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PRNewswire 9-May-2019 6:30 AM
CHICAGO, May 9, 2019 /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 March 31, 2019.
First Quarter 2019 Consolidated Financial Results
"Our focus on operational execution, improving business fundamentals and cost control within our CA business led to a strong start in 2019," said Oakleigh Thorne, Gogo's President and CEO. "Based on our excellent first quarter financial performance, we are raising our 2019 Adjusted EBITDA guidance to a range of $90 million to $105 million, representing over 35% year-over-year growth at the mid-point of Adjusted EBITDA."
"We expect that Gogo will improve its Free Cash Flow by at least $100 million in 2019," said Barry Rowan, Gogo's Executive Vice President and CFO. "Following the successful refinancing of our entire balance sheet and based on our current plans and projected cash flow trajectory, we do not anticipate requiring additional capital except as needed to refinance our debt maturing in 2022 and 2024."
First Quarter 2019 Business Segment Financial Results
Business Aviation (BA)
Commercial Aviation - North America (CA-NA)
Commercial Aviation - Rest of World (CA-ROW)
Recent Developments
Business Outlook
The Company updates its 2019 financial guidance as follows:
Note that CA equipment revenue is affected by the number of installations completed under the airline-directed business model in the period.
(1) |
See "Non-GAAP Financial Measures" below. |
(2) |
Please refer to the definition of "backlog" in our Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the Securities and Exchange Commission on February 21, 2019, under the heading "Contracts with Airline Partners" in Item 1. |
Conference Call
The Company will host its first quarter conference call on May 9, 2019 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 9529728.
Non-GAAP Financial Measures
We report certain non-GAAP financial measurements, including Adjusted EBITDA, Free Cash Flow and Unlevered Free Cash Flow, in the supplemental tables below. Management uses Adjusted EBITDA, Free Cash Flow and Unlevered Free Cash Flow 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 used by other companies. Adjusted EBITDA, Free Cash Flow and Unlevered Free Cash Flow are not recognized measurements under accounting principles generally accepted in the United States, or GAAP; when analyzing our performance with Adjusted EBITDA or liquidity with Free Cash Flow or Unlevered Free Cash Flow, as applicable, investors should (i) evaluate each adjustment in our reconciliation to the corresponding GAAP measure, 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, (iv) use Free Cash Flow or Unlevered Free Cash Flow in addition to, and not as an alternative to, consolidated net cash provided by (used in) operating activities when evaluating our liquidity. No reconciliation of the forecasted range for Adjusted EBITDA and Free Cash Flow for fiscal 2019 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.
Gogo Inc. and Subsidiaries |
|||||||||||||||
Unaudited Condensed Consolidated Statements of Operations |
|||||||||||||||
(in thousands, except per share amounts) |
|||||||||||||||
For the Three Months |
|||||||||||||||
Ended March 31, |
|||||||||||||||
2019 |
2018 |
||||||||||||||
Revenue: |
|||||||||||||||
Service revenue |
$ |
165,012 |
$ |
150,678 |
|||||||||||
Equipment revenue |
34,537 |
