Thread by @DPogrebinsky

$gogo why I’m long:
$gogo sold it’s CA biz for $400M in cash plus 17M/yr rev guarantee. Before sale company had 117M cash and 1.126B debt paying 120M a year in interest expense however the CA biz was where all the losses were. The remaining BA biz is actually profitable

Last q $gogo broke out that BA biz had operating income of 22M for the q, after subtracting 31M in interest expense they lost 9M. After sale of Ca biz they now have 460M in cash which they plan to pay down debt & refinance the 10% interest. They estimate this will save 50M/yr $

$gogo said they plan to refinance debt before May (which is why I bought May calls) & that its their top priority. $gogo has history of outperforming timelines, they said CA biz sale would happen before end of 1q and they finished it in Dec, expect refinance well before May

What would refinancing debt do? Through 9 months this yr excluding CA biz (with COVID impact on BA biz) $gogo had 60.5M operating income off of 192M in rev! Let that sink in, their ebitda margins of 45% are HUGE & are being masked by all the debt payments!

Again that 66M operating income INCLUDES covid impact, imagine what happens when COVID goes away & now also subtract out 50M of debt & $gogo would be solidly profitable this yr even with COVID. But that’s not all the benefits $gogo has.

benefits:
1) $gogo has racked up 800M of NOL tax credits which they can use against future positive earnings heavily benefiting them against years of positive earnings...
2) 17M of rev guarantee they got for the next 10 yrs for their sale of CA biz

$gogo 865M mrkt cap 5x EV value with 45% ebitda margins off revs of 300M next yr generating 50M net income after refinancing or a 15PE for biz with 70% gross margins & 80% of total revs being subs with over 90% retention. I think it’s worth 50% higher post refinance & 2x in a yr

As always do your due diligence because I could be super wrong!

Failed to mention that weeks ago S&P already upgraded $gogo debt rating which is what they needed to refinance at much better rates, given that we KNOW they will be able to do so and perhaps even outperform their 50M interest expense savings they indicated.

For transparency in addition to the May calls I also own a sizable long stock position in $gogo

Last point. $gogo short interest is 44% as of 12/15... that’s a lot of fuel to the fire and could cause stock to vastly overshoot my targets