Gogo Announces Third Quarter 2016 Financial Results
Nov. 3, 2016
Gogo Inc. announced its financial results for the quarter ended September 30, 2016.
"We are delighted by the rapid acceptance of our 2Ku system, which is delivering streaming class connectivity service and which we are installing at an ever-growing pace" said Michael Small, Gogo's President and CEO. "By year end, we will have between 75 and 100 2Ku aircraft installed, and we are on track to install up to another 1,200 between 2017 and 2018. The success of 2Ku, and our pending deployment of a much faster ATG system, positions us to deliver 100 Mbps speeds to far more commercial and business aircraft than any other IFC provider."
"We expect to be solidly generating cash in 2020 due to strong revenue growth from 2Ku and lower cash CAPEX after 2018," said Gogo's Executive Vice President and CFO, Norman Smagley.
Third Quarter 2016 Business Segment Financial Results
Commercial Aviation - North America (CA-NA)
Total revenue increased to $90.7 million, up 15% from Q3 2015, primarily driven by an increase in aircraft online.
Aircraft online increased to 2,629, up 33 aircraft from June 30, 2016, and included more than 1,500 ATG-4 equipped aircraft. This segment had approximately 170 net new awarded but not yet installed aircraft, including approximately 80 2Ku net new aircraft as of September 30, 2016. In addition, approximately 800 aircraft have been awarded for conversion to 2Ku as of September 30, 2016.
Average monthly service revenue per aircraft equivalent, or ARPA, was $11,145, essentially unchanged from Q3 2015. However, Q3 2016 ARPA increased by approximately 8% year over year when adjusted to exclude regional jets and aircraft operated by new airline partners that have been added since 2015.
Segment profit increased to $14.5 million, up 23% from Q3 2015. Segment profit as a percentage of segment revenue rose to 16% in Q3 2016, up from 15% in Q3 2015.
Business Aviation (BA)
Service revenue increased to $33.3 million, up 28% from Q3 2015, driven primarily by a 20% increase in ATG systems online and a 9% increase in average monthly service revenue per ATG unit online. Service revenue accounted for 68% of the segment's total revenue in Q3 2016.
Equipment revenue decreased to $15.6 million, down 14% from Q3 2015, driven primarily by $2.0 million of deferral of GogoBiz equipment revenue until 4G equipment is shipped, which is expected to start in the first half of 2017.
Total segment revenue increased to $48.9 million, up 11% from Q3 2015.
Segment profit increased to $20.7 million, up 14% from Q3 2015. Segment profit as a percentage of segment revenue was 42% in Q3 2016, up from 41% in Q3 2015.
Commercial Aviation - Rest of World (CA-ROW)
Total revenue increased to $7.6 million, up 110% from Q3 2015, driven primarily by an increase in aircraft online and higher revenue per aircraft.
Aircraft online increased to 256, up 96 aircraft from Q3 2015. This segment had approximately 600 net new awarded but not yet installed aircraft as of September 30, 2016.
ARPA increased to $14,536, up 22% from Q3 2015, primarily driven by increased airline-paid passenger usage.
Segment loss of $19.9 million was largely unchanged from Q3 2015.
Recent Developments
Air France-KLM selected Gogo's 2Ku technology for its existing long-haul fleet, with an option to install 2Ku on additional aircraft in the future. European airline partners now include Air France-KLM, British Airways, Iberia and Virgin Atlantic for a total of nearly 300 aircraft awards.
Gogo announced the development of its next generation air-to-ground network for business and commercial aircraft operating in North America. The network, which will employ both Gogo's current licensed ATG spectrum and the unlicensed 2.4 GHz spectrum, is expected to increase peak speeds to the aircraft to 100 Mbps and leverage Gogo's existing ground network infrastructure.
Gogo partnered with Phasor, a developer of modular and electronically steerable antennas, to develop low profile, electronically-steerable antennas for in-flight connectivity applications.
Gogo has received the regulatory approvals required to offer in-flight connectivity service on international flights over China and launched service in partnership with China Telecom Satellite.
Gogo Business Aviation partnered with Garmin, JetFuelX and FltPlan.com to bring a variety of new cockpit and operational applications to pilots of light jets and turboprops through Gogo's ATG 1000 system.
Business Outlook
For the full year ending December 31, 2016, Gogo's guidance remains unchanged. The Company expects:
In-flight connectivity installations
CA-NA net new installations of approximately 300 aircraft in 2016, including approximately 600 ATG-4 aircraft installations and upgrades
CA-ROW net new installations of approximately 75 aircraft in 2016
2Ku installations of 75 to 100 aircraft in 2016
Total revenue above the mid-point 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 EBITDA1 of $55 million to $65 million
Capital expenditures and Cash CAPEX toward the high end of the $150 million to $185 million and $110 million to $135 million ranges, respectively