81,147 |
|||||||||||||
Total revenue |
199,549 |
231,825 |
|||||||||||||
Operating expenses: |
|||||||||||||||
Cost of service revenue (exclusive of items shown below) |
68,121 |
74,947 |
|||||||||||||
Cost of equipment revenue (exclusive of items shown below) |
29,731 |
52,293 |
|||||||||||||
Engineering, design and development |
24,728 |
29,777 |
|||||||||||||
Sales and marketing |
12,318 |
15,901 |
|||||||||||||
General and administrative |
22,454 |
25,159 |
|||||||||||||
Depreciation and amortization |
30,749 |
35,919 |
|||||||||||||
Total operating expenses |
188,101 |
233,996 |
|||||||||||||
Operating income (loss) |
11,448 |
(2,171) |
|||||||||||||
Other (income) expense: |
|||||||||||||||
Interest income |
(1,149) |
(1,076) |
|||||||||||||
Interest expense |
32,554 |
30,554 |
|||||||||||||
Other income |
(3,365) |
(505) |
|||||||||||||
Total other expense |
28,040 |
28,973 |
|||||||||||||
Loss before income taxes |
(16,592) |
(31,144) |
|||||||||||||
Income tax provision (benefit) |
207 |
(3,725) |
|||||||||||||
Net loss |
$ |
(16,799) |
$ |
(27,419) |
|||||||||||
Net loss attributable to common stock per share—basic and diluted |
$ |
(0.21) |
$ |
(0.34) |
|||||||||||
Weighted average number of shares—basic and diluted |
80,446 |
79,696 |
|||||||||||||
Gogo Inc. and Subsidiaries |
|||||||
Unaudited Condensed Consolidated Balance Sheets |
|||||||
(in thousands, except share and per share data) |
|||||||
March 31, |
December 31, |
||||||
2019 |
2018 |
||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
188,690 |
$ |
184,155 |
|||
Short-term investments |
- |
39,323 |
|||||
Total cash, cash equivalents and short-term investments |
188,690 |
223,478 |
|||||
Accounts receivable, net of allowances of $583 and $500, respectively |
123,791 |
134,308 |
|||||
Inventories |
147,354 |
193,045 |
|||||
Prepaid expenses and other current assets |
32,140 |
34,695 |
|||||
Total current assets |
491,975 |
585,526 |
|||||
Non-current assets: |
|||||||
Property and equipment, net |
565,485 |
511,867 |
|||||
Goodwill and intangible assets, net |
82,888 |
83,491 |
|||||
Operating lease right-of-use assets |
70,129 |
- |
|||||
Other non-current assets |
86,333 |
84,212 |
|||||
Total non-current assets |
804,835 |
679,570 |
|||||
Total assets |
$ |
1,296,810 |
$ |
1,265,096 |
|||
Liabilities and Stockholders' deficit |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ |
27,861 |
$ |
23,860 |
|||
Accrued liabilities |
183,067 |
213,111 |
|||||
Deferred revenue |
37,602 |
38,571 |
|||||
Deferred airborne lease incentives |
22,726 |
24,145 |
|||||
Total current liabilities |
271,256 |
299,687 |
|||||
Non-current liabilities: |
|||||||
Long-term debt |
1,030,359 |
1,024,893 |
|||||
Deferred airborne lease incentives |
131,743 |
129,086 |
|||||
Non-current operating lease liabilities |
99,870 |
- |
|||||
Other non-current liabilities |
47,556 |
80,191 |
|||||
Total non-current liabilities |
1,309,528 |
1,234,170 |
|||||
Total liabilities |
1,580,784 |
1,533,857 |
|||||
Commitments and contingencies (Note 12) |
- |
- |
|||||
Stockholders' deficit |
|||||||
Common stock, par value $0.0001 per share; 500,000,000 shares authorized at March 31, 2019 and December 31, 2018; 87,878,770 and 87,678,812 shares issued at March 31, 2019 and December 31, 2018, respectively; and 87,797,614 and 87,560,694 shares outstanding at March 31, 2019 and December 31, 2018, respectively |
9 |
9 |
|||||
