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Gogo Announces Second Quarter 2018 Financial Results

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Gogo Announces Second Quarter 2018 Financial Results

- Consolidated revenue of $227.5 million

- Net loss decreased to $37.2 million, an improvement of 16% from Q2 2017, primarily related to increased BA performance and a reduction in CA operating spend

- Adjusted EBITDA(1) of $18.9 million, up 90% over Q2 2017

- BA Revenue and Segment Profit of $74.2 million and $36.7 million, an increase of 28% and 46%, respectively, from Q2 2017

- Reached 785 total 2Ku aircraft online on 12 global airlines, adding 139 incremental 2Ku aircraft online in the second quarter

- Completed Integrated Business Plan, "Gogo 2020", designed to change Gogo's go-to-market strategy, increase quality, reduce cost structure and improve business processes

PR Newswire

CHICAGO, Aug. 8, 2018 /PRNewswire/ -- Gogo (NASDAQ:GOGO), the leading global provider of broadband connectivity products and services for aviation, today announced its financial results for the quarter ended June 30, 2018.

GogoLOGO. (PRNewsfoto/Gogo)

Second Quarter 2018 Consolidated Financial Results

  • Consolidated revenue increased to $227.5 million.  Service revenue increased to $159.1 million, up 3% from Q2 2017.  Equipment revenue increased to $68.4 million, up from $18.7 million in Q2 2017.
  • Net loss decreased to $37.2 million, an improvement of 16% from the prior year period, primarily related to increased BA performance and a reduction in CA operating spend.
  • Adjusted EBITDA(1) increased to $18.9 million, up 90% from $9.9 million in Q2 2017.
  • Capital expenditures decreased to $52.5 million from $74.1 million in Q2 2017, a reduction of over 29%.
  • Cash CAPEX(1) decreased to $46.2 million from $65.6 million in Q2 2017, a decline of 30%.
  • Cash, cash equivalents and short-term investments were $263.6 million as of June 30, 2018.

"Our BA segment achieved its highest ever quarterly revenue and EBITDA and we believe this segment is well positioned for continued growth," said Oakleigh Thorne, Gogo's President and CEO.   "Our CA-NA segment showed solid service revenue growth over Q2 2017, excluding American Airlines.  Our 2Ku operating metrics continue to improve and are helping to drive increased customer satisfaction."

"Our second quarter results were elevated by the strong BA performance, a reduction and the timing of operating costs, and higher CA Net Service Revenue, among other items, and we maintain our 2018 Adjusted EBITDA guidance range of $35-$45 million," said Barry Rowan, Gogo's Executive Vice President and CFO. "We are beginning to realize the benefits of our 'Gogo 2020' plan and we believe these operational improvements will drive strong EBITDA growth going forward."

Second Quarter 2018 Business Segment Financial Results

Business Aviation (BA)

  • Total revenue increased to a record $74.2 million, up over 28% from Q2 2017.
  • Service revenue increased to $48.1 million, up over 14% from Q2 2017, driven by a 10% increase in ATG units online and a 5% increase in average monthly service revenue per ATG unit online.
  • Equipment revenue increased to $26 million, up 67% from Q2 2017, driven by continuing strong demand for AVANCE systems.
  • AVANCE L5 systems have achieved the fastest initial sales ramp of any new product in the history of BA
  • Segment profit increased to nearly $36.7 million, up 46% versus the prior year period as segment profit margin reached 49%, a quarterly record for BA.

Commercial Aviation - North America (CA-NA)

  • Total revenue increased to $119.7 million, up 19% from Q2 2017.
  • Service revenue decreased to $95.7 million, down 3% from Q2 2017, due to the impact of American Airlines.
  • Equipment revenue increased to $23.9 million, up $21.6 million from Q2 2017, due to the post-adoption impact of ASC 606 for equipment shipments.
  • Aircraft online increased to 2,809, up 18 from June 30, 2017, with over 20% operating on the Company's satellite network.
  • Net annualized ARPA of $113,000 was essentially flat year-over-year, materially weakened by the American Airlines impact.
  • Segment profit decreased to $7 million from $16.2 million in Q2 2017, driven largely by lower service revenue, higher operating costs and increased satellite costs to support coverage and capacity requirements of the Company's 2Ku network.

