Gogo (GOGO): Coming Down To Earth
Key Points
GOGO has been a stagnant business for several years and faces revenue and market share loss to new entrants, including Starlink, as business jet owners wait to see a long-delayed 5G upgrade.
GOGO outsourced the development of this upgrade, and it has been mired in delays. Entering the year, GOGO said the upgraded product would be available in Q3’24, but this timeline was pushed back to Q4’24 in February and “a few months later” than Q4 in May.
Analysts have accepted the near-term inflection story without question: after two years of single-digit revenue growth, analysts expect 2025 and 2026 revenue to grow substantially. The vast majority of GOGO’s revenue lift is expected to come from 5G.
However, disclosures from a recently minted SPAC, a cash-crunched business and key Gogo partner called GCT Holdings,shine a new light on the issue. We think this revelation shows analysts are offside with their estimates and that GOGO has been misleading about the status of its operational launch.
On GOGO’s Q1 earnings call, GOGO’s CEO referenced a “minor chip hardware redesign” that would push out the launch of Gogo 5G “a few months later than the previously stated fourth quarter of 2024.”
We believe this is either ludicrously hopeful or intentionally deceptive. GOGO’s suppliers tell a different story, and GOGO’s supply chain is plagued by many issues that are 1) continuing and 2) not being properly disclosed to investors.
Just a week after GOGO’s Q1 conference call, GOGO’s chip development partner issued a press release suggesting that development was much more delayed than GOGO has admitted.
After the deSPAC, GCTS disclosed it negotiated a release from its development contract with Samsung and instead engaged Alpha Holdings, a tiny $25m market cap Korean-listed company that has been halted for several years.
A conversation with GCTS management in May indicates that it is at odds with GOGO’s timeline. 5G is expected to drive the majority of future GOGO profits, and any pushback will further impair GOGO.
Conversations with GOGO distributors reveal that Starlink is already encroaching on GOGO territory and the competition will only heat up.
Disclosure: Funds managed by Bleecker Street Capital are short Gogo (GOGO). Please see the full disclosure at the end of this report.
Introduction
Gogo has a problem. Its customers have been holding off on purchasing new Gogo products while they wait on its 5G upgrade since the sale of its commercial aviation business in August 2020.
Gogo is still running 3G and 4G technology for its business aviation customers. In 2019 the company announced a 5G upgrade plan that based on recent disclosures from Gogo will be almost five years delayed.
This upgrade cycle should be considered a “bet the farm” moment for Gogo as it faces existential risk from Starlink, which numerous dealer checks show encroaching on Gogo’s turf, despite the “close your eyes and pray” behavior from the incumbents in the business aviation business.
The long-awaited upgrade was due in the fourth quarter of 2024, but Gogo once again delayed the chip, making a small reference to a “minor chip redesign” on the call. The upgrade was pushed into “the first few months of 2025.”
Unfortunately for Gogo, it outsourced the development of the 5G chip to two suppliers. Both are SPACs. One is going through bankruptcy. The other one is offering a materially different timeline than Gogo for the delivering of a chip.
Gogo farmed out the development of the antenna and tower hardware to a 2021 deSPAC called Airspan (MIMOQ), that is now in bankruptcy. In turn, Airspan used GCT Semiconductor (GCTS), a recent deSPAC, to supply Airspan with the 5G chipset for these antennas. This unique setup makes GCT’s execution a critical part of the Gogo 5G upgrade. It’s not going well.
In typical SPAC fashion, GCT had a major issue it did not disclose until after its deSPAC. In Q1 2024, GCT negotiated a release from its development contract with Samsung and instead engaged Korean chip designer Alpha Holdings, a tiny Korean listed chip designer currently facing delisting.
We believe this change could have been the “minor change” that Gogo referenced on its Q1 call.
GCT’s timeline for delivering “material” amounts of 5G chips is the back end of H1 2025, which is at odds both with Gogo’s stated timeline and what analysts are projecting, seemingly taking Gogo management’s word for it and not thinking to ask what the supplier is saying. And, of course, assuming this loss-making nanocap meets its targets after years of misfires.
If GCT can’t deliver chipsets by early next year, then Gogo can’t make its widely awaited product upgrade. Given the length of this delay, we wonder if Starlink doesn’t become a more enticing option for the business jet customers. Expert calls and distributor checks indicate this is happening.
Meanwhile, analysts are still projecting a massive 2025 and 2026 revenue lift from 5G. We think they are offsides, and at odds with Gogo’s supply chain.
Gogo’s History: How Its Tech Became Ancient History
Gogo was founded as Aircell in 1991. The idea for the business was to create a system that would allow phone calls to be made between private jets. In the late 1990s, Aircell won FCC authorization to operate its analog network.
