Successful Completion of Comprehensive Refinancing in April Reduces Annualized Cash Interest Expense by Approximately $70 Million
Raises 2021 Revenue and Adjusted EBITDA Guidance and Provides Free Cash Flow Targets
CHICAGO – Gogo Inc. (NASDAQ: GOGO) (“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 ended March 31, 2021.
Q1 2021 Highlights
- Total revenue of $73.9 million increased 4% year-over-year
- Net loss of $5.9 million from continuing operations compared to a net loss from continuing operations of $9.4 million in Q1 2020, and Adjusted EBITDA(1) of $33.9 million, an increase of 25% from Q1 2020
- Total ATG aircraft online (“AOL”) grew 3% year-over-year and 2% sequentially to 5,892
- Total AVANCE units online grew more than 42% year-over-year to 1,900. AVANCE units comprised more than 32% of total AOL as of March 31, 2021, up from 23% as of March 31, 2020
“Our enhanced financial flexibility and strong cash flow enable us to invest in our planned 5G deployment, which will significantly improve the performance of our proprietary ATG network, and to drive further market penetration of our AVANCE platform,” Thorne said.
First Quarter 2021 Financial Results from Continuing Operations
- Total revenue of $73.9 million increased 4% compared to Q1 2020, driven by increases in both service and equipment revenue that reflect continuing recovery in the business aviation industry and strong sales of Gogo’s AVANCE platform.
- Service revenue of $59.4 million increased nearly 3% compared to Q1 2020, due primarily to a 3% increase in AOL and recognition of service revenue from the Network Sharing Agreement with Intelsat. Service revenue increased more than 4% sequentially, due primarily to an increase in AOL.
- Equipment revenue of $14.5 million increased 10% compared to Q1 2020, due primarily to increased shipments of AVANCE L5 units.
- Combined engineering, design and development, sales and marketing and general and administrative expenses decreased 26% to $19.6 million from $26.5 million in Q1 2020, due primarily to decreases in general and administrative spending.
- Adjusted EBITDA of $33.9 million increased 25 % from $27.2 million in Q1 2020 and 76% from $19.3 million in Q4 2020.
On April 30, 2021, Gogo completed a comprehensive refinancing transaction, securing a 7-year $725 million Term Loan B bearing interest at LIBOR (with a LIBOR floor of 0.75%) plus 3.75% (the “Term Loan”) and a 5-year $100 million revolving credit facility (the “Revolver”). The Company used the proceeds of the Term Loan and cash on hand to redeem in full the $975 million aggregate principal outstanding of its Senior Secured Notes due 2024 (the "Senior Secured Notes") and pay a redemption premium, accrued interest, and transaction fees and expenses.
In addition, as previously announced, in March and April Gogo entered into separate privately negotiated exchange agreements with certain existing holders of the Company’s 6.00% Convertible Senior Notes due 2022 (the “Convertible Notes”), under which approximately $135 million aggregate principal amount of the Convertible Notes were exchanged for approximately 24 million shares of Gogo common stock. As of May 6, 2021, the Company had approximately 109.6 million shares of common stock outstanding and approximately $103 million aggregate principal amount of the Convertible Notes outstanding.
As a result of these transactions, Gogo has reduced its total debt by $385 million and will realize approximately $70 million in annualized cash interest expense savings. As of May 4, 2021, Gogo had $100 million of cash and cash equivalents, $828 million of total debt outstanding and no amounts outstanding under the Revolver.
“The completion of our comprehensive refinancing transaction has transformed our financial profile by improving our credit rating, reducing our leverage and interest expense, and enhancing our financial and strategic flexibility,” said Barry Rowan, Gogo's Executive Vice President and CFO. “This milestone will accelerate our free cash flow growth and drive value creation.”
Updated 2021 Financial Guidance
- Total revenue in the range of $310 million to $325 million
- Adjusted EBITDA in the range of $115 million to $125 million, including approximately $12 million of 5G-related expenses and excluding approximately $4 million of non-recurring separation and migration costs related to the sale of the CA division
- Capital expenditures in the range of $25 million to $30 million, with the majority tied to Gogo 5G
- Free cash flow(1) in the range of $10 million to $20 million, including cash interest payments of approximately $71 million
Reflecting the completion of its comprehensive refinancing transaction, the Company is also now providing a long-term free cash flow target of approximately $100 million for the full-year 2023, following the deployment of the Gogo 5G network in 2022, and significant growth thereafter.
- See “Non-GAAP Financial Measures” below.
The Company will host its first quarter conference call on May 6, 2021 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 https://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: 2187912
Non-GAAP Financial Measures
We report certain non-GAAP financial measurements, including Adjusted EBITDA and Free Cash Flow, in the supplemental tables below. Management uses Adjusted EBITDA and 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 and 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, 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, and (iii) use 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 for fiscal 2021 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.
Cautionary Note Regarding Forward-Looking Statements
Certain disclosures in this press release and related comments by our management include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding our business outlook, industry, business strategy, plans, goals and expectations concerning our market position, international expansion, future technologies, future operations, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “future” and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this press release. Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: our ability to attract and retain customers and generate revenue from the provision of our connectivity and entertainment services; our reliance on our key OEMs and dealers for equipment sales; our ability to compete effectively with other current or future providers of in-flight connectivity services and other products and services that we offer, including on the basis of price and performance; the impact of the COVID-19 pandemic and the measures implemented to combat it; our ability to evaluate or pursue strategic opportunities; our reliance on third parties for equipment and services; our ability to recruit, train and retain highly skilled employees; the achievement of the anticipated benefits of the sale of the CA business or our ability to operate as a standalone business; the impact of adverse economic conditions; our ability to develop and deploy Gogo 5G; a revocation of, or reduction in, our right to use licensed spectrum, the availability of other air-to-ground spectrum to a competitor or the repurposing by a competitor of other spectrum for air-to-ground use; our use of open source software and licenses; the availability of additional ATG spectrum in the United States or internationally; the effects of service interruptions or delays, technology failures and equipment failures or malfunctions arising from defects or errors in our software or defects in or damage to our equipment; the impact of assertions by third parties of infringement, misappropriation or other violations; our ability to innovate and provide products and services; the impact of government regulation of the internet; our possession and use of personal information; the extent of expenses or liabilities resulting from litigation; our ability to protect our intellectual property; our substantial indebtedness, limitations and restrictions in the agreements governing our current and future indebtedness and our ability to service our indebtedness; fluctuations in our operating results; the utilization of our tax losses; and other events beyond our control that may result in unexpected adverse operating results.
Additional information concerning these and other factors can be found under the caption “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”) on March 11, 2021 and our quarterly report on Form 10-Q as filed with the SEC on May 6, 2021.
Any one of these factors or a combination of these factors could materially affect our financial condition or future results of operations and could influence whether any forward-looking statements contained in this report ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. All forward-looking statements speak only as of the date made and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
About Gogo
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 March 31, 2021, Gogo reported 1,900 business aircraft flying with Gogo’s AVANCE L5 or L3 system installed, 5,892 aircraft flying with its ATG systems onboard, and 4,614 aircraft with satellite connectivity installed. Connect with us at business.gogoair.com.