false000153705400015370542022-05-052022-05-050001537054us-gaap:CommonStockMember2022-05-052022-05-050001537054gogo:PreferredStockPurchaseRightsMember2022-05-052022-05-05

 

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): May 5, 2022

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.)

 

105 Edgeview Dr., Suite 300 Broomfield, CO		80021
(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 May 5, 2022, Gogo Inc. issued a press release announcing its results of operations for the first quarter ended March 31, 2022. 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 May 5, 2022.
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: May 5, 2022

 

 

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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 First Quarter Results and Updates 2022 Guidance

 

First Quarter Revenue of $92.8 million, up 26% Year-over-Year, Net Income from Continuing Operations of $22.2 million, and Adjusted EBITDA(1)of $42.8 million also up 26% Year-over-Year

 

Gogo 5G on Track for Commercial Launch in the Second Half of 2022

 

BROOMFIELD, CO - May 5, 2022 – 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 March 31, 2022.

 

Q1 2022 Highlights

 

“Given the continued unprecedented demand for connectivity in business aviation coupled with the strong performance of our supply chain management team, we have increased our projection for ATG equipment unit shipments to 1,300 in

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2022, up nearly 50% year over year versus prior expectations for 25% growth,” said Oakleigh Thorne, Chairman and CEO of Gogo. “We remain on track for commercial deployment of our 5G ATG network in the second half of 2022.”

 

“Strong first quarter results and our increased 2022 guidance provide a solid foundation for generating significant Free Cash Flow growth in 2023 and beyond,” said Barry Rowan, Gogo’s Executive Vice President and CFO. “Our financial performance and continued de-leveraging also create the flexibility for strategic investments to further enhance our growth and return of capital to shareholders over time.”

 

Updated 2022 Financial Guidance

 

The Company updates its guidance for 2022 as follows:

 

Long-Term Financial Targets

 

The Company reiterates its baseline long-term targets as follows:

 

The Company's 2022 guidance and long-term targets are derived from the Company's baseline forecast and long-term plan and include planned investments in Gogo 5G but do not include potential strategic investments currently under consideration (including a global broadband initiative).

 

 

Conference Call

 

The Company will host its first quarter conference call on May 5, 2022 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: 3438308

 

Non-GAAP Financial Measures

 

We report certain non-GAAP financial measurements, including Adjusted EBITDA and Free Cash Flow, in the supplemental tables below, and we refer to Adjusted EBITDA Margin in our discussion of long-term baseline targets above. Management uses Adjusted EBITDA, Adjusted EBITDA Margin 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

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other companies. Adjusted EBITDA, Adjusted EBITDA Margin 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 Adjusted EBITDA Margin 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 and Adjusted EBITDA Margin in addition to, and not as an alternative to, net income (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 2022, Adjusted EBITDA Margin for fiscal 2022, 2023 and 2026 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,” “forecast,” “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 are based on 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 develop and deploy Gogo 5G; the impact of competition; the impact of the COVID-19 pandemic and the measures implemented to combat it, including global shortages of certain electronic components and global logistics issues; 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 impact of adverse economic conditions; our ability to maintain our rights to use our licensed 3 Mhz of ATG spectrum in the United States and obtain rights to additional spectrum if needed; the impact of our use of open source software; the impact of equipment failures or material software defects; the impact of service disruptions caused by, among other things, force majeure events, cyber attacks or other malicious activities; 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 and conflict minerals; our possession and use of personal information; the extent of expenses, liabilities or business disruption resulting from litigation; our ability to protect our intellectual property rights; 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; our ability to fully utilize portions of our deferred tax assets; 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, 2021 as filed with the Securities and Exchange Commission (the “SEC”) on March 3, 2022 and in our quarterly report on Form 10-Q as filed with the SEC on May 5, 2022.

 

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 types from turboprops

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

 

