Gogo Inc. · NASDAQ:GOGO
Gogo — Q3 2017 Earnings Presentation
28 slides from Gogo's earnings presentation, Nov 2, 2017
Slide 1: 3rd Quarter 2017 Earnings Results
3rd Quarter 2017 Earnings Results Michael Small – Chief Executive Officer John Wade – Chief Operating Officer Barry Rowan – Chief Financial Officer November 2, 2017 Exhibit 99.2
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: 2Ku transforming our business
2Ku transforming our business 1. Improves customer experience across the North American networks 2. Accelerates take rate growth 3. Enables new products and services Increased bandwidth: This transformation will drive revenue growth and long-term profitability Review table and footnote in 2Ku table
Slide 4: Strong execution continues
Strong execution continues 17% Y/Y Growth Total Revenue ($MM) Added $110M in cash, on the strength of airline wins Total revenue up 17% Y/Y Adjusted EBITDA ($MM) Adj. EBITDA up $3M sequentially 30% Q/Q Growth Cash ($MM) 8% Q/Q Growth * Note: Cash includes cash, cash equivalents and short-term invest
Slide 5: Expanding our leading market position
Expanding our leading market position More than 1,900+ awards for 2Ku Awarded Alaska & Virgin America fleets, totaling 250+ aircraft Awarded 100 aircraft with largest airline in South America
Slide 6: High bandwidth is arriving
High bandwidth is arriving 6 Y/Y growth in bandwidth per aircraft in CA-NA 47% CA-NA fleet will be 2Ku by end of 2018 ~1/3 On target to hit 2Ku install guidance 550 450 to Y/Y growth in bandwidth per aircraft in BA 20% 2Ku aircraft installed year-to-date 320+ 2Ku aircraft installed in October 76
Slide 7: Engaging more passengers
Engaging more passengers 7 15% Y/Y increase in CA-NA take rate to 7.5% Expanding partnerships to deliver free connectivity to the passenger Gogo Vision Touch leverages our existing connectivity system
Slide 8: Business Aviation growing and innovating
Business Aviation growing and innovating 30% Y/Y Growth BA Service Revenue ($MM) Service revenue up 30% Y/Y Launched Gogo AVANCE platform L3 and L5 connectivity systems
Slide 9: Key takeaways - CEO
Key takeaways - CEO Dedicated networks delivering leading bandwidth, coverage and reliability Performance driving wins Engaging more passengers with more bandwidth enables cutting-edge products and services Setting records for getting more aircraft online
Slide 10: Strong operational execution
Strong operational execution 10 2Ku aircraft installed in year-to-date 322 Hour 2Ku installation achieved 36 2Ku aircraft installed in October 76
Slide 11: Progress with OEMs
Progress with OEMs 11 3 A350s installed and delivered by Airbus with 2Ku installed B787 Expect first Boeing 2Ku installation to be completed around year-end C Series Expect first Bombardier production installation in May of 2018
Slide 12: Gogo Vision Touch evolved from our customer's need
Gogo Vision Touch evolved from our customer’s need Seatback entertainment solution Without the weight, cost and complexity of legacy solutions Engages even more passengers Simplicity and cost savings are driving interest from other carriers
Slide 13: Business Aviation continues to expand market share
Business Aviation continues to expand market share L5 units sold is 86 YTD check w/ Leigh and Shannon to verify Announced a global Ku band connectivity solution Strong market demand for Gogo Avance L5 connectivity system 86 sold year to date Selected as a factory option by Dassault and Embraer
Slide 14: Key takeaways - COO
Key takeaways - COO Industry-leading operational execution On track with OEM installed aircraft deliveries and accelerating Business Aviation market position and competitive strengths are formidable advantage
Slide 15: Strong revenue growth
15% Y/Y Decrease Strong revenue growth 17% Y/Y Growth Q3 ’17 revenue up 17% Y/Y Service revenue up 19% Y/Y Growth across all segments Q3 ’17 Adjusted EBITDA up $3 million sequentially Includes $4.5 million write-down of legacy product lines and retirement of test aircraft Note: Minor differences exi
