Gogo(US:GOGO)2024-05-07 20:06Part I. Financial Information Financial Statements The company's Q1 2024 financial statements show total assets increased to $809.0 million, total revenue grew 5.8% to $104.3 million, and net income rose to $30.5 million ($0.23 per diluted share) Unaudited Condensed Consolidated Balance Sheets As of March 31, 2024, total assets increased to $809.0 million, driven by higher cash and a new convertible note investment, while total stockholders' equity grew to $62.4 million Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $152,820 | $139,036 | | Total current assets | $335,305 | $314,594 | | Total assets | $808,953 | $781,539 | | Liabilities & Equity | | | | Total current liabilities | $79,866 | $71,996 | | Long-term debt | $586,274 | $587,501 | | Total liabilities | $746,514 | $740,814 | | Total stockholders' equity | $62,439 | $40,725 | Unaudited Condensed Consolidated Statements of Operations For Q1 2024, total revenue increased 5.8% to $104.3 million, operating income rose to $34.7 million, and net income grew to $30.5 million ($0.23 per diluted share), boosted by a $13.1 million gain on a convertible note Q1 2024 vs Q1 2023 Statement of Operations (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Service revenue | $81,673 | $78,499 | | Equipment revenue | $22,649 | $20,098 | | Total revenue | $104,322 | $98,597 | | Operating income | $34,674 | $31,928 | | Other (income) expense, net | $(13,099) | $31 | | Income before income taxes | $41,411 | $24,837 | | Net income | $30,490 | $20,449 | | Diluted EPS | $0.23 | $0.15 | Unaudited Condensed Consolidated Statements of Cash Flows In Q1 2024, net cash from operations significantly increased to $29.7 million, while investing activities used $2.6 million and financing activities used $13.3 million, primarily for stock repurchases Q1 2024 vs Q1 2023 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $29,657 | $18,514 | | Net cash (used in) provided by investing activities | $(2,604) | $1,559 | | Net cash used in financing activities | $(13,296) | $(7,445) | | Increase in cash, cash equivalents and restricted cash | $13,784 | $12,716 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail Gogo 5G and Galileo development, FCC reimbursement status, a $5 million convertible note investment valued at $18.1 million, and ongoing patent litigation with SmartSky Networks - Gogo is developing its Gogo 5G network, with commercial launch now expected a few months later than Q4 2024, while Gogo Galileo, a global broadband service, is targeted for Q4 2024 launch1785 - The company was approved for up to $334 million in the FCC Reimbursement Program, with approximately $132 million currently allocated due to a funding shortfall, and the deadline extended to January 21, 20253133 - Gogo invested $5 million in a convertible note on February 26, 2024, which was valued at $18.1 million as of March 31, 2024, resulting in a $13.1 million unrealized gain6063 - Gogo is involved in a patent infringement lawsuit with SmartSky Networks concerning Gogo 5G, with a trial scheduled for April 14, 2025, and Gogo has filed counterclaims7576 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, noting a 5.8% revenue increase to $104.3 million, 19% growth in AVANCE aircraft online, and strong Adjusted EBITDA and Free Cash Flow, despite a Gogo 5G launch delay Key Business Metrics Key business metrics for Q1 2024 show total ATG aircraft online increased to 7,136, driven by a 19% rise in AVANCE systems, with average monthly service revenue per aircraft slightly increasing to $3,458 Key Operating Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Aircraft online (at period end) | | | | ATG AVANCE | 4,110 | 3,447 | | Gogo Biz | 3,026 | 3,599 | | Total ATG | 7,136 | 7,046 | | Narrowband satellite | 4,285 | 4,458 | | Avg. monthly service revenue per aircraft | | | | ATG | $3,458 | $3,389 | | Units sold | | | | ATG | 258 | 223 | Results of Operations Q1 2024 total revenue increased 5.8% to $104.3 million, driven by growth in both service and equipment revenue, while engineering expenses rose 17% and other income included a $13.1 million gain on a convertible note - The increase in service revenue was due to a higher number of ATG aircraft online97 - The increase in equipment revenue was due to selling more ATG units (258 in Q1 2024 vs. 