Commercial Aviation - Rest of World (CA-ROW)

  • Total revenue increased to $33.6 million, up from $14.1 million in Q2 2017.
  • Service revenue increased to $15.2 million, up 15% from Q2 2017, due to an increase in aircraft online
  • Equipment revenue increased to $18.5 million, up nearly $18 million from the prior year period, due to the post-adoption impact of ASC 606 for equipment shipments.
  • Aircraft online increased to 459, up 141 from June 30, 2017.
  • Net annualized ARPA decreased to $147,000 from $203,000 in Q2 2017 due to the significant growth in new aircraft fleets online, which initially generate lower net annualized ARPA.
  • Segment loss improved 22% versus Q2 2017 to ($24.5) million, driven primarily by improved utilization of our satellite network and lower operating expenses.

Recent Developments

  • Launched service on Air Canada's international wide body fleets, Iberia Airlines and Alaska Airlines
  • Delivered continued improvement in 2Ku performance, with an average availability of over 97% in the combined months of June 2018 and July 2018, across all airline customers
  • Completed Integrated Business Plan, or "Gogo 2020," which includes a reduction in CA operating spend, excluding satellite communications costs, of nearly 20% over the next 10 quarters  
  • Achieved STC for A321NEO, a key STC expected to help drive future wins

Business Outlook

The Company reaffirms the following 2018 financial guidance:

  • Total revenue of $865 million to $935 million
  • An increase in 2Ku aircraft on-line to be at the low end of 550 to 650
  • Consolidated capital expenditures of $150 million to $170 million and Cash CAPEX (1) of $110 million to $130 million
  • Adjusted EBITDA(1)  of $35 million to $45 million

 

(1)

See "Non-GAAP financial measures" below

Conference Call

The Company will host its second quarter conference call on August 8, 2018 at 8:30 a.m. ET. A live webcast of the conference call, as well as a replay, will be available online on the Investor Relations section of the company's website at http://ir.gogoair.com. Participants can access the call by dialing (844) 464-3940 (within the United States and Canada) or (765) 507-2646 (international dialers) and entering conference ID number 5286077.

Non-GAAP Financial Measures

We report certain non-GAAP financial measurements, including Adjusted EBITDA 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. 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 and Cash CAPEX are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance with Adjusted EBITDA or liquidity with Cash CAPEX, 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 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. No reconciliation of the forecasted range for Adjusted EBITDA for fiscal 2018 is included in this release because we are unable to quantify certain amounts that would be required to be included in the corresponding GAAP measure without unreasonable efforts and we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors. In particular, we are not able to provide a reconciliation for the forecasted range of Adjusted EBITDA due to variability in the timing of aircraft installations and deinstallations impacting depreciation expense and amortization of deferred airborne leasing proceeds.

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 and passenger satisfaction with our equipment or our service; any inability to timely and efficiently deploy our 2Ku service or develop and deploy the technology to which our ATG network evolves or other components of our technology roadmap for any reason, including technological issues and related remediation efforts, changes in regulations or regulatory delays or failures affecting us, our suppliers, some of whom are single source, or the failure by our airline partners or customers to roll out equipment upgrades or new services or adopt new technologies in order to support increased network capacity demands; the timing of deinstallation of our equipment from aircraft, including deinstallations resulting from aircraft retirements and other deinstallations permitted by certain airline contract provisions; the loss of relationships with original equipment manufacturers or dealers; our ability to make our equipment factory linefit available on a timely basis; 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 and customers and the effect of shifts in business models; 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 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 certify and install our equipment and deliver our products and services, including newly developed products and services, on schedules consistent with our contractual commitments to customers; the failure of our equipment or material defects or errors in our software resulting in recalls or substantial warranty claims; 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-ROW segment; contract changes and implementation issues resulting from decisions by airlines to transition from the turnkey model to the airline-directed model; 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; changes as a result of U.S. federal tax reform; costs associated with defending pending or future intellectual property infringement and other litigation or claims and any negative outcome or effect of pending or future litigation; 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; our substantial indebtedness; limitations and restrictions in the agreements governing our indebtedness and our ability to service our indebtedness; our ability to obtain additional financing or financing intended to refinance our existing indebtedness 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, including changes or developments affecting the ability of passengers or airlines to use our in-flight connectivity services, including the recent U.S. and U.K. bans on the use of certain personal devices such as laptops and tablets on certain aircraft flying certain routes; a future act or threat of terrorism, cybersecurity attack or other events that could result in adverse regulatory changes or developments as referenced above, or otherwise adversely affect our business and industry; our ability to attract and retain 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; our ability to successfully implement our new enterprise resource planning system, our new Integrated Business Plan and other improvements to systems, operations, strategy and procedures needed to support our growth; and other events beyond our control that may result in unexpected adverse operating results.

