BROOMFIELD, Colo. - Gogo Inc . (NASDAQ: NASDAQ:GOGO), currently valued at $931 million, has concluded the acquisition of Satcom Direct, positioning the company as a unique provider of multi-orbit and multi-band in-flight connectivity for global business aviation and military markets. The $375 million cash transaction, supplemented by five million Gogo shares and potential additional payments, is aimed at expanding Gogo's reach and accelerating its low Earth orbit (LEO) satellite connectivity product sales. According to InvestingPro data, while the stock has seen recent volatility with a 9% decline over the past week, analysts maintain a positive outlook on the company's prospects.
The deal, which includes a potential extra $225 million based on performance over the next four years, was funded through $250 million in debt and $150 million in cash from Gogo's balance sheet. This acquisition is expected to generate $18 million in immediate annual cost savings and increase the company's annual interest expense by approximately $25 million to $27 million. Gogo's net leverage ratio is projected to rise to 3.6x by year-end 2024 but should return to the target range within one to two years. InvestingPro analysis shows the company maintains strong liquidity with a current ratio of 3.58, indicating robust ability to meet short-term obligations.
Chris Moore, the former President of Satcom Direct, has been appointed as the new CEO of Gogo, succeeding Oakleigh Thorne, who now serves as the Executive Chair of the Board. The leadership transition also includes Zachary Cotner taking over as CFO and Mike Begler as Executive Vice President and COO.
The acquisition is anticipated to expedite the deployment of Gogo's Galileo LEO connectivity product by tapping into Satcom Direct's customer base and sales force. Gogo has reiterated its standalone 2024 financial guidance, including total revenue of $400 million to $410 million and adjusted EBITDA of $120 million to $130 million. The combined company is projected to generate pro forma 2024 revenue of around $890 million, with an adjusted EBITDA margin of about 24% and free cash flow exceeding $100 million. With a healthy gross profit margin of 66% and demonstrated profitability over the last twelve months, InvestingPro research suggests the company is well-positioned for future growth. Subscribers can access the comprehensive Pro Research Report for detailed analysis of Gogo's financial health and growth prospects.
Gogo's upcoming product launches remain on schedule, with its Galileo HDX LEO service set to begin shipping by the end of 2024 and the Gogo 5G network expected to launch in the second quarter of 2025.
This strategic move is supported by Gogo's principal shareholders, GTCR and Thorndale Farm Inc., who retained their shares, signaling confidence in the long-term value of the merged entity.
The information provided is based on a press release statement.
In other recent news, Gogo Inc. has been making significant leadership changes as it finalizes its acquisition of Satcom Direct. Christopher Moore, formerly of Satcom Direct, will take over as CEO, while current CEO Oakleigh Thorne transitions to the role of executive chair. Other promotions include Mike Begler as the new chief operating officer and Zachary Cotner as chief financial officer. These changes coincide with the departure of President and COO Sergio Aguirre, who will now serve as a consultant.
In terms of financials, Gogo reported a 3% increase in year-over-year revenue during its third quarter earnings call. Despite a 19% decrease in adjusted EBITDA compared to the previous year, the company saw a rise in demand for its business aviation connectivity services, reflected in a 2% increase in flight demand and a 17% increase in data usage per hour year-over-year. The company anticipates negative free cash flow in Q4 due to strategic investments, with revised 2024 financial guidance projecting adjusted EBITDA of $120 million to $130 million.
As part of its strategic initiatives, Gogo is transitioning to new products like the Gogo Galileo LEO satellite and Gogo 5G systems. The company is also set to acquire Satcom Direct, a move expected to significantly expand its market presence. Gogo's 5G network, targeting North America, is scheduled for launch in late Q2 2025. These are the recent developments in Gogo Inc.'s business strategy and financial performance.
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