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IFC Provider Gogo Declares Turnaround in Progress, No Sale

Fortunes changing at a company that looked on the brink of collapse in summer 2018.

Inflight connectivity (IFC) provider Gogo no longer is for sale and it instead expects to close on a large investment in coming months as it eyes major growth, the company’s CEO said Feb. 21, marking a dramatic turnaround for a company seemingly on the brink of collapse just last summer.

CEO and President Oakleigh Thorne expects to close a round of funding from strategic and financial investors by early May, on better terms than a round debt and credit financing the company closed late last year during unfavorable debt market conditions.

What is more, selling a division or more of the company now appears unlikely, a reversal of events when Thorne took over about a year ago.

“At this point, I think that is less likely as we have other approaches to dealing with our debt that we believe create more value for shareholders,” he told a quarterly teleconference. “Over time, we continue to believe that the IFC industry would benefit from consolidation and we would like to play a role in that consolidation from a position of strength.”

Thorne added that he sees growth for the company, especially via business aviation work, starting in 2020. But before then, the company will have to work through its restructuring, and it forecast lower consolidated revenue in 2019 than 2018, as well as around a $100 million cash outflow – albeit half of each of the last two years – and only moderately higher pretax earnings. Total consolidated revenue this year should be $800-850 million and adjusted pretax earnings of $75-95 million.

Total revenue for 2018 was $893.77 million compared with $699.09 million in 2017. Adjusted pretax earnings were $71.2 million against $58.5 million in 2017. Net loss in 2018 decreased to $162 million, 6% better than 2017’s loss, primarily due to a “strong” performance in BA. Net loss attributable to common stock per share was $2.02 versus $2.17.

In turn, stock traders knocked off almost 8% after the teleconference.

One of the bright spots in Gogo’s apparent turnaround is BA. For 2018, the division saw total revenue grow 21% and segment profit expand more than 40% to $140 million. BA revenue growth was led by a 34% growth in equipment revenue based on continued strong sales and installations of its AVANCE L3 and L5 products. Service revenue grew 15% to $196 million through growing the number of aircraft with its air-to-ground (ATG) technology, as well as increasing ATG average monthly revenue per unit, which grew 12% and 3%, respectively. Thorne said 65-70% of customers were new.

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