Additional information concerning these and other factors can be found under the caption "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission ("SEC") on February 22, 2018, in Item 1A of our quarterly report on Form 10-Q for the quarter ended March 31, 2018 as filed with the SEC on May 4, 2018, and in Item 1A of our quarterly report on Form 10-Q for the quarter ended June 30, 2018 as filed with the SEC on August 8, 2018.

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.

About Gogo

Gogo is the inflight internet company.  We are the leading global provider of broadband connectivity products and services for aviation. We design and source innovative network solutions that connect aircraft to the Internet, and develop software and platforms that enable customizable solutions for and by our aviation partners.  Once connected, we provide industry leading reliability around the world. Our mission is to help aviation go farther by making planes fly smarter, so our aviation partners perform better and their passengers travel happier.

Gogo's products and services are installed on thousands of aircraft operated by the leading global commercial airlines and thousands of private aircraft, including those of the largest fractional ownership operators.  Gogo is headquartered in Chicago, IL with additional facilities in Broomfield, CO and locations across the globe. Connect with us at gogoair.com.

Investor Relations Contact:

Media Relations Contact:

Will Davis                                                                       

Meredith Payette

+1 312-517-5725

+1 312-517-6216

ir@gogoair.com

pr@gogoair.com

 

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)


















For the Three Months




For the Six Months



Ended June 30,




Ended June 30,



2018




2017




2018




2017

Revenue:















Service revenue

$

159,056



$

154,076



$

309,734



$

300,571

Equipment revenue


68,402




18,724




149,549




37,635

Total revenue


227,458




172,800




459,283




338,206
















Operating expenses:















Cost of service revenue (exclusive of items shown below)


73,650




69,127




148,597




133,940

Cost of equipment revenue (exclusive of items shown below)


64,350




14,649




116,643




26,297

Engineering, design and development


28,409




35,685




58,186




71,949

Sales and marketing


15,427




16,564




31,328




30,959

General and administrative


21,133




23,549




46,292




46,098

Depreciation and amortization


31,938




30,562




67,857




60,997

Total operating expenses


234,907




190,136




468,903




370,240

Operating loss


(7,449)




(17,336)




(9,620)




(32,034)
















Other (income) expense:















Interest income


(1,328)




(771)




(2,404)




(1,316)

Interest expense


30,641




27,226




61,195




54,169

Other (income) expense


374




56




(131)




94

Total other expense


29,687




26,511




58,660




52,947
















Loss before income taxes


(37,136)




(43,847)




(68,280)




(84,981)

Income tax provision (benefit)


71




362




(3,654)




595

Net loss

$

(37,207)



$

(44,209)



$

(64,626)



$

(85,576)
















Net loss attributable to common stock per share—basic and diluted

$

(0.47)



$

(0.56)



$

(0.81)



$

(1.08)
















Weighted average number of shares—basic and diluted


79,783




79,334




79,718




79,237
















 

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)










June 30,




December 31,



2018




2017

Assets







Current assets:







Cash and cash equivalents

$

140,420



$

196,356

Short-term investments


123,191




212,792

Total cash, cash equivalents and short-term investments


263,611




409,148

Accounts receivable, net of allowances of $664 and $587, respectively


141,134




117,896

Inventories


178,506




45,543

Prepaid expenses and other current assets


35,092




20,310

Total current assets


618,343




592,897








Non-current assets:







Property and equipment, net


532,148




656,038

Goodwill and intangible assets, net


83,078




87,133

Other non-current assets


70,739




67,107

Total non-current assets


685,965




810,278

Total assets

$

1,304,308



$

1,403,175








Liabilities and Stockholders' deficit







Current liabilities:







Accounts payable

$

37,257



$

27,130

Accrued liabilities


205,018




201,815

Deferred revenue


37,275




43,448

Deferred airborne lease incentives


27,207




42,096

Current portion of capital leases


1,442




1,789

Total current liabilities


308,199




316,278








Non-current liabilities:







