Gogo Announces First Quarter 2014 Results

May 12, 2014

Gogo Inc. announced its financial results for the quarter ended March 31, 2014.

Gogo reported record first quarter revenue of $95.7 million, up 35% year-over-year.  Adjusted EBITDA for Q1 2014 was $5.3 million, up 87% from $2.9 million in Q1 2013, driven by strong performance by our CA-NA and BA segments that was partially offset by an increased segment loss in our CA-ROW segment as we continued to invest in our international expansion. Net loss attributable to common stock for Q1 2014 was $16.9 million, or $0.20 per share, compared to net loss attributable to common stock of $32.5 million, or $4.77 per share, in Q1 2013.

"We had an excellent first quarter, during which we produced strong financial results, achieved several important technical and business milestones, and launched connectivity service on Delta's international fleet," said Gogo's President and CEO, Michael Small. "Furthermore, we unveiled 2Ku - our new and exclusive communications technology for the global aviation industry. We also announced our partnership with Air Canada for its entire North American fleet. Our technology leadership, operational expertise, and suite of communications solutions continue to set us apart both in North America and internationally," added Mr. Small.

First Quarter 2014 Consolidated Financial Results

• Revenue increased to $95.7 million, up 35% from $70.8 million in Q1 2013. Service revenue increased 32% to $72.3 million and equipment revenue increased 48% to $23.4 million year-over-year.
• Operating expenses increased to $105.0 million, up 30% from $81.1 million in Q1 2013. We incurred higher operating expenses primarily due to higher cost of service expenses at CA-NA and BA as a result of increased service revenue, and increased cost of equipment expenses at BA as a result of increased equipment revenue. In CA-ROW, we incurred increased operating expenses primarily due to higher satellite transponder and teleport fees, and expenses related to the development and certification of our satellite connectivity systems.
• Adjusted EBITDA increased to $5.3 million from $2.9 million in Q1 2013, driven by strong growth in CA-NA and BA segment profit, offset in part by increased segment loss in CA-ROW due to increased investment in our international expansion.
• Cash CAPEX, defined as capital expenditures net of airborne equipment proceeds received from the airlines, increased to $28.6 million, up 6% from $27.1 million in Q1 2013, driven primarily by investments in our ATG network.
• As of March 31, 2014, Gogo had cash and cash equivalents of $219.6 million compared to $266.3 million as of December 31, 2013.

First Quarter 2014 Business Segment Financial Results

First Quarter 2014 Business Segment Financial Results

• Commercial Aviation - North America (CA-NA)
    We ended the quarter with 2,056 aircraft online, up 9% from 1,878 at March 31, 2013
  
    Average monthly service revenue per aircraft online, or ARPA, increased to $9,199, up 20% from $7,696 in Q1 2013, driven primarily by an 11% increase in take rate, to 6.9% in Q1 2014 from 6.2% in Q1 2013
  
    Total revenue increased to $57.1 million, up 32% from $43.4 million in Q1 2013
  
    Segment profit increased to $5.8 million, up $6.2 million from a segment loss of $0.4 million in Q1 2013, due to strong revenue growth and the timing of airborne equipment certification and development expenses.
  
  Business Aviation (BA)
    We ended the quarter with 2,250 ATG systems online, up 45% from 1,555 at March 31, 2013, and 5,252 satellite systems online, up 4% from 5,062 at March 31, 2013
  
    Service revenue increased to $15.8 million, up 44% from $10.9 million in Q1 2013, driven by the increase in ATG systems online and higher average monthly service revenue per aircraft online for both ATG and satellite service
  
    Equipment revenue increased to $22.8 million, up 49% from $15.2 million in Q1 2013, driven by a 41% increase in ATG units shipped to 241 for Q1 2014, up from 171 in Q1 2013, higher average revenue per ATG unit shipped, and strong sales of the recently introduced Gogo Text & Talk product
  
    Total revenue increased to $38.6 million, up 47% from $26.2 million in Q1 2013
  
    Segment profit increased to $16.5 million, up 74% from $9.5 million in Q1 2013, and segment profit as a percentage of segment revenue increased to 43% in Q1 2014, up from 36% in Q1 2013.
  
  Commercial Aviation - Rest of World (CA-ROW)
  
    We launched our Ku-band satellite connectivity service on Delta's international fleet in March of 2014 and ended the quarter with five aircraft online. We expect to end 2014 with 50 to 100 CA-ROW aircraft online.
  
    Segment loss increased to $16.9 million from a segment loss of $6.2 million in Q1 2013, due primarily to increased satellite transponder and teleport fees, and expenses associated with the development and certification of our aircraft satellite connectivity systems.

Business Outlook

For the full year ending December 31, 2014, our guidance remains unchanged:

Total revenue of $400 million to $422 million
  CA-NA revenue of $240 million to $250 million
  BA revenue of $157 million to $167 million
  CA-ROW revenue of $3 million to $5 million

Adjusted EBITDA of $8 million to $18 million

Cash CAPEX of $105 million to $125 million

"We expect continued strong growth in revenue fueled by strong secular trends and passenger adoption of new services. We continue to add capacity by upgrading aircraft to ATG-4 technology and had 534 aircraft equipped with ATG-4 systems at the end of March. We expect to see significant capacity increases with the introduction of our GTO and 2Ku airborne antennas, both of which are capable of delivering industry leading speeds of 70 mbps to the aircraft initially, and up to 100 mbps when spot beam Ku satellites are launched," commented Mr. Small.