Gogo Inc. 10-K Analysis & Summary – 3/14/2025

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Gogoro Inc.

10-K

Annual report

Filing date:

03/14/2025

TLDR:

ELI5:

Gogo, a company that provides internet on airplanes, bought another company called Satcom Direct. While they made a little more money overall, their expenses went up a lot because of the purchase. They also have some challenges ahead, so it’s best to wait and see how things go before investing.

Accession #:

0000950170-25-039384

Published on

March 16, 2025

Analyst Summary

Gogo Inc. acquired Satcom Direct, expanding its service offerings and global footprint.
Total revenue increased by 1.7% year-over-year, driven by a 2.8% increase in service revenue, while equipment revenue decreased by 2.7%.
Operating expenses increased significantly, primarily due to a 71% surge in general and administrative expenses related to the Satcom Direct acquisition and integration.
Net income decreased from $145.68 million in 2023 to $13.75 million in 2024 due to increased operating expenses.
ARPU (average revenue per user) is increasing, indicating improved revenue generation per connected aircraft.
The Gogo 5G launch has been delayed, posing a potential risk to the company’s competitive positioning.
Key financial ratios indicate decreased profitability and increased leverage compared to the previous year.
Gross Profit Margin decreased by 6.05% to 62.53%, Operating Profit Margin decreased by 63.08% to 11.53%, and Net Profit Margin decreased by 91.58% to 3.09%.
The Current Ratio decreased by 59.50% to 1.77, and the Debt-to-Equity Ratio is very high at 16.73.
Adjusted EBITDA decreased by 12.11% to $142.496 million, and Free Cash Flow decreased by 49.28% to $41.942 million.

Opportunities and Risks

Opportunity: Successful integration of Satcom Direct could lead to significant growth and market expansion.
Opportunity: Increasing demand for in-flight connectivity presents a favorable market environment.
Risk: Substantial indebtedness and ability to refinance pose a financial risk.
Risk: Competition from other in-flight connectivity providers could impact market share.
Risk: Delays or failures in developing and deploying Gogo 5G and Gogo Galileo could hinder growth.
Risk: Failure to realize the anticipated benefits of the Satcom Direct acquisition could negatively impact profitability.
Risk: High Debt-to-Equity and Debt-to-Assets ratios indicate significant financial leverage.

Potential Implications

Company Performance

The Satcom Direct acquisition is expected to drive future revenue growth, but integration costs may continue to impact profitability in the short term.
The success of the Gogo 5G rollout will be crucial for maintaining a competitive edge and attracting new customers.
Effective cost management and debt reduction will be essential for improving financial performance.
Decreased profitability margins and high leverage could constrain future investment and growth opportunities.

Stock Price

Successful integration of Satcom Direct and positive progress on the Gogo 5G rollout could positively impact the stock price.
Continued delays in the Gogo 5G launch or failure to achieve expected synergies from the Satcom Direct acquisition could negatively impact the stock price.
Concerns about the company’s debt levels and profitability could lead to investor caution and downward pressure on the stock price.
Negative trends in key financial ratios, such as decreasing profit margins and increasing leverage, may negatively affect investor sentiment.

SEC Filing Report: Gogo Inc. (10-K) – Fiscal Year Ended December 31, 2024

Executive Summary

This report analyzes Gogo Inc.’s 10-K filing for the fiscal year ended December 31, 2024. Key findings include the acquisition of Satcom Direct, a shift in segment reporting, and a delay in the Gogo 5G rollout. While revenue increased slightly, general and administrative expenses surged due to acquisition-related costs. The company faces risks related to debt, competition, technology development, and regulatory compliance. Overall, a hold rating is suggested, pending successful integration of Satcom Direct and execution of the Gogo 5G strategy.

Company Overview

Gogo Inc. is a provider of in-flight connectivity solutions for business aviation and military/government markets. The recent acquisition of Satcom Direct has expanded Gogo’s service offerings to include global satellite-based communication solutions. The company’s strategy focuses on leveraging its multi-orbit, multi-band capabilities to meet the evolving demands of the in-flight connectivity market.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management highlights the Satcom Direct acquisition as a key strategic move, creating a combined organization with a global footprint and access to the military/government mobility vertical. The MD&A emphasizes the importance of LEO satellite technology and increasing demand for in-flight connectivity. However, the delay in the Gogo 5G launch is a concern. Management’s tone is optimistic, but the report acknowledges significant risks and uncertainties.

