Gogo(GOGO)2019-08-08 17:11Financial Data and Key Metrics Changes - Quarterly service revenue grew to $174 million, up 9% from Q2 2018 [6] - Adjusted EBITDA reached $37.8 million, a 100% increase year-over-year, driven by service revenue and cost savings [6][30] - Free cash flow improved to negative $3 million from negative $35 million in the prior year [6] Business Line Data and Key Metrics Changes - Commercial Aviation (CA) segments saw strong service revenue growth, with combined profits positive for the second consecutive quarter [17][33] - CA North America (CA-NA) service revenue increased to $96.4 million, up 1% year-over-year despite de-installations [35] - Business Aviation (BA) segment experienced a 14% increase in service revenue to $54.8 million, but equipment revenue decreased by 37% [39] Market Data and Key Metrics Changes - Gogo supports two airlines providing free Wi-Fi, with Delta conducting market tests on 55 daily flights [10] - The company has a backlog of approximately 900 aircraft, with 61% in the rest of the world, indicating growth potential [18] - The total fleet of commercial aircraft online increased to 3,134, up 81 from Q1 [18] Company Strategy and Development Direction - The company aims to grow as demand for in-flight connectivity accelerates, particularly with airlines offering free Wi-Fi [8] - Gogo is working on Gogo 5G and new satellite technologies to enhance service offerings and operational efficiency [12][11] - The company plans to improve its cash flow trajectory and does not expect to need new capital before reaching positive free cash flow in 2021 [15][29] Management's Comments on Operating Environment and Future Outlook - Management expressed caution for Q3 and Q4 due to the absence of "good guys" contributing to adjusted EBITDA [16] - The company anticipates increased investments in key programs like line-fit and Gogo 5G in the second half of the year [16] - Management remains optimistic about the long-term growth potential in the in-flight connectivity market [22] Other Important Information - The company refinanced $690 million in senior notes, extending maturities to 2024, which enhances strategic flexibility [15] - Adjusted EBITDA guidance was raised to a range of $105 million to $115 million, reflecting strong performance [43] Q&A Session Summary Question: Thoughts on take rates in CA-NA and CA-ROW - Management expects take rates to improve significantly as airlines move to free Wi-Fi, with potential for 30% take rates in Asia and higher in North America [47][48] Question: Modeling sat-com costs - Management noted that while sat-com expenses will grow with usage, improved network management is expected to reduce costs over time [50][51] Question: Update on Gogo 5G - Initial spending for Gogo 5G is expected to be a few million dollars for the latter part of the year, with costs included in guidance [52][53] Question: Delta free trials results - The trial aimed at market acceptance of free Wi-Fi, with operational support from Gogo, but specific results were not disclosed [60] Question: Strategic and competitive ecosystem for in-flight broadband - Management sees growing demand for free Wi-Fi as beneficial for the industry and anticipates potential consolidation among competitors [62]