0001537054false0001537054us-gaap:CommonStockMember2021-11-042021-11-0400015370542021-11-042021-11-040001537054gogo:PreferredStockPurchaseRightsMember2021-11-042021-11-04

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 4, 2021

GOGO INC.
(Exact name of registrant as specified in its charter)

Delaware		001-35975		27-1650905
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

111 North Canal St., Suite 1400 Chicago, IL		60606
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code:

303-301-3271

 

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

 

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Item 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On November 4, 2021, Gogo Inc. issued a press release announcing its results of operations for the third quarter ended September 30, 2021. A copy of the press release is attached hereto as Exhibit 99.1.

 

Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit No.		Description
99.1		Press Release dated November 4, 2021.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

GOGO INC.

 

 

 

By: /s/ Barry Rowan

Barry Rowan
Executive Vice President and

Chief Financial Officer

 

Date: November 4, 2021

 

 

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Exhibit 99.1

 

 

Investor Relations Contact:	Media Relations Contact:
Will Davis	Dave Mellin
+1 917-519-6994	+1 303-301-3606
wdavis@gogoair.com	pr@gogoair.com

Gogo Announces Record Third Quarter 2021 Financial Results

 

Continued Strong Customer Demand Driving Service and Equipment Revenue Growth

 

Raising 2021 Adjusted EBITDA and Free Cash Flow Guidance

with Revenue at High End of Guidance Range

 

 

CHICAGO - November 4, 2021 – Gogo Inc. (NASDAQ: GOGO) (“Gogo” or the “Company”), the world’s largest provider of broadband connectivity services for the business aviation market, today announced its financial results for the quarter ended September 30, 2021.

 

Q3 2021 Highlights

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“Demand for business aviation connectivity is surging and we expect it to continue to surge for the next several years,” said Oakleigh Thorne, Chairman and CEO of Gogo. "Our Gogo team is doing a great job exceeding customers’ expectations and turning demand into top and bottom line growth.”

 

“Our record results for the quarter reflect our strong business model as we drive equipment sales and capture recurring service revenue as that equipment comes on line,” said Barry Rowan, Gogo’s Executive Vice President and CFO. “Our balance sheet also continues to strengthen with our improved operating performance and reduced interest expense."

 

Updating 2021 Financial Guidance

 

Reiterating Long-Term Financial Targets

 

 

Conference Call

 

The Company will host its third quarter conference call on November 4, 2021 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 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: 3498333

 

Non-GAAP Financial Measures

 

We report certain non-GAAP financial measurements, including Adjusted EBITDA and Free Cash Flow, in the supplemental tables below. Management uses Adjusted EBITDA and Free Cash Flow 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 used by other companies. Adjusted EBITDA and Free Cash Flow are not recognized measurements under accounting principles generally accepted in the United States, or GAAP; when analyzing our performance with Adjusted EBITDA or liquidity with Free Cash Flow, as applicable, investors should (i) evaluate each adjustment in our reconciliation to the corresponding GAAP measure, and the explanatory footnotes regarding those adjustments, (ii) use Adjusted EBITDA in addition to, and not as an alternative to, net income

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(loss) attributable to common stock as a measure of operating results, and (iii) use Free Cash Flow in addition to, and not as an alternative to, consolidated net cash provided by (used in) operating activities when evaluating our liquidity. No reconciliation of the forecasted range for Adjusted EBITDA for fiscal 2021, Adjusted EBITDA margin for fiscal 2025 and Free Cash Flow for fiscal 2023 and 2025 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.

 

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: our ability to attract and retain customers and generate revenue from the provision of our connectivity and entertainment services; our reliance on our key OEMs and dealers for equipment sales; our ability 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 and performance; the impact of the COVID-19 pandemic and the measures implemented to combat it; our ability to evaluate or pursue strategic opportunities; our reliance on third parties for equipment and services; our ability to recruit, train and retain highly skilled employees; the achievement of the anticipated benefits of the sale of the CA business or our ability to operate as a standalone business; the impact of adverse economic conditions; our ability to develop and deploy Gogo 5G; 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 availability of additional ATG spectrum in the United States or internationally; 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 impact of assertions by third parties of infringement, misappropriation or other violations; our ability to innovate and provide products and services; the impact of government regulation of the internet; our possession and use of personal information; the extent of expenses or liabilities resulting from litigation; our ability to protect our intellectual property; our substantial indebtedness, limitations and restrictions in the agreements governing our current and future indebtedness and our ability to service our indebtedness; fluctuations in our operating results; the utilization of our tax losses; and other events beyond our control that may result in unexpected adverse operating results.

