Gogo(GOGO) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Gogo reported total revenue of $98.6 million for Q1 2023, a 6% increase year-over-year, driven by record service revenue of$ 78.5 million, which was up 11% year-over-year [27][13] - Adjusted EBITDA for Q1 2023 was $39.7 million, down 7% year-over-year, primarily due to lower equipment revenues and increased operating expenses [34][14] - Net income for Q1 2023 was$ 20.4 million, translating to $0.16 in basic earnings per share [35] Business Line Data and Key Metrics Changes - Gogo's ATG aircraft online reached a record 7,046 units, representing an 8% growth year-over-year [27] - AVANCE units online grew to 3,447 units, up 28% year-over-year, now comprising 49% of the total fleet [28] - Equipment revenue was$ 20.1 million, a 9% decrease year-over-year, reflecting standard seasonality and normalization towards pre-pandemic order dynamics [29] Market Data and Key Metrics Changes - The business aviation industry is experiencing demand levels significantly higher than pre-pandemic, with Gogo's installed base showing strong market position [6][11] - Gogo's installed base includes almost 50% of the 15,000 business jets in North America equipped with Gogo IFC systems [11] - Data usage across Gogo's networks increased by 137% from Q1 2019 to Q1 2023, indicating a growing demand for connectivity [15] Company Strategy and Development Direction - Gogo aims to expand its service addressable market by broadening its advanced platform product offerings and adding networks to meet the needs of various segments [17] - The launch of Gogo 5G is on track for Q4 2023, expected to deliver significantly faster speeds than current networks [18] - Gogo is also developing a Global Broadband Product (GBP) to expand its market reach, particularly targeting the 14,000 business aircraft registered outside North America [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong performance in the second half of 2023, driven by pent-up demand for Gogo 5G and expected activations from record shipments in 2022 [14] - The company anticipates that the ongoing strategic investments will support sustained top-line growth and significant free cash flow growth in 2025 and beyond [32][43] - Management highlighted the importance of customer loyalty and service improvements as key drivers for future growth [17] Other Important Information - Gogo was awarded a $334 million grant under the FCC's Secure and Trusted Communications Networks program, which was reduced to$ 132 million due to more qualified grants than planned [24] - The company made a strategic decision to pay down $100 million of its outstanding term loan debt, which is expected to reduce cash interest by approximately$ 8.5 million annually [36][38] Q&A Session Summary Question: What drives the underpenetration of in-flight connectivity in the business jet market? - Management noted that many jets are older and that service levels and the capacity increase from 5G and GBP will incentivize installations [46][47] Question: What factors influence the turboprop market's adoption of in-flight connectivity? - Price sensitivity and the expectation of connectivity when chartering are key factors, with ongoing efforts to design smaller form factors for installations [49][50] Question: What is the outlook for the GBP network and OneWeb's progress? - Management indicated that OneWeb has launched the necessary satellites and is working on positioning them for operational service, with the GBP terminal development on track [59][60]