Additional paid-in-capital |
967,727 |
963,458 |
|||||
Accumulated other comprehensive loss |
(3,144) |
(3,554) |
|||||
Accumulated deficit |
(1,248,566) |
(1,228,674) |
|||||
Total stockholders' deficit |
(283,974) |
(268,761) |
|||||
Total liabilities and stockholders' deficit |
$ |
1,296,810 |
$ |
1,265,096 |
|||
Gogo Inc. and Subsidiaries |
|||||||
Unaudited Condensed Consolidated Statements of Cash Flows |
|||||||
(in thousands) |
|||||||
For the Three Months |
|||||||
Ended March 31, |
|||||||
2019 |
2018 |
||||||
Operating activities: |
|||||||
Net loss |
$ |
(16,799) |
$ |
(27,419) |
|||
Adjustments to reconcile net loss to cash used in operating activities: |
|||||||
Depreciation and amortization |
30,749 |
35,919 |
|||||
Loss on asset disposals, abandonments and write-downs |
1,241 |
1,687 |
|||||
Gain on transition to airline-directed model |
- |
(19,302) |
|||||
Deferred income taxes |
44 |
(3,863) |
|||||
Stock-based compensation expense |
4,327 |
4,386 |
|||||
Amortization of deferred financing costs |
1,249 |
1,035 |
|||||
Accretion and amortization of debt discount and premium |
4,774 |
4,539 |
|||||
Changes in operating assets and liabilities: |
|||||||
Accounts receivable |
10,635 |
(14,046) |
|||||
Inventories |
(1,118) |
(12,304) |
|||||
Prepaid expenses and other current assets |
3,015 |
(1,863) |
|||||
Contract assets |
(6,175) |
2,578 |
|||||
Accounts payable |
2,843 |
11,755 |
|||||
Accrued liabilities |
(19,381) |
(7,229) |
|||||
Deferred airborne lease incentives |
(3,923) |
(1,834) |
|||||
Deferred revenue |
2,257 |
5,440 |
|||||
Accrued interest |
(19,514) |
(24,955) |
|||||
Warranty reserves |
(588) |
442 |
|||||
Other non-current assets and liabilities |
208 |
(1,171) |
|||||
Net cash used in operating activities |
(6,156) |
(46,205) |
|||||
Investing activities: |
|||||||
Purchases of property and equipment |
(23,154) |
(56,886) |
|||||
Acquisition of intangible assets—capitalized software |
(4,557) |
(5,772) |
|||||
Purchases of short-term investments |
- |
(39,323) |
|||||
Redemptions of short-term investments |
39,323 |
69,482 |
|||||
Other, net |
95 |
- |
|||||
Net cash provided by (used in) investing activities |
11,707 |
(32,499) |
|||||
Financing activities: |
|||||||
Payment of debt issuance costs |
(557) |
- |
|||||
Payments on financing leases |
(125) |
(618) |
|||||
Stock-based compensation activity |
(58) |
(70) |
|||||
Net cash used in financing activities |
(740) |
(688) |
|||||
Effect of exchange rate changes on cash |
(276) |
75 |
|||||
Increase (decrease) in cash, cash equivalents and restricted cash |
4,535 |
(79,317) |
|||||
Cash, cash equivalents and restricted cash at beginning of period |
191,116 |
203,729 |
|||||
Cash, cash equivalents and restricted cash at end of period |
$ |
195,651 |
$ |
124,412 |
|||
Cash, cash equivalents and restricted cash at end of period |
$ |
195,651 |
$ |
124,412 |
|||
Less: current restricted cash |
1,535 |
738 |
|||||
Less: non-current restricted cash |
5,426 |
6,635 |
|||||
Cash and cash equivalents at end of period |
$ |
188,690 |
$ |
117,039 |
|||
Supplemental Cash Flow Information: |
|||||||
Cash paid for interest |
$ |
46,163 |
$ |
49,911 |
|||
Gogo Inc. and Subsidiaries |
|||||||||||||||
Supplemental Information – Key Operating Metrics |
|||||||||||||||
Commercial Aviation North America |
|||||||||||||||
For the Three Months |
|||||||||||||||
Ended March 31, |
|||||||||||||||
2019 |
