Gogo Inc. (Nasdaq: GOGO), the global leader in providing broadband connectivity solutions and wireless entertainment to the aviation industry, today announced its financial results for the quarter ended March 31, 2016.
First Quarter 2016 Consolidated Financial Results
- Revenue increased to $141.7 million, up 23% from $115.5 million in Q1 2015. Service revenue increased to $118.7 million, up 24% from $95.4 million in Q1 2015.
- Combined segment profit of CA-NA and BA increased to $34.0 million, up 29% from $26.4 million in Q1 2015.
- Adjusted EBITDA increased to $14.5 million, up 76% or $6.3 million from $8.2 million in Q1 2015.
- Cash CAPEX of $24.2 million was down from $32.0 million in Q1 2015, primarily due to the timing of airborne equipment purchases.
- As of March 31, 2016, we had cash and cash equivalents of $312.7 million.
“We are thrilled to announce 2Ku awards by Delta Air Lines and International Airlines Group, including British Airways, Iberia, and Aer Lingus, bringing our total 2Ku awards to over 1,000,” said Gogo’s President and CEO Michael Small.
“We also are excited by the commercial launch of 2Ku on AeroMexico. Based on airline demand, we are accelerating 2Ku deployment and expect to exceed our 2016 target of 75 installs.”
Added Gogo’s Executive Vice President and CFO, Norman Smagley, “Our strong financial and operating performance coupled with aircraft awards on three continents give us great momentum to continue to drive growth in revenue and profitability.”
First Quarter 2016 Business Segment Financial Results
Commercial Aviation – North America (CA-NA)
- Total revenue increased to $87.0 million, up 20% from $72.5 million in Q1 2015.
- Aircraft online increased by 113 to reach 2,500, and approximately 230 aircraft were awarded but not yet installed as of March 31, 2016.
- Average monthly service revenue per aircraft equivalent, or ARPA, of $11,137 was down slightly from $11,163 in Q1 2015, driven primarily by an increase in the number of regional jets online and a Gogo Vision airline launch promotion that occurred in Q1 2015. However, Q1 2016 ARPA increased an estimated 15% year-over-year excluding the impact of the Gogo Vision airline launch promotion and aircraft we have added since the beginning of 2015, which primarily includes regional jets and aircraft with new airline partners.
- Segment profit increased to $13.8 million, up 44% from $9.6 million in Q1 2015. Segment profit as a percentage of segment revenue was 16% in Q1 2016, up from 13% in Q1 2015.
Business Aviation (BA)
- Service revenue increased to $30.7 million, up 41% from $21.8 million in Q1 2015, driven primarily by a 23% increase in ATG systems online and a 15% increase in average monthly service revenue per ATG unit online.
- Equipment revenue decreased to $19.4 million, down slightly from $19.7 million in Q1 2015.
- Total segment revenue increased to $50.1 million, up 21% from $41.6 million in Q1 2015.
- Segment profit increased to $20.2 million, up 20% from $16.8 million in Q1 2015. Segment profit as a percentage of segment revenue was 40% in Q1 2016, largely unchanged from Q1 2015.
Commercial Aviation – Rest of World (CA-ROW)
- Total revenue increased to $4.6 million, up 227% from $1.4 million in Q1 2015 driven primarily by increases in aircraft online and higher average revenue per aircraft.
- Gogo had 237 aircraft online flying on its global Ku satellite network as of March 31, 2016, up 35 aircraft from December 31, 2015. Gogo’s awarded but not yet installed aircraft increased to over 600, including recent international aircraft awards.
- Segment loss increased to $19.7 million, up 8% from $18.3 million in Q1 2015, primarily due to higher engineering, design and development expenses related to the roll out of our next generation 2Ku technology.
- Gogo awarded but not yet installed 2Ku aircraft increased to more than 1,000 aircraft including recent awards.
- Delta Air Lines increased its total commitment to install 2Ku to more than 600 aircraft.
- Gogo was selected by International Airlines Group to bring its 2Ku technology to over 130 aircraft operated by British Airways, Iberia and Aer Lingus. The first British Airways aircraft is expected to be in service in early 2017.
