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Gogo Announces Second Quarter 2016 Financial Results

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Gogo Announces Second Quarter 2016 Financial Results


Record quarterly revenue up 22 percent to $148 million
2Ku is now flying on three airlines

CHICAGO, Aug. 4, 2016 /PRNewswire/ -- Gogo Inc. (Nasdaq: GOGO), the global leader in providing broadband connectivity solutions and wireless entertainment to the aviation industry, today announced its financial results for the quarter ended June 30, 2016.

GogoLOGO.

Second Quarter 2016 Highlights

  • Revenue increased to $147.5 million, up 22% from $121.2 million in Q2 2015.  Service revenue increased to $127.6 million, up 26% from $101.4 million in Q2 2015.
  • Net loss increased to $40.2 million ($0.51 per share) from $24.8 million in Q2 2015 ($0.32 per share), driven by a $15.4 million ($0.20 per share) charge for the extinguishment of debt.
  • Adjusted EBITDA increased to $14.4 million, up 33% from $10.8 million in Q2 2015.
  • Approximately 600 new 2Ku aircraft were awarded, bringing total 2Ku aircraft awards to more than 1,200.
  • Gogo issued $525 million of senior secured notes, repaid its existing senior term credit facility and ended Q2 with cash and cash equivalents of $508.6 million.
  • Capital expenditures of $47.6 million were up from $37.4 million in Q2 2015. Cash CAPEX of $39.8 million was up from $22.8 million in Q2 2015, primarily due to increased 2Ku airborne equipment purchases.

"We are very pleased to announce that our next generation 2Ku technology is now flying on Aeromexico, Delta, and Virgin Atlantic aircraft," said Gogo's President and CEO Michael Small. "We are focused on installing our 1,200 2Ku awarded aircraft, continuing our global expansion, and winning new international airlines."

Second Quarter 2016 Business Segment Financial Results

Commercial Aviation - North America (CA-NA)

  • Total revenue increased to $92.7 million, up 23% from $75.6 million in Q2 2015.
  • Aircraft online increased to 2,596, up 96 aircraft from March 31, 2016. This segment had approximately 200 net new awarded but not yet installed aircraft as of June 30, 2016.
  • Average monthly service revenue per aircraft equivalent, or ARPA, increased to $11,483, up 2% year-over-year, driven primarily by increased passenger usage. Q2 2016 ARPA increased an estimated 14% year-over-year excluding aircraft added since the beginning of 2015, which primarily include regional jets and aircraft operated by new airline partners.
  • Segment profit increased to $18.6 million, up 66% from $11.2 million in Q2 2015. Segment profit as a percentage of segment revenue was 20% in Q2 2016, up from 15% in Q2 2015.

Business Aviation (BA)

  • Service revenue increased to $32.4 million, up 36% from $23.8 million in Q2 2015, driven primarily by a 20% increase in ATG systems online and a 14% increase in average monthly service revenue per ATG unit online.
  • Equipment revenue decreased to $16.7 million from $19.5 million in Q2 2015, driven primarily by a decrease in satellite and ATG units shipped, consistent with trends in the business aviation market.
  • Total segment revenue increased to $49.1 million, up 13% from $43.3 million in Q2 2015.
  • Segment profit increased to $19.0 million, up 8% from $17.5 million in Q2 2015. Segment profit as a percentage of segment revenue was 39% in Q2 2016, down from 41% in Q2 2015.

Commercial Aviation - Rest of World (CA-ROW)

  • Total revenue increased to $5.7 million, up 149% from $2.3 million in Q2 2015, driven primarily by an increase in aircraft online and higher revenue per aircraft.
  • Aircraft online increased to 249, up 12 aircraft from March 31, 2016. This segment had approximately 500 net new awarded but not yet installed aircraft as of June 30, 2016.
  • ARPA increased to $12,065, up 30% year-over-year, primarily driven by increased passenger usage.
  • Segment loss increased to $23.3 million from $18.0 million in Q2 2015, primarily due to higher engineering, design and development expenses related to the roll out of 2Ku and increased satellite capacity costs.

