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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, 2021

 

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

 

 

https://cdn.kscope.io/505a4589bbcabb81bca7a0e85bb1897c-img232991232_0.jpg 

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 1400

Chicago, IL 60606

(Address of principal executive offices)

Telephone Number (303) 301-3271

(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). YesNo

As of October 29, 2021, 109,953,885 shares of $0.0001 par value common stock were outstanding.

 

 

0


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 Income (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

8

Item 2.

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

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

Item 4.

Controls and Procedures

45

 

 

 

Part II.

Other Information

 

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

48

Signatures

49

 

 

 

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,

 

 

 

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, par value $0.0001 per share; 500,000,000 shares authorized at September 30, 2021 and December 31, 2020; 116,541,881 and 91,086,191 shares issued at September 30, 2021 and December 31, 2020, respectively; and 109,926,367 and 85,990,499 shares outstanding at September 30, 2021 and December 31, 2020, respectively

 

 

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

 

 

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
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

 

 

See the Notes to Unaudited Condensed Consolidated Financial Statements

3


 

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

 

 

 

For the Three Months
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income (loss)

 

$

10,959

 

 

$

(80,124

)

 

$

(65,974

)

 

$

(250,881

)

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustments

 

 

(32

)

 

 

535

 

 

 

106

 

 

 

(2,067

)

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized loss

 

 

(2

)

 

 

 

 

 

(432

)

 

 

 

Amount realized and reclassified to earnings

 

 

 

 

 

 

 

 

 

 

 

 

Changes in fair value of cash flow hedges

 

 

(2

)

 

 

 

 

 

(432

)

 

 

 

Other comprehensive income (loss), net of tax

 

 

(34

)

 

 

535

 

 

 

(326

)

 

 

(2,067

)

Comprehensive income (loss)

 

$

10,925

 

 

$

(79,589

)

 

$

(66,300

)

 

$

(252,948

)

 

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,

 

 

 

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

 

Cash paid for taxes

 

 

326

 

 

 

311

 

 

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, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated