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Gogo Inc. (GOGO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue rose 41% year over year to $137.8M as the Satcom Direct (SD) deal added $40.2M; service revenue grew 47% to $118.8M. GAAP net loss was $(28.2)M due to $46.8M transaction/integration costs; Adjusted EBITDA was $34.0M and essentially flat sequentially. Record ATG ARPU reached $3,500, and AVANCE AOL grew 16% YoY to 4,608 .
  • 2025 guidance: revenue $870–$910M, Adjusted EBITDA $200–$220M (including ~$25M of strategic OpEx for 5G/Galileo), FCF $60–$90M, capex ~$60M (incl. $45M for 5G/Galileo/LTE; excludes $20M FCC reimbursement) .
  • Execution milestones: FAA PMA for Galileo HDX antenna (shipping to dealers), first EASA STC for Airbus A319, and strong synergy traction ($18M run-rate at close; tracking to >$25–$30M within 2 years; $27M by end Q1’25). Management expects 2026 FCF to inflect as program spend rolls off and synergies fully annualize .
  • Stock reaction catalysts: (i) HDX shipments and STC rollouts; (ii) 5G chip fabrication progress toward Q4’25 revenue start; (iii) visible synergy capture; (iv) any update to long-term targets (10% revenue growth, mid‑20s EBITDA margin) later in 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • PMA obtained for Galileo HDX; units shipping to dealers for STCs, broadening the product set and opening international/LEO markets. “We received PMA for the Galileo HDX… and are now shipping product to dealers” .
    • Service momentum: Q4 service revenue +47% YoY to $118.8M; ARPU hit a record $3,500; AVANCE AOL +16% YoY to 4,608; Broadband GEO AOL reached 1,249 (+182 YoY; +65 QoQ) .
    • Synergies tracking ahead: $18M run-rate at close; +$9M expected by end Q1’25; management now expects to exceed high end of $25–$30M run-rate within two years; costs to achieve at low end of $15–$20M .

  • What Went Wrong

    • GAAP loss from acquisition costs: $(28.2)M net loss (vs $14.5M profit in Q4’23), including $46.8M in pre‑tax SD acquisition expenses; diluted EPS $(0.22) (vs $0.11 in Q4’23) .
    • Margin pressure/mix: Q4 service margin was 64% (vs 77% in Q3) reflecting inclusion of SD; equipment margin negative 6% on higher E&O reserves and inventory write‑offs .
    • Cash flow trough: Q4 FCF $(39.6)M driven by ~$60M of SD transaction payments; company guides 2025 as FCF trough with improvement expected in 2026 .

Financial Results

Consolidated results (USD Millions, except per-share)

MetricQ4 2023Q3 2024Q4 2024
Total Revenue$97.8 $100.5 $137.8
Service Revenue$80.9 $81.9 $118.8
Equipment Revenue$16.9 $18.7 $19.0
Adjusted EBITDA$35.1 $34.8 $34.0
Net Income (Loss)$14.5 $10.6 $(28.2)
Diluted EPS$0.11 $0.08 $(0.22)

Margins

Margin MetricQ3 2024Q4 2024
Service Margin %77% 64%
Equipment Margin %n/a-6%
Adjusted EBITDA Margin %34.6% (calc: 34.8/100.5) 24.6% (calc: 34.0/137.8)

Segment/Disaggregated Revenue – Q4 2024 (USD Millions)

Revenue TypeGogo BASatcom DirectTotal
Service – Satellite Broadband$1.0 $23.9 $24.9
Service – ATG Broadband$77.6 —$77.6
Service – Narrowband & Other$3.0 $13.3 $16.3
Total Service$81.6 $37.2 $118.8
Equipment – Satellite Broadband$0.07 $1.8 $1.8
Equipment – ATG Broadband$14.1 —$14.1
Equipment – Narrowband & Other$1.9 $1.2 $3.1
Total Equipment$16.0 $3.0 $19.0

Key Performance Indicators

KPIQ4 2023Q3 2024Q4 2024
ATG Aircraft Online (end of period)7,205 7,016 7,059
AVANCE Aircraft Online3,976 4,379 4,608
AVANCE as % of ATG55% 62% 65%
ATG ARPU ($/mo)$3,387 $3,497 $3,500
ATG Units Sold202 214 208

Additional GEO KPI

KPIQ4 2023Q4 2024YoY ΔQoQ Δ
Broadband GEO AOL (end of period)10 1,249 +182 aircraft +65 aircraft

Cash flow and balance sheet highlights

  • Q4 Net cash used in operating activities $(38.3)M; Q4 Free Cash Flow $(39.6)M (driven by ~$60M SD-related transaction payments). Cash and equivalents fell to $41.8M after ~$150M cash used to fund SD acquisition .
  • Year-end net leverage ~3.6x; $41.8M cash; $850.8M term loans outstanding; $122M revolver undrawn .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenueFY 2025n/a$870–$910MIntroduced
Adjusted EBITDAFY 2025n/a$200–$220M (incl. ~$25M strategic OpEx)Introduced
Free Cash FlowFY 2025n/a$60–$90M (incl. $70M strategic initiatives, net of FCC)Introduced
Capital ExpendituresFY 2025n/a~$60M (incl. $45M strategic; excl. $20M FCC)Introduced
Run-rate SynergiesWithin 2 yrs of close$25–$30MExpect to exceed high end; achieved $18M at close; +$9M by end Q1’25Raised
Cost to Achieve SynergiesTotal$15–$20MLow end of range; funded by sale of SD HQ buildingLowered
Capital Returns PolicyOngoingn/aConsider returns once net leverage <3.5x; no buybacks until target leverage range (2.5x–3.5x)Policy set
2026 FCF TrajectoryFY 2026n/aImprovement vs 2025 as investments roll off; 2026 FCF inflection targetedNew qualitative guide

