Gogo(GOGO)2023-11-06 16:00Aircraft Connectivity - Gogo's ATG aircraft online increased to 7,150 as of September 30, 2023, compared to 6,777 in the same period of 2022, representing a growth of approximately 5.5%[102] - The number of narrowband satellite aircraft online decreased to 4,395 as of September 30, 2023, from 4,484 in the same period of 2022, indicating a decline of approximately 2%[102] - Gogo's average monthly connectivity service revenue per narrowband satellite aircraft online was $294 for the three months ended September 30, 2023, down from $297 in the same period of 2022[102] - Average monthly connectivity service revenue per ATG aircraft online was $3,373 for the three months ended September 30, 2023, slightly down from $3,376 in the same period of 2022[102] Revenue Performance - Total revenue decreased to $97.9 million for the three-month period ended September 30, 2023, down 7.0% from $105.3 million in the prior-year period, while total revenue increased to $299.8 million for the nine-month period, up 1.3% from $295.9 million[112] - Service revenue increased to $79.5 million for the three-month period, up 5.7% from $75.3 million, and to $237.1 million for the nine-month period, up 8.3% from $219.0 million, primarily due to increases in ATG aircraft online[112] - Equipment revenue decreased to $18.4 million for the three-month period, down 38.8% from $30.1 million, and to $62.7 million for the nine-month period, down 18.5% from $76.9 million, primarily due to a decrease in the number of ATG units sold[112] Expenses and Costs - Cost of service revenue increased to $18.1 million for the three-month period, up 4.7% from $17.3 million, and to $51.7 million for the nine-month period, up 8.5% from $47.7 million, primarily due to increased personnel and ATG network costs[114] - Engineering, design, and development expenses increased to $9.2 million for the three-month period, up from $8.0 million, and to $26.3 million for the nine-month period, up from $21.3 million, primarily due to the Gogo Galileo development program[116] - General and administrative expenses decreased to $13.3 million for the three-month period, down from $15.5 million, and to $40.7 million for the nine-month period, down from $44.3 million, primarily due to decreased personnel costs[116] Cash Flow and Financial Position - Free Cash Flow for Q3 2023 was $21.0 million, significantly up from $8.5 million in Q3 2022, and for the nine-month period, it increased to $54.3 million from $32.8 million[126] - Net cash provided by operating activities for the nine months ended September 30, 2023, was $52.8 million, down from $71.9 million in the same period of 2022[130] - As of September 30, 2023, cash and cash equivalents totaled $86.5 million, down from $152.5 million at the end of September 2022[130] - The company announced a share repurchase program allowing for the repurchase of up to $50 million of common stock, with no time limit on the program[131] Debt and Financing - The Term Loan Facility has an aggregate principal amount of $725.0 million, with a maturity date of April 30, 2028, and bears interest at a floating rate based on an adjusted term SOFR rate[131] - Cash used in financing activities for the nine-month period ended September 30, 2023 was $113.9 million, primarily due to principal payments on the Term Loan Facility[137] - The company prepaid $100 million of the outstanding principal amount of the Term Loan Facility on May 3, 2023[134] - The Revolving Facility was undrawn as of September 30, 2023, and is available for working capital and general corporate purposes[134] Future Outlook - Gogo plans to commercially launch its Gogo 5G network in Q3 2024 and Gogo Galileo in the second half of 2024, expanding its broadband offerings beyond ATG[98] - The company expects service revenue to increase in the future with additional aircraft coming online, including the launch of Gogo 5G and Gogo Galileo[112] - The company anticipates that engineering, design, and development expenses will increase as a percentage of service revenue through 2024 due to Gogo Galileo and Gogo 5G program costs[116] - The company expects capital expenditures to increase in the near term due to Gogo 5G and the LTE network build-out related to the FCC Reimbursement Program[138] Tax and Valuation - The effective income tax rates for Q3 2023 were 24.3%, down from 28.3% in Q3 2022, while the nine-month period showed a tax benefit of $52.7 million due to a partial release of the valuation allowance on deferred income tax assets[121] - The company released approximately $71.2 million of its valuation allowance for deferred tax assets during the nine-month period ended September 30, 2023[105] Challenges - The company continues to face challenges related to supply chain disruptions and labor shortages affecting the aviation industry[99] - A $27.3 million decrease in cash flows related to operating assets and liabilities was noted, primarily due to changes in prepaid expenses and accrued interest[135] - The company has agreements with various vendors under which it has remaining commitments to purchase hardware components and development services[140]