Gogo Announces Second Quarter 2017 Financial Results
CHICAGO, Aug. 7, 2017 /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, 2017.
Second Quarter 2017 Consolidated Financial Results
-- Revenue increased to $172.8 million, up 17% from Q2 2016. Service
revenue increased to $154.1 million, up 21% from Q2 2016, on a 9%
increase in commercial aircraft online to 3,109, a 17% increase in ATG
business aircraft online to 4,453, and increased customer usage across
all segments.
-- Net loss increased to $44.2 million, a 10% increase from Q2 2016, and
Adjusted EBITDA((1)) decreased to $9.9 million, down 31% from Q2 2016.
Both net loss and Adjusted EBITDA in Q2 2017 included $14.0 million in
increased costs related to the launch of 2Ku service for new and
existing airline partners, OEM 2Ku programs, and costs associated with
the development of Gogo's next generation ATG solution.
-- Capital expenditures increased to $74.1 million from $47.6 million in Q2
2016. Cash CapEx((1)) increased to $65.6 million from $39.8 million in
Q2 2016 due to an increase in success-based airborne equipment purchases
in advance of heavy 2Ku installations in the second half of 2017.
"We launched 2Ku service on five new airlines in the quarter and are on plan to meet our targeted increase in installations during the second half of the year," said Michael Small, Gogo's President and CEO. "While these installs require up-front investment, they will all produce positive returns in the future."
"Our planned increase in investments in the second quarter lay the foundation for future growth in revenue and profitability," said Barry Rowan, Gogo's Executive Vice President and CFO. "We expect Adjusted EBITDA to increase substantially in the second half of 2017 and into 2018, and we are on track to generate positive free cash flow in 2019."
Second Quarter 2017 Business Segment Financial Results
Commercial Aviation - North America (CA-NA)
CA-NA connectivity take rate rose more than 20% in the quarter, increasing ARPA to more than $141,000 on an annualized basis.
-- Aircraft online reached 2,791, up 195 aircraft from Q2 2016. As of June
30, 2017, CA-NA had approximately 740 aircraft awarded for installation
or conversion to 2Ku, 60 of which are net new aircraft.
-- Total revenue increased to $101.0 million, up 9% from Q2 2016, primarily
driven by higher aircraft online.
-- Segment profit decreased to $16.2 million, down 13% from Q2 2016,
primarily due to costs associated with launching 2Ku service and the
development of its next generation ATG solution. Segment profit as a
percentage of segment revenue was 16% in Q2 2017, down from 20% in Q2
2016.
Commercial Aviation - Rest of World (CA-ROW)
CA-ROW revenue doubled year-over-year for the second consecutive quarter and ARPA grew 56% to more than $226,000 on an annualized basis as passenger demand continued to grow.
-- Aircraft online reached 318, up 69 aircraft from Q2 2016. CA-ROW had
approximately 620 net new 2Ku awarded but not yet installed aircraft as
of June 30, 2017.
-- Total revenue increased to $14.1 million, up 145% from Q2 2016, driven
primarily by higher ARPA and an increase in aircraft online.
-- Segment loss increased to $31.4 million from $23.3 million in Q2 2016,
as a result of launching 2Ku service on several new airline partners and
advancing OEM programs.
Business Aviation (BA)
BA service revenue grew 30% with segment profit increasing 33% and segment profit margin expanding to 44%. This growth demonstrates the continued strong demand for Gogo's ATG systems and services in the large and growing market opportunity of more than 20,000 North American business and turboprop aircraft.
-- Service revenue increased to $42.2 million, up 30% from Q2 2016, driven
primarily by a 17% increase in ATG systems online and a 14% increase in
average monthly service revenue per ATG unit online.
-- Equipment revenue decreased to $15.6 million, down $1.1 million from Q2
2016.
-- Total segment revenue increased to $57.8 million, up 18% from Q2 2016.
-- Segment profit increased to $25.2 million, up 33% from Q2 2016. Segment
profit as a percentage of segment revenue was 44% in Q2 2017, up from
39% in Q2 2016, on an increased mix of higher margin service revenue and
lower engineering, design and development expenses.
Recent Developments
-- Launched 2Ku service on five airlines: Air Canada Rouge, British
Airways, JTA, Virgin Atlantic, and Virgin Australia.
