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Gogo's quarterly revenue increased to $126.4 million, up 22% year-over-year; service revenue increased to $107.2 million, up 31% year-over-year; and Adjusted EBITDA increased to $9.7 million, up 738% or $8.5 million year-over-year.

"We are extremely pleased with our strong financial performance for the quarter, and even more pleased with the flight test results of 2Ku, our next generation global connectivity solution, and that portends great things for our future," said Gogo's President and CEO, Michael Small. "2Ku is the first truly global broadband highway in the sky. It enables real-time streaming and live television programming and unlocks the full potential of the connected aircraft on a global basis. Eight airlines have selected this industry-leading technology since we first announced it a year and a half ago, a pace of adoption that's unprecedented in our industry."

Third Quarter 2015 Consolidated Financial Results

  • Revenue increased to $126.4 million, up 22% from $104.0 million in Q3 2014.  Service revenue increased to $107.2 million, up 31% from $81.6 million in Q3 2014.
  • Combined segment profit of CA-NA and BA increased to $30 million, up 46% from $20.5 million in Q3 2014.
  • Adjusted EBITDA increased to $9.7 million, up 738% or $8.5 million from $1.2 million in Q3 2014.

 

Cash CAPEX decreased to $11.8 million, down 60% from $29.8 million in Q3 2014, driven primarily by lower spend on airborne equipment.

  • As of September 30, 2015, we had cash and cash equivalents of $388.0 million.

Third Quarter 2015 Business Segment Financial Results

Commercial Aviation - North America (CA-NA)

  • Total revenue increased to $78.6 million, up 24% from $63.3 million in Q3 2014.

During the quarter, we installed 114 aircraft and our airline partners retired 51 installed aircraft, primarily due to fleet-refresh programs. As a result, we ended the quarter with 2,312 aircraft online.

  • Average monthly service revenue per aircraft online, or ARPA, increased to $11,303, up 12% year-over-year, driven primarily by connectivity service price increases. Estimated ARPA growth excluding the impact of regional jets would have been approximately 20% year-over-year.
  • Segment profit increased to $11.8 million, up $6.3 million year-over-year, as a result of strong service revenue growth and increased operating leverage. Segment profit as a percent of segment revenue increased to 15% in Q3 2015, up from 9% in Q3 2014.

Business Aviation (BA)

  • Service revenue increased to $26 million, up 38% from $18.9 million in Q3 2014, driven primarily by a 26% increase in ATG systems online to 3,314 at September 30, 2015 compared to 2,637 at September 30, 2014.
  • Equipment revenue decreased to $18.3 million, down 15% from $21.4 million in Q3 2014, driven primarily by a decrease in satellite and ATG units shipped.
  • Total segment revenue increased to $44.2 million, up 10% from $40.2 million in Q3 2014.

 

Segment profit increased to $18.2 million, up 21% from $15.0 million in Q3 2014. Segment profit as a percentage of segment revenue increased to 41% in Q3 2015, up from 37% in Q3 2014.

Commercial Aviation - Rest of World (CA-ROW)

  • We ended the quarter with 160 aircraft online and approximately 400 aircraft awarded but not yet installed.

Revenue increased to $3.6 million, up 563% or $3.1 million from $0.5 million in Q3 2014.

  • Segment loss increased to $19.9 million, up 3% from $19.4 million in Q3 2014, due primarily to increased expenses related to the development and certification of our next generation products and technologies.
  • We have been testing 2Ku, our industry-leading global satellite connectivity technology, on our test plane since August, and results have surpassed our expectations. We have seen speed test results consistently above 12 Mbps to a device even as we have simultaneously streamed videos on more than 40 devices.

Recent Developments

  • Japan Transocean Air selected Gogo's 2Ku in-flight connectivity and in-flight entertainment services for its new Boeing 737-800 aircraft fleet.
  • BA announced the introduction of the Gogo Biz 4G connectivity product, which provides business aviation aircraft with streaming video and audio capabilities.
  • Gogo formed a partnership with Ultramain Systems, a developer of airline operational software, to connect its industry leading aircraft maintenance applications. This partnership enhances our connected aircraft strategy by allowing airlines to process and analyze maintenance data in real-time.

Business Outlook

For the full year ending December 31, 2015, we are raising our Adjusted EBITDA guidance. We now expect Adjusted EBITDA of $30 million to $35 million for the full year 2015 and maintain our prior revenue and Cash CAPEX guidance.

Accordingly, our updated full year guidance is as follows:

  • Total revenue of $485 million to $505 million
    • CA-NA revenue of $300 million to $320 million
    • BA revenue of $170 million to $180 million

CA-ROW revenue of $10 million to $15 million

  • Adjusted EBITDA of $30 million to $35 million
  • Cash CAPEX of $100 million to $120 million

"Because of our strong profitability trend, we now expect to exceed our previous 2015 Adjusted EBITDA guidance," said Gogo's Executive Vice President and CFO, Norman Smagley. "Going forward, we also expect strong growth in revenue and profitability supported by the aggressive roll out of 2Ku."