Slide 16: CA-NA: Continued service revenue growth
16 CA-NA: Continued service revenue growth 7% Y/Y Growth Service revenue up 7% 2,817 aircraft online, up 188 aircraft Y/Y Note: Minor differences exist due to rounding ARPA flat Y/Y at $133k Satellite ARPA $220k ATG ARPA $125k
Slide 17: CA-NA: Expanding engagement through multi-payer strategy
17 CA-NA: Expanding engagement through multi-payer strategy 15% Y/Y Growth Take rate up 15%: Increased passenger engagement due to airline and 3rd party paid offerings Note: Minor differences exist due to rounding Segment profit of $16 million Includes: $2.4 million write-down of legacy products and
Slide 18: CA-ROW: Revenue doubled for third consecutive quarter
CA-ROW: Revenue doubled for third consecutive quarter year-over-year 18 117% Y/Y Growth Note: Minor differences exist due to rounding Service revenue of $15.7 million, up 117% from Q3 ’16 $226k annualized ARPA, up 30% Y/Y Aircraft equivalents online increased 41% Y/Y 13.5% take rate Annualized ARPA
Slide 19: CA-ROW: Scaling our international business
CA-ROW: Scaling our international business Note: Minor differences exist due to rounding Aircraft online up 96 Y/Y, to 352 680 2Ku awarded but not yet installed as of 10/24/17 Segment loss improved $7 million from Q2 ‘17 Lower spending on OEM programs Increased utilization of global Ku network 38% Y
Slide 20: BA: Continuing strong revenue growth
BA: Continuing strong revenue growth Total revenue increased 24% Y/Y, to $61 million Service revenue increased 30% Y/Y to $43 million ATG aircraft online increased 15% Y/Y, to over 4,500 ATG Service ARPU increased 13% Y/Y, to nearly $2,900 per month Note: Minor differences exist due to rounding 15%
Slide 21: BA: Strong AVANCE platform adoption
BA: Strong AVANCE platform adoption Segment profit increased 3% Y/Y, to $21 million $2 million charges related to write-down of legacy product line One Phone Increased ED&D and sales and marketing to further drive market penetration Note: Minor differences exist due to rounding 3% Y/Y Growth 27% Y/Y
Slide 22: Investing in rapid 2Ku installations
Investing in rapid 2Ku installations Note: Minor differences exist due to rounding. Note: Cash CAPEX is a non-GAAP measure. See Appendix for a reconciliation to the most comparable GAAP measure. $17MM Y/Y Increase Cash CapEx Y/Y increase reflects investment in installing aircraft with 2Ku
Slide 23: Outlook
Outlook Expect Adjusted EBITDA to be significantly higher in 2018 than 2017 Expect 2017 revenue to be at the high end of $670-$695 million guidance range Adjusted EBITDA expected to approximately double in the second half of 2017 compared to the first half of 2017 and to be at the low end of $60-$75
Slide 24: Q&A
Q&A
Slide 25: Appendix
Appendix
Slide 26: Gogo installed and awarded aircraft as of 9/30/2017
Gogo installed and awarded aircraft as of 9/30/2017 Note: On May 27, 2016, we entered into a letter agreement with American Airlines whereby American exercised its option to terminate its agreement with Gogo on approximately 550 Gogo-installed mainline aircraft and we currently expect such aircraft
Slide 27: Adjusted EBITDA reconciliation ($MM)
Adjusted EBITDA reconciliation ($MM) 2016 Q1 2016 Q3 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 Net Income (24) (40) (33) (27) (41) (44) (45) Interest Income (0) (0) (1) (1) (1) (1) (1) Interest Expense 16 18 25 25 27 27 28 Depreciation & Amortization 24 25 27 30 30 31 36 EBITDA 17 2 18 27 16 13 18 Sto
Slide 28: Cash CapEx reconciliation ($MM)
Cash CapEx reconciliation ($MM) 2016 Q1 2016 Q3 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 Purchases of Property and Equipment (31) (40) (36) (41) (64) (65) (62) Acquisition of Intangible Assets (Capitalized Software) (6) (8) (8) (7) (8) (9) (7) Consolidated Capital Expenditures (37) (48) (44) (48) (72