Gogo(US:GOGO)2020-08-10 19:08Financial Data and Key Metrics Changes - Consolidated revenue decreased by 55% year-over-year, with service revenue down 57% and equipment revenue down 44% [46][37] - EBITDA fell into negative territory for the first time since Q4 2013, reporting adjusted EBITDA of negative $15.9 million [47][37] - The company achieved breakeven unlevered free cash flow for the quarter, ending with $156 million in cash [44][37] Business Line Data and Key Metrics Changes - Business Aviation (BA) revenue declined by 23% to $54.6 million, with service revenue down 20% and equipment revenue down 36% [48][37] - Commercial Aviation (CA) revenue saw a significant decline, with North American revenue down 72% to $30 million and service revenue down 74% [50][37] - CA Rest of World revenue decreased by 67% to $12 million, with service revenue down 79% [53][37] Market Data and Key Metrics Changes - Pre-COVID, the company averaged 37 million passengers per month on Gogo-equipped aircraft, which plummeted to 1.9 million in April, recovering to 7.1 million in June [8][37] - In Business Aviation, daily flights dropped from 3,500 pre-COVID to 397 in April, recovering to over 2,700 in August [11][37] - In North America, flights per day increased from 2,300 in April to over 6,000 in August, with load factors rising from 10%-20% to 40%-60% [15][37] Company Strategy and Development Direction - The company has developed a three-track value creation plan focusing on liquidity preservation, strategic initiatives for commercial aviation, and financial management [9][37] - The strategic track includes potential combinations with other service providers or satellite operators to enhance market position [29][37] - The company is pursuing a financing track due to uncertainty in revenue recovery and upcoming convertible notes due in May 2022 [34][37] Management's Comments on Operating Environment and Future Outlook - Management expects U.S. domestic passenger traffic to recover to 50% of 2019 levels by the end of 2020 and 71% by the end of 2021 [10][37] - The company remains focused on liquidity and driving shareholder value despite the challenges posed by COVID-19 [8][37] - Management expressed optimism about the recovery in Business Aviation and a gradual recovery in Commercial Aviation [8][37] Other Important Information - The company implemented significant cost controls, achieving savings projected to exceed $330 million through 2021 [39][37] - A workforce reduction of 14% was announced, with a total reduction of 30% in the Commercial Aviation division since the pandemic began [24][37] - The company has applied for government assistance under the CARES Act but has not yet received confirmation [34][37] Q&A Session Summary Question: Is a joint venture outcome something that is on the table? - Management refrained from commenting on potential forms of combinations but confirmed that debt levels would remain at the parent level and not be transferred to the Commercial Aviation side [59] Question: Can you provide more detail on CA North American gross margins? - Management indicated that cost reductions are part of their plan and will benefit future margins, with ongoing negotiations with satcom providers [60][61] Question: What is the outlook for Business Aviation and new aircraft demand? - Order flow is down, but there is a cautious reopening of orders, with expectations for higher shipment levels in Q3 and Q4 [64]