Gogo Inc. (NASDAQ:GOGO) Q4 2022 Earnings Call Transcript

Scott Searle: Barry, I’d like to add my congratulations, best of luck going forward in your new endeavors. And Jessi, congrats. I look forward to working with you going forward. Maybe to dive in on the guidance for this year, right, we’ve got some elevated OpEx as a result of 5G pushing out from ’22 to ’23 on top of that investment cycle for GBB going up this year. I was wondering if you could extrapolate that into ’24, right? 5G should start to come down, but I think the GBB cycle continues to increase a little bit. How we should be thinking about that? And also in terms of the guidance this year. I wonder if you could clarify how you’re thinking about equipment gross margins? I think you’ve talked about possibly being a little bit more aggressive, if need be, where gross margins could be under 30%. What do you guys kind of factoring in at the current time in that guidance?

Jessi Betjemann: So for 2024, as we mentioned, ’23 and 2024 are investment nearest for us. So we will have the remaining spend, it’s going to be around the $30 million to $35 million for the remaining spending GBB in 2024 and that’s predominantly OpEx. We will — that’s going to get offset as we see some of the 2022 shipments are coming online in ’23 and will continue to be providing service revenue in 2024, but it still will be an investment year. With regards to the equipment margins, that’s right. So as you noticed our long term targets for the adjusted EBITDA did come down slightly and part of that is reflecting the lower equipment margins to be able to grow our units online and support the advanced penetration strategy that we have. Also included as part of that is continued funding in ED&D, so that we can remain competitive in the outer years where we’re being cautious in that and being able to keep that level of innovation going forward.

Barry Rowan: And I might just add that on the average sales price, to remind people, we’ve often talked about going down market as well as that market. And part of this, I’ll call our segmentation strategy here is also going down market and penetrating down market. And as you go down market, the markets are more price sensitive. And so we sort of factored in some increased promotions or some price reductions on what I’ll call more value oriented advanced form factors down market.

Scott Searle: And I apologize if I missed this on the call. But did you give a unit number that you’re targeting in 2023? And then lastly, if I could, on the ARPA front, you’ve done pretty well on that front, I think, over the course of ’22, it’s going up. A lot of moving parts, moving down market, plus you’ve got more unlimited plans and your 5G coming in to the back of this year. Given the current backdrop, if I look at some of the BA data in North America, utilization is flat to maybe down a little bit, still under penetrated, right? So you’re growing overall units and connected aircraft. But utilization is going down a little bit. I’m wondering, is that having any near term impact on ARPAs in terms of how you’re seeing for utilization, or are customers moving towards higher end plants? And how do you expect 5G to impact that as we start to get into the back of this year and into 2024?

Oakleigh Thorne: By utilization I’m assuming you mean aircraft utilization, not network utilization, but our network utilization is way up. Aircraft utilization and frankly, I think on Gogo equipped aircraft is up slightly. But yes, the trend is sort of leveling off. And then that looks just like it’s kind of a plateau the demand for lift, but that demand is still way over where it was in 2019. And that’s the structural change in the industry that’s driving IFC demand, because 70% of their planes don’t have anything and the people selling those aircraft, there’s more demand now for IFC, given all the changes I talked about in my script in terms of the demographics and the applications people are using, et cetera. In terms of the impact on us have a slight decrease in flight count, industrywide, really not much impact.