Gogo Inc. (“Gogo” or the “Company”), the world’s largest provider of broadband connectivity services for the business aviation market, today announced its financial results for the quarter and full-year ended December 31, 2022.
Q4 2022 Highlights
- Record total revenue of $108.2 million increased 17% compared to Q4 2021, fueled by strong growth in both service and equipment revenue.
- Record service revenue of $77.3 million increased 12% compared to Q4 2021 and 3% compared to Q3 2022.
- Record equipment revenue of $30.8 million increased 34% compared to Q4 2021 and 2% compared to Q3 2022.
- AVANCE equipment units shipped totaled a record 390, an increase of 36% compared to Q4 2021 and a slight increase compared to the previous quarterly record set in Q3 2022.
- Total ATG aircraft online (“AOL”) reached 6,935 an increase of 8% compared to Q4 2021 and 2% compared to Q3 2022.
- Total AVANCE units online grew to 3,279, an increase of 31% compared to Q4 2021 and 6% compared to Q3 2022. AVANCE units comprised more than 47% of total AOL as of December 31, 2022, up from 39% as of December 31, 2021.
- Average monthly revenue per ATG aircraft online (“ARPU”) of $3,370 increased 2% compared to Q4 2021 and decreased slightly compared to Q3 2022.
- Net income from continuing operations decreased to $27.7 million from $209.1 million in Q4 2021. Q4 2022 net income from continuing operations is net of a $3.0 million income tax provision compared to an income tax benefit of $187.7 million in Q4 2021.
- Diluted earnings per share from continuing operations was $0.21 compared to $1.57 in Q4 2021, driven primarily by the income tax benefit in Q4 2021.
- Record Adjusted EBITDA(1) of $46.2 million, which includes approximately $1 million of expenses related to Global Broadband, increased 17% compared to Q4 2021 and 6% compared to Q3 2022.
- Cash provided by operating activities from continuing operations of $31.5 million in Q4 2022 increased from $30.3 million in the prior year period.
- Free Cash Flow(1) was $25.0 million in Q4 2022 compared to $25.7 million in the prior year period and increased from $8.5 million in Q3 2022.
- Cash, cash equivalents and short-term investments totaled $175.3 million as of December 31, 2022 compared to $152.2 million as of September 30, 2022. Cash and cash equivalents reflect the Company’s September repurchase of 1.5 million shares of common stock for $18.4 million in a private transaction.
Full Year 2022 Highlights
- Record total revenue of $404.1 million increased 20% compared to 2021.
- Record service revenue of $296.3 million increased 14% compared to 2021.
- Record equipment revenue of $107.7 million increased 42% compared to 2021.
- Record ARPU of $3,349 increased 3% compared to 2021.
- Net income from continuing operations decreased to $92.1 million compared to $156.6 million in 2021. The prior year included a $187.2 million tax benefit.
- Adjusted EBITDA(1) of $173.8 million increased 15% compared to 2021.
- Cash provided by operating activities from continuing operations increased to $103.4 million compared to $66.7 million in 2021.
- Free Cash Flow(1) increased to $57.8 million compared to $49.4 million in 2021.
“Our equipment revenue surged, which bodes well for future service revenue, as Gogo met extraordinary demand for inflight connectivity and delivered a 50% increase in equipment shipments despite global supply chain constraints in 2022,” said Oakleigh Thorne, Chairman and CEO. “We’re also on track to commercially launch our 5G service in Q4 this year, and our LEO-based Global Broadband product in the second half of 2024.”
“Our strong financial results underpin our confidence in our financial targets,” said Barry Rowan, Executive Vice President and CFO. “We have extended our long-term revenue growth target of 17% from 2022 through 2027 and reiterate our target for over $200 million in Free Cash Flow beginning in 2025.”
2023 Financial Guidance and Long-Term Financial Targets
The Company is providing the following guidance for 2023:
- Total revenue in the range of $440 million to $455 million.
- Adjusted EBITDA(1) of $150 million to $160 million, reflecting operating expenses of approximately $30 million for strategic and operational initiatives including Gogo 5G and Global Broadband.
- Free Cash Flow(1) of $80 million to $90 million. Free Cash Flow includes capital expenditures of approximately $30 million to $40 million, of which $20 million is tied to Gogo 5G.
