximately $820 million to $850 million, excluding capitalized interest, for the total capital investment required to complete the development of our whole GeoEye-2 program. We expect our current cash balances and projected cash flow from operations to be more than sufficient to fund these capital requirements.

Now let's discuss our updated guidance for 2012. As Matt said, we're not going to confirm our full year guidance since we hope to close this deal before the end of the year. For the third quarter, we are forecasting revenues in the range of $86 million to $93 million. We expect our adjusted EBITDA margin to continue to be in the 50% target range.

In summary, we are pleased with our operating results this quarter. We're looking forward to finalizing our renewal agreement with the NGA and continuing to move forward with DigitalGlobe.

Now, I'll turn the call back to Matt.

Matthew O'Connell

Thanks, Joe. There are 3 key points investors should take away from this call. First, we believe the combination of GeoEye and DigitalGlobe will benefit our customers, employees, our shareholder base and the U.S. taxpayers. Second, we'll continue to drive forward to keep GeoEye-2 on schedule and on budget. And third, our sales teams remain committed to generating new business, both domestically and internationally, and to diversifying the products and services we offer our customers over the next few months as we drive toward a successful conclusion of this combination. We will continue to share information with you when we have it, and operator, now we'll take investor questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Andrea James with Dougherty & Company.

Andrea James - Dougherty & Company LLC, Research Division

So a question about the GeoEye-2 cost share. How do you recognize that? And also, is it tied to any sort of launch contingency? And I'm just wondering what happens if there's a -- there's the merger proposal. Is that money at risk at all? Obviously, you already got a portion of it.

Joseph F. Greeves

You want me to take the first part, Matt?

Matthew O'Connell

Yes, you take the first part, and I'll do the second.

Joseph F. Greeves

Yes. Yes, actually, as I said in my script, the $111 million will be recognized when the -- when we meet the NGA's final contractual milestones and GeoEye-2 becomes operational. So we -- those are the 2 criteria, basically, to start the revenue recognition.

Matthew O'Connell

And as to whether or not it's at risk, no. We -- that $111 million, we don't regard that as at risk.

Andrea James - Dougherty & Company LLC, Research Division

Is it tied to a launch contingency?

Matthew O'Connell

No.

Andrea James - Dougherty & Company LLC, Research Division

Okay. And then also, can you tell us about how the Google exclusive relationship works now that there's a merger proposal?

Matthew O'Connell

Yes. Google's agreement with GeoEye provides they get exclusivity for all GeoEye-1 imagery in the Internet search space for several more years. That contract will survive the merger, like every contract.

Andrea James - Dougherty & Company LLC, Research Division

And it's tied just to the GeoEye-1 imagery? Is that...

Matthew O'Connell

Yes.

Operator

Our next question comes from Paul Coster from JPMorgan.

Paul Coster - JP Morgan Chase & Co, Research Division

Just a quick question. First of all, on the sort of the process here. If this transaction with DigitalGlobe doesn't close until first quarter perhaps, will you have already passed the point of no return in terms of the G2 satellite launch?

Matthew O'Connell

Well, it depends on when in the quarter it occurs, but all the guidance that we are getting from our counselors is that we don't expect any opposition to this. We wouldn't have gone into this if we didn't think that it was going to get approved, and so we can't give you an exact date. But we believe that the fourth quarter, early first quarter estimate is accurate, and so I don't think there's going to be a timing issue there.

Paul Coster - JP Morgan Chase & Co, Research Division

From a critical path perspective, when is the date that you have to make the final decision on the launch for G2?

Matthew O'Connell

That would be late in the first quarter, I think.

Paul Coster - JP Morgan Chase & Co, Research Division

Okay. All right. You said that you've increased sales and marketing expense a little bit. Can you just give us some color on where that investment has been directed?

Matthew O'Connell

We have beefed up some of the people in the Information Services area. As we've said, that continues to grow and shows good promise. And not only is it growing in revenue, but what it does is it helps diversify our revenue away from NGA, and we think that's positive. We've got a couple of success stories there that we want to build on.

Paul Coster - JP Morgan Chase & Co, Research Division

Okay. My last question is in negotiating with the NGA, do they still treat you as a separate and distinct entity? Or has the negotiation got just a great deal more complex now because they sort of factor in the proposed combination?

Matthew O'Connell

No, they're still treating us separately. We talked at all levels of the organization, and we and they realized that until this deal closes, we have to conduct business as usual. So that's what we're doing. By the way, on the sales and marketing, Paul, I forgot. As I said, we opened an office in Amsterdam, so there's a little pickup in international expense on the sales side too.