-- The first OEM installation of 2Ku on an Airbus A350 has been completed
and is ready for delivery to Delta.
-- Next generation ATG achieved speeds of 134Mbps in the lab and remains on
track for its expected deployment in 2018, and Gogo introduced a new
satellite modem capable of delivering more than 16 times the throughput
of the existing satellite modem.
-- BA launched its connected aircraft services platform, introduced new
Smart Cabin Services (SCS) and partnered with Rockwell Collins to
deliver real-time moving maps for its customers via the newly launched
platform.
Business Outlook
Gogo reaffirms all 2017 and long-term guidance previously provided in the fourth quarter 2016 earnings press release. The Company expects:
-- 2017 2Ku installations of 450 to 550 aircraft, including approximately
150 in CA-ROW.
-- Total revenue at the high end of guidance range of $670 million to $695
million.
-- Adjusted EBITDA at the low end of guidance range of $60 million to $75
million, as a result of investments in launching 2Ku service for new and
existing airline partners, OEM programs, and development of Gogo's next
generation ATG solution. Adjusted EBITDA is expected to increase
substantially in the second half of 2017 and in 2018.
-- Gross capital expenditures of $290 million to $330 million and Cash
CapEx of $230 million to $260 million, of which approximately 70% is
related to success-based airborne equipment purchases.
(1) See Non-GAAP Financial Measures below
Conference Call
The second quarter conference call will be held on August 7(th), 2017 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 also 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 54679937.
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 2017 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 satisfaction with our equipment or our service; any inability to timely and efficiently deploy our 2Ku service or develop and deploy our next-generation ATG solution 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 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 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 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 retail 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; 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 future litigation; 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 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, cyber-security 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 and other improvements to systems and procedures needed to support our growth.
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, 2016 filed with the Securities and Exchange Commission on February 27, 2017 and in our quarterly report on Form 10-Q for the quarter ended March 31, 2017 as filed with the SEC on May 4, 2017.
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 in-flight 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.
You can find Gogo's products and services 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:
Varvara Alva Meredith Payette
312-517-6460 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,
-------------- --------------
2017 2016 2017 2016
---- ---- ---- ----
Revenue:
Service revenue $154,076 $127,587 $300,571 $246,307
Equipment revenue 18,724 19,952 37,635 42,978
------ ------ ------ ------
Total revenue 172,800 147,539 338,206 289,285
------- ------- ------- -------
Operating expenses:
Cost of service revenue (exclusive of items
shown below) 69,127 53,396 133,940 108,250
Cost of equipment revenue (exclusive of items
shown below) 14,649 12,477 26,297 26,225
Engineering, design and development 35,685 24,718 71,949 46,366
Sales and marketing 16,564 16,750 30,959 31,492
General and administrative 23,549 22,388 46,098 43,377
Depreciation and amortization 30,562 24,906 60,997 49,263
------ ------ ------ ------
Total operating expenses 190,136 154,635 370,240 304,973
------- ------- ------- -------
Operating loss (17,336) (7,096) (32,034) (15,688)
------- ------ ------- -------
Other (income) expense:
Interest income (771) (166) (1,316) (212)
Interest expense 27,226 17,557 54,169 33,853
Loss on extinguishment of debt - 15,406 - 15,406
Adjustment of deferred financing costs - 77 - (792)
Other (income) expense 56 3 94 (171)
--- --- --- ----
Total other expense 26,511 32,877 52,947 48,084
------ ------ ------ ------
Loss before income taxes (43,847) (39,973) (84,981) (63,772)
Income tax provision 362 221 595 528
--- --- --- ---
Net loss $(44,209) $(40,194) $(85,576) $(64,300)
======== ========
Net loss attributable to common
stock per share-basic and diluted $(0.56) $(0.51) $(1.08) $(0.82)
====== ====== ====== ======
Weighted average number of shares-basic and
diluted 79,334 78,849 79,237 78,793
====== ====== ====== ======
Gogo Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
June 30, December 31,
2017 2016
---- ----
Assets