In the mid-2000s, Aircell began a broadband push, winning an FCC auction for a 3MHz air-to-ground spectrum for $31.3 million. This would allow for the creation of a commercial aviation business for Aircell.
Aircell would then rebrand as Gogo, around the time Gogo launched its commercial aviation business in 2008. Its commercial aviation arm provided Internet connectivity for airlines, while its business aviation segment focused on private jet manufacturers and fractional aircraft operators.
While Gogo made a name for itself in the commercial aviation business, in 2020 Gogo was facing a mounting debt load and continued unprofitability, so it sold its commercial aviation business to Intelsat in August 2020. During the pandemic, business aviation rebounded much more quickly than commercial aviation did. At the time, Gogo framed the sale as allowing them to pay down debt and allowing it to “invest in growth opportunities.” It would specifically call out its Gogo 5G initiative as a key growth driver for the future.
Even as of 2020, Gogo’s 5G upgrade was long awaited. Many of Gogo’s current customers are still using 3G technology (first available on iPhones in 2008). Gogo was planning on upgrading to 4G in 2019, but Gogo had used sanctioned Chinese supplier ZTE in its hardware.
Gogo’s Long-Awaited 5G Upgrade: Biggest Thing Hurting Gogo Now
“Probably the biggest thing that is hurting Gogo right now, in my opinion, is that they keep delaying the release of the 5G product. And that is starting to cause credibility issues in the market and people are wondering if Gogo is going to get across the finish line with it.” - Gogo channel partner.
Gogo first announced it was launching a 5G network in May 2019. At the time, Gogo suggested that it would launch the network in 2021, at the same time as the terrestrial networks were rolling out 5G systems on the ground.
Facing a cash crunch, and with the commercial aviation market not responding as fast as the business aviation market was, Gogo sold its commercial aviation business to Intelsat for $400 million in 2020. This would turn Gogo into a pure play on the “business aviation” market, and at the time Gogo framed the sale as allowing them to pay down debt and providing the funding for the company's 5G upgrade.
“The proceeds from the transaction significantly strengthen Gogo's financial position by reducing its net debt position and enhancing the company's ability to invest in growth opportunities, including Gogo 5G.” Source: Gogo Press Release
Gogo’s 5G upgrade has been mired in massive delays, the history of which we lay out below.
Given the shockingly long history of delays, we don’t see how the analyst community can have as much confidence as they do that 2025 will be the year Gogo’s suppliers figure it out.
One of the comments the Gogo CEO made in announcing a delay is worth exploring, in light of the news that Gogo’s supplier GCT exited its Samsung development contract to use Alpha Holdings for the development of its 5G chipset.
In August 2023, Gogo CEO remarked that “5G chips are hard to make.” And they are. We’d point you to this interview with Columbia University professor Harish Krishnaswamy, a chip design expert.
Meanwhile, Gogo’s business has struggled. Despite the topline tailwind provided by FCC rip and replace funding, Gogo’s revenue has been stagnant for the past two years.
But analysts think this time is different: 5G service is forecast to drive the vast majority of Gogo’s future profits. Indeed, the only other major product on Gogo’s roadmap is third-party satellite internet access resold through its own antennas. This makes Gogo’s issues all the more dire.
Gogo’s Supply Chain: Problems All The Way Down
On Gogo’s May 2024 earnings call, CEO Oakleigh Thorne slow-rolled the company’s third 5G launch delay. The delay came via a breezy reference to a “minor chip hardware redesign” that would delay “the launch of Gogo 5G… a few months later than the previously stated fourth quarter of 2024.”
A week after Gogo’s announcement of a hardware redesign, Gogo’s 5G chip development partner put out a press release that suggests chip development is significantly more delayed than Gogo is letting on, putting a meaningful Gogo launch into the second half of 2025, at best.
In trying to reconcile Gogo’s statements with their key supplier’s statements, we uncovered a morass of cash-strapped suppliers that appear to have grossly mismanaged the 5G chip manufacturing process, and that continue to run into problems that Gogo has yet to disclose to investors.
The problems began early. Gogo contracted out 5G chipset development to a company called Airspan Networks. Airspan went public via SPAC during the SPAC heyday, fell well short of financial projections, and is now in bankruptcy court.
Airspan (MIMOQ) is down 99% since its deSPAC and is now in bankruptcy court. It is the integrator for Gogo’s 5G launch.
Airspan Partners With Another Recent deSPAC: “Not a wise choice”
Airspan itself would outsource the Gogo contract to GCT. Per industry checks, GCT is a small player with rock-bottom pricing that has had repeated execution issues.