Financial Statement Analysis

Revenue

Total revenue increased by 1.7% year-over-year, driven by a 2.8% increase in service revenue. Equipment revenue decreased by 2.7%. The Satcom Direct segment contributed $40.2 million in revenue for the period after the acquisition.

Revenue Type	2024 (Gogo BA)	2024 (Satcom Direct)	2024 (Total)	2023 (Gogo BA)	2022 (Gogo BA)
Service Revenue	$327.06M	$37.21M	$364.27M	$318.02M	$296.33M
Equipment Revenue	$77.45M	$2.99M	$80.44M	$79.56M	$107.74M
Total Revenue	$404.51M	$40.20M	$444.71M	$397.58M	$404.07M

Analysis: The revenue growth is modest, and the decline in equipment revenue is a potential concern. The Satcom Direct contribution is significant but needs to be evaluated over a longer period.

Expenses

Operating expenses increased significantly, primarily due to a 71% surge in general and administrative expenses. This increase is attributed to acquisition and integration-related costs and legal expenses.

Expense Type	2024 (Gogo BA)	2024 (Satcom Direct)	2024 (Total)	2023 (Gogo BA)	2022 (Gogo BA)
Cost of Service Revenue	$74.93M	$24.12M	$99.04M	$69.57M	$64.43M
Cost of Equipment Revenue	$63.72M	$3.84M	$67.56M	$63.38M	$71.47M
Engineering, Design & Development	$43.47M	$1.31M	$44.77M	$36.68M	$29.59M
Sales & Marketing	$36.08M	$1.94M	$38.02M	$29.80M	$25.47M
General & Administrative	$98.23M	$26.84M	$125.07M	$57.28M	$58.20M
Depreciation & Amortization	$15.29M	$3.69M	$18.97M	$16.70M	$12.58M

Analysis: The significant increase in G&A expenses raises concerns about the cost of integrating Satcom Direct. Controlling these costs will be crucial for future profitability.

Profitability

Net income decreased from $145.68 million in 2023 to $13.75 million in 2024. This decline is primarily due to the increase in operating expenses, partially offset by an increase in service revenue.

Key Ratios

Ratio	2024	2023	2022
Average monthly connectivity service revenue per ATG aircraft online	$3,481	$3,380	$3,349

Analysis: ARPU is increasing, indicating improved revenue generation per connected aircraft. This is a positive sign for the core business.

Risk Factors

The 10-K outlines numerous risks, including:

Substantial indebtedness and ability to refinance.
Competition from other in-flight connectivity providers.
Dependence on single-source, third-party satellite network providers.
Delays or failures in developing and deploying Gogo 5G and Gogo Galileo.
Cybersecurity threats and data security breaches.
Regulatory compliance and potential loss of FCC licenses.
Failure to realize the anticipated benefits of the Satcom Direct acquisition.

Analysis: The risk factors highlight the challenges Gogo faces in a rapidly evolving industry. The company’s ability to mitigate these risks will be critical to its long-term success.

Uncommon Metrics

The filing highlights the number of ATG aircraft online, segmented by AVANCE and Gogo Biz systems. This metric provides insight into the adoption of Gogo’s newer technology (AVANCE) and the transition from legacy systems.

Conclusion and Actionable Insights

Gogo Inc.’s 2024 10-K reveals a company in transition. The Satcom Direct acquisition presents significant opportunities for growth and market expansion, but also introduces integration challenges and increased expenses. The delay in the Gogo 5G launch is a setback, and the company faces ongoing competitive and regulatory pressures.

Recommendations:

Monitor the integration of Satcom Direct and its impact on profitability.
Track the progress of the Gogo 5G rollout and its competitive positioning.
Assess the company’s ability to manage its debt and maintain financial flexibility.
Evaluate the impact of regulatory changes on Gogo’s business model.

Overall Assessment: Hold. While Gogo has made strategic moves to position itself for future growth, the near-term outlook is uncertain. Successful execution of its integration and technology strategies is needed to justify a more bullish outlook.

Financial Analysis of Gogo Inc. (GOGO) – 2024

1. Commentary

Gogo Inc. demonstrates mixed financial performance in 2024. Revenue increased slightly, driven by service revenue growth, but this was offset by a decrease in equipment revenue. Net income decreased significantly compared to 2023, although it remained positive. The acquisition of Satcom Direct significantly impacted the balance sheet, increasing assets, liabilities, and goodwill. Adjusted EBITDA decreased, while free cash flow decreased significantly.

2. Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin

Metric: (Total Revenue – Cost of Service Revenue – Cost of Equipment Revenue) / Total Revenue
= ($444,709 – $99,042 – $67,561) / $444,709 = 62.53%
Trend: Previous year’s Gross Profit Margin = ($397,577 – $69,568 – $63,383) / $397,577 = 66.56%. Percentage Change: (62.53% – 66.56%) / 66.56% = -6.05%
Industry: The telecommunications industry typically has gross profit margins ranging from 40% to 70%. Gogo’s margin is within this range but slightly below the higher end.

Operating Profit Margin

Metric: Operating Income / Total Revenue = $51,271 / $444,709 = 11.53%
Trend: Previous year’s Operating Profit Margin = $124,165 / $397,577 = 31.23%. Percentage Change: (11.53% – 31.23%) / 31.23% = -63.08%
Industry: The telecommunications industry typically has operating profit margins ranging from 10% to 25%. Gogo’s margin is at the lower end of this range.

Net Profit Margin

Metric: Net Income / Total Revenue = $13,746 / $444,709 = 3.09%
Trend: Previous year’s Net Profit Margin = $145,678 / $397,577 = 36.64%. Percentage Change: (3.09% – 36.64%) / 36.64% = -91.58%
Industry: The telecommunications industry typically has net profit margins ranging from 5% to 15%. Gogo’s margin is significantly below this range.

Return on Assets (ROA)

Metric: Net Income / Total Assets = $13,746 / $1,229,231 = 1.12%
Trend: Previous year’s ROA = $145,678 / $781,539 = 18.64%. Percentage Change: (1.12% – 18.64%) / 18.64% = -93.99%
Industry: The telecommunications industry typically has ROA ranging from 2% to 8%. Gogo’s ROA is below this range.

Return on Equity (ROE)

Metric: Net Income / Total Stockholders’ Equity = $13,746 / $69,324 = 19.83%
Trend: Previous year’s ROE = $145,678 / $40,725 = 357.69%. Percentage Change: (19.83% – 357.69%) / 357.69% = -94.46%
Industry: The telecommunications industry typically has ROE ranging from 10% to 20%. Gogo’s ROE is within this range.

Earnings Per Share (EPS) – Basic and Diluted

Metric: Basic EPS = $0.11, Diluted EPS = $0.10
Trend: Previous year’s Basic EPS = $1.12, Diluted EPS = $1.09. Percentage Change: Basic EPS = (0.11 – 1.12) / 1.12 = -90.18%, Diluted EPS = (0.10 – 1.09) / 1.09 = -90.83%
Industry: EPS varies widely within the telecommunications industry.

Liquidity

Current Ratio

Metric: Total Current Assets / Total Current Liabilities = $323,093 / $182,028 = 1.77
Trend: Previous year’s Current Ratio = $314,594 / $71,996 = 4.37. Percentage Change: (1.77 – 4.37) / 4.37 = -59.50%
Industry: A current ratio between 1.5 and 2.0 is generally considered healthy. Gogo’s current ratio is within this range.

Quick Ratio (Acid-Test Ratio)

Metric: (Total Current Assets – Inventories) / Total Current Liabilities = ($323,093 – $97,934) / $182,028 = 1.24
Trend: Previous year’s Quick Ratio = ($314,594 – $63,187) / $71,996 = 3.49. Percentage Change: (1.24 – 3.49) / 3.49 = -64.47%
Industry: A quick ratio above 1.0 is generally considered healthy. Gogo’s quick ratio is above 1.0.

Cash Ratio

Metric: (Cash and Cash Equivalents) / Total Current Liabilities = $41,765 / $182,028 = 0.23
Trend: Previous year’s Cash Ratio = $139,036 / $71,996 = 1.93. Percentage Change: (0.23 – 1.93) / 1.93 = -88.08%
Industry: A cash ratio of 0.5 or higher is generally considered good. Gogo’s cash ratio is below this level.

Solvency/Leverage

Debt-to-Equity Ratio

Metric: Total Liabilities / Total Stockholders’ Equity = $1,159,907 / $69,324 = 16.73
Trend: Previous year’s Debt-to-Equity Ratio = $740,814 / $40,725 = 18.19. Percentage Change: (16.73 – 18.19) / 18.19 = -8.03%
Industry: A debt-to-equity ratio of 1.0 to 1.5 is generally considered acceptable. Gogo’s debt-to-equity ratio is very high.