Current assets:
Cash and cash equivalents $96,416 $117,302
Short-term investments 283,241 338,477
------- -------
Total cash, cash equivalents and short-term investments 379,657 455,779
Accounts receivable, net of allowances of $657 and $499,
respectively 87,097 73,743
Inventories 52,041 50,266
Prepaid expenses and other current assets 20,870 24,942
------ ------
Total current assets 539,665 604,730
------- -------
Non-current assets:
Property and equipment, net 583,245 519,810
Intangible assets, net 90,296 85,175
Goodwill 620 620
Long-term restricted cash 6,873 7,773
Other non-current assets 56,557 28,088
------ ------
Total non-current assets 737,591 641,466
------- -------
Total assets $1,277,256 $1,246,196
========== ==========
Liabilities and Stockholders' deficit
Current liabilities:
Accounts payable $29,471 $31,689
Accrued liabilities 148,569 132,055
Accrued airline revenue share 15,504 15,521
Deferred revenue 36,817 32,722
Deferred airborne lease incentives 35,342 36,277
Current portion of long-term debt and capital leases 2,613 2,799
----- -----
Total current liabilities 268,316 251,063
------- -------
Non-current liabilities:
Long-term debt 880,371 800,715
Deferred airborne lease incentives 117,459 135,879
Deferred tax liabilities 8,791 8,264
Other non-current liabilities 118,833 90,668
------- ------
Total non-current liabilities 1,125,454 1,035,526
--------- ---------
Total liabilities 1,393,770 1,286,589
--------- ---------
Commitments and contingencies (Note 11) - -
Stockholders' deficit
Common stock 9 9
Additional paid-in-capital 888,100 879,135
Accumulated other comprehensive loss (1,673) (2,163)
Accumulated deficit (1,002,950) (917,374)
---------- --------
Total stockholders' deficit (116,514) (40,393)
-------- -------
Total liabilities and stockholders' deficit $1,277,256 $1,246,196
========== ==========
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,
--------------
2017 2016
---- ----
Operating activities:
Net loss $(85,576) $(64,300)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization 60,997 49,263
Loss on asset disposals/abandonments 3,477 924
Deferred income taxes 527 420
Stock-based compensation expense 9,724 7,986
Loss of extinguishment of debt - 15,406
Amortization of deferred financing costs 1,799 2,163
Accretion and amortization of debt discount and premium 9,142 8,508
Adjustment of deferred financing costs - (792)
Changes in operating assets and liabilities:
Accounts receivable (13,316) 4,409
Inventories (1,775) (4,155)
Prepaid expenses and other current assets 4,468 (12,428)
Accounts payable 1,444 (1,598)
Accrued liabilities 2,830 (2,873)
Deferred airborne lease incentives 6,374 8,374
Deferred revenue 5,024 14,235
Deferred rent 103 443
Accrued airline revenue share (27) 1,005
Accrued interest 963 3,012
Other non-current assets and liabilities (3,790) (5,641)
------ ------
Net cash used in operating activities 2,388 24,361
----- ------
Investing activities:
Proceeds from the sale of property and equipment - 1
Purchases of property and equipment (128,892) (71,048)
Acquisition of intangible assets-capitalized software (16,851) (13,993)
Purchases of short-term investments (193,845) (259,068)
Redemptions of short-term investments 249,081 99,886
(Decrease) increase in restricted cash 500 (14)
Net cash used in investing activities (90,007) (244,236)
------- --------
Financing activities:
Proceeds from the issuance of senior secured notes 70,200 525,000
Payments on amended and restated credit agreement - (310,132)
Payment of issuance costs (1,485) (10,610)
Payments on capital leases (1,540) (1,218)
Stock-based compensation activity (759) (346)
Net cash provided by financing activities 66,416 202,694
------ -------
Effect of exchange rate changes on cash 317 (233)
Decrease in cash and cash equivalents (20,886) (17,414)
Cash and cash equivalents at beginning of period 117,302 147,342
------- -------
Cash and cash equivalents at end of period $96,416 $129,928
======= ========
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
-------------- -------------
2017 2016 2017 2016
---- ---- ---- ----
Aircraft online (at
period end) 2,791 2,596 2,791 2,596
Aircraft equivalents
(average during the
period) 2,816 2,622 2,794 2,567
Average monthly
service
revenue per
aircraft
equivalent
(ARPA) $11,784 $11,483 $11,789 $11,314
Gross passenger
opportunity (GPO) (in
thousands) 108,480 100,458 204,088 190,461
Total average
revenue per
session (ARPS) $10.86 $12.94 $11.01 $12.99
Connectivity take rate 7.7% 6.3% 8.0% 6.4%
Commercial Aviation Rest of World
---------------------------------
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------- --------------
2017 2016 2017 2016
---- ---- ---- ----
Aircraft online (at
period end) 318 249 318 249
Aircraft equivalents
(average during the
period) 247 196 227 186
ARPA $18,872 $12,065 $17,932 $11,851
-- 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.