2018 |
||||||||||||||
Aircraft online (at period end) |
2,412 |
2,840 |
|||||||||||||
Satellite |
718 |
486 |
|||||||||||||
ATG |
1,694 |
2,354 |
|||||||||||||
Total aircraft equivalents (average during the period) |
2,519 |
2,912 |
|||||||||||||
Net annualized average monthly service revenue per aircraft equivalent (annualized ARPA) (in thousands) |
$ |
126 |
$ |
103 |
|||||||||||
Commercial Aviation Rest of World |
|||||||||||||||
For the Three Months |
|||||||||||||||
Ended March 31, |
|||||||||||||||
2019 |
2018 |
||||||||||||||
Aircraft online (at period end) |
641 |
414 |
|||||||||||||
Total aircraft equivalents (average during the period) |
550 |
339 |
|||||||||||||
Net annualized ARPA (in thousands) |
$ |
136 |
$ |
159 |
|||||||||||
Business Aviation |
|||||||||||||||
For the Three Months |
|||||||||||||||
Ended March 31, |
|||||||||||||||
2019 |
2018 |
||||||||||||||
Aircraft online (at period end) |
|||||||||||||||
Satellite |
5,135 |
5,288 |
|||||||||||||
ATG |
5,348 |
4,803 |
|||||||||||||
Average monthly service revenue per aircraft online |
|||||||||||||||
Satellite |
$ |
237 |
$ |
251 |
|||||||||||
ATG |
3,071 |
3,037 |
|||||||||||||
Units Sold |
|||||||||||||||
Satellite |
130 |
104 |
|||||||||||||
ATG |
187 |
250 |
|||||||||||||
Average equipment revenue per unit sold (in thousands) |
|||||||||||||||
Satellite |
$ |
40 |
$ |
41 |
|||||||||||
ATG |
61 |
62 |
Gogo Inc. and Subsidiaries |
|||||||||||||
Supplemental Information – Segment Revenue and Segment Profit (Loss) (1) |
|||||||||||||
(in thousands, unaudited) |
|||||||||||||
For the Three Months Ended |
|||||||||||||
March 31, 2019 |
|||||||||||||
CA-NA |
CA-ROW |
BA |
|||||||||||
Service revenue |
$ |
92,027 |
$ |
19,772 |
$ |
53,213 |
|||||||
Equipment revenue |
4,042 |
13,159 |
17,336 |
||||||||||
Total revenue |
$ |
96,069 |
$ |
32,931 |
$ |
70,549 |
|||||||
Segment profit (loss) |
$ |
23,542 |
$ |
(19,149) |
$ |
33,498 |
|||||||
For the Three Months Ended |
|||||||||||||
March 31, 2018 |
|||||||||||||
CA-NA |
CA-ROW |
BA |
|||||||||||
Service revenue |
$ |
88,783 |
$ |
14,245 |
$ |
47,650 |
|||||||
Equipment revenue (2) |
55,038 |
4,924 |
21,185 |
||||||||||
Total revenue |
$ |
143,821 |
$ |
19,169 |
$ |
68,835 |
|||||||
Segment profit (loss) |
$ |
1,656 |
$ |
(22,605) |
$ |
32,323 |
|||||||
(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 items (including amortization of deferred airborne lease incentives, stock-based compensation expense, amortization of STC costs and the accounting impact of the transition to the airline-directed model) and other income (expense). |
(2) |
CA-NA equipment revenue for the three month period ended March 31, 2018 includes the accounting impact of the transition of one of our airline partners to the airline-directed model. See Note 1, "Basis of Presentation," in our March 31, 2019 10-Q for additional information. |
Gogo Inc. and Subsidiaries |
|||||||||||
Supplemental Information – Segment Cost of Equipment Revenue (1) |
|||||||||||
(in thousands, unaudited) |
|||||||||||
For the Three Months |
% Change |
||||||||||
Ended March 31, |
2019 over |
||||||||||
2019 |
2018 |
2018 |
|||||||||
CA-NA |
$ |
36,425 |
$ |
46,553 |
(21.8) |
% |
|||||
BA |
13,052 |
11,114 |
17.4 |
% |
|||||||
CA-ROW |
18,644 |
17,280 |
7.9 |
% |
|||||||
Total |
$ |
68,121 |
$ |
74,947 |
(9.1) |
% |
|||||
(1) |
Excludes depreciation and amortization expense. |
Gogo Inc. and Subsidiaries |