223 in Q1 2023)97 - Engineering, design and development expenses increased by 17% to $9.2 million due to Gogo Galileo development costs99 - Total other income was $6.7 million, compared to an expense of $7.1 million in the prior year, primarily due to a $13.1 million unrealized holding gain on the Investment in Convertible Note101 Non-GAAP Measures The company reported increased non-GAAP metrics for Q1 2024, with Adjusted EBITDA rising to $43.3 million and Free Cash Flow growing to $32.1 million, driven by higher revenue and stronger operating cash flow Reconciliation of Non-GAAP Measures (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income (GAAP) | $30,490 | $20,449 | | Adjusted EBITDA | $43,322 | $39,729 | | Net cash provided by operating activities (GAAP) | $29,657 | $18,514 | | Free cash flow | $32,053 | $20,005 | Liquidity and Capital Resources The company ended Q1 2024 with $152.8 million in cash, supported by an undrawn $100.0 million credit facility, and repurchased $10.1 million in shares, with management confident in sufficient liquidity for the next twelve months - The company has an undrawn $100.0 million revolving credit facility as of March 31, 202452112 - Under a $50 million share repurchase program, the company repurchased 1.1 million shares for $10.1 million during Q1 2024110 - Capital expenditures for Q1 2024 were $4.2 million, with expectations for increases due to Gogo 5G and LTE network build-outs117 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its variable-rate Term Loan Facility, partially mitigated by $525.0 million in interest rate caps, with a 1% rate increase impacting annual interest expense by $2.0 million with hedges - The company is exposed to interest rate risk on its variable rate debt, with $525.0 million in interest rate caps hedging a notional amount as of March 31, 2024120 - A hypothetical 1% change in interest rates would impact annual interest expense by approximately $2.0 million (with hedges) or $6.1 million (without hedges)120 Controls and Procedures Management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024121 - No material changes were made to the internal control over financial reporting during the most recent fiscal quarter121 Part II. Other Information Legal Proceedings The company is involved in a patent infringement lawsuit by SmartSky Networks concerning Gogo 5G, with a trial scheduled for April 14, 2025, and Gogo has filed counterclaims - Gogo is being sued by SmartSky Networks for alleged patent infringement related to the Gogo 5G system, with a trial date set for April 14, 20257576 - Gogo has filed counterclaims against SmartSky, alleging that SmartSky's ATG network infringes on three Gogo patents76 Risk Factors An updated risk factor highlights the delay in the commercial launch of Gogo 5G by a few months from Q4 2024 due to a third-party chip design error, posing risks to customer retention and confidence - The commercial launch of Gogo 5G is delayed from its previously stated Q4 2024 timeline by a few months124 - The delay is due to a design error in a non-5G chip component from a third-party subcontractor124 - Risks from the delay include customers seeking competitor technologies, potential marketing confusion with the Gogo Galileo launch, and a decrease in customer confidence124 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,138,681 shares for approximately $10.1 million under its $50 million program during Q1 2024, with $35.1 million remaining for future repurchases Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Jan 1-31, 2024 | 566,418 | $9.18 | $40,000,000 | | Feb 1-29, 2024 | — | $— | $40,000,000 | | Mar 1-31, 2024 | 572,263 | $8.63 | $35,073,000 | Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - The company reported no defaults upon senior securities127 Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable to the company127 Other Information No director or officer trading plans (Rule 10b5-1 or non-Rule 10b5-1) were adopted, modified, or terminated during the fiscal quarter ended March 31, 2024 - No director or officer trading plans (Rule 10b5-1 or non-Rule 10b5-1) were adopted, modified, or terminated during the quarter127 Exhibits This section lists exhibits filed with the 10-Q report, including employment agreements, CEO and CFO certifications, and XBRL data files