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Why Gogo Shares Jumped 20% Today

By Anders Bylund - Aug 8, 2019 at 4:41PM

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The provider of in-flight broadband services fell far short of Wall Street's estimates in the second quarter but still held on to its full-year sales guidance while raising an important profit target.

What happened

Shares of in-flight broadband specialist Gogo (GOGO -0.33%) rose as much as 20.5% on Thursday following the release of disappointing second-quarter results and optimistic guidance for the company's full-year sales and profits.

So what

In the second quarter, Gogo reported total revenues of $174 million and an adjusted net loss of $1.04 per diluted share. Your average Wall Street analyst had been looking for a smaller loss near $0.57 per share and top-line sales in the neighborhood of $200 million.

But all was forgiven because Gogo's management called the results "solid" and raised their full-year earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance from $97 million to $110 million. The revenue target for fiscal year 2019 was left unchanged at $825 million.

Silhouette of a jetliner against a colorful sunset.

Image source: Getty Images.

Now what

In other words, Gogo's management expects the third and fourth quarters to make up for the second-quarter-report's shortcomings. Adjusted EBITDA clocked in at $38 million in the second quarter, exactly doubling the year-ago period's $19 million. More than half of this period's bottom-line pain stemmed from a $58 million financial charge as the company refinanced some of its debt during this quarter. Now, 3,134 commercial airline planes carry Gogo's broadband-sharing equipment.

Gogo's management prefers to measure the company's success by its adjusted EBITDA instead of ordinary earnings because this metric is handmade to reflect its operating results with the fewest distractions possible. You'll find the debt refinancing charge among the largest exclusions from its adjusted EBITDA in the second quarter, alongside $36 million of interest expenses and $30 million in depreciation and amortization.

This volatile stock now sits at almost exactly the same share price as it did 52 weeks ago. It's also 41% below yearly highs and 74% above the lows of the same period. Expect the wild swings to continue.

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