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false 0001537054 Q3 --12-31 A company generally experiences an ownership change if the percentage of the value of its stock owned by certain “5-percent shareholders,” as such term is defined in Section 382 of the Code, increases by more than 50 percentage points over a rolling three-year period. The Rights Agreement is intended to reduce the likelihood of an ownership change under Section 382 of the Code by deterring any or group from acquiring beneficial ownership of 4.9% or more of the shares of the Company’s common stock then-outstanding. Initially, the Rights will be attached to all shares of the Company’s common stock. Until the Distribution Date (as defined below), the Rights will be transferred with and only with the common stock. As long as the Rights are attached to the common stock, the Company will issue one Right with each new share of common stock so that all such shares of common stock will have Rights attached (subject to certain limited exceptions). The Rights will separate and begin trading separately from the common stock, and Right certificates will be caused to evidence the Rights, on the earlier to occur of (i) the close of business on the tenth day following public disclosure of facts indicating that a person or group has acquired beneficial ownership of 4.9% or more of the outstanding common stock (an “Acquiring Person”) (or, in the event the Board of Directors determines to effect an exchange in accordance with Section 24 of the Rights Agreement and the Board of Directors determines that a later date is advisable, then such later date) and (ii) the close of business on the tenth business day (or such later date as may be determined by action of the Board of Directors prior to such time as any person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 4.9% or more of the outstanding common stock (the earlier of such dates, the “Distribution Date”). 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One):

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended September 30, 2020

 

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the transition period from __________ to __________

 

 

Commission File Number: 001-35975

 

 

Gogo Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

27-1650905

(State or other jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

111 North Canal St., Suite 1500

Chicago, IL 60606

(Address of principal executive offices)

Telephone Number (312517-5000

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Class

 

Trading Symbol

 

Name of Each Exchange on Which Registered

Common stock, par value $0.0001 per share

 

GOGO

 

NASDAQ Global Select Market

Preferred Stock Purchase Rights

 

GOGO

 

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 6, 2020, 85,249,840 shares of $0.0001 par value common stock were outstanding.

 


 


 

Gogo Inc.

 

INDEX

 

 

 

Page

Part I.

Financial Information

 

Item 1.

Financial Statements

2

 

Unaudited Condensed Consolidated Balance Sheets

2

 

Unaudited Condensed Consolidated Statements of Operations

3

 

Unaudited Condensed Consolidated Statements of Comprehensive Loss

4

 

Unaudited Condensed Consolidated Statements of Cash Flows

5

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

40

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

56

Item 4.

Controls and Procedures

57

 

 

 

Part II.

Other Information

 

Item 1.

Legal Proceedings

58

Item 1A.

Risk Factors

59

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

63

Item 3.

Defaults Upon Senior Securities

63

Item 4.

Mine Safety Disclosures

63

Item 5.

Other Information

63

Item 6.

Exhibits

64

Signatures

66

 

 

 

1


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

117,483

 

 

$

170,016

 

Accounts receivable, net of allowances of $1,539 and $660, respectively

 

 

32,497

 

 

 

42,322

 

Inventories

 

 

35,107

 

 

 

35,205

 

Prepaid expenses and other current assets

 

 

6,448

 

 

 

6,813

 

Current assets held for sale

 

 

627,499

 

 

 

170,469

 

Total current assets

 

 

819,034

 

 

 

424,825

 

Non-current assets:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

64,307

 

 

 

69,183

 

Goodwill and intangible assets, net

 

 

53,188

 

 

 

51,803

 

Operating lease right-of-use assets

 

 

32,564

 

 

 

35,807

 

Other non-current assets, net of allowances of $320 and $0, respectively

 

 

15,362

 

 

 

12,121

 

Non-current assets held for sale

 

 

-

 

 

 

620,961

 

Total non-current assets

 

 

165,421

 

 

 

789,875

 

Total assets

 

$

984,455

 

 

$

1,214,700

 

Liabilities and Stockholders’ deficit

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,060

 

 

$

5,495

 

Accrued liabilities

 

 

77,901

 

 

 

48,070

 

Deferred revenue

 

 

2,492

 

 

 

2,225

 

Current liabilities held for sale

 

 

369,436

 

 

 

196,852

 

Total current liabilities

 

 

455,889

 

 

 

252,642

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Long-term debt

 

 

1,126,634

 

 

 

1,101,248

 

Non-current operating lease liabilities

 

 

38,223

 

 

 

42,016

 

Other non-current liabilities

 

 

10,903

 

 

 

7,531

 

Non-current liabilities held for sale

 

 

-

 

 

 

210,153

 

Total non-current liabilities

 

 

1,175,760

 

 

 

1,360,948

 

Total liabilities

 

 

1,631,649

 

 

 

1,613,590

 

Commitments and contingencies (Note 14)

 

 

-

 

 

 

-

 

Stockholders’ deficit

 

