Gogo Inc. · NASDAQ:GOGO
Gogo — Q2 2016 Earnings Presentation
28 slides from Gogo's earnings presentation, Aug 4, 2016
Slide 1: 2nd Quarter 2016 Earnings Results
2nd Quarter 2016 Earnings Results Michael Small – Chief Executive Officer Norman Smagley – Chief Financial Officer August 4, 2016
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT Safe Harbor Statement This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are based on management’s beliefs and assumptions and on information current
Slide 3: Significant Momentum in Q2 '16
SIGNIFICANT MOMENTUM IN Q2 ‘16 2Ku flying on three airlines Considerable progress on Gogo Biz 4G development and launching with Delta Private Jets New Partnership with IBM and The Weather Company ©2016 Gogo Inc. and Affiliates. Proprietary & Confidential. 3
Slide 4: Bond Deal Adds Liquidity
BOND DEAL ADDS LIQUIDITY Closed $525 million bond deal and extended our debt maturities Added more than $200M of cash on the balance sheet Funds will be used to support 2Ku installs 2-3 year gross margin payback on 2Ku installs 1 (1) Based on current average mainline ARPA as of 6/30/2016. ©2
Slide 5: Strong Q2 '16 Financial Results
STRONG Q2 ‘16 FINANCIAL RESULTS Q2 ‘16 revenue was nearly $148 million, up 22% Y/Y Q2 ‘16 Adjusted EBITDA was over $14 million, up 33% Y/Y 1 (1) Adjusted EBITDA is a non-GAAP measure. See Appendix for a reconciliation to the comparable measure. ©2016 Gogo Inc. and Affiliates. Proprietary & Confi
Slide 6: 2Ku Awards Exceed 1,200
2Ku AWARDS EXCEED 1,200 New aircraft awards in Q2 ’16: IAG (British Airways, Iberia, Aer Lingus) Delta American Airlines Total 2Ku awarded, but not yet installed aircraft, is more than 1,200 1 (1) As of 8/4/2016 ©2016 Gogo Inc. and Affiliates. Proprietary & Confidential. 6
Slide 7: Strong Progress on 2Ku
STRONG PROGRESS ON 2Ku Received six STCs including Airbus A319, Boeing 737-800, Airbus A330 and Airbus A340 Successfully completed first factory retrofit on A350 ©2016 Gogo Inc. and Affiliates. Proprietary & Confidential. 7
Slide 8: 2Ku Installation Forecast Is Increased
2Ku INSTALLATION FORECAST IS INCREASED Expect 2Ku installs of 75-100 in 2016 Expect 2Ku installs of 350-450 in 2017 Building supply chain to support at least 750 2Ku installs annually ©2016 Gogo Inc. and Affiliates. Proprietary & Confidential. 8
Slide 9: 2Ku Increasing Bandwidth to Aviation
2Ku INCREASING BANDWIDTH TO AVIATION 2Ku is performing well, pleased with Netflix streaming on Aeromexico Recently introduced a software upgrade that doubled throughput to the seat 2Ku performance is expected to improve to over 100 Mbps in 2017 ©2016 Gogo Inc. and Affiliates. Proprietary & Con
Slide 10: Business Aviation Progress
BUSINESS AVIATION PROGRESS Gogo Biz 4G on track to launch in 2Q 2017 4G offers enough bandwidth to bring ground-like experience to the BA market, including streaming video Delta Private Jets agreement strengthens ties with a key airline partner Partnership with The Weather Company offers pil
Slide 11: Looking Ahead
LOOKING AHEAD Focused on installing 2Ku as quickly as possible 2016 2Ku installations of 75 – 100 2017 2Ku installations of 350 – 450 Focused on scaling our operating capabilities to support our airline partners Focused on getting Gogo Biz 4G into the market ©2016 Gogo Inc. and Affiliates. Pro
Slide 12: Q2'16 Record Revenue
Q2’16 RECORD REVENUE Total Revenue ($MM) $138 $142 $148 $121 $126 $23 $20 22% $20 $19 $22 Y/Y Growth • Q2’16 revenue up 22% Y/Y $101 $107 $116 $119 $128 • Service revenue up 26% Y/Y Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Service Revenue Equipment Revenue Note: Minor differences exist due to rounding ©20
Slide 13: Solid Growth in Q2'16 Adjusted EBITDA
SOLID GROWTH IN Q2’16 ADJUSTED EBITDA Adjusted EBITDA ($MM) $14 $14 33% Y/Y Growth $11 $10 • Q2 ’16 Adjusted EBITDA 1 9% 10% 10% $8 8% 6% increased 33% to $14.4 million • Q2 ’16 Adjusted EBITDA margin Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2' 16 increased to 10% from 9% Y/Y Adjusted EBTIDA Adjusted EBITDA Mar
Slide 14: CA-NA - Strong Growth in Revenue & Aircraft Online
CA-NA - STRONG GROWTH IN REVENUE & AIRCRAFT ONLINE Service Revenue ($MM) • Service revenue driven largely by $83 $90 increases in aircraft online $83 $75 $78 19% • 2,596 Aircraft Online as of Y/Y Growth 6/30/2016 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 • ~200 net awarded but not yet Aircraft Online insta