Long-term debt


1,012,155




1,000,868

Deferred airborne lease incentives


128,279




142,938

Other non-current liabilities


83,887




134,655

Total non-current liabilities


1,224,321




1,278,461

Total liabilities


1,532,520




1,594,739








Commitments and contingencies (Note 12)


-




-








Stockholders' deficit







Common stock, par value $0.0001 per share; 500,000,000 shares authorized at June 30, 2018 and December 31, 2017; 87,471,813 and 87,062,578 shares issued at June 30, 2018 and December 31, 2017, respectively; and 87,351,300 and 86,843,928 shares outstanding at June 30, 2018 and December 31, 2017, respectively


9




9

Additional paid-in-capital


907,071




898,729

Accumulated other comprehensive loss


(3,146)




(933)

Accumulated deficit


(1,132,146)




(1,089,369)

Total stockholders' deficit


(228,212)




(191,564)

Total liabilities and stockholders' deficit

$

1,304,308



$

1,403,175








See the Notes to Unaudited Condensed Consolidated Financial Statements

 

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)






For the Six Months



Ended June 30,



2018




2017

Operating activities:







Net loss

$

(64,626)



$

(85,576)

Adjustments to reconcile net loss to cash (used in) provided by operating activities:







Depreciation and amortization


67,857




60,997

Loss on asset disposals, abandonments and write-downs


6,529




3,477

Gain on transition to airline-directed model


(21,551)




-

Deferred income taxes


(3,911)




527

Stock-based compensation expense


8,599




9,724

Amortization of deferred financing costs


2,083




1,799

Accretion and amortization of debt discount and premium


9,204




9,142

Changes in operating assets and liabilities:







Accounts receivable


(23,522)




(13,316)

Inventories


(6,223)




(1,775)

Prepaid expenses and other current assets


(4,472)




4,468

Contract assets


(14,469)




-

Accounts payable


9,263




1,444

Accrued liabilities


6,498




2,565

Deferred airborne lease incentives


(2,986)




6,374

Deferred revenue


1,223




5,024

Accrued interest


-




963

Warranty reserves


5,355




57

Other non-current assets and liabilities


(3,880)




(3,506)

Net cash (used in) provided by operating activities


(29,029)




2,388








Investing activities:







Purchases of property and equipment


(103,599)




(128,892)

Acquisition of intangible assets—capitalized software


(11,567)




(16,851)

Purchases of short-term investments


(39,323)




(193,845)

Redemptions of short-term investments


128,924




249,081

Net cash used in investing activities


(25,565)




(90,507)








Financing activities:







Proceeds from the issuance of senior secured notes


-




70,200

Payment of issuance costs


-




(1,485)

Payments on capital leases


(1,187)




(1,540)

Stock-based compensation activity


(257)




(759)

Net cash provided by (used in) financing activities


(1,444)




66,416








Effect of exchange rate changes on cash


(373)




317








Decrease in cash, cash equivalents and restricted cash


(56,411)




(21,386)

Cash, cash equivalents and restricted cash at beginning of period


203,729




125,189

Cash, cash equivalents and restricted cash at end of period

$

147,318



$

103,803








Cash, cash equivalents and restricted cash at end of period

$

147,318



$

103,803

Less: current restricted cash


1,738




514

Less: non-current restricted cash


5,160




6,873

Cash and cash equivalents at end of period

$

140,420



$

96,416








Supplemental Cash Flow Information:







Cash paid for interest

$

49,911



$

42,698

Cash paid for taxes


374




24








Noncash Investing and Financing Activities:







Purchases of property and equipment in current liabilities

$

19,001



$

48,721

Purchases of property and equipment paid by commercial airlines


4,816




5,917

Purchases of property and equipment under capital leases


279




1,174

Acquisition of intangible assets in current liabilities


955




1,532

Asset retirement obligation incurred and adjustments


516




745








See the Notes to Unaudited Condensed Consolidated Financial Statements

 

Gogo Inc. and Subsidiaries

Supplemental Information – Key Operating Metrics

Commercial Aviation North America


















For the Three Months




For the Six Months



Ended June 30,




Ended June 30,



2018




2017




2018




2017
















Aircraft online (at period end)


