Shares of Gogo Inc. (NASDAQ:GOGO) were up 18.3% as of 1:30 p.m. EST Monday after the in-flight connectivity specialist announced stronger-than-expected fourth-quarter 2016 results.
Quarterly revenue climbed 16% year over year, to $160 million, including a 20% increase in service revenue, to $138.9 million. Gogo elaborated that the latter figure was driven by a 14% increase in commercial aircraft online, to 2,943, 20% growth in ATG business aircraft online, to 4,172, and higher customer usage in all segments. On the bottom line, that translated to a net loss of $26.9 million, or $0.34 per share, narrowed from a net loss of $33.9 million, or $0.43 per share in the same year-ago period.
By comparison, analysts' consensus estimates predicted that Gogo would turn in lower revenue of $152.1 million, and a wider adjusted net loss of $0.46 per share.
Gogo CEO Michael Small elaborated:
2Ku performance demonstrates industry leading speed, coverage, and service availability, and we now have more than 130 2Ku aircraft installed. We are increasing 2Ku installation guidance to 450 to 550 aircraft in 2017 and 650 to 750 in 2018. 2Ku is transformative for global aviation. With speeds exceeding 100 Mbps, it brings a streaming class connectivity experience to everyone on the plane."
Gogo CFO Normal Smagley added that thanks to both accelerated 2Ku installations and higher operating leverage, Gogo should become free-cash-flow positive by 2019 -- a year earlier than expected.
In addition, Gogo now anticipates full-year 2017 revenue will increase 12% to 17% from 2016, or to a range of $670 million to $695 million -- well above Wall Street's consensus estimates for 2017 revenue of roughly $664 million.
Finally, looking further out to 2018, Gogo expects 2Ku installations of 650 to 750 aircraft, as well as a "significant decline in cash needs compared to 2017 due to a substantial decline in Gogo's average investment per 2Ku installation and a significant increase in consolidated" earnings before interest, taxes, depreciation, and amortization (EBITDA).
In the end, this was indeed an encouraging quarter for Gogo, especially after the stock's nearly 50% plunge in 2016. Assuming Gogo can indeed live up to its latest financial and installation targets, while avoiding any contract losses similar to those that caused last year's drop, I suspect Gogo stock could have more room to rise from here.