Operator

Our next question comes from Jim McIlree of Dominick and Dominick.

James Patrick McIlree - Dominick and Dominick Securities Inc., Research Division

Joe, you talked about direct expenses ticking up. Can you frame that in terms of how many dollars a tick is?

Joseph F. Greeves

Yes. We are actually at 34% this quarter. I would expect it to be in the 35%. I don't expect it to be more than $1 million going forward.

James Patrick McIlree - Dominick and Dominick Securities Inc., Research Division

Okay. I think I misunderstood the first part of your response. I thought you said 35%.

Joseph F. Greeves

Yes, yes. I mean, I -- it wouldn't go above 35%. It's 34.3% this quarter.

James Patrick McIlree - Dominick and Dominick Securities Inc., Research Division

Oh, I'm sorry. I see what you're saying. Okay, great. And then the same kind of question for SG&A. I know that there was some special stuff in Q2's number, but what's a reasonable level going forward?

Joseph F. Greeves

Well, we actually did -- there was about $2 million in G&A related to the transaction costs. So there will be some more transaction costs going forward. So ignoring those, I think the level of -- backing out the $2 million would be $16.2 million. That's a reasonable level for expectation for next quarter.

James Patrick McIlree - Dominick and Dominick Securities Inc., Research Division

Okay. Great. And I'm assuming that there's a Hart-Scott-Rodino review that's required for this transaction. Is that true? And if true, when is the reasonable expectation for that to be done?

Matthew O'Connell

Yes, it is reasonable, and we're going to make the filing in the next couple of weeks.

James Patrick McIlree - Dominick and Dominick Securities Inc., Research Division

Obviously, you don't think that's going to be a significant issue?

Matthew O'Connell

No. As I said, we wouldn't have started this, Jim, if we didn't think that we're going to get approved.

Operator

Our next question comes from Chris Quilty with Raymond James.

Chris Quilty - Raymond James & Associates, Inc., Research Division

Got a question on the production activities. Some good year-over-year growth there, and I was hoping you could maybe give us some visibility if you broke that down in terms of revenue source of where that's coming from, either value-add services or other budget areas. And I guess what I'm driving at is even if the SLA goes away, how sustainable are the production revenues and services? And what's the requirement for the customer to maintain those services separate from buying imagery?

Joseph F. Greeves

Okay. So the growth this quarter was primarily due to the GE Aviation contract. We won a substantial contract, which we announced there as a multi-year contract, and some growth in our Analytics business. So both of those are obviously separate from the NGA activities.

Chris Quilty - Raymond James & Associates, Inc., Research Division

Okay. But when you look at the -- how much of that is NGA-related? Is it 50% or 80% that's tied to the EnhancedView contract in some way? And were the EnhancedView contract to end, do you think the NGA or the end customers could find budget monies elsewhere to maintain those services?

Joseph F. Greeves

So I would say that less than 1/3 of that -- the number for the quarter is related to the NGA. And so we're quite comfortable that the 2/3 is -- will continue. We've got the GE Aviation backlog. Analytics business is continuing to grow, and we believe there's plenty of demand for an NGA for production. There's a big GDS proposal coming out, which we're bidding on in multiple teams.

Matthew O'Connell

Yes. Chris, you have a good question because, obviously, it's hard to predict where the government's going these days in general, but we are proud of the fact that we have managed to diversify the revenue. GE Aviation is a product that we created from something we used to sell to the government, 3D Airports, and we created an unclassified version. Obviously, you've seen a lot of growth there. We're also actively developing new products in the Analytics field. We've done a play in solar that should start contributing revenue in the third quarter. And I think that we've done a good job of trying to grow our government business but at the same time grow other business lines away from the government, or if they are within the government, add revenue that's not NGA-centric. And so I think that's all going well.

Chris Quilty - Raymond James & Associates, Inc., Research Division

Okay. And one final point to belabor here on this issue. Opening up a new office would SOCOM -- presumably, that's a lot of production work. Is that type of activity currently funded through EnhancedView? Or does SOCOM have their own budget for those activities?

Matthew O'Connell

That's not EnhancedView dollars at all. Special Ops has their own budget line. And I'm glad you asked about the Tampa office, because as we announced in our last call, we've had to expand it, because that business line is growing. In fact, our head of marketing just came back from Stuttgart, which is where America has a lot of its Special Ops work for Africa and Europe, and demand is growing there. So again, we think that the Analytics move was a smart move back in 2010, and it's turned out to be a very good diversification play.

