Gogo Inc. Reports Mixed Q2 2024 Results with Delayed 5G Launch
Gogo Inc. has recently reported its second-quarter earnings for 2024, revealing a nuanced financial picture. Total revenue decreased by 1% year-over-year to $102.1 million, primarily due to a decline in equipment revenue. However, the company hit a record high in service revenue, which reached $81.9 million, up 4% year-over-year.
Key Takeaways
- Gogo Inc. reported a slight decrease in total revenue but achieved record service revenue in Q2 2024.
- The company is expanding its product line with the launch of Gogo Galileo LEO satellite product and Gogo 5G North American air-to-ground product.
- Gogo maintains optimism for long-term growth, focusing on free cash flow generation and customer retention.
- The company updated its 2024 financial guidance, reflecting the delay in the Gogo 5G launch and fewer aircraft online at the end of 2024.
Company Outlook
Gogo expects its new product offerings to drive growth and expand market share. The company has already signed agreements for Galileo installations. Updated 2024 guidance anticipates revenue of $400 million to $410 million, with CapEx (capital expenditure) of approximately $35 million. Long-term targets include free cash flow of $150 million in 2025 and a CAGR (Compound Annual Growth Rate) of 15% to 17% from 2023 to 2028.
Bearish Highlights
- Total revenue decreased by 1% year-over-year to $102.1 million, mainly due to a decline in equipment revenue.
- The number of ATG (air-to-ground) aircraft online decreased by 0.5% year-over-year to 7,031.
- Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the quarter was down 31% year-over-year to $30.4 million.
Bullish Highlights
- Record service revenue of $81.9 million, a 4% increase year-over-year.
- Service margins were 77%, higher than expected.
- Free cash flow increased to $24.9 million in Q2, from $13.3 million year-over-year.
Misses
- Equipment revenue declined by 17% year-over-year and 11% sequentially to $20.1 million.
- The delay in the Gogo 5G launch to Q2 2025.
Q&A Highlights
In the earnings call, CEO Oakleigh Thorne highlighted Gogo's competitive advantages over competitors like StarLink and SmartSky. Thorne expressed skepticism about the suitability of StarLink's mini-antenna for business aviation. Updates on the progress of OneWeb’s network and its support for Galileo were also discussed. The company is in constant dialogue with the FAA (Federal Aviation Administration) regarding the installation of their Challenger 300.
Financial Outlook
Gogo expects the launch of new products will significantly contribute to growth and market share expansion. The company has signed agreements with OEMs (Original Equipment Manufacturers) and dealers for Galileo installations. Revised 2024 financial guidance anticipates revenue of $400 million to $410 million, with a CapEx of about $35 million. Long-term targets include free cash flow of $150 million by 2025 and a compound annual growth rate of 15% to 17% from 2023 to 2028.
Gogo Inc.'s recent earnings report reflects mixed financial results. Despite a record service revenue, total revenue decreased slightly, and the launch of Gogo 5G has been delayed. The company remains optimistic about its future with new product launches expected to drive growth and customer retention.