Recent Developments

  • New awards from Delta Air Lines, International Airlines Group and American Airlines have increased total 2Ku awards to more than 1,200. 2Ku is now installed on 10 aircraft.
  • Gogo's 2Ku technology enabled Aeromexico to offer its passengers free in-flight streaming of Netflix content.
  • Delta Private Jets announced it will equip its fleet of more than 70 aircraft with Gogo Biz 4G, which provides in-flight connectivity, Gogo Vision and Gogo Text and Talk and enables real time in-flight applications that include weather and flight tracker.
  • Gogo partnered with leading aerospace software specialist PACE, enabling real-time analysis of flight data metrics to drive fuel savings and improve airlines' on-time performance.
  • Gogo Business Aviation partnered with The Weather Company to enable real-time turbulence reports and alerts to pilots, furthering the realization of the connected aircraft.
  • Gogo Business Aviation partnered with Garmin, JetFuelX and FltPlan.com to give pilots of light jets and turboprops the ability to lower fuel costs by giving them the information needed to adjust flight plans due to changing weather conditions.

Business Outlook

For the full year ending December 31, 2016, we are raising our installation guidance and expect 2016 consolidated revenue to be above the midpoint of our guidance range.

Accordingly, our updated guidance is as follows:

  • In-flight connectivity installations
    • CA-NA net new installations of approximately 300 aircraft in 2016, including approximately 600 ATG-4 aircraft installations and upgrades
    • CA-ROW net new installations of approximately 75 aircraft in 2016 and more than 200 aircraft in 2017
    • 2Ku installations of 75 to 100 aircraft in 2016 and 350 to 450 aircraft in 2017
  • Total revenue of $575 million to $595 million
    • CA-NA revenue of $350 million to $365 million
    • BA revenue of $190 million to $205 million
    • CA-ROW revenue of $25 million to $30 million
  • Adjusted EBITDA1 of $55 million to $65 million
  • Capital expenditures of $150 million to $185 million and Cash CAPEX of $110 million to $135 million in 2016
  • Capital expenditures of $220 million to $265 million and Cash CAPEX of $140 million to $165 million in 2017

"We expect 2016 consolidated revenue to be above the midpoint of our guidance range following strong year-to-date financial performance," said Gogo's Executive Vice President and CFO, Norman Smagley. "With more than $500 million of cash on the balance sheet, we are well positioned to more aggressively roll out 2Ku and continue our international expansion."

(1)  See Non-GAAP Financial Measures below

Conference Call

The second quarter conference call will be held on August 4th, 2016 at 8:30 a.m. ET. A live webcast of the conference call, as well as a replay, will be available online on the Investor Relations section of the company's website at http://ir.gogoair.com. Participants can also access the call by dialing (844) 464-3940 (within the United States and Canada) or (765) 507-2646 (international dialers) and entering conference ID number 54378034.

Non-GAAP Financial Measures

We report certain non-GAAP financial measurements, including Adjusted EBITDA and Cash CAPEX in the supplemental tables below.  Management uses Adjusted EBITDA and Cash CAPEX for business planning purposes, including managing our business against internally projected results of operations and measuring our performance and liquidity. These supplemental performance measures also provide another basis for comparing period to period results by excluding potential differences caused by non-operational and unusual or non-recurring items. These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies. Adjusted EBITDA and Cash CAPEX are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance with Adjusted EBITDA or liquidity with Cash CAPEX, as applicable, investors should (i) evaluate each adjustment in our reconciliation to net loss attributable to common stock, and the explanatory footnotes regarding those adjustments, (ii) use Adjusted EBITDA in addition to, and not as an alternative to, net loss attributable to common stock as a measure of operating results, and (iii) use Cash CAPEX in addition to, and not as an alternative to, consolidated capital expenditures when evaluating our liquidity. No reconciliation of the forecasted range for Adjusted EBITDA for fiscal 2016 is included in this release because we are unable to quantify certain amounts that would be required to be included in the corresponding GAAP measure without unreasonable efforts and we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors. In particular, we are not able to provide a reconciliation for the forecasted range of Adjusted EBITDA due to variability in the timing of aircraft installations and deinstallations impacting depreciation expense and amortization of deferred airborne leasing proceeds.

Cautionary Note Regarding Forward-Looking Statements

Certain disclosures in this press release and related comments by our management include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements include, without limitation, statements regarding our business outlook, industry, business strategy, plans, goals and expectations concerning our market position, international expansion, future technologies, future operations, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words "anticipate," "assume," "believe," "budget," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will," "future" and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this press release.

Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: the loss of, or failure to realize benefits from, agreements with our airline partners or any failure to renew any existing agreements upon expiration or termination; the failure to maintain airline satisfaction with our equipment or our service; any inability to timely and efficiently roll out our 2Ku service or other components of our technology roadmap for any reason, including regulatory delays or failures, or delays on the part of any of our suppliers, some of whom are single source, or the failure by our airline partners to roll out equipment upgrades, new services or adopt new technologies in order to support increased network capacity demands; the timing of deinstallation of our equipment from aircraft, including deinstallations resulting from aircraft retirements and other deinstallations permitted by certain airline contract provisions; the loss of relationships with original equipment manufacturers or dealers; our ability to develop or purchase ATG and satellite network capacity sufficient to accommodate current and expected growth in passenger demand in North America and internationally as we expand; our reliance on third-party suppliers, some of whom are single source, for satellite capacity and other services and the equipment we use to provide services to commercial airlines and their passengers and business aviation customers; unfavorable economic conditions in the airline industry and/or the economy as a whole; our ability to expand our international or domestic operations, including our ability to grow our business with current and potential future airline partners; an inability to compete effectively with other current or future providers of in-flight connectivity services and other products and services that we offer, including on the basis of price, service performance and line-fit availability; our ability to successfully develop and monetize new products and services such as Gogo Vision, Gogo Text & Talk and Gogo TV, including those that were recently released, are currently being offered on a limited or trial basis, or are in various stages of development; our ability to deliver products and services, including newly developed products and services, on schedules consistent with our contractual commitments to customers; the effects, if any, on our business of past or future airline mergers, including the merger of American Airlines and U.S. Airways; the failure of our equipment or material defects or errors in our software resulting in recalls or substantial warranty claims; a future act or threat of terrorism, cyber-security attack or other events that could result in a prohibition or restriction of the use of Wi-Fi enabled devices on aircraft; a revocation of, or reduction in, our right to use licensed spectrum, the availability of other air-to-ground spectrum to a competitor or the repurposing by a competitor of other spectrum for air-to-ground use; our use of open source software and licenses; the effects of service interruptions or delays, technology failures and equipment failures or malfunctions arising from defects or errors in our software or defects in or damage to our equipment; the limited operating history of our CA-NA and CA-ROW segments; increases in our projected capital expenditures due to, among other things, unexpected costs incurred in connection with the roll-out of our technology roadmap or our international expansion; compliance with U.S. and foreign government regulations and standards, including those related to regulation of the Internet, including e-commerce or online video distribution changes, and the installation and operation of satellite equipment and our ability to obtain and maintain all necessary regulatory approvals to install and operate our equipment in the United States and foreign jurisdictions; our, or our technology suppliers', inability to effectively innovate; costs associated with defending pending or future intellectual property infringement and other litigation or claims; our ability to protect our intellectual property; breaches of the security of our information technology network, resulting in unauthorized access to our customers' credit card information or other personal information; any negative outcome or effects of pending or future litigation; limitations and restrictions in the agreements governing our indebtedness and our ability to service our indebtedness; our ability to obtain additional financing on acceptable terms or at all; fluctuations in our operating results; our ability to attract and retain customers and to capitalize on revenue from our platform; the demand for and market acceptance of our products and services; changes or developments in the regulations that apply to us, our business and our industry; the attraction and retention of qualified employees, including key personnel; the effectiveness of our marketing and advertising and our ability to maintain and enhance our brands; our ability to manage our growth in a cost-effective manner and integrate and manage acquisitions; compliance with anti-corruption laws and regulations in the jurisdictions in which we operate, including the Foreign Corrupt Practices Act and the (U.K.) Bribery Act 2010; restrictions on the ability of U.S. companies to do business in foreign countries, including, among others, restrictions imposed by the U.S. Office of Foreign Assets Control; difficulties in collecting accounts receivable. 

Additional information concerning these and other factors can be found under the caption "Risk Factors" in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission

Any one of these factors or a combination of these factors could materially affect our financial condition or future results of operations and could influence whether any forward-looking statements contained in this report ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. All forward-looking statements speak only as of the date made and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

About Gogo

With more than two decades of experience, Gogo is the leader in in-flight connectivity and wireless entertainment services for commercial and business aircraft around the world.  Gogo connects aircraft, providing its aviation partners with the world's most powerful network and platform to help optimize their operations.  Gogo's superior technologies, best-in-class service, and global reach help planes fly smarter, our aviation partners perform better, and their passengers travel happier.