We wondered why Gogo and Airspan would lean on such a small supplier, but one former Airspan Executive stated that Gogo “is kind of a small fry.” A different former Airspan employee has a similar view: “It’s really not hard to develop 5G pieces. But because there are not many players in the field, they allowed themselves not to fully test the product…. [Airspan was] never really realistic about the timings they are scheduling… I don’t remember one project that was on time.” (That might explain traversing the SPAC IPO to bankruptcy court pipeline in 18 months). The former Airspan employee described GCT as “the cheapest in the market” and stated, “I’m not sure the choice of GCT was a wise one.”
GCT went public in March 2024 through a reverse merger with a Bob Diamond-backed SPAC called Concord Acquisition III. Diamond, who runs Atlas Merchant Capital, is also the Chairman of AGBA, a Hong-Kong based “financial supermarket” that recently announced a $4 billion merger with Triller, an “AI powered open garden technology platform for creators.”
GCT was founded in 1998 and since then racked up $549 million in accumulated deficit with only scant revenue to show for it. Q1’24 revenue was $3.3 million, while the company burned $14.4 million in cash. With $50.2 million in debt against only $16 million in cash, mostly from the SPAC transaction, GCT appears to be a financially stressed company.
GCT is a company facing a cash crunch. It has pledged almost the entirety of its receivables balance, $4.9 million, to Anapass, a major shareholder of GCT, in exchange for third-party loan guarantees.
GCT says that it is relying on its $16m in SPAC proceeds to fund the business, after which it has a $50 million equity sale agreement with B Riley in place.
Gogo must be aware of the issues at GCT. Gogo made a $5 million loan to GCT in the form of a convertible note at 5% interest. The note is deeply underwater, with a $10 strike price, and appears to simply be a desperate double-down from Gogo, which seems to have chosen subsidizing its supplier rather than go through the process of making a last minute switch.
Perhaps in an effort to hide the subsidization of key suppliers, Gogo did not disclose the loan to GCT by name in filings, instead disclosing that:
“On February 26, 2024, Gogo invested $5 million in a convertible note offering (“Investment in Convertible Note”). The Investment in Convertible Note accrues interest at 5% per annum, payable upon maturity of the note or upon conversion, and matures two years after the date of issuance. We have elected to measure our Investment in Convertible Note using the fair value option and record changes in fair value, including accrued interest, in Other (income) expense, net on the Unaudited Condensed Consolidated Statements of Operations.”
Gogo recognized a $13.1 million fair value gain on the convertible note balance in Q1 as GCT squeezed to $33 per share after the deSPAC, a move it would give right back.
Even though Gogo did not name GCT directly, Gogo’s results benefited: the company recorded a $13.1 million fair value gain on the convertible note balance in Q1 as GCT squeezed to $33.00 per share after the deSPAC. The fair value gain was 43% of Gogo’s net income in the quarter.
GCT Has Its Own Problems It Did Not Disclose During SPAC Process
GCT had its own major business disruption during its SPAC process, but in true SPAC fashion, it did not disclose this disruption until much later.
In February, GCT terminated its long-standing 5G chip design agreement with Samsung and signed a new agreement with Alpha Holdings, a $27 million market cap semiconductor designer whose stock has been halted for over a year on the Korean exchange as it faces delisting.
This change coincided roughly with when Gogo claimed there was an “issue” necessitating a “minor chip hardware redesign.” If indeed this was the problem Gogo referenced on its Q1 call, we think it is a bigger deal than a minor issue. The downgrading of GCT’s only named development partner to an unknown nanocap currently facing delisting is a major change is one we think was born of desperation.
GCT expected its 5G chipsets to be “available for broad sampling to customers during the fourth quarter of 2024, with volume shipments commencing in the first half of 2025.”
We spoke to GCT management in May, and they suggested that “material” revenue would only come in at the end of the first half of 2025.
No commercial production until the first half of 2025 suggests that Gogo won’t be able to launch 5G before the second half of 2025 at the earliest. This assumes no further delays caused by Alpha Holdings, GCT, Airspan, or Gogo itself. Given the number of moving pieces, and the turmoil several of these companies are in, it would seem that achieving this would be difficult.
Because of GCT’s delays and the long(er) tenure of some of its other customer relationships, we wonder if Airspan will get its 5G chipset orders filled from GCT faster than, say, Verizon.
When we asked about Gogo, GCT called Gogo a “very small-scale” customer for them.
Another different former Airspan employee had a similar view of the Gogo-Airspan-GCT relationship:
“Its really not hard to develop 5G pieces. But because there are many players in the field, they allowed themselves not to fully test the product… [Airspan was] never really realistic about the timings they are scheduling… I don’t remember one project that was on time.”
Will history change this time? We think not.