 

Additional information concerning these and other factors can be found under the caption “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”) on March 11, 2021 and our quarterly reports on Form 10-Q as filed with the SEC on May 6, 2021 and August 5, 2021.

 

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

Gogo is the world’s largest provider of broadband connectivity services for the business aviation market. We offer a customizable suite of smart cabin systems for highly integrated connectivity, inflight entertainment and voice solutions. Gogo’s products and services are installed on thousands of business aircraft of all sizes and mission

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types from turboprops to the largest global jets, and are utilized by the largest fractional ownership operators, charter operators, corporate flight departments and individuals.

 

As of September 30, 2021, Gogo reported 2,237 business aircraft flying with Gogo’s AVANCE L5 or L3 system installed, 6,154 aircraft flying with its ATG systems onboard, and 4,542 aircraft with narrowband satellite connectivity installed. Connect with us at business.gogoair.com.

 

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Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

 

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2021				2020				2021				2020
Revenue:
Service revenue		$	66,204			$	53,324			$	190,326			$	155,083
Equipment revenue			20,968				13,201				53,090				37,001
Total revenue			87,172				66,525				243,416				192,084
Operating expenses:
Cost of service revenue			12,985				11,635				42,257				32,809
Cost of equipment revenue			12,368				8,543				31,582				24,036
Engineering, design and development			5,958				4,510				17,992				17,365
Sales and marketing			5,538				3,758				14,093				10,724
General and administrative			15,250				12,539				37,369				36,378
Depreciation and amortization			4,160				3,320				11,824				10,117
Total operating expenses			56,259				44,305				155,117				131,429
Operating income			30,913				22,220				88,299				60,655
Other (income) expense:
Interest income			(34	)			(36	)			(145	)			(689	)
Interest expense			10,943				31,199				56,577				93,595
Loss on extinguishment of debt and settlement of convertible notes			—				—				83,961				—
Other (income) expense			143				12				11				12
Total other expense			11,052				31,175				140,404				92,918
Income (loss) from continuing operations before income taxes			19,861				(8,955	)			(52,105	)			(32,263	)
Income tax provision (benefit)			131				(65	)			443				216
Net income (loss) from continuing operations			19,730				(8,890	)			(52,548	)			(32,479	)
Net loss from discontinued operations, net of tax			(8,771	)			(71,234	)			(13,426	)			(218,402	)
Net income (loss)		$	10,959			$	(80,124	)		$	(65,974	)		$	(250,881	)
Net income (loss) attributable to common stock per share - basic:
Continuing operations		$	0.18			$	(0.11	)		$	(0.52	)		$	(0.40	)
Discontinued operations			(0.08	)			(0.86	)			(0.13	)			(2.67	)
Net income (loss) attributable to common stock per share - basic		$	0.10			$	(0.97	)		$	(0.65	)		$	(3.07	)
Net income (loss) attributable to common stock per share - diluted:
Continuing operations		$	0.16			$	(0.11	)		$	(0.52	)		$	(0.40	)
Discontinued operations			—				(0.86	)			(0.13	)			(2.67	)
Net income (loss) attributable to common stock per share - diluted		$	0.16			$	(0.97	)		$	(0.65	)		$	(3.07	)
Weighted average number of shares
Basic			109,345				82,707				101,189				81,892
Diluted			133,160				82,707				101,189				81,892

 

 

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Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

 

