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Gogo posts wider-than-expected Q2 loss

Gogo Inc. (NASDAQ: GOGO) reported a wider loss in the second quarter due to a loss on extinguishment of debt arising from the $925 million debt refinancing. The bottom line missed analysts’ expectations while the top line exceeded consensus estimates. Further, the company maintained its 2019 revenue guidance while raising its adjusted EBITDA forecast.

Net loss was $83.96 million or $1.04 per share, compared to a loss of $37.21 million or $0.47 per share in the previous year quarter. Total revenues declined by 6% to $213.69 million. Analysts had expected a loss of $0.57 per share on revenue of $199.62 million for the second quarter.

Service revenue increased by 9% helped by increased take rates, an increase in aircraft online, and an 11% growth in ATG units online. However, equipment revenue fell by 42% lower 2Ku installations, a shift in mix from airline-directed to turnkey installations, fewer installations under the airline-directed model, and timing delays in the aftermarket channel.

Gogo Q2 earnings review
Photo Courtesy: Gogo / Facebook post

Looking ahead into the full year 2019, the company still expects total revenue in the range of $800 million to $850 million. Adjusted EBITDA outlook is lifted to the range of $105 million to $115 million from the previous range of $90 million to $105 million. Free cash flow is still expected to improve at least $100 million versus 2018. The company still predicts an increase of 400 to 475 in 2Ku aircraft online.

As of June 30, 2019, 2Ku aircraft online reached 1,216, an increase of 109 aircraft in Q2 2019. Gogo had a 2Ku backlog of about 900 aircraft as of June 30, 2019.

For the second quarter, revenue in Commercial Aviation North America fell by 12% year-over-year due to lower equipment revenue in the segment. Revenue in Business Aviation declined by 4% on weak equipment revenue. However, revenue in Commercial Aviation Rest of World increased by 9% as growth in service offset declines in equipment.

Also read: Netease Q2 earnings review

Gogo completed a $925 million debt refinancing to lower borrowing costs and extend debt maturities, including the repurchase of $159 million of the company’s 3.75% convertible senior notes due 2020.

According to Owler, Gogo is ranked fifth among the top 10 competitors in the inflight wireless telecom services sector. The top ten competitors are ViaSat, Inmarsat, Intelsat, Comcast, Satcom Direct, Harris CapRock, Hughes, Eutelsat, Satellogic and VT iDirect.

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