Gogo Inc. (GOGO:NASDAQ) reported its first quarter 2024 (1Q24) results, beating consensus estimates on strong equipment sales and slightly better service sales. The company also reiterated its 2024 outlook and long-term guidance, emphasizing the importance of its Galileo project as a key growth driver for 2025 and beyond.
Roth MKM analyst Scott W. Searle, in a research report published on May 7, 2024, maintained a Buy rating on Gogo, highlighting the company's strong performance and the potential of its Galileo project despite ongoing questions surrounding its 5G network.
"1Q24 results beat consensus on strong Equipment and slightly better Service sales (this translated to adj EBITDA (US$43.3M, 41.6%) and EPS upside (US$0.25 vs. our US$0.13))," Searle noted. "Additionally, GOGO also reiterated its 2024 outlook of sales of US$410-425M with adj EBITDA at the high end of the US$110-125M range and reinforced its long-term outlook of 15-17% top-line CAGR through 2028."
Gogo's 1Q24 sales of US$104.3M, up 6% year-over-year (y/y) and 7% sequentially (seq), exceeded consensus expectations by 8%. The upside was largely driven by Equipment sales (US$22.6M, up 13% y/y and 34% seq), reflecting upgrade pull-ins from NetJets and early contribution from the FCC "Rio & Replace" program. Services segment sales of US$81.7M were up 4% y/y and 1% seq, despite a decline in Aircraft Online (AoL) due to temporary maintenance deactivations and low-end churn.
"While 5G continues to have minor delays (a potential slippage of "months" which could push the anticipated next-gen network commercial launch into early 2025), Galileo remains on or ahead of schedule with HDX (smaller aircraft with up to 60Mbps) commercialization expected in 4Q24 and FDX (larger aircraft with up to 200Mbps) in 1H25 (likely 2Q25)," Searle commented. "We believe that the expanding addressable market opportunity from Galileo could entirely meet our Service expectations for 8% 2025 growth."
The analyst modestly adjusted Roth MKM's 2024/2025 outlook for 1Q24 results, with 2025 largely unchanged (~US$506M, up 20% y/y; 8.4% Services and ~61% Equipment growth, with unchanged adj EBITDA/EPS of US$158M/US$0.80).
Searle emphasized the importance of Gogo's Galileo project, stating, "Importantly, despite its direct competition from Starlink, Galileo remains an increasingly important and growing facet to the GOGO story as it addresses the previously unaddressed international opportunity (14k BA jets) as well as the medium/large transcontinental market. In general, we believe that this remains significantly underappreciated within the GOGO model."
Gogo's management team, led by CEO Oakleigh Thorne, has been focused on executing the company's growth strategy, which includes the rollout of its 5G network and the expansion of its Galileo project. The company's strong balance sheet and cash flow generation provide it with the financial flexibility to invest in these strategic initiatives.
Roth MKM maintains a 12-month price target of US$16.00 on Gogo, implying significant upside potential from the company's current share price. As Gogo continues to deliver strong financial results and make progress on its key growth initiatives, the company appears well-positioned to create substantial value for its shareholders in the coming years.
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Disclosures for Roth MKM, Gogo Inc., May 7, 2024
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: ROTH makes a market in shares of Gogo, Inc. and as such, buys and sells from customers on a principal basis.
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