Today, Gogo has partnerships with 16 commercial airlines and is now installed on more than 2,800 commercial aircraft. Approximately 7,000 business aircraft are also flying with its solutions, including the world's largest fractional ownership fleets. Gogo also is a factory option at every major business aircraft manufacturer.  Gogo has more than 1,000 employees and is headquartered in Chicago, IL, with additional facilities in Broomfield, CO, and various locations overseas. Connect with us at www.gogoair.com and business.gogoair.com.

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)


















For the Three Months




For the Six Months



Ended June 30,




Ended June 30,



2016




2015




2016




2015

Revenue:















Service revenue

$

127,587



$

101,395



$

246,307



$

196,801

Equipment revenue


19,952




19,796




42,978




39,901

Total revenue


147,539




121,191




289,285




236,702
















Operating expenses:















Cost of service revenue (exclusive of items shown below)


53,396




45,228




108,250




91,560

Cost of equipment revenue (exclusive of items shown below)


12,477




10,266




26,225




19,792

Engineering, design and development


24,718




18,816




46,366




37,432

Sales and marketing


16,750




13,263




31,492




25,077

General and administrative(1)


22,388




21,373




43,377




41,609

Depreciation and amortization


24,906




20,813




49,263




39,590

Total operating expenses


154,635




129,759




304,973




255,060

Operating loss


(7,096)




(8,568)




(15,688)




(18,358)
















Other (income) expense:















Interest income


(166)




(11)




(212)




(16)

Interest expense


17,557




15,801




33,853




25,896

Loss on extinguishment of debt


15,406




-




15,406




-

Adjustment of deferred financing costs


77




-




(792)




-

Other (income) expense


3




(8)




(171)




(90)

Total other expense


32,877




15,782




48,084




25,790
















Loss before income taxes


(39,973)




(24,350)




(63,772)




(44,148)

Income tax provision


221




422




528




716

Net loss

$

(40,194)



$

(24,772)



$

(64,300)



$

(44,864)
















Net loss attributable to common stock per share—basic and diluted

$

(0.51)



$

(0.32)



$

(0.82)



$

(0.56)
















Weighted average number of shares—basic and diluted


78,849




78,478




78,793




80,770































(1)

Note:  Previously reported operating expenses for the quarter ended June 30, 2015 have been revised to reflect the classification of incentive compensation expense and stock-based compensation expense in the same operating expense line items as the related base cash compensation. There was no change in total operating expenses, net loss or net loss per share, or to the consolidated balance sheets or statements of comprehensive loss, cash flows or stockholders' equity (deficit). See Note 1, "Basis of Presentation" in our Quarterly Report on Form 10-Q for the period ended June 30, 2016 for additional information on these revisions.

 

Gogo Inc. and Subsidiaries


Unaudited Condensed Consolidated Balance Sheets


(in thousands, except share and per share data)












June 30,




December 31,




2016




2015


Assets








Current assets:








Cash and cash equivalents

$

508,601



$

366,833


Accounts receivable, net of allowances of $497 and $417, respectively


65,107




69,317


Inventories


25,092




20,937


Prepaid expenses and other current assets


23,379




10,920


Total current assets


622,179




468,007










Non-current assets:








Property and equipment, net


467,105




434,490


Intangible assets, net


82,535




78,823


Goodwill


620




620


Long-term restricted cash


7,535




7,535


Other non-current assets


25,353




14,878


Total non-current assets


583,148




536,346


Total assets

$

1,205,327



$

1,004,353










Liabilities and Stockholders' equity








Current liabilities:








Accounts payable

$

22,882



$

28,189


Accrued liabilities


85,131




88,690


Accrued airline revenue share


14,717




13,708


Deferred revenue


26,521




24,055


Deferred airborne lease incentives


25,734




21,659


Current portion of long-term debt and capital leases


2,752




21,277


Total current liabilities


177,737




197,578










Non-current liabilities:








Long-term debt


790,951




542,573


Deferred airborne lease incentives


135,425




121,732


Deferred tax liabilities


7,845




7,425


Other non-current liabilities


83,358




68,850


Total non-current liabilities


1,017,579




740,580


Total liabilities


1,195,316




938,158










Stockholders' equity








Common stock


9




9


Additional paid-in-capital


868,883




861,243


Accumulated other comprehensive loss


(1,712)