The Company provides the following long-term financial targets:
- Revenue growth at a compound annual growth rate of approximately 17% from 2022 through 2027, with Global Broadband contributing to revenue beginning in 2025.
- Annual Adjusted EBITDA Margin(1) in the mid-40% range by 2027.
- Free Cash Flow(1) of more than $200 million beginning in 2025 and growing thereafter, consistent with the prior target.
The Company’s 2023 financial guidance and long-term targets include Gogo 5G and Global Broadband but do not reflect the impact of the Federal Communications Commission’s Secure and Trusted Communications Networks Reimbursement Program (the “FCC Program”), as the Company awaits further information regarding whether Congress will appropriate additional funds.
(1) See “Non-GAAP Financial Measures” below.
Gogo is the world’s largest provider of broadband connectivity services for the business aviation market. We offer a customizable suite of smart cabin systems for highly integrated connectivity, inflight entertainment and voice solutions. Gogo’s products and services are installed on thousands of business aircraft of all sizes and mission types from turboprops to the largest global jets, and are utilized by the largest fractional ownership operators, charter operators, corporate flight departments and individuals.
As of December 31, 2022, Gogo reported 3,279 business aircraft flying with Gogo’s AVANCE L5 or L3 system installed, 6,935 aircraft flying with its ATG systems onboard, and 4,475 aircraft with narrowband satellite connectivity installed. Connect with us at business.gogoair.com.
- 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. This number excludes aircraft receiving ATG service as part of the ATG Network Sharing Agreement with Intelsat.
- Satellite aircraft online. We define satellite aircraft online as the total number of business aircraft for which we provide narrowband satellite services as of the last day of each period presented.
- Average monthly connectivity service revenue per ATG aircraft online. We define average monthly connectivity service revenue per ATG aircraft online as the aggregate ATG connectivity 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). Revenue share earned from the ATG Network Sharing Agreement with Intelsat is excluded from this calculation.
- Average monthly connectivity service revenue per satellite aircraft online. We define average monthly connectivity service revenue per satellite aircraft online as the aggregate narrowband satellite connectivity service revenue for the period divided by the number of months in the period, divided by the number of narrowband satellite 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 ATG or narrowband satellite units for which we recognized revenue during the period.
- 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.
- Average equipment revenue per satellite unit sold. We define average equipment revenue per satellite unit sold as the aggregate equipment revenue earned from all narrowband satellite units sold during the period, divided by the number of narrowband satellite units sold.
Definition of Non-GAAP Measures
EBITDA represents net income attributable to common stock before interest expense, interest income, income taxes and depreciation and amortization expense.
Adjusted EBITDA represents EBITDA adjusted for (i) stock-based compensation expense included in the results of continuing operations, (ii) the results of discontinued operations, including stock-based compensation expense, (iii) loss on extinguishment of debt and settlement of convertible notes and (iv) separation costs related to the sale of CA. 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 that 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 that 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 it is useful for an understanding of our operating performance to exclude the results of our discontinued operations from Adjusted EBITDA because they are not part of our ongoing operations.
We believe it is useful for an understanding of our operating performance to exclude the loss on extinguishment of debt and settlement of convertible notes from Adjusted EBITDA because this activity is not related to our operating performance.
We believe it is useful for an understanding of our operating performance to exclude separation costs related to the sale of CA from Adjusted EBITDA for the three and twelve months ended December 31, 2021 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 consolidated 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.
Adjusted EBITDA Margin represents Adjusted EBITDA divided by total revenue. We present Adjusted EBITDA Margin as a supplemental performance measure because we believe that it provides meaningful information regarding our operating efficiency.
Free Cash Flow represents net cash provided by operating activities, plus the proceeds from our interest rate caps, less purchases of property and equipment and the acquisition of intangible assets and cash paid to purchase our interest rate caps. We believe that Free Cash Flow provides meaningful information regarding our liquidity.
To conform to current year presentation, we included the cash paid for our interest rate caps in Free Cash Flow for the twelve-month period ended December 31, 2021. We believe it is useful for an understanding of our liquidity to include the cash flows associated with interest rate caps to facilitate a more consistent comparison of net cash paid for interest and the interest rate changes for which we are hedged.