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024 and Q3 2024)Current Period (Q4 2024)Trend
5G program statusQ2: 5G launch pushed to Q2’25; chip redesign/fabrication; robust STC/kit pre-provisioning Chip in fabrication (May completion); expect late Q3 boxes; modest Q4’25 revenue; mix of service/equipment Progressing to fabrication; 2025 revenue start intact
Galileo HDX/FDXQ2: HDX shipments expected Q4’24; FDX 1H’25; plan for OEM/STCs; website pricing; ARPU uplift longer-term PMA obtained; HDX shipping to dealers; more STC deals; FDX launch in summer ’25; service rev ramps in Q1’26 HDX launched; FDX on track; service rev inflects 2026
Competitive landscapeQ2: Starlink noted; multi-orbit differentiation; aviation-grade equipment; service model focus Only viable LEO alternative to Starlink; multi-orbit required for coverage (e.g., India/China); support advantage Narrative consistent; differentiation emphasized
Regulatory/FCC programQ2: Partial funding; expected negative FCF impact ’25–’26 without full funding NDAA fully funds program; expected net cash outlay ≈$10–$15M; strengthens 2026 FCF Improved funding outlook; 2026 FCF tailwind
Synergies/integrationQ3: Deal announced (pre-close) $18M run-rate at close; $27M by end Q1’25; expect >$25–$30M within 2 yrs; costs to achieve at low end Ahead of plan; bulk executed in 2025
ATG fleet/ARPUQ2: AVANCE 60% of ATG; record ARPU; Classic declines ahead of 5G/Galileo AVANCE 65% of ATG; record ARPU $3,500; ATG AOL up QoQ AVANCE mix rising; ARPU steady higher

Management Commentary

  • “We received PMA for the Galileo HDX… and are now shipping product to dealers to kick off work on their aircraft-specific STCs.” — Oakleigh Thorne, Executive Chairman .
  • “We believe the unique multi-orbit, multi-band platform enabled by the Gogo and Satcom Direct merger enables us to meet the needs of… the BA and Military/Government mobility markets.” — Chris Moore, CEO .
  • “We achieved $18 million of run-rate synergy at close and expect another $9 million before the end of the first quarter of 2025… we now expect run-rate synergies to exceed our targeted range of $25 million to $30 million.” — Zach Cotner, CFO .
  • “We expect 2025 to be a trough of our free cash flow, reaching an inflection point in 2026.” — Zach Cotner, CFO .
  • “HDX PMA… plus a small slip in Gogo 5G, puts a hole in our 2025 plans and leads us to provide pretty flat revenue and EBITDA guidance for this year.” — Oakleigh Thorne .

Q&A Highlights

  • Competitive positioning vs Starlink: Management underscored multi-orbit coverage (LEO+GEO) and regulatory constraints in markets like India/China; emphasized aviation-grade hardware and global support footprint .
  • FDX timing and GEO revenue model: FDX targeted launch in summer ’25; expect modest late ’25 revenue with service ramp in 2026; SD full month revenues trending low-$40Ms (combined), with ~20% MilGov mix; GEO ARPU not disclosed; anticipate modest growth with some ARPA pressure .
  • Revenue-sharing with satellite operators: Shifted to rev-share models to maintain pricing flexibility and margins across multi-orbit offerings .
  • Synergies and offsets: $27M run-rate achieved by end Q1’25; labor-driven synergies (~75%) but offset by margin pressures in GEO connectivity and ATG service; further operational synergies (software, manufacturing relocation) to come .
  • 5G commercialization path: Chip fabrication/testing pipeline, package into LX5 late Q3’25, initial Q4’25 revenue; installed pre-provision kits enable rapid service activation via box swap .

Estimates Context

  • S&P Global consensus for Q4 2024 (EPS/revenue/EBITDA) was unavailable due to an S&P Global daily request limit; as a result, we cannot provide beat/miss versus Street for this quarter. We attempted to retrieve “Primary EPS Consensus Mean,” “Revenue Consensus Mean,” and “EBITDA Consensus Mean” for “Q4 2024,” but the request failed due to limits. No estimate comparison is included in this recap [functions.GetEstimates error].

Key Takeaways for Investors

  • 2025 reset, 2026 inflection: Flat 2025 revenue/EBITDA guidance reflects HDX PMA delay and 5G timing; management is clear about 2026 FCF inflection as product/network investments roll off, synergies annualize, and FCC funding supports LTE transition .
  • Execution milestones to watch: (i) HDX STC rollouts and initial installs, (ii) FDX launch timing, (iii) 5G chip bring-up and initial Q4’25 revenue, and (iv) synergy capture cadence .
  • Multi-orbit differentiation: Ability to combine LEO+GEO and ATG should resonate with high-end BA and MilGov customers needing redundancy and global coverage; early signs include GEO AOL growth and international OEM alignments .
  • Margin mix shift: Inclusion of SD lowers consolidated service margin near term (Q4 64% vs 77% Q3), and equipment margin variability may persist; EBITDA margin compressed in Q4 (24.6%) but expected to improve with service ramp in 2026 .
  • Balance sheet discipline: Year-end net leverage ~3.6x; no further buybacks until leverage returns to 2.5x–3.5x; potential shareholder returns once <3.5x per policy .
  • Near-term trading setup: Catalysts include HDX installs and deal wins, FDX summer launch checkpoints, and 5G fabrication milestones; any acceleration in synergy realization or clearer 2026 targets could be stock-positive .

Notes:

  • All non-GAAP metrics are as defined by the company; reconciliations are provided in the press release/8‑K materials .
  • Q4 and FY 2024 figures include approximately one month of Satcom Direct results and significant SD-related transaction costs .