(2,188)


Accumulated deficit


(857,169)




(792,869)


Total stockholders' equity


10,011




66,195


Total liabilities and stockholders' equity

$

1,205,327



$

1,004,353


 


Gogo Inc. and Subsidiaries


Unaudited Condensed Consolidated Statements of Cash Flows


(in thousands)








For the Six Months




Ended June 30,




2016




2015


Operating activities:








Net loss

$

(64,300)



$

(44,864)


Adjustments to reconcile net loss to cash provided by operating activities:








Depreciation and amortization


49,263




39,590


Loss on asset disposals/abandonments


924




1,148


Deferred income taxes


420




413


Stock-based compensation expense


7,986




6,299


Loss on extinguishment of debt


15,406




-


Amortization of deferred financing costs


2,163




1,889


Accretion of debt discount


8,508




4,500


Adjustment of deferred financing costs


(792)




-


Changes in operating assets and liabilities:








Accounts receivable


4,409




1,580


Inventories


(4,155)




(823)


Prepaid expenses and other current assets


(12,428)




(242)


Accounts payable


(1,598)




(5,725)


Accrued liabilities


(2,873)




11,467


Deferred airborne lease incentives


8,374




15,912


Deferred revenue


14,235




12,753


Deferred rent


443




18,714


Accrued airline revenue share


1,005




(796)


Accrued interest


3,012




3,943


Other non-current assets and liabilities


(5,641)




192


Net cash provided by operating activities


24,361




65,950










Investing activities:








Proceeds from the sale of property and equipment


1




-


Purchases of property and equipment


(71,048)




(85,655)


Acquisition of intangible assets—capitalized software


(13,993)




(8,590)


Decrease (increase) in restricted cash


(14)




19


Net cash used in investing activities


(85,054)




(94,226)










Financing activities:








Proceeds from the issuance of senior secured notes


525,000




-


Payments on amended and restated credit agreement


(310,132)




(5,283)


Proceeds from the issuance of convertible notes


-




361,940


Forward transactions


-




(140,000)


Payment of issuance costs


(10,610)




(10,357)


Payments on capital leases


(1,218)




(966)


Stock-based compensation activity


(346)




3,706


Net cash provided by financing activities


202,694




209,040










Effect of exchange rate changes on cash


(233)




117










Increase in cash and cash equivalents


141,768




180,881


Cash and cash equivalents at beginning of period


366,833




211,236


Cash and cash equivalents at end of period

$

508,601



$

392,117


 

Gogo Inc. and Subsidiaries


Supplemental Information – Key Operating Metrics


Commercial Aviation North America




















For the Three Months




For the Six Months




Ended June 30,




Ended June 30,




2016




2015




2016




2015


















Aircraft online (at period end)


2,596




2,249




2,596




2,249


Aircraft equivalents (average during the period)


2,622




2,233




2,567




2,194


Average monthly service revenue per aircraft equivalent (ARPA)

$

11,483



$

11,243



$

11,314



$

11,204


Gross passenger opportunity (GPO) (in thousands)


100,458




89,741




190,461




164,125


Total average revenue per session (ARPS)

$

12.94



$

12.74



$

12.99



$

12.23


Connectivity take rate


6.3

%



5.9

%



6.4

%



6.5

%

















Commercial Aviation Rest of World




















For the Three Months




For the Six Months




Ended June 30,




Ended June 30,




2016




2015




2016




2015


















Aircraft online (at period end)


249




148




249




148


Aircraft equivalents (average during the period)


196




124




186




113


ARPA

$

12,065



$

9,255



$

11,851



$

8,451


















 