		September 30,				December 31,
		2021				2020
Assets
Current assets:
Cash and cash equivalents		$	133,233			$	435,345
Accounts receivable, net of allowances of $711 and $1,044, respectively			40,354				39,833
Inventories			29,964				28,114
Prepaid expenses and other current assets			36,921				8,934
Total current assets			240,472				512,226
Non-current assets:
Property and equipment, net			58,403				63,493
Intangible assets, net			48,162				52,693
Operating lease right-of-use assets			71,411				33,690
Other non-current assets, net of allowances of $431 and $375, respectively			24,757				11,486
Total non-current assets			202,733				161,362
Total assets		$	443,205			$	673,588
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable		$	13,974			$	11,013
Accrued liabilities			94,816				83,009
Deferred revenue			2,257				3,113
Current portion of long-term debt			109,348				341,000
Total current liabilities			220,395				438,135
Non-current liabilities:
Long-term debt			695,894				827,968
Non-current operating lease liabilities			77,774				38,018
Other non-current liabilities			9,379				10,581
Total non-current liabilities			783,047				876,567
Total liabilities			1,003,442				1,314,702
Stockholders’ deficit
Common stock			11				9
Additional paid-in capital			1,240,231				1,088,590
Accumulated other comprehensive loss			(1,339	)			(1,013	)
Treasury stock, at cost			(128,803	)			(98,857	)
Accumulated deficit			(1,670,337	)			(1,629,843	)
Total stockholders’ deficit			(560,237	)			(641,114	)
Total liabilities and stockholders’ deficit		$	443,205			$	673,588

 

 

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Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

		For the Nine Months Ended September 30,
		2021				2020
Operating activities from continuing operations:
Net loss		$	(52,548	)		$	(32,479	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization			11,824				10,117
(Gain) Loss on asset disposals, abandonments and write-downs			121				64
Provision for expected credit losses			55				1,048
Deferred income taxes			147				134
Stock-based compensation expense			10,144				8,283
Amortization of deferred financing costs			3,718				4,355
Accretion and amortization of debt discount and premium			303				10,311
Losses on extinguishment of debt and settlement of convertible notes			83,961				—
Changes in operating assets and liabilities:
Accounts receivable			(520	)			8,619
Inventories			(1,850	)			98
Prepaid expenses and other current assets			(26,794	)			1,487
Contract assets			(4,689	)			(7,581	)
Accounts payable			2,474				577
Accrued liabilities			16,245				(12,193	)
Deferred revenue			(849	)			277
Accrued interest			(7,034	)			26,379
Other non-current assets and liabilities			1,647				819
Net cash provided by operating activities from continuing operations			36,355				20,315
Investing activities from continuing operations:
Proceeds from sale of property and equipment			1,000				—
Purchases of property and equipment			(2,833	)			(448	)
Acquisition of intangible assets—capitalized software			(1,171	)			(5,915	)
Purchase of interest rate cap			(8,629	)			—
Net cash used in investing activities from continuing operations			(11,633	)			(6,363	)
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	)
Redemption of senior secured notes			(1,023,146	)			—
Proceeds from term loan, net of discount			721,375				—
Payments on term loan			(1,813	)			—
Payment of debt issuance costs			(20,251	)			—
Payments on financing leases			(154	)			(33	)
Stock-based compensation activity			(2,234	)			(1,428	)
Net cash provided by (used in) financing activities from continuing operations			(326,223	)			16,041
Cash flows from discontinued operations:
Cash used in operating activities			(809	)			(56,009	)
Cash used in investing activities			—				(28,152	)
Cash used in financing activities			—				(344	)
Net cash used in discontinued operations			(809	)			(84,505	)
Effect of exchange rate changes on cash			28				(19	)
Decrease in cash, cash equivalents and restricted cash			(302,282	)			(54,531	)
Cash, cash equivalents and restricted cash at beginning of period			435,870				177,675
Cash, cash equivalents and restricted cash at end of period		$	133,588			$	123,144
Cash, cash equivalents and restricted cash at end of period		$	133,588			$	123,144
Less: current restricted cash			25				560
Less: non-current restricted cash			330				5,101
Cash and cash equivalents at end of period		$	133,233			$	117,483
Supplemental Cash Flow Information:
Cash paid for interest		$	59,660			$	53,230

 

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Gogo Inc. and Subsidiaries

Supplemental Information – Key Operating Metrics

 

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2021				2020				2021				2020
Aircraft online (at period end)
ATG			6,154				5,577				6,154				5,577
Satellite			4,542				4,737				4,542				4,737
Average monthly service revenue per aircraft online
ATG		$	3,264			$	2,996			$	3,216			$	2,910
Satellite			257				211				248				207
Units Sold
ATG			266				167				583				392
Satellite			22				28				169				151
Average equipment revenue per unit sold (in thousands)
ATG		$	66			$	65			$	72			$	70
Satellite			102				78				52				60