-- Aircraft equivalents. We define aircraft equivalents for a segment as
the total 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.
-- Average monthly service revenue per aircraft equivalent ("ARPA"). We
define ARPA for a segment 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 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.
-- Gross passenger opportunity ("GPO"). We define GPO as the aggregate
number of passengers who board commercial aircraft on which Gogo service
has been available at any time during the period presented. When actual
passenger counts are available directly from our airline partners, we
aggregate such counts across flights on Gogo-equipped aircraft. When
not available directly from our airline partners, we estimate GPO.
Estimated GPO is calculated by first estimating the number of flights
occurring on each Gogo-equipped aircraft, then multiplying by the number
of seats on that aircraft, and finally multiplying by a seat factor that
is determined from historical information provided to us in arrears by
our airline partners. The estimated number of flights is derived from
real-time flight information provided to our front-end systems by Air
Radio Inc. (ARINC), direct airline feeds and supplementary third-party
data sources. These aircraft-level estimates are then aggregated with
any available airline-provided passenger counts to obtain total GPO.
-- Total average revenue per session ("ARPS"). We define ARPS as revenue
from Passenger Connectivity, excluding non-session related revenue,
divided by the total number of sessions during the period. A session, or
a "use" of Passenger Connectivity, is defined as the use by a unique
passenger of Passenger Connectivity on a flight segment. Multiple logins
or purchases under the same user name during one flight segment count as
only one session.
-- Connectivity take rate. We define connectivity take rate as the number
of sessions during the period expressed as a percentage of GPO. Included
in our connectivity take-rate calculation are sessions for which we did
not receive revenue, including those provided pursuant to free
promotional campaigns and, to a lesser extent, as a result of
complimentary passes distributed by our customer service representatives
for unforeseen technical issues. For the periods listed above, the
number of sessions for which we did not receive revenue was not
material.
Business Aviation
-----------------
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------- --------------
2017 2016 2017 2016
---- ---- ---- ----
Aircraft online (at
period end)
Satellite 5,464 5,458 5,464 5,458
ATG 4,453 3,795 4,453 3,795
Average monthly
service revenue
per aircraft
online
Satellite $236 $226 $230 $220
ATG 2,872 2,529 2,835 2,514
Units Sold
Satellite 99 108 187 241
ATG 197 191 386 393
Average equipment
revenue per unit
sold (in
thousands)
Satellite $42 $44 $44 $43
ATG 52 57 54 58
--- --- --- --- ---
-- 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, 2017, we recognized revenue on 3 Gogo Biz 4G units
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, 2017
-------------
CA-NA CA-ROW BA
----- ------ ---
Service revenue $98,679 $13,188 $42,209
Equipment revenue 2,272 885 15,567
Total revenue $100,951 $14,073 $57,776
======== ======= =======
Segment profit (loss) $16,191 $(31,403) $25,202
======= ======== =======
For the Three Months Ended
June 30, 2016
-------------
CA-NA CA-ROW BA
----- ------ ---
Service revenue $89,808 $5,376 $32,403
Equipment revenue 2,879 368 16,705
Total revenue $92,687 $5,744 $49,108
======= ====== =======
Segment profit (loss) $18,641 $(23,300) $19,016
======= ======== =======
For the Six Months Ended
June 30, 2017
CA-NA CA-ROW BA
----- ------ ---
Service revenue $195,824 $22,556 $82,191
Equipment revenue 3,943 1,803 31,889
Total revenue $199,767 $24,359 $114,080
======== ======= ========
Segment profit (loss) $27,350 $(57,958) $51,317
======= ======== =======
For the Six Months Ended
June 30, 2016
-------------
CA-NA CA-ROW BA
----- ------ ---
Service revenue $173,217 $9,978 $63,112
Equipment revenue 6,517 371 36,090
Total revenue $179,734 $10,349 $99,202
======== ======= =======
Segment profit (loss) $32,457 $(43,021) $39,240
======= ======== =======
(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
and stock compensation expense) and
other income (expense).