  • Aircraft online. We define aircraft online as the total number of commercial aircraft on which our equipment is installed and service has been made commercially available as of the last day of each period presented.  We assign aircraft to CA-NA or CA-ROW at the time of contract signing as follows: (i) all aircraft operated by North American airlines and under contract for ATG or ATG-4 service are assigned to CA-NA, (ii) all aircraft operated by North American airlines and under a contract for satellite service are assigned to CA-NA or CA-ROW based on whether the routes flown by such aircraft under the contract are anticipated to be predominantly within or outside of North America at the time the contract is signed, and (iii) all aircraft operated by non-North American airlines and under contract are assigned to CA-ROW.
  • Aircraft equivalents. We define aircraft equivalents for a segment as the total number of commercial aircraft online (as defined above) multiplied by the percentage of flights flown within the scope of that segment, rounded to the nearest whole aircraft and expressed as an average of the month end figures for each month in such period.  This methodology takes into account the fact that during a particular period certain aircraft may fly routes outside the scope of the segment to which they are assigned for purposes of the calculation of aircraft online.
  • Average monthly service revenue per aircraft equivalent ("ARPA").  We define ARPA for a segment as the aggregate service revenue plus monthly service fees included as a reduction to cost of service revenue for that segment for the period divided by the number of months in the period, divided by the number of aircraft equivalents (as defined above) for that segment during the period. Prior to the three month period ended March 31, 2016, aircraft online were used as the denominator to calculate ARPA. Beginning with the three month period ended March 31, 2016, ARPA is calculated by using aircraft equivalents as the denominator. We believe the revised ARPA methodology more accurately reflects ARPA by segment because it better reflects the number of aircraft that actually generated the revenue while flying within the scope of each segment during a specific period. ARPA for the CA-NA segment for the three and six month periods ended June 30, 2015 was originally reported as $11,324 and $11,260, respectively, and has been revised to $11,243 and $11,204, respectively, to reflect the change in methodology. 
  • Gross passenger opportunity ("GPO"). We define GPO as the aggregate number of passengers who board commercial aircraft on which Gogo service has been available during the period presented. When available directly from our airline partners, we aggregate actual passenger counts across flights on Gogo-equipped aircraft.  When not available directly from our airline partners, we estimate GPO.  Estimated GPO is calculated by first estimating the number of flights occurring on each Gogo-equipped aircraft, then multiplying by the number of seats on that aircraft, and finally multiplying by a seat factor that is determined from historical information provided to us in arrears by our airline partners.  The estimated number of flights is derived from real-time flight information provided to our front-end systems by Air Radio Inc. (ARINC), direct airline feeds and supplementary third-party data sources.  These aircraft-level estimates are then aggregated with actual airline-provided passenger counts to obtain total GPO. 
  • Total average revenue per session ("ARPS"). We define ARPS as revenue from Passenger Connectivity, excluding non-session related revenue, divided by the total number of sessions during the period. A session, or a "use" of Passenger Connectivity, is defined as the use by a unique passenger of Passenger Connectivity on a flight segment. Multiple logins or purchases under the same user name during one flight segment count as only one session.
  • Connectivity take rate. We define connectivity take rate as the number of sessions during the period expressed as a percentage of GPO. Included in our connectivity take-rate calculation are sessions for which we did not receive revenue, including those provided pursuant to free promotional campaigns and, to a lesser extent, as a result of complimentary passes distributed by our customer service representatives for unforeseen technical issues. For the periods listed above, the number of sessions for which we did not receive revenue was not material.

 

Business Aviation




















For the Three Months




For the Six Months




Ended June 30,




Ended June 30,




2016




2015




2016




2015


















Aircraft online (at period end)
















Satellite


5,458




5,424




5,458




5,424


ATG


3,795




3,170




3,795




3,170


Average monthly service revenue per aircraft online
















Satellite

$

226



$

179



$

220



$

174


ATG


2,529




2,227




2,514




2,199


Units Shipped
















Satellite


108




155




241




298


ATG


198




227




405




461


Average equipment revenue per unit shipped (in thousands)
















Satellite

$

44



$

41



$

43



$

40


ATG


55




55




56




55


 

  • Satellite aircraft online. We define satellite aircraft online as the total number of business aircraft for which we provide satellite services as of the last day of each period presented.
  • ATG aircraft online. We define ATG aircraft online as the total number of business aircraft for which we provide ATG services as of the last day of each period presented.
  • Average monthly service revenue per satellite aircraft online. We define average monthly service revenue per satellite aircraft online as the aggregate satellite service revenue for the period divided by the number of months in the period, divided by the number of satellite aircraft online during the period (expressed as an average of the month end figures for each month in such period).
  • Average monthly service revenue per ATG aircraft online. We define average monthly service revenue per ATG aircraft online as the aggregate ATG service revenue for the period divided by the number of months in the period, divided by the number of ATG aircraft online during the period (expressed as an average of the month end figures for each month in such period).
  • Units shipped. We define units shipped as the number of satellite or ATG network equipment units shipped during the period.
  • Average equipment revenue per satellite unit shipped. We define average equipment revenue per satellite unit shipped as the aggregate equipment revenue earned from all satellite shipments during the period, divided by the number of satellite units shipped.
  • Average equipment revenue per ATG unit shipped. We define average equipment revenue per ATG unit shipped as the aggregate equipment revenue from all ATG shipments during the period, divided by the number of ATG units shipped.