|||||||||||
Supplemental Information – Segment Cost of Service Revenue (1) |
|||||||||||
(in thousands, unaudited) |
|||||||||||
For the Three Months |
% Change |
||||||||||
Ended March 31, |
2019 over |
||||||||||
2019 |
2018 |
2018 |
|||||||||
CA-NA |
$ |
1,591 |
$ |
35,486 |
(95.5) |
% |
|||||
BA |
11,398 |
12,456 |
(8.5) |
% |
|||||||
CA-ROW |
16,742 |
4,351 |
284.8 |
% |
|||||||
Total |
$ |
29,731 |
$ |
52,293 |
(43.1) |
% |
|||||
(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 |
||||||||||||||||
Ended March 31, |
||||||||||||||||
2019 |
2018 |
|||||||||||||||
Adjusted EBITDA: |
||||||||||||||||
Net loss attributable to common stock (GAAP) |
$ |
(16,799) |
$ |
(27,419) |
||||||||||||
Interest expense |
32,554 |
30,554 |
||||||||||||||
Interest income |
(1,149) |
(1,076) |
||||||||||||||
Income tax provision (benefit) |
207 |
(3,725) |
||||||||||||||
Depreciation and amortization |
30,749 |
35,919 |
||||||||||||||
EBITDA |
45,562 |
34,253 |
||||||||||||||
Stock-based compensation expense |
4,327 |
4,386 |
||||||||||||||
Amortization of deferred airborne lease incentives |
(8,953) |
(7,630) |
||||||||||||||
Amortization of STC costs |
320 |
172 |
||||||||||||||
Transition to airline-directed model |
- |
(19,302) |
||||||||||||||
Proceeds from litigation settlement |
(3,215) |
- |
||||||||||||||
Adjusted EBITDA |
$ |
38,041 |
$ |
11,879 |
||||||||||||
Free Cash Flow: |
||||||||||||||||
Net cash used in operating activities (GAAP) (1) |
$ |
(6,156) |
$ |
(46,205) |
||||||||||||
Consolidated capital expenditures (1) |
(27,711) |
(62,658) |
||||||||||||||
Free cash flow |
(33,867) |
(108,863) |
||||||||||||||
Cash paid for interest (1) |
46,163 |
49,911 |
||||||||||||||
Interest income (2) |
(1,149) |
(1,076) |
||||||||||||||
Unlevered free cash flow |
$ |
11,147 |
$ |
(60,028) |
(1) |
See unaudited condensed consolidated statements of cash flows. |
|||||||||||||||
(2) |
See unaudited condensed consolidated statements of operations. |
Definition of Non-GAAP Measures:
EBITDA represents net income (loss) attributable to common stock before interest expense, interest income, income taxes, 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 (iv) the accounting impact of the transition to the airline-directed model and (v) proceeds from litigation settlement. 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 (see Note 15, "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 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 believe the exclusion of litigation proceeds from Adjusted EBITDA is appropriate as this is non-recurring in nature and represents an infrequent financial benefit to our operating performance.
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.
Free Cash Flow represents net cash provided by (used in) operating activities, less purchases of property and equipment and the acquisition of intangible assets. We believe Free Cash Flow provides meaningful information regarding the Company's liquidity.
Unlevered Free Cash Flow represents Free Cash Flow adjusted for cash interest payments and interest income. We believe that Unlevered Free Cash Flow provides an additional view of the Company's liquidity, excluding the impact of our capital structure.
Investor Relations Contact: |
Media Relations Contact: |
Will Davis |
Meredith Payette |
+1 312-517-5725 |
+1 312-517-6216 |
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SOURCE Gogo