 

 

 

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Gogo Inc. and Subsidiaries

Supplemental Information – Revenue and Cost of Revenue

(in thousands, unaudited)

 

		For the Three Months Ended September 30,								% Change				For the Nine Months Ended September 30,								% Change
		2021				2020				2021 over 2020				2021				2020				2021 over 2020
Service revenue		$	66,204			$	53,324				24.2	%		$	190,326			$	155,083				22.7	%
Equipment revenue			20,968				13,201				58.8	%			53,090				37,001				43.5	%
Total revenue		$	87,172			$	66,525				31.0	%		$	243,416			$	192,084				26.7	%

 

		For the Three Months Ended September 30,								% Change				For the Nine Months Ended September 30,								% Change
		2021				2020				2021 over 2020				2021				2020				2021 over 2020
Cost of service revenue (1)		$	12,985			$	11,635				11.6	%		$	42,257			$	32,809				28.8	%
Cost of equipment revenue (1)		$	12,368			$	8,543				44.8	%		$	31,582			$	24,036				31.4	%

 

 

 

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Gogo Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, unaudited)

 

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,								For the Three Months Ended June 30,
		2021				2020				2021				2020				2021
Adjusted EBITDA:
Net income (loss) attributable to common stock (GAAP)		$	10,959			$	(80,124	)		$	(65,974	)		$	(250,881	)		$	(69,248	)
Interest expense			10,943				31,199				56,577				93,595				16,340
Interest income			(34	)			(36	)			(145	)			(689	)			(54	)
Income tax provision			131				(65	)			443				216				277
Depreciation and amortization			4,160				3,320				11,824				10,117				3,547
EBITDA			26,159				(45,706	)			2,725				(147,642	)			(49,138	)
Stock-based compensation expense			5,403				4,680				10,144				8,283				2,892
Loss from discontinued operations			8,771				71,234				13,426				218,402				2,854
Loss on extinguishment of debt and settlement of convertible notes			—				—				83,961				—				79,564
Separation costs related to CA sale			450				—				1,170				—				575
Adjusted EBITDA		$	40,783			$	30,208			$	111,426			$	79,043			$	36,747
Free Cash Flow:
Net cash provided by (used in) operating activities (GAAP) (1)		$	26,754			$	21,498			$	36,355			$	20,315			$	(14,973	)
Consolidated capital expenditures (1)			(2,178	)			(1,293	)			(4,004	)			(6,363	)			(1,124	)
Free cash flow		$	24,576			$	20,205			$	32,351			$	13,952			$	(16,097	)

Gogo Inc. and Subsidiaries

Reconciliation of Estimated Full-Year GAAP Net Cash

Provided by Operating Activities to Non-GAAP Measures

(in millions, unaudited)

	FY 2021
Free Cash Flow:
Net cash provided by operating activities (GAAP)	$	60
Consolidated capital expenditures		(20	)
Free cash flow	$	40

 

 

Definition of Non-GAAP Measures

EBITDA represents net loss attributable to common stock before interest expense, interest income, income taxes and depreciation and amortization expense.

Adjusted EBITDA represents EBITDA adjusted for (i) stock-based compensation expense included in the results of continuing operations, (ii) the results of discontinued operations, including stock-based compensation expense, (iii) loss on extinguishment of debt and settlement of convertible notes and (iv) separation costs related to the sale of CA. 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 that 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 that 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

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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 it is useful for an understanding of our operating performance to exclude the results of our discontinued operations from Adjusted EBITDA because they are not part of our ongoing operations.

We believe it is useful for an understanding of our operating performance to exclude the loss on extinguishment of debt and settlement of convertible notes from Adjusted EBITDA because of the infrequently occurring nature of these activities.

We believe it is useful for an understanding of our operating performance to exclude separation costs related to the sale of CA from Adjusted EBITDA because of the non-recurring nature of these activities.

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.

Free Cash Flow represents net cash provided by operating activities, less purchases of property and equipment and the acquisition of intangible assets. We believe that Free Cash Flow provides meaningful information regarding our liquidity.

 

 

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