2,809




2,791




2,809




2,791

Satellite


578




163




578




163

ATG


2,231




2,628




2,231




2,628
















Total aircraft equivalents (average during the period)


2,876




2,816




2,894




2,794
















Net annualized average monthly service revenue per aircraft equivalent (annualized ARPA) (in thousands)

$

113



$

114



$

108



$

114
















Commercial Aviation Rest of World


















For the Three Months




For the Six Months



Ended June 30,




Ended June 30,



2018




2017




2018




2017
















Aircraft online (at period end)


459




318




459




318

Total aircraft equivalents (average during the period)


389




247




364




227

Net annualized ARPA (in thousands)

$

147



$

203



$

153



$

192
















 

  • Aircraft online. We define aircraft online as the total number of commercial aircraft on which our equipment is installed and service has been made commercially available as of the last day of each period presented.  We assign aircraft to CA-NA or CA-ROW at the time of contract signing as follows: (i) all aircraft operated by North American airlines and under contract for ATG or ATG-4 service are assigned to CA-NA, (ii) all aircraft operated by North American airlines and under a contract for satellite service are assigned to CA-NA or CA-ROW based on whether the routes flown by such aircraft under the contract are anticipated to be predominantly within or outside of North America at the time the contract is signed, and (iii) all aircraft operated by non-North American airlines and under a contract are assigned to CA-ROW.  All aircraft online for the CA-ROW segment are equipped with our satellite equipment.
  • Aircraft equivalents. We define aircraft equivalents for a segment as the number of commercial aircraft online (as defined above) multiplied by the percentage of flights flown by such aircraft within the scope of that segment, rounded to the nearest whole aircraft and expressed as an average of the month end figures for each month in the period.  This methodology takes into account the fact that during a particular period certain aircraft may fly routes outside the scope of the segment to which they are assigned for purposes of the calculation of aircraft online.
  • Net annualized average monthly service revenue per aircraft equivalent ("ARPA"). We define net annualized ARPA as the aggregate service revenue plus monthly service fees, some of which are reported as a reduction to cost of service revenue for that segment for the period, less revenue share expense and other transactional costs which are included in cost of service revenue for that segment, divided by the number of months in the period, and further divided by the number of aircraft equivalents (as defined above) for that segment during the period, which is then annualized and rounded to the nearest thousand.  Beginning with the three month period ended March 31, 2018, we changed the calculation of ARPA to be net of revenue share expense and other transactional expenses in order to better reflect the financial statement impact of revenues generated under both the turnkey model and airline-directed model. The amounts reported above for the three and six month periods ended June 30, 2018 and 2017 reflect this change in methodology.  ARPA for the CA-NA segment for both the three and six month periods ended June 30, 2017 was originally reported as $141 thousand. ARPA for the CA-ROW segment for the three and six month periods ended June 30, 2017 was originally reported as $226 thousand and $215 thousand, respectively.

 

Business Aviation


















For the Three Months




For the Six Months



Ended June 30,




Ended June 30,



2018




2017




2018




2017
















Aircraft online (at period end)















Satellite


5,204




5,464




5,204




5,464

ATG


4,920




4,453




4,920




4,453

Average monthly service revenue per aircraft online















Satellite

$

228



$

236



$

239



$

230

ATG


3,027




2,872




3,032




2,835

Units Sold















Satellite


113




99




217




187

ATG


281




197




531




386

Average equipment revenue per unit sold (in thousands)















Satellite

$

39



$

42



$

40



$

44

ATG


67




52




65




54

 

  • Satellite aircraft online. We define satellite aircraft online as the total number of business aircraft for which we provide satellite services as of the last day of each period presented.
  • ATG aircraft online. We define ATG aircraft online as the total number of business aircraft for which we provide ATG services as of the last day of each period presented.
  • Average monthly service revenue per satellite aircraft online. We define average monthly service revenue per satellite aircraft online as the aggregate satellite service revenue for the period divided by the number of months in the period, divided by the number of satellite aircraft online during the period (expressed as an average of the month end figures for each month in such period).
  • Average monthly service revenue per ATG aircraft online. We define average monthly service revenue per ATG aircraft online as the aggregate ATG service revenue for the period divided by the number of months in the period, divided by the number of ATG aircraft online during the period (expressed as an average of the month end figures for each month in such period).
  • Units sold. We define units sold as the number of satellite or ATG units for which we recognized revenue during the period.  In the three and six months ended June 30, 2018, we recognized revenue on eight and 15 AVANCE units, respectively, that were previously deferred.
  • Average equipment revenue per satellite unit sold. We define average equipment revenue per satellite unit sold as the aggregate equipment revenue earned from all satellite units sold during the period, divided by the number of satellite units sold.
  • Average equipment revenue per ATG unit sold. We define average equipment revenue per ATG unit sold as the aggregate equipment revenue from all ATG units sold during the period, divided by the number of ATG units sold.