 

 

 

 

 

 

 

Common stock, par value $0.0001 per share; 500,000,000 shares authorized at September 30, 2020 and December 31, 2019; 85,255,574 and 88,292,821 shares issued at September 30, 2020 and December 31, 2019, respectively; and 85,237,282 and 88,240,877 shares outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

9

 

 

 

9

 

Additional paid-in-capital

 

 

1,086,665

 

 

 

979,499

 

Accumulated other comprehensive loss

 

 

(4,323

)

 

 

(2,256

)

Treasury stock, at cost

 

 

(98,857

)

 

 

-

 

Accumulated deficit

 

 

(1,630,688

)

 

 

(1,376,142

)

Total stockholders’ deficit

 

 

(647,194

)

 

 

(398,890

)

Total liabilities and stockholders’ deficit

 

$

984,455

 

 

$

1,214,700

 

 

See the Notes to Unaudited Condensed Consolidated Financial Statements

2


 

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

 

 

 

For the Three Months

 

 

For the Nine Months

 

 

 

Ended September 30,

 

 

Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

$

53,324

 

 

$

55,349

 

 

$

155,083

 

 

$

163,318

 

Equipment revenue

 

 

13,201

 

 

 

25,991

 

 

 

37,001

 

 

 

59,812

 

Total revenue

 

 

66,525

 

 

 

81,340

 

 

 

192,084

 

 

 

223,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of service revenue (exclusive of items shown below)

 

 

11,635

 

 

 

10,046

 

 

 

32,809

 

 

 

29,847

 

Cost of equipment revenue (exclusive of items shown below)

 

 

8,543

 

 

 

14,915

 

 

 

24,036

 

 

 

38,122

 

Engineering, design and development

 

 

4,510

 

 

 

8,130

 

 

 

17,365

 

 

 

18,620

 

Sales and marketing

 

 

3,758

 

 

 

5,178

 

 

 

10,724

 

 

 

15,946

 

General and administrative

 

 

12,539

 

 

 

12,157

 

 

 

36,378

 

 

 

41,627

 

Depreciation and amortization

 

 

3,320

 

 

 

3,861

 

 

 

10,117

 

 

 

11,876

 

Total operating expenses

 

 

44,305

 

 

 

54,287

 

 

 

131,429

 

 

 

156,038

 

Operating income

 

 

22,220

 

 

 

27,053

 

 

 

60,655

 

 

 

67,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(36

)

 

 

(960

)

 

 

(689

)

 

 

(3,231

)

Interest expense

 

 

31,199

 

 

 

30,694

 

 

 

93,595

 

 

 

99,368

 

Loss on extinguishment of debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

57,962

 

Other expense

 

 

12

 

 

 

19

 

 

 

12

 

 

 

27

 

Total other expense

 

 

31,175

 

 

 

29,753

 

 

 

92,918

 

 

 

154,126

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations before income taxes

 

 

(8,955

)

 

 

(2,700

)

 

 

(32,263

)

 

 

(87,034

)

Income tax provision (benefit)

 

 

(65

)

 

 

154

 

 

 

216

 

 

 

461

 

Net loss from continuing operations

 

 

(8,890

)

 

 

(2,854

)

 

 

(32,479

)

 

 

(87,495

)

Net loss from discontinued operations, net of tax

 

 

(71,234

)

 

 

(20,037

)

 

 

(218,402

)

 

 

(36,158

)

Net loss

 

$

(80,124

)

 

$

(22,891

)

 

$

(250,881

)

 

$

(123,653

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stock per share – basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

 

$

(0.11

)

 

$

(0.04

)

 

$

(0.40

)

 

$

(1.09

)

Net loss from discontinued operations

 

 

(0.86

)

 

 

(0.25

)

 

 

(2.67

)

 

 

(0.45

)

Net loss

 

$

(0.97

)

 

$

(0.29

)

 

$

(3.07

)

 

$

(1.54

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of sharesbasic and diluted

 

 

82,707

 

 

 

80,908

 

 

 

81,892

 

 

 

80,370

 

 

See the Notes to Unaudited Condensed Consolidated Financial Statements

3


 

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

 

 

 

For the Three Months

 

 

 

For the Nine Months

 

 

 

Ended September 30,

 

 

 

Ended September 30,

 

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Net loss

$

(80,124

)

 

$

(22,891

)

 

$

(250,881

)

 

$

(123,653

)

Currency translation adjustments, net of tax

 

535

 

 

 

(663

)

 

 

(2,067

)

 

 

674

 

Comprehensive loss

$

(79,589

)

 

$

(23,554

)

 

$

(252,948

)

 

$

(122,979

)

 

See the Notes to Unaudited Condensed Consolidated Financial Statements

4


 

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

For the Nine Months

 

 

 

Ended September 30,

 

 

 

2020

 

 

2019

 