Starlink Is Rapidly Encroaching On Gogo’s Turf
“Starlink is absolutely going to disrupt the whole [business aviation] market as a whole. I have never seen a product come to market with so much interest.” – Executive at a major Gogo dealer
While Gogo has struggled to get its 5G chip in the skies, competitors have been hard at work. Starlink in particular, while once dismissed by Gogo management, has started making serious inroads into a market that was once Gogo’s.
Starlink has received Supplemental Type Certificates (STCs) from the FCC allowing it to run on business jets including the Gulfstream GIV and GV as well as the Bombardier BD-700. Starlink has additional STCs in the works for Gulfstream, Bombardier, Cessna, Dassault, Embraer, and Pilatus jets. To make matters worse for Gogo, Starlink is pricing its internet service at a discount to Gogo’s satellite plan.
An executive at a major Gogo dealer said, “Starlink is absolutely going to disrupt the whole BA industry as a whole. I have never seen a product come to market with so much interest where we posted that we are a Starlink dealer, and we are accepting RFQs. To date, I have about 65-plus RFQs for Starlink in the last three months, which is absolutely massive, massive numbers.”
That executive also opined that Gogo’s satellite resale solution, Galileo, will take much longer to come to market than Gogo is suggesting. This is a critical fact, as analysts are effectively touting a Q4 launch. If Galileo takes longer to come to market, then this leaves the door even further open for Starlink in the meantime.
“If Starlink comes up with a technology, an antenna I could fit on medium jet or light jets, everyone is in trouble. It's going to be a very serious issue. I'm very candid with Gogo. I talked to them five, six times a week… They do have a product coming down the line, Galileo, which I'm sure you're aware of. But it's just not out yet. So, in the next two years, Starlink is gaining territory in this market while they have no solution to fill the void as a Gogo customer… there are rumors out there that [Starlink] are working on something two to three years out, that they will be able to install on a smaller airframe.”
These channel checks also bring into question the reality of a 2025 Galileo launch, something Gogo has hung its hat on as the 5G delays have mounted. Yet this executive opined that Galileo will take longer than Gogo and the analyst community are expecting, and will also require a major investment from larger installation shops. This executive thinks the first half of 2026 is a more realistic timeline for launch.
“They're saying 2025, I think that's ambitious… They're just now vetting the STC process for donor aircraft to install those antennas on. So, one thing is the proof of concept on an airplane. Another thing is starting the STC process to get STCs out on a different airframe. And that's a very big misconception well for them. “Galileo will be out in 2025”… okay, but there's no STCs; that size antenna needs an STC on every single airframe. You can't do FAA field approval. So, what that does is now they're going to lean on the larger shops, the top-tier shops to invest a significant amount of time and resources to developing those STCs after the product is even out. So, it will cause a delay. I think it’s more realistic to assume [installations in] Q1, Q2 2026.”
Doubt among Gogo customers appears to be so great that many are debating whether to take Gogo’s product, even with massive incentives. According to the same dealer, “So on December 31, 2025, Gogo is shutting down their legacy air-to-ground network, which has been around since 2008 [and] they're forcing everybody to migrate to their new LTE network… as a result of that early adopting this process, you will get either $25,000 or $50,000 back, which has been a very good selling point… There's probably 2,300 aircraft still need to get upgraded from the legacy to the new events. Those are the customers that are entitled to that rebate, but those are the customers now pausing and saying, wait a second, should I go to Gogo's advanced new network? Or should I wait and hold for Starlink? That's what people are going back and forth on.”
As a sales executive at another dealer said, “I’m probably selling as much Gogo as I am Starlink, but I’m not quoting as much Gogo as I was a year ago.”
Conclusion
Gogo’s 5G upgrade has been plagued with delays and issues. Now, with the homework due, and analysts including substantial 5G revenue in 2025. One key Gogo 5G supplier is in bankruptcy and GCT doesn’t expect material revenue from the launch of its 5G chip until late in the first half of 2025. GCT is cash-strapped, and its development partner was once Samsung, now a tiny Korean chip maker currently facing delisting. Gogo dealers are openly wondering if Gogo’s 5G upgrade will ever come, while the analyst community is unaware of the issues both in Gogo’s supply chain and the encroaching competition from Starlink. A bet on Gogo right now is a bet on four things:
Can a bankrupt SPAC integrate a product on time?
Can another cash-strapped SPAC deliver a 5G chipset on time after switching development partners?
Will Gogo then be able to get it to customers and drive meaningful revenue with time running out?
And will Starlink fail to secure major market share with a faster product offering whose cost continues to drop?
We think “probably not” and as such are short Gogo, as we believe a thorough review of the competitive landscape and its suppliers reveals it continues to overpromise and underdeliver.
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