 

Gogo Inc. and Subsidiaries

Supplemental Information – Segment Revenue and Segment Profit (Loss)(1)

(in thousands, Unaudited)





For the Three Months Ended




June 30, 2018



CA-NA



CA-ROW



BA



Total

















Service revenue


$

95,746



$

15,185



$

48,125



$

159,056

Equipment revenue



23,904




18,460




26,038




68,402

Total revenue


$

119,650



$

33,645



$

74,163



$

227,458

















Segment profit (loss)


$

7,041



$

(24,474)



$

36,679



$

19,246




















For the Three Months Ended




June 30, 2017



CA-NA



CA-ROW



BA



Total

















Service revenue


$

98,679



$

13,188



$

42,209



$

154,076

Equipment revenue



2,272




885




15,567




18,724

Total revenue


$

100,951



$

14,073



$

57,776



$

172,800

















Segment profit (loss)


$

16,191



$

(31,403)



$

25,202



$

9,990








For the Six Months Ended




June 30, 2018



CA-NA



CA-ROW



BA



Total

















Service revenue


$

184,529



$

29,430



$

95,775



$

309,734

Equipment revenue



78,942




23,384




47,223




149,549

Total revenue


$

263,471



$

52,814



$

142,998



$

459,283

















Segment profit (loss)


$

8,697



$

(47,079)



$

69,002



$

30,620




















For the Six Months Ended




June 30, 2017



CA-NA



CA-ROW



BA



Total

















Service revenue


$

195,824



$

22,556



$

82,191



$

300,571

Equipment revenue



3,943




1,803




31,889




37,635

Total revenue


$

199,767



$

24,359



$

114,080



$

338,206

















Segment profit (loss)


$

27,350



$

(57,958)



$

51,317



$

20,709









1)

Segment profit (loss) is defined as net income (loss) attributable to common stock before interest expense, interest income, income taxes, depreciation and amortization, certain non-cash charges (including amortization of deferred airborne lease incentives, stock compensation expense, amortization of STC costs and the accounting impact of the transition to the airline-directed model, and other income (expense).

 

Gogo Inc. and Subsidiaries

Supplemental Information – Segment Cost of Service Revenue(1)

(in thousands, Unaudited)




For the Three Months




% Change




Ended June 30,




2018 over




2018




2017




2017














CA-NA

$

45,594



$

37,954




20.1

%

BA


10,086




9,877




2.1

%

CA-ROW


17,970




21,296




(15.6)

%

Total

$

73,650



$

69,127




6.5

%











For the Six Months




% Change




Ended June 30,




2018 over




2018




2017




2017














CA-NA

$

92,147



$

74,701




23.4

%

BA


21,200




19,386




9.4

%

CA-ROW


35,250




39,853




(11.5)

%

Total

$

148,597



$

133,940




10.9

%









(1)

Excludes depreciation and amortization expense.

 

Gogo Inc. and Subsidiaries

Supplemental Information – Segment Cost of Equipment Revenue(1)

(in thousands, Unaudited)




For the Three Months




% Change




Ended June 30,




2018 over




2018




2017




2017














CA-NA

$

29,312



$

3,214




812.0

%

BA


15,268




10,600




44.0

%

CA-ROW


19,770




835




2,267.7

%

Total

$

64,350



$

14,649




339.3

%















For the Six Months




% Change




Ended June 30,




2018 over




2018




2017




2017














CA-NA

$

64,798



$

4,581




1,314.5

%

BA


27,724




20,237




37.0

%

CA-ROW


24,121




1,479




1,530.9

%

Total

$

116,643



$

26,297




343.6

%













1)

Excludes depreciation and amortization expense.

