WHY IT RATES: Gogo’s business plan has made in-flight connecting easier and cheaper for travelers. It doesn’t look like that’s going to change any time soon.—Michael Schottey, TravelPulse Director of Digital Content
Gogo Inc. the leading global provider of broadband connectivity products and services for aviation, today announced that it has completed a comprehensive analysis of its business and is implementing an Integrated Business Plan (“IBP”) designed to improve the Company’s operational and financial performance. The IBP, branded as “Gogo 2020”, transforms Gogo’s business model and is intended to significantly reduce its cost structure, improve quality, drive revenue, streamline business processes and prudently strengthen its balance sheet.
Oakleigh Thorne, President and CEO of Gogo, said, “The initiatives we are executing under our Integrated Business Plan demonstrate our commitment to taking aggressive action to position Gogo for sustainable value creation. Gogo 2020 represents a new era for Gogo with a significantly reduced cost structure, much lower capital expenditures, and a streamlined and standardized approach to meeting the needs of our customers with improved quality and service. As we prioritize resources to strengthen the resiliency of our model, we remain focused on accomplishing our objectives without sacrificing our long-term growth opportunities and will continue to evaluate strategic options to drive revenue, monetize assets and realize the significant value of our business.”
Gogo 2020 resulted in the following:
—Targeting Free Cash Flow break-even for the full year 2020.
—Targeting significant annual EBITDA growth each year in our plan, reaching over $200 million in 2022,
—Continuing to build on the significant improvement in 2Ku performance metrics, including availability of over 97% in June, by enhancing product and service quality.
—Maintain cash capex reduction in 2018 with further material reductions in 2019.
—Materially reducing upfront equipment subsidies for airline contracts.
—Reducing total operating spend in Gogo’s Commercial Aviation “CA” business (excluding satellite costs) by nearly 20% by the end of 2020.
—Reducing total cash burn in 2019 by over $100 million from expected 2018 cash burn and by a further $100 million in 2020.
—Reviewing multiple options to address our outstanding convertible debt before it becomes current in March of 2019.
—Renewing focus on third-party payer revenue streams to better monetize existing connected aircraft.
—Focusing on improving the range of user experiences.
—Reviewing a range of attractive strategic alternatives, including opportunities suggested by various strategic and financial parties, with the goal of maximizing shareholder value.
The Company provides 2018 guidance as follows:
—Total revenue of $865 million to $935 million, in line with prior guidance.
—2Ku incremental aircraft on-line to be at the low end of the prior guidance range of 550 to 650.
—Gross capex of $150 million to $170 million and cash capex of $110 million to $130 million, in line with prior guidance.
—Adjusted EBITDA guidance of $35-45 million.
Strategic and Financial Alternatives Processes
During Gogo’s first quarter of 2018 earnings call, the Company discussed increased strategic activity in our industry. Since that time, a number of parties have contacted management to suggest various strategic and/or financial relationships and transactions, some of which would involve splitting the Company into BA and CA.
The Board has asked management to assess whether shareholder value would be increased by the Company engaging in any of the suggested relationships or transactions or others suggested by third parties or conceived by management and its advisors.
The Board has not made any decision to pursue any such transaction or relationship at this time. Please note that Gogo has no obligation to provide further disclosure in respect of any of these matters, and will decide in its discretion if and when to provide any further comment.
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