Debt-to-Assets Ratio

Metric: Total Liabilities / Total Assets = $1,159,907 / $1,229,231 = 0.94
Trend: Previous year’s Debt-to-Assets Ratio = $740,814 / $781,539 = 0.95. Percentage Change: (0.94 – 0.95) / 0.95 = -1.05%
Industry: A debt-to-assets ratio below 0.5 is generally considered good. Gogo’s debt-to-assets ratio is very high.

Interest Coverage Ratio (Times Interest Earned)

Metric: Operating Income / Interest Expense = $51,271 / $38,431 = 1.33
Trend: Previous year’s Interest Coverage Ratio = $124,165 / $33,056 = 3.76. Percentage Change: (1.33 – 3.76) / 3.76 = -64.63%
Industry: An interest coverage ratio above 1.5 is generally considered safe. Gogo’s interest coverage ratio is low.

Activity/Efficiency

Inventory Turnover

Metric: Cost of Equipment Revenue / Average Inventory = $67,561 / (($97,934 + $63,187) / 2) = 0.84
Trend: Data not available to calculate previous year’s inventory turnover.
Industry: Inventory turnover varies widely depending on the specific products sold.

Days Sales Outstanding (DSO)

Metric: (Accounts Receivable / Total Revenue) * 365 = ($111,513 / $444,709) * 365 = 91.51 days
Trend: Previous year’s DSO = ($48,233 / $397,577) * 365 = 44.24 days. Percentage Change: (91.51 – 44.24) / 44.24 = 106.85%
Industry: DSO varies by industry and customer payment terms.

Days Payable Outstanding (DPO)

Metric: (Accounts Payable / Cost of Service Revenue + Cost of Equipment Revenue) * 365 = ($67,231 / ($99,042 + $67,561)) * 365 = 147.54 days
Trend: Data not available to calculate previous year’s DPO.
Industry: DPO varies by industry and supplier payment terms.

Asset Turnover

Metric: Total Revenue / Total Assets = $444,709 / $1,229,231 = 0.36
Trend: Previous year’s Asset Turnover = $397,577 / $781,539 = 0.51. Percentage Change: (0.36 – 0.51) / 0.51 = -29.41%
Industry: Asset turnover varies by industry.

Valuation

Price-to-Earnings Ratio (P/E)

Metric: Market Cap / Net Income = (130,918,997 * $6.86) / $13,746,000 = 65.20
Trend: Data not available to calculate previous year’s P/E.
Industry: P/E ratios vary widely.

Price-to-Book Ratio (P/B)

Metric: Market Cap / Total Stockholders’ Equity = (130,918,997 * $6.86) / $69,324,000 = 12.95
Trend: Data not available to calculate previous year’s P/B.
Industry: P/B ratios vary widely.

Price-to-Sales Ratio (P/S)

Metric: Market Cap / Total Revenue = (130,918,997 * $6.86) / $444,709,000 = 2.02
Trend: Data not available to calculate previous year’s P/S.
Industry: P/S ratios vary widely.

Enterprise Value to EBITDA (EV/EBITDA)

Metric: (Market Cap + Total Debt – Cash) / EBITDA = ((130,918,997 * $6.86) + $831,581,000 – $41,765,000) / $67,201,000 = 19.39
Trend: Data not available to calculate previous year’s EV/EBITDA.
Industry: EV/EBITDA ratios vary widely.

Growth Rates

Revenue Growth

Metric: (Current Year Revenue – Previous Year Revenue) / Previous Year Revenue = ($444,709 – $397,577) / $397,577 = 11.86%

Net Income Growth

Metric: (Current Year Net Income – Previous Year Net Income) / Previous Year Net Income = ($13,746 – $145,678) / $145,678 = -90.58%

EPS Growth

Metric: (Current Year EPS – Previous Year EPS) / Previous Year EPS = ($0.11 – $1.12) / $1.12 = -90.18%

Other Relevant Metrics

Adjusted EBITDA

Metric: $142,496
Trend: Previous year’s Adjusted EBITDA = $162,126. Percentage Change: ($142,496 – $162,126) / $162,126 = -12.11%
Significance: Adjusted EBITDA is a non-GAAP metric that Gogo uses to measure its operating performance. It excludes certain non-cash expenses and other items that the company believes are not indicative of its core operating performance.

Free Cash Flow

Metric: $41,942
Trend: Previous year’s Free Cash Flow = $82,687. Percentage Change: ($41,942 – $82,687) / $82,687 = -49.28%
Significance: Free cash flow is a measure of the cash that Gogo generates from its operations after accounting for capital expenditures. It is an important indicator of the company’s financial health and its ability to invest in future growth.