Gogo Inc. and Subsidiaries
Supplemental Information - Segment Cost of Service Revenue(1)
(in thousands, Unaudited)
For the Three Months
Ended June 30,
--------------
2017 2016
---- ----
CA-NA $37,954 $33,797
BA 9,877 8,898
CA-ROW 21,296 10,701
Total $69,127 $53,396
======= =======
For the Six Months
Ended June 30,
--------------
2017 2016
---- ----
CA-NA $74,701 $70,371
BA 19,386 17,317
CA-ROW 39,853 20,562
Total $133,940 $108,250
======== ========
(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
Ended June 30,
--------------
2017 2016
---- ----
CA-NA $3,214 $2,862
BA 10,600 9,365
CA-ROW 835 250
Total $14,649 $12,477
======= =======
For the Six Months
Ended June 30,
--------------
2017 2016
---- ----
CA-NA $4,581 $6,809
BA 20,237 19,166
CA-ROW 1,479 250
Total $26,297 $26,225
======= =======
(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,
-------------- --------------
2017 2016 2017 2016
---- ---- ---- ----
Adjusted EBITDA:
Net loss attributable to common
stock (GAAP) $(44,209) $(40,194) $(85,576) $(64,300)
Interest expense 27,226 17,557 54,169 33,853
Interest income (771) (166) (1,316) (212)
Income tax provision 362 221 595 528
Depreciation and amortization 30,562 24,906 60,997 49,263
------ ------ ------ ------
EBITDA 13,170 2,324 28,869 19,132
Stock-based compensation expense 5,394 3,788 9,724 7,986
Amortization of deferred airborne lease
incentives (8,630) (7,241) (17,978) (12,885)
Loss on extinguishment of debt - 15,406 - 15,406
Adjustment of deferred financing costs - 77 - (792)
--- ---
Adjusted EBITDA $9,934 $14,354 $20,615 $28,847
====== ======= ======= =======
Cash CAPEX:
Consolidated capital expenditures
(GAAP) (1) $(74,135) $(47,615) $(145,743) $(85,041)
Change in deferred airborne lease incentives
(2) (111) 683 3,505 8,344
Amortization of deferred airborne lease
incentives (2) 8,608 7,175 17,917 12,761
----- -----
Cash CAPEX $(65,638) $(39,757) $(124,321) $(63,936)
======== ======== ========= ========
(1) See unaudited condensed
consolidated statements of cash
flows.
(2) Excludes deferred airborne lease
incentives and related
amortization associated with STCs
for the three and six month
periods ended June 30, 2017 and
2016 as STC costs are expensed as
incurred as part of Engineering,
Design and Development.
For the Year Ending
December 31, 2017
-----------------
Cash CapEx Guidance:
Low High
--- ----
Consolidated capital
expenditures (GAAP) $(290,000) $(330,000)
Deferred airborne lease
incentives 60,000 70,000
------ ------
Cash CapEx $(230,000) $(260,000)
========= =========
(3) See unaudited condensed
consolidated statements of cash
flows.
(4) Excludes deferred airborne lease
incentives and related
amortization associated with STCs
for the three month periods ended
June 30, 2017 and 2016 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) loss on extinguishment of debt and (iv) adjustment of deferred financing costs. 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 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 (see Note 14, "Business Segments and Major Customers," for a description of segment profit (loss) in our unaudited condensed consolidated financial statements). Management evaluates segment profit and loss in this manner, excluding the amortization of deferred airborne lease incentives, 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. See "--Key Components of Consolidated Statements of Operations--Cost of Service Revenue--Commercial Aviation North America and Rest of World" in our 2016 10-K for a discussion of the accounting treatment of deferred airborne lease incentives.
We believe it is useful to an understanding of our operating performance to exclude the loss on extinguishment of debt and adjustment of deferred financing costs from Adjusted EBITDA because of the non-recurring nature of these charges.
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 and incentives paid to us by landlords under certain facilities leases. 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