Operating activities from continuing operations:

 

 

 

 

 

 

 

 

Net loss

 

$

(32,479

)

 

 

(87,495

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

10,117

 

 

 

11,876

 

Loss on asset disposals, abandonments and write-downs

 

 

64

 

 

 

438

 

Provision for expected credit losses

 

 

1,048

 

 

-

 

Deferred income taxes

 

 

134

 

 

 

133

 

Stock-based compensation expense

 

 

8,283

 

 

 

6,731

 

Amortization of deferred financing costs

 

 

4,355

 

 

 

3,901

 

Accretion and amortization of debt discount and premium

 

 

10,311

 

 

 

11,490

 

Loss on extinguishment of debt

 

 

-

 

 

 

57,962

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

8,619

 

 

 

(6,986

)

Inventories

 

 

98

 

 

 

5,019

 

Prepaid expenses and other current assets

 

 

1,487

 

 

 

715

 

Contract assets

 

 

(7,581

)

 

 

(567

)

Accounts payable

 

 

577

 

 

 

2,425

 

Accrued liabilities

 

 

(11,364

)

 

 

(1,835

)

Deferred revenue

 

 

277

 

 

 

(186

)

Accrued interest

 

 

26,379

 

 

 

(1,993

)

Warranty reserves

 

 

(450

)

 

 

700

 

Right-of-use assets and operating lease liabilities

 

 

(924

)

 

 

(1,065

)

Other non-current assets and liabilities

 

 

1,364

 

 

 

158

 

Net cash provided by operating activities from continuing operations

 

 

20,315

 

 

 

1,421

 

 

 

 

 

 

 

 

 

 

Investing activities from continuing operations:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(448

)

 

 

(1,091

)

Acquisition of intangible assetscapitalized software

 

 

(5,915

)

 

 

(4,229

)

Redemptions of shortterm investments

 

 

-

 

 

 

39,323

 

Net cash provided by (used in) investing activities from continuing operations

 

 

(6,363

)

 

 

34,003

 

 

 

 

 

 

 

 

 

 

Financing activities from continuing operations:

 

 

 

 

 

 

 

 

Proceeds from credit facility draw

 

 

26,000

 

 

 

-

 

Repayments of amounts drawn from credit facility

 

 

(6,000

)

 

 

-

 

Repurchase of convertible notes

 

 

(2,498

)

 

 

(159,502

)

Proceeds from issuance of senior secured notes

 

 

-

 

 

 

920,683

 

Redemption of senior secured notes

 

 

-

 

 

 

(741,360

)

Payment of debt issuance costs

 

 

-

 

 

 

(23,409

)

Other financing activities

 

 

(1,461

)

 

 

88

 

Net cash provided by (used in) financing activities from continuing operations

 

 

16,041

 

 

 

(3,500

)

Cash flows from discontinued operations:

 

 

 

 

 

 

 

 

Cash provided by (used in) operating activities

 

 

(56,009

)

 

 

73,917

 

Cash used in investing activities

 

 

(28,152

)

 

 

(70,403

)

Cash used in financing activities

 

 

(344

)

 

 

(576)

 

Net cash provided by (used in) discontinued operations

 

 

(84,505)

 

 

 

2,938

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

(19

)

 

 

(357

)

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

 

(54,531

)

 

 

34,505

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

177,675

 

 

 

191,116

 

Cash, cash equivalents and restricted cash at end of period

 

$

123,144

 

 

$

225,621

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash at end of period

 

$

123,144

 

 

$

225,621

 

Less: current restricted cash

 

 

560

 

 

 

535

 

Less: non-current restricted cash

 

 

5,101

 

 

 

7,424

 

Cash and cash equivalents at end of period

 

$

117,483

 

 

$

217,662

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

53,230

 

 

$

86,477

 

Cash paid for taxes

 

 

311

 

 

 

456

 

 

See the Notes to Unaudited Condensed Consolidated Financial Statements

5


 

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share data)

 

 

 

For the Three Months Ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Treasury Stock

 

 

 

 

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Total

 

Balance at June 30, 2020

 

 

84,032,343

 

 

$

8

 

 

$

1,085,254

 

 

$

(4,858

)

 

$

(1,550,564

)

 

 

5,077,400

 

 

$

(98,857

)

 

$

(569,017

)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(80,124

)

 

 

-

 

 

 

-

 

 

 

(80,124

)

Currency translation adjustments, net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

535

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

535

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

2,577

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,577

 

Issuance of common stock upon exercise of stock options

 

 

38,383

 

 

 

-

 

 

 

102

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

102

 

Issuance of common stock upon vesting of restricted stock units and restricted stock awards

 

 

1,066,909

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Tax withholding related to vesting of restricted stock units

 

 

-

 

 

 

-

 

 

 

(1,464

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,464

)

Issuance of common stock in connection with employee stock purchase plan

 

 

99,647