Gogo said it has started a new business plan with the aim of improving the company’s operational and financial performance. The move comes as the company reiterated its revenue guidance for 2018, but significantly lowered its adjusted EBITDA forecast. Gogo said it is also considering whether it should split the company into BA (business aviation) and CA (commercial aviation). No decision has yet been made on the matter.
With the Gogo 2020 plan, Gogo will transform its business model, and so hopefully reduce its cost structure while improving quality, driving revenue, streamlining business processes and strengthening its balance sheet in a prudent manner.
Financially, Gogo 2020 is targeting free cash flow break-even for full year 2020 and a “significant” annual EBITDA growth for each year of the plan, with the aim of reaching over USD 200 million in 2022. Capex will be reduced this year and next.
As goals, the company will continue to build on the significant improvement in 2Ku performance metrics, including availability of over 97 percent in June, by enhancing product and service quality. Gogo will also renew its focus on third-party revenue streams to better monetise existing connected aircraft. Finally, the company will seek to improve the range of user experience.
Regarding costs, Gogo said it also wants to materially reduce upfront equipment subsidies for airline contracts and lower total operating spend in Gogo's Commercial Aviation "CA" business (excluding satellite costs) by nearly 20 percent by the end of 2020. Total cash burn should be reduced by 2019 by over USD 100 million, against 2018, and by a further USD 100 million in 2020. Gogo said it will also be reviewing different options to address its outstanding convertible debt before it becomes current in March of 2019. Lastly, the company will look at different ways of maximising shareholder value.
For full year 2018, the company still sees revenues of USD 865-935 million, but the adjusted EBITDA guidance has been lowered to USD 35-45 million. 2Ku incremental aircraft on-line are seen at the low end of the guidance range of 550 to 650. Gross capex is still seen at USD 150-170 million and cash capex at USD 110-130 million.