 

Gogo Inc. and Subsidiaries

Supplemental Information – Segment Revenue and Segment Profit (Loss)(1)

(in thousands, Unaudited)








For the Three Months Ended




June 30, 2016



CA-NA



CA-ROW



BA















Service revenue


$

89,808



$

5,376



$

32,403


Equipment revenue



2,879




368




16,705


Total revenue


$

92,687



$

5,744



$

49,108















Segment profit (loss)


$

18,641



$

(23,300)



$

19,016


















For the Three Months Ended




June 30, 2015



CA-NA



CA-ROW



BA















Service revenue


$

75,329



$

2,303



$

23,763


Equipment revenue



262




-




19,534


Total revenue


$

75,591



$

2,303



$

43,297















Segment profit (loss)


$

11,244



$

(17,996)



$

17,540









For the Six Months Ended




June 30, 2016



CA-NA



CA-ROW



BA















Service revenue


$

173,217



$

9,978



$

63,112


Equipment revenue



6,517




371




36,090


Total revenue


$

179,734



$

10,349



$

99,202















Segment profit (loss)


$

32,457



$

(43,021)



$

39,240


















For the Six Months Ended




June 30, 2015



CA-NA



CA-ROW



BA















Service revenue


$

147,507



$

3,713



$

45,581


Equipment revenue



618




-




39,283


Total revenue


$

148,125



$

3,713



$

84,864















Segment profit (loss)


$

20,860



$

(36,272)



$

34,346




(1)

Segment profit (loss) is defined as net income (loss) attributable to common stock before interest expense, interest income, income taxes, depreciation and amortization, certain non-cash charges (including amortization of deferred airborne lease incentives and stock compensation expense) and other income (expense).

 

Gogo Inc. and Subsidiaries

Supplemental Information – Segment Cost of Service Revenue(1)

(in thousands, Unaudited)






For the Three Months



Ended June 30,



2016




2015








CA-NA

$

33,797



$

30,919

BA


8,898




6,218

CA-ROW


10,701




8,091

Total

$

53,396



$

45,228






For the Six Months



Ended June 30,



2016




2015








CA-NA

$

70,371



$

63,085

BA


17,317




12,045

CA-ROW


20,562




16,430

Total

$

108,250



$

91,560















(1) Excludes depreciation and amortization expense.

 


Gogo Inc. and Subsidiaries

Supplemental Information – Segment Cost of Equipment Revenue(1)

(in thousands, Unaudited)






For the Three Months



Ended June 30,



2016




2015








CA-NA

$

2,862



$

651

BA


9,365




9,615

CA-ROW


250




-

Total

$

12,477



$

10,266










For the Six Months



Ended June 30,



2016




2015








CA-NA

$

6,809



$

802

BA


19,166




18,990

CA-ROW


250




-

Total

$

26,225



$

19,792















(1)  Excludes depreciation and amortization expense.

 

Gogo Inc. and Subsidiaries



Reconciliation of GAAP to Non-GAAP Measures



(in thousands, except per share amounts)



(unaudited)





















For the Three Months




For the Six Months




Ended June 30,




Ended June 30,




2016




2015




2016




2015


Adjusted EBITDA:
















Net loss attributable to common stock (GAAP)

$

(40,194)



$

(24,772)



$

(64,300)



$

(44,864)


Interest expense


17,557




15,801




33,853




25,896


Interest income


(166)




(11)




(212)




(16)


Income tax provision


221




422




528




716


Depreciation and amortization


24,906




20,813




49,263




39,590


EBITDA


2,324




12,253




19,132




21,322


Stock-based compensation expense


3,788




3,214




7,986




6,299


Amortization of deferred airborne lease incentives


(7,241)




(4,671)




(12,885)




(8,597)


Loss on extinguishment of debt


15,406




-




15,406




-


Adjustment of deferred financing costs


77




-




(792)




-


Adjusted EBITDA

$

14,354



$

10,796



$

28,847



$

19,024


















Cash CAPEX:
