Chris Quilty - Raymond James & Associates, Inc., Research Division

Okay. And a follow-up question for Joe. You had mentioned that you would begin amortizing the cost share payments upon launch of GeoEye-2. However, if they terminate your EnhancedView contract, you have no obligation to launch that satellite, presumably, as a merged company. NGA can make a decision about which of the 2 satellites in production they want launched. But if it were not to be launched, how would you eventually take in that revenue? Would you end up, for accounting purposes, taking it in to some kind of a lump sum? Because you're not going to be amortizing it over a performance period if you don't have a contractor performing against.

Joseph F. Greeves

Well, it would really depend upon the contractual terms. Obviously, we're in a dialogue with the NGA. I think it's safe to say they have a high interest in GeoEye-2. And so it will really depend upon what the -- how those negotiations play out, which we said that we would cover once we settle that up with the NGA.

Operator

Our next question comes from Brian Ruttenbur with CRT Capital.

Brian W. Ruttenbur - CRT Capital Group LLC, Research Division

A couple of quick questions. First of all, on the SG&A expense going forward, you talked about transaction cost in the second quarter of about $2 million. Should we expect that same level in third quarter, first of all?

Joseph F. Greeves

Give me a second here. Yes, I would expect about $3 million in the third quarter.

Brian W. Ruttenbur - CRT Capital Group LLC, Research Division

Okay. And then fourth quarter, similar?

Joseph F. Greeves

Hold on a second. I'm getting an update. Hold on. Okay. I'm correct that it will be $6 million -- $6.2 million in the third quarter, just so you're aware.

Brian W. Ruttenbur - CRT Capital Group LLC, Research Division

Okay. And then in the fourth quarter?

Joseph F. Greeves

About $1 million.

Brian W. Ruttenbur - CRT Capital Group LLC, Research Division

Okay, very good. So it should be more like $17.2 million, going back to that $16.2 million as your core, right?

Joseph F. Greeves

Yes, that would be -- that is our [indiscernible] in the fourth quarter.

Brian W. Ruttenbur - CRT Capital Group LLC, Research Division

In the fourth quarter, yes?

Joseph F. Greeves

Yes.

Brian W. Ruttenbur - CRT Capital Group LLC, Research Division

So third quarter would be about $24.2 million or $24.4 million or something like that, in that $24 million range, if we're talking about all the expenses?

Joseph F. Greeves

Yes, that's about right. Yes.

Brian W. Ruttenbur - CRT Capital Group LLC, Research Division

Okay. Great. Then next question. Cash generation in the second quarter, can you break that down by how much you got for the sale of your -- the division, how much you got from cash from operations and how much you got from any cash coming in, in addition from the government, outside of cash from operations?

Joseph F. Greeves

We haven't given those details. $111 million, obviously, is the biggest change that has taken place in the cash flow from operations.

Operator

[Operator Instructions] Our next question comes from Josephine Millward with Benchmark.

Josephine Lin Millward - The Benchmark Company, LLC, Research Division

Matt, in light of the merger and the latest Senate Appropriations markup, can you talk about whether you expect the NGA to renew your SLA before November?

Matthew O'Connell

Well, as we said, we're in negotiations now, and we expect to conclude those in the next couple of weeks, so I don't want to get too specific. We won't know the final outcome of the EnhancedView funding until the budgets are finally passed, and as I said, that will take months. We do think that the announcement of the combination has probably affected the appetite for a full restoration of funding, but we do think if there's funding available that the NGA will exercise the option to renew for 9 months.

Josephine Lin Millward - The Benchmark Company, LLC, Research Division

Understood. Can you give us an update on the GEOINT production solicitation? What do you think the maximum ceiling value is going to be? And what proportion of that is applicable to GeoEye and DigitalGlobe?

Matthew O'Connell

No, I don't think we can go into those kind of details. They did recently announce the RFP. And as I said, they put a decision date in January, but I think that's about all we can say at this point, Josephine.

Josephine Lin Millward - The Benchmark Company, LLC, Research Division

Okay. So would you bid independently? Or, I guess, would both GeoEye and DigitalGlobe submit its own bid?

Matthew O'Connell

We will each submit our own bids. As I said, GeoEye's teams have several of the large primes.

Operator

I'm not showing any further questions at this time. I'd like to turn the conference call back over to Matt for closing comments.

Matthew O'Connell

Okay. Thank you all for dialing in and for your interest, and we'll update you as we get more news going forward.

Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.

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