- Air Canada selected Gogo’s 2Ku in-flight connectivity and entertainment services for its entire wide-body international fleet, including Boeing 787 and 777 aircraft.
- Gogo was selected by Shareco Technologies of China to provide Gogo’s 2Ku in-flight connectivity and entertainment solution for installation on approximately 50 aircraft in China operated by Shareco’s partners, including Hainan Airlines and Beijing Capital Airlines.
- Gogo launched 2Ku service on five AeroMexico aircraft.
- Gogo partnered with Airbus Corporate Jet Centre to install 2Ku technology on A350 aircraft on a retrofit basis, allowing airlines to receive new aircraft from Airbus with connectivity equipment already installed.
- Gogo signed multi-Ghz capacity deals with SES and Intelsat for capacity on their high-throughput satellites that together with the proposed OneWeb network of satellites, will enable high performance service on polar flights.
- Gogo announced its new satellite modem capable of delivering network speeds of up to 400 Mbps which is expected to be commercially available in 2017.
- Gogo’s Business Aviation division successfully completed the initial phase of flight testing for Gogo Biz 4G service, its next generation connectivity offering for the business aviation market, which is scheduled for first customer shipment in early 2017.
For the full year ending December 31, 2016, our guidance remains unchanged. We expect:
- In-flight connectivity installations:
- CA-NA net installations of more than 200 aircraft including more than 400 ATG-4 installations and upgrades
- CA-ROW net installations of approximately 75 aircraft in 2016 and more than 200 in 2017
- 2Ku installations of more than 75 in 2016 and more than 300 aircraft in 2017
- Total revenue of $575 million to $595 million
- CA-NA revenue of $350 million to $365 million
- BA revenue of $190 million to $205 million
- CA-ROW revenue of $25 million to $30 million
- Adjusted EBITDA of $55 million to $65 million
- Cash CAPEX of $110 million to $135 million
Non-GAAP Financial Measures
We report certain non-GAAP financial measurements, including Adjusted EBITDA, Adjusted Net Loss Per Share and Cash CAPEX in the supplemental tables below. Management uses Adjusted EBITDA and Cash CAPEX for business planning purposes, including managing our business against internally projected results of operations and measuring our performance and liquidity. Management prepares Adjusted Net Loss Per Share for investors, securities analysts and other users of our financial statements for use in evaluating our performance under our current capital structure. These supplemental performance measures also provide another basis for comparing period-to-period results by excluding potential differences caused by non-operational and unusual or non-recurring items. These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies. Adjusted EBITDA, Adjusted Net Loss Per Share and Cash CAPEX are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance or liquidity, as applicable, investors should (i) evaluate each adjustment in our reconciliation to net loss attributable to common stock, and the explanatory footnotes regarding those adjustments, (ii) use Adjusted EBITDA and Adjusted Net Loss Per Share in addition to, and not as an alternative to, net loss attributable to common stock as a measure of operating results, and (iii) use Cash CAPEX in addition to, and not as an alternative to, consolidated capital expenditures when evaluating our liquidity.
Cautionary Note Regarding Forward-Looking Statements
Certain disclosures in this press release and related comments by our management include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding our business outlook, industry, business strategy, plans, goals and expectations concerning our market position, international expansion, future technologies, future operations, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “future” and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this press release.
Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: the loss of, or failure to realize benefits from, agreements with our airline partners or any failure to renew any existing agreements upon expiration or termination; the failure to maintain airline satisfaction with our equipment or our service; any inability to timely and efficiently roll out our 2Ku service or other components of our technology roadmap for any reason, including regulatory delays or failures, or delays on the part of any of our suppliers, some of whom are single source, or the failure by our airline partners to roll out equipment upgrades, new services or adopt new technologies in order to support increased network capacity demands; the loss of relationships with original equipment manufacturers or dealers; our ability to develop or purchase ATG and satellite network capacity sufficient to accommodate current and expected growth in passenger demand in North America and internationally as we expand; our reliance on third-party suppliers, some of whom are single source, for satellite capacity and other services and the equipment we use to provide services to commercial airlines and their passengers and business aviation customers; unfavorable economic conditions in the airline industry and/or the economy as a whole; our ability to expand our international or domestic operations, including our ability to grow our business with current and potential future airline partners; an inability to compete effectively with other current or future providers of in-flight connectivity services and other products and services that we offer, including on the basis of price, service performance and line-fit availability; our ability to successfully develop and monetize new products and services such as Gogo Vision, Gogo Text & Talk and Gogo TV, including those that were recently released, are currently being offered on a limited or trial basis, or are in various stages of development; our ability to deliver products and services, including newly developed products and services, on schedules consistent with our contractual commitments to customers; the effects, if any, on our business of past or future airline mergers, including the merger of American Airlines and U.S. Airways; the failure of our equipment or material defects or errors in our software resulting in recalls or substantial warranty claims; a future act or threat of terrorism, cyber-security attack or other events that could result in a prohibition or restriction of the use of Wi-Fi enabled devices on aircraft; a revocation of, or reduction in, our right to use licensed spectrum, the availability of other air-to-ground spectrum to a competitor or the repurposing by a competitor of other spectrum for air-to-ground use; our use of open source software and licenses; the effects of service interruptions or delays, technology failures and equipment failures or malfunctions arising from defects or errors in our software or defects in or damage to our equipment; the limited operating history of our CA-NA and CA-ROW segments; increases in our projected capital expenditures due to, among other things, unexpected costs incurred in connection with the roll-out of our technology roadmap or our international expansion; compliance with U.S. and foreign government regulations and standards, including those related to regulation of the internet, including e-commerce or online video distribution changes, and the installation and operation of satellite equipment and our ability to obtain and maintain all necessary regulatory approvals to install and operate our equipment in the United States and foreign jurisdictions; our, or our technology suppliers’, inability to effectively innovate; costs associated with defending pending or future intellectual property infringement and other litigation or claims; our ability to protect our intellectual property; breaches of the security of our information technology network, resulting in unauthorized access to our customers’ credit card information or other personal information; any negative outcome or effects of pending or future litigation; limitations and restrictions in the agreements governing our indebtedness and our ability to service our indebtedness; our ability to obtain additional financing on acceptable terms or at all; fluctuations in our operating results; our ability to attract and retain customers and to capitalize on revenue from our platform; the demand for and market acceptance of our products and services; changes or developments in the regulations that apply to us, our business and our industry; the attraction and retention of qualified employees, including key personnel; the effectiveness of our marketing and advertising and our ability to maintain and enhance our brands; our ability to manage our growth in a cost-effective manner and integrate and manage acquisitions; compliance with anti-corruption laws and regulations in the jurisdictions in which we operate, including the Foreign Corrupt Practices Act and the (U.K.) Bribery Act 2010; restrictions on the ability of U.S. companies to do business in foreign countries, including, among others, restrictions imposed by the U.S. Office of Foreign Assets Control; difficulties in collecting accounts receivable.
Additional information concerning these and other factors can be found under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Any one of these factors or a combination of these factors could materially affect our financial condition or future results of operations and could influence whether any forward-looking statements contained in this report ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. All forward-looking statements speak only as of the date made and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
With more than two decades of experience, Gogo is the leader in in-flight connectivity and wireless entertainment services for commercial and business aircraft around the world. Gogo connects aircraft, providing its aviation partners with the world’s most powerful network and platform to help optimize their operations. Gogo’s superior technologies, best-in-class service, and global reach help planes fly smarter, our aviation partners perform better, and their passengers travel happier.
Today, Gogo has partnerships with 17 commercial airlines and is now installed on more than 2,700 commercial aircraft. More than 7,000 business aircraft are also flying with its solutions, including the world’s largest fractional ownership fleets. Gogo also is a factory option at every major business aircraft manufacturer. Gogo has more than 1,000 employees and is headquartered in Chicago, IL, with additional facilities in Broomfield, CO, and various locations overseas. Connect with us at www.gogoair.com and business.gogoair.com.