• Total Revenue: $100.5 million, up 3% year over year.
• Service Revenue: $81.9 million, up 3% year over year.
• Equipment Revenue: $18.7 million, with 214 advanced shipments, up 11% year over year.
• ATG Aircraft Online: 7,016, a 2% decrease year over year.
• Advanced Aircraft Online: 4,379, an increase of 16% year over year.
• ATG ARPU: $3,497, a 4% year over year increase.
• Service Margin: 77% in the third quarter.
• Equipment Margin: 19% in the third quarter.
• Adjusted EBITDA: $34.8 million, a 19% decrease year over year.
• Net Income: $10.6 million, decreased $10.3 million year over year.
• Free Cash Flow: $24.6 million, up $3.6 million year over year.
• Cash and Short-term Investments: $176.7 million at the end of the quarter.
• Outstanding Principal on Term Loan: $601 million.
• Net Leverage Ratio: 3.0 times.
• 2024 Revenue Guidance: $400 to $410 million.
• 2024 Adjusted EBITDA Guidance: $120 to $130 million.
• 2024 Free Cash Flow Guidance: $55 to $65 million.

• Warning! GuruFocus has detected 3 Warning Signs with GOGO.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Gogo Inc (NASDAQ:GOGO) reported a 3% year-over-year increase in total revenue for Q3 2024, driven by ARPA growth and an increase in advanced units online.
• The company is seeing strong demand for its new Gogo Galileo and 5G products, which are expected to drive future growth.
• Gogo Inc (NASDAQ:GOGO) anticipates its acquisition of Satcom Direct will significantly augment growth, leveraging Satcom's strong sales and service organization.
• The company reported a 14% sequential increase in Q3 EBITDA, primarily due to lower legal fees.
• Gogo Inc (NASDAQ:GOGO) has a robust pipeline of strategic initiatives aimed at expanding its market globally and enhancing its product offerings.

Negative Points

• Gogo Inc (NASDAQ:GOGO) experienced a modest 3% year-over-year revenue growth, which is below its historical robust growth rates.
• The company is facing pressure on equipment margins, which declined 14% year-over-year due to increased production costs and a catch-up accrual benefit in the prior year.
• Gogo Inc (NASDAQ:GOGO) is withdrawing its multiyear long-term financial targets due to the pending acquisition of Satcom Direct, creating uncertainty about future financial performance.
• The company anticipates negative free cash flow in Q4 2024 due to higher networking capital and continued investments in strategic initiatives.
• Gogo Inc (NASDAQ:GOGO) is facing increased competition in the business aviation connectivity market, particularly from established GEO providers, which may impact pricing and margins.

Q & A Highlights

Q: With the Satcom Direct acquisition, how will this impact Gogo's free cash flow and strategic positioning in the avionics market? A: Jessics Betjemann, CFO, explained that the acquisition will increase debt, impacting interest expenses and free cash flow. The demand for HDX will increase equipment revenue, which generally has lower margins. Oakleigh Thorne, CEO, emphasized that the acquisition is primarily about enhancing Gogo's LEO capabilities, leveraging Satcom's distribution channels and customer base to drive growth in LEO products.

Q: Can you provide an update on the timeline for closing the Satcom Direct acquisition? A: Oakleigh Thorne, CEO, stated that they aim to close the acquisition by early December. The process involves obtaining commercial consents and regulatory approvals, including DOJ and CMA filings. Financing is complete, and integration planning is underway to ensure a smooth transition.

Q: How should we interpret the revised long-term revenue growth guidance from 15-17% to 10% for the combined company? A: Oakleigh Thorne, CEO, clarified that the standalone Gogo growth remains at 15-17%. The revised guidance reflects caution regarding GEO connectivity and the need for detailed planning post-acquisition. Updated guidance will be provided after closing and integration.

Q: What are the expectations for Gogo Galileo shipments in 2025, and how does the Satcom Direct acquisition influence this? A: Oakleigh Thorne, CEO, mentioned that they expect to double their initial projection of 200 shipments in 2025 due to strong market demand. The acquisition enhances distribution capabilities, potentially increasing shipments further.

Q: How does the Satcom Direct acquisition extend beyond its existing GEO customer base? A: Oakleigh Thorne, CEO, noted that the acquisition provides access to a broader market segment, including large jets and military customers. Satcom's superior GEO terminals and established relationships will help drive growth beyond the current 1,300 GEO customers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.