Slide 15: CA-NA - ARPA Growth, Segment Margin Expands
CA-NA – ARPA GROWTH SEGMENT MARGIN EXPANDS Annualized ARPA ($M) • ARPA grew to $138K: - 14% y/y growth in ARPA excluding $135 $135 $139 $138 $134 aircraft added since the beginning of 2015, primarily regional jets and aircraft with new airline partners Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 • Segment pr
Slide 16: Strong Growth in BA Service Revenue
STRONG GROWTH IN BA SERVICE REVENUE Service Revenue ($MM) 66% 59% 61% 55% 58% $32.4 $30.7 $26.0 $28.5 36% • Service revenue increased Y/Y Growth $23.8 36% Y/Y to $32 million • Total BA revenue increased Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Service Revenue Service Revenue as a % of Total BA Revenue 13%
Slide 17: Increased ATG Units Online & Service ARPU Drive Segment Profit Growth
INCREASED ATG UNITS ONLINE & SERVICE ARPU DRIVE SEGMENT PROFIT GROWTH ATG Units Online (End of Period) 3,795 • ATG units online increased 20%, 3,477 3,681 20% to nearly 3,800 3,314 3,170 Y/Y Growth • ATG Service ARPU increased 14%, to over $2,500 per month Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 • Segmen
Slide 18: Continued Growth in CA-ROW Revenue and Aircraft Online
CONTINUED GROWTH IN CA-ROW REVENUE AND AIRCRAFT ONLINE Total Revenue ($MM) $5.7 • 249 aircraft online, up 12 Q/Q $4.2 $4.6 149% $3.6 Y/Y Growth • Near completion of Ku installs with $2.3 Delta and Japan Airlines • Revenue of $5.7 million, double from Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q2 ’15 Aircraf
Slide 19: Strong CA-ROW ARPA Growth
STRONG CA-ROW ARPA GROWTH Annualized ARPA ($M) $145 • Annualized ARPA grew 30% Y/Y to 30% Y/Y Growth $145K $111 • Awarded but not yet installed aircraft is approximately 500, mostly 2Ku Q2 '15 Q2 '16 • Expect to install majority of awarded Segment Loss ($MM) aircraft by end of 2018 $5MM • Segment lo
Slide 20: Consolidated Cash CapEx
CONSOLIDATED CASH CAPEX Cash CapEx ($MM) $40 • Q2 ’16 Y/Y changes in capital expenditures due primarily to $23 $24 $17MM increased 2Ku airborne equipment purchases Y/Y Increase $12 $13 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Note: Minor differences exist due to rounding. Note: Cash CAPEX is a non-GAAP me
Slide 21: Balance Sheet and Bond Deal
BALANCE SHEET AND BOND DEAL $509 million of cash on balance sheet at end of 2nd quarter Using proceeds from bond deal to support 2Ku rollout, continued global expansion and to retire existing senior debt One-time $15 million debt extinguishment charge had $0.20 impact on EPS ©2016 Gogo Inc. an
Slide 22: Updated Guidance
UPDATED GUIDANCE Installations • 2Ku installations: 75-100 in 2016, 350-450 in 2017 • CA-NA approximately 300 incremental installations, up from more than 200 • CA-ROW ~75 aircraft in 2016, at least 200 in 2017, both consistent with prior guidance Cash CAPEX 1 • $110-$135 million in 2016 consist
Slide 23: Q&A
Q&A
Slide 24: Appendix
Appendix
Slide 25: Gogo Installed and Awarded Aircraft as of 6/30/2016
GOGO INSTALLED AND AWARDED AIRCRAFT AS OF 6/30/2016 Aircraft Online CA-NA CA-ROW Total ATG Aircraft Online 1,255 - 1,255 ATG-4 Aircraft Online 1,332 - 1,332 Ku Aircraft Online - 249 249 2Ku Aircraft Online 9 - 9 Total Aircraft Online 2,596 249 2,845 Awarded But Not Yet Installed Aircraft1 ATG & ATG-
Slide 26: Adjusted EBITDA Reconciliation ($MM)
ADJUSTED EBITDA RECONCILIATION ($MM) 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 Net Income (20) (25) (29) (34) (24) (40) Interest Income (0) (0) (0) (0) (0) (0) Interest Expense 10 16 17 16 16 18 Income Tax Provision – – – – – – Depreciation & Amortization 19 21 22 25 24 25 EBITDA 9 12 10 8 17
Slide 27: Cash CapEx Reconciliation ($MM)
CASH CAPEX RECONCILIATION ($MM) 2015 2015 2015 2015 2016 2016 Q1 Q2 Q3 Q4 Q1 Q2 Purchases of Property and Equipment (53) (33) (19) (30) (31) (40) Acquisition of Intangible Assets (Capitalized Software) (4) (4) (4) (5) (6) (8) Consolidated Capital Expenditures (57) (37) (24) (35) (37) (48) Change in
Slide 28: Cash CapEx Guidance Reconciliation ($MM)
CASH CAPEX GUIDANCE RECONCILIATION ($MM) For the year ending 2016 Low High Consolidated capital expenditures (GAAP) (150) (185) Deferred airborne lease incentives 40 50 Cash CAPEX (110) (135) For the year ending 2017 Low High Consolidated capital expenditures (GAAP) (220) (265) Deferred airborne lea