Consolidated capital expenditures (GAAP) (1)

$

(47,615)



$

(37,382)



$

(85,041)



$

(94,245)


Change in deferred airborne lease incentives (2)


683




7,297




8,344




16,018


Amortization of deferred airborne lease incentives (2)


7,175




4,616




12,761




8,491


Landlord incentives


-




2,668




-




14,904


Cash CAPEX

$

(39,757)



$

(22,801)



$

(63,936)



$

(54,832)




















For the year Ending




For the year Ending




December 31, 2016




December 31, 2017


Cash CAPEX Guidance:


Low




High




Low




High


Consolidated capital expenditures (GAAP)

$

(150,000)



$

(185,000)



$

(220,000)



$

(265,000)


Deferred airborne lease incentives


40,000




50,000




80,000




100,000


Cash CAPEX

$

(110,000)



$

(135,000)



$

(140,000)



$

(165,000)



















(1)

See unaudited condensed consolidated statements of cash flows.

(2)

Excludes deferred airborne lease incentives and related amortization associated with STCs for the three and six month periods ended June 30, 2016 and 2015 as STC costs are expensed as incurred as part of Engineering, Design and Development.

 

Definition of Non-GAAP Measures

EBITDA represents net income (loss) attributable to common stock before income taxes, interest income, interest expense, depreciation expense and amortization of other intangible assets.

Adjusted EBITDA represents EBITDA adjusted for (i) stock-based compensation expense, (ii) amortization of deferred airborne lease incentives (iii) loss on extinguishment of debt and (iv) adjustment to deferred financing costs. Our management believes that the use of Adjusted EBITDA eliminates items that, management believes, have less bearing on our operating performance, thereby highlighting trends in our core business which may not otherwise be apparent. It also provides an assessment of controllable expenses, which are indicators management uses to determine whether current spending decisions need to be adjusted in order to meet financial goals and achieve optimal financial performance.

We believe the exclusion of stock-based compensation expense from Adjusted EBITDA is appropriate given the significant variation in expense that can result from using the Black-Scholes model to determine the fair value of such compensation. The fair value of our stock options is determined using the Black-Scholes model and varies based on fluctuations in the assumptions used in this model, including inputs that are not necessarily directly related to the performance of our business, such as the expected volatility, the risk-free interest rate and the expected life of the options. Therefore, we believe the exclusion of this cost provides a clearer view of the operating performance of our business. Further, stock option grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time. While we believe that investors should have information about any dilutive effect of outstanding options and the cost of that compensation, we also believe that stockholders should have the ability to consider our performance using a non-GAAP financial measure that excludes these costs and that management uses to evaluate our business.

We believe the exclusion of the amortization of deferred airborne lease incentives from Adjusted EBITDA is useful as it allows an investor to view operating performance across time periods in a manner consistent with how management measures segment profit and loss (see Note 14, "Business Segments and Major Customers," for a description of segment profit (loss) in our unaudited condensed consolidated financial statements). Management evaluates segment profit and loss in this manner, excluding the amortization of deferred airborne lease incentives, because such presentation reflects operating decisions and activities from the current period, without regard to the prior period decision or the form of connectivity agreements. See "—Key Components of Consolidated Statements of Operations—Cost of Service Revenue—Commercial Aviation North America and Rest of World" in our 2015 10-K for a discussion of the accounting treatment of deferred airborne lease incentives.

We believe it is useful to an understanding of our operating performance to exclude the loss on extinguishment of debt and adjustment to deferred financing costs from Adjusted EBITDA because of the non-recurring nature of these charges.

We also present Adjusted EBITDA as a supplemental performance measure because we believe that this measure provides investors, securities analysts and other users of our financial statements with important supplemental information with which to evaluate our performance and to enable them to assess our performance on the same basis as management.

Cash CAPEX represents capital expenditures net of airborne equipment proceeds received from the airlines and incentives paid to us by landlords under certain facilities leases. We believe Cash CAPEX provides a more representative indication of our liquidity requirements with respect to capital expenditures, as under certain agreements with our airline partners we are reimbursed for all or a substantial portion of the cost of our airborne equipment, thereby reducing our cash capital requirements.

Investor Relations Contact:

Media Relations Contact:

Varvara Alva

Steve Nolan

312-517-6460

312-517-6074

ir@gogoair.com

pr@gogoair.com

 

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SOURCE Gogo Inc.