The company had a strong quarter, with all three of its business segments contributing more than expected.
The company, which describes itself as the leading provider of broadband connectivity for aviation, reported that its consolidated revenue for the period increased to US$227.5 million, while its service revenue increased to US$159.1 million.
Further, Gogo said that its net loss for the period decreased to US$37.2 million, which is a 16-percent improvement from the year-ago quarter.
Oakleigh Thorne, CEO of Gogo, said in an earnings call that all prime segments of the company performed ahead of expectations.
The company’s prime focus is on business aviation (BA), commercial aviation in North America (CA-NA) and commercial aviation in rest of the world (CA-ROW).
The BA segment recorded revenue of US$74.2 million, which is an increase of over 28 percent compared to the second quarter of 2017, while CA-NA revenue was US$119.7 million, a 19-percent increase from Q2 2017. Gogo’s CA-ROW segment revenue increased to US$33.6 million, which is up from US$14.1 million in second quarter of 2017.
“The BA division outperformance demonstrates the continued strength of that business and was driven by stronger-than-expected revenue and a variety of cost saves,” Thorne said. “It’s important to remember we’re the leader and have a very strong position in the BA market, but that only 23 percent of all BA aircraft carry a broadband product today, leaving a lot of room for future profitable growth.”
The company’s BA segment growth also relies on the US passing the Defense Authorization bill, which will let American companies do business with companies from China, especially ZTE (SZSE:000063). Gogo sources equipment from ZTE for its 2.4-GHz next-gen ATG network. Thorne was upbeat on the company’s prospects as both the House of Representatives and Senate have approved the bill.
“This is very important as it gives us optionality around whether to deploy Next-Gen, and if so when to deploy Next-Gen,” Thorne said.
Meanwhile, the company launched its service on Air Canada’s (TSX:AC) international wide-body aircrafts, as well as with Iberia Airlines and Alaska Airlines. Gogo in a release said that 785 aircraft on 12 airlines are currently connected through its 2Ku platform.
The company’s 2Ku platform offers in-flight connectivity with a peak speed of 70 Mbps, Gogo claiming that the platform is forward compatible as it is designed to work with future Ku satellites. The company added over 130 flights in the second quarter through its 2Ku platform.
Thorne also revealed that Gogo has received a number of strategic inquiries from financial players, as well as others in the industry. Thorne said that company’s board has considered those inquiries and that it has asked management to assess these players.
“Strategic conversations in our industry are heating up, competitors are thinking about consolidation, our strategic players are thinking about how to enter the business,” Thorne said. “We don’t have an update to provide on those matters today rather than to say management is assessing various opportunities as requested by our board.”
Following the announcement, Gogo was up 6.51 percent and closed the trading session on Wednesday at US$4.09. Over 2.99 million shares of Gogo were traded that day with the company’s share price reaching a high of US$4.44.
The stock has a “sell” ranking on TradingView with nine verticals against, nine neutral and eight in favor.
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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.