 

Gogo Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(unaudited)


















For the Three Months




For the Six Months



Ended June 30,




Ended June 30,



2018




2017




2018




2017

Adjusted EBITDA:















Net loss attributable to common stock (GAAP)

$

(37,207)



$

(44,209)



$

(64,626)



$

(85,576)

Interest expense


30,641




27,226




61,195




54,169

Interest income


(1,328)




(771)




(2,404)




(1,316)

Income tax provision (benefit)


71




362




(3,654)




595

Depreciation and amortization


31,938




30,562




67,857




60,997

EBITDA


24,115




13,170




58,368




28,869

Stock-based compensation expense


4,213




5,394




8,599




9,724

Amortization of deferred airborne lease incentives


(7,462)




(8,630)




(15,092)




(17,978)

Amortization of STC costs


255




-




427




-

Transition to airline-directed model


(2,249)




-




(21,551)




-

Adjusted EBITDA

$

18,872



$

9,934



$

30,751



$

20,615
















Cash CAPEX:















Consolidated capital expenditures (GAAP) (1)

$

(52,508)



$

(74,135)



$

(115,166)



$

(145,743)

Change in deferred airborne lease incentives (2)


(1,015)




(111)




(2,711)




3,505

Amortization of deferred airborne lease incentives (2)


7,348




8,608




14,864




17,917

Cash CAPEX

$

(46,175)



$

(65,638)



$

(103,013)



$

(124,321)


____________________

(1)   See unaudited condensed consolidated statements of cash flows.

(2)   Excludes deferred airborne lease incentives and related amortization associated with STC costs for the three and six month periods ended June 30, 2018 and 2017 as STC costs are expensed as incurred as part of Engineering, Design and Development.


Definition of Non-GAAP Measures

EBITDA represents net income (loss) attributable to common stock before income taxes, interest income, interest expense, depreciation expense and amortization of other intangible assets.

Adjusted EBITDA represents EBITDA adjusted for (i) stock-based compensation expense, (ii) amortization of deferred airborne lease incentives, (iii) amortization of STC costs and (iv) the accounting impact of the transition to the airline-directed model. Our management believes that the use of Adjusted EBITDA eliminates items that, management believes, have less bearing on our operating performance, thereby highlighting trends in our core business which may not otherwise be apparent. It also provides an assessment of controllable expenses, which are indicators management uses to determine whether current spending decisions need to be adjusted in order to meet financial goals and achieve optimal financial performance.

We believe the exclusion of stock-based compensation expense from Adjusted EBITDA is appropriate given the significant variation in expense that can result from using the Black-Scholes model to determine the fair value of such compensation. The fair value of our stock options is determined using the Black-Scholes model and varies based on fluctuations in the assumptions used in this model, including inputs that are not necessarily directly related to the performance of our business, such as the expected volatility, the risk-free interest rate and the expected life of the options. Therefore, we believe the exclusion of this cost provides a clearer view of the operating performance of our business. Further, stock option grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time. While we believe that investors should have information about any dilutive effect of outstanding options and the cost of that compensation, we also believe that stockholders should have the ability to consider our performance using a non-GAAP financial measure that excludes these costs and that management uses to evaluate our business.

We believe the exclusion of the amortization of deferred airborne lease incentives and amortization of STC costs from Adjusted EBITDA is useful as it allows an investor to view operating performance across time periods in a manner consistent with how management measures segment profit and loss. Management evaluates segment profit and loss in this manner, excluding the amortization of deferred airborne lease incentives and amortization of STC costs, because such presentation reflects operating decisions and activities from the current period, without regard to the prior period decision or the form of connectivity agreements.

We believe it is useful for an understanding of our operating performance to exclude the accounting impact of the transition by one of our airline partners to the airline-directed model from Adjusted EBITDA because of the non-recurring nature of this activity.

We also present Adjusted EBITDA as a supplemental performance measure because we believe that this measure provides investors, securities analysts and other users of our financial statements with important supplemental information with which to evaluate our performance and to enable them to assess our performance on the same basis as management.

Cash CAPEX represents capital expenditures net of airborne equipment proceeds received from the airlines. We believe Cash CAPEX provides a more representative indication of our liquidity requirements with respect to capital expenditures, as under certain agreements with our airline partners we are reimbursed for all or a substantial portion of the cost of our airborne equipment, thereby reducing our cash capital requirements.

 

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SOURCE Gogo

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