As of March 31, 2022, Gogo reported 2,699 business aircraft flying with Gogo’s AVANCE L5 or L3 system installed, 6,526 aircraft flying with its ATG systems onboard, and 4,522 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 March 31,
		2022				2021
Revenue:
Service revenue		$	70,667			$	59,355
Equipment revenue			22,083				14,514
Total revenue			92,750				73,869
Operating expenses:
Cost of service revenue (exclusive of items shown below)			14,634				14,095
Cost of equipment revenue (exclusive of items shown below)			14,281				8,282
Engineering, design and development			5,406				5,493
Sales and marketing			6,231				3,729
General and administrative			13,458				10,373
Depreciation and amortization			3,791				4,117
Total operating expenses			57,801				46,089
Operating income			34,949				27,780
Other (income) expense:
Interest income			(47	)			(57	)
Interest expense			10,889				29,294
Loss on settlement of convertible notes			—				4,397
Other income, net			(26	)			(5	)
Total other expense			10,816				33,629
Income (loss) from continuing operations before income taxes			24,133				(5,849	)
Income tax provision			1,937				35
Net income (loss) from continuing operations			22,196				(5,884	)
Net loss from discontinued operations, net of tax			—				(1,801	)
Net income (loss)		$	22,196			$	(7,685	)
Net income (loss) attributable to common stock per share - basic:
Continuing operations		$	0.20			$	(0.07	)
Discontinued operations			—				(0.02	)
Net income (loss) attributable to common stock per share - basic		$	0.20			$	(0.09	)
Net income (loss) attributable to common stock per share - diluted:
Continuing operations		$	0.18			$	(0.07	)
Discontinued operations			—				(0.02	)
Net income (loss) attributable to common stock per share - diluted		$	0.18			$	(0.09	)
Weighted average number of shares
Basic			111,414				84,649
Diluted			134,095				84,649

 

 

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Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

		March 31,				December 31,
		2022				2021
Assets
Current assets:
Cash and cash equivalents		$	152,829			$	145,913
Accounts receivable, net of allowances of $1,127 and $894, respectively			42,102				37,730
Inventories			36,467				33,976
Prepaid expenses and other current assets			39,654				32,295
Total current assets			271,052				249,914
Non-current assets:
Property and equipment, net			71,596				63,672
Intangible assets, net			49,159				49,554
Operating lease right-of-use assets			70,973				70,989
Other non-current assets, net of allowances of $515 and $455, respectively			44,561				28,425
Deferred income taxes			177,934				185,133
Total non-current assets			414,223				397,773
Total assets		$	685,275			$	647,687
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable		$	18,119			$	17,203
Accrued liabilities			58,683				59,868
Deferred revenue			1,599				1,825
Current portion of long-term debt			109,897				109,620
Total current liabilities			188,298				188,516
Non-current liabilities:
Long-term debt			693,617				694,760
Non-current operating lease liabilities			77,074				77,329
Other non-current liabilities			7,326				7,236
Total non-current liabilities			778,017				779,325
Total liabilities			966,315				967,841
Stockholders’ deficit
Common stock			11				11
Additional paid-in capital			1,259,223				1,258,477
Accumulated other comprehensive income			17,961				1,789
Treasury stock, at cost			(128,803	)			(128,803	)
Accumulated deficit			(1,429,432	)			(1,451,628	)
Total stockholders’ deficit			(281,040	)			(320,154	)
Total liabilities and stockholders’ deficit		$	685,275			$	647,687

 

 

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Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

		For the Three Months Ended March 31,
		2022				2021
Operating activities from continuing operations:
Net income (loss)		$	22,196			$	(5,884	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization			3,791				4,117
Loss (gain) on asset disposals, abandonments and write-downs			14				(100	)
Provision for expected credit losses			259				15
Deferred income taxes			1,887				95
Stock-based compensation expense			4,007				1,849
Amortization of deferred financing costs and interest rate caps			947				1,703
Accretion of debt discount			115				84
Loss on settlement of convertible notes			—				4,397
Changes in operating assets and liabilities:
Accounts receivable			(4,571	)			3,586
Inventories			(2,491	)			(446	)
Prepaid expenses and other current assets			392				(375	)
Contract assets			(2,407	)			(1,886	)
Accounts payable			(857	)			292
Accrued liabilities			(5,926	)			(10,424	)
Deferred revenue			(226	)			646
Accrued interest			1,349				27,559
Other non-current assets and liabilities			(613	)			(654	)
Net cash provided by operating activities from continuing operations			17,866				24,574
Investing activities from continuing operations:
Purchases of property and equipment			(7,598	)			(360	)
Acquisition of intangible assets—capitalized software			(1,457	)			(342	)
Net cash used in investing activities from continuing operations			(9,055	)			(702	)
Financing activities from continuing operations:
Payments on term loan			(1,813	)			—
Payment of debt issuance costs			—				(550	)
Payments on financing leases			(43	)			(124	)
Stock-based compensation activity			(23	)			(2,646	)
Net cash used in financing activities from continuing operations			(1,879	)			(3,320	)
Cash flows from discontinued operations:
Cash used in operating activities			—				(748	)
Cash used in investing activities			—				—
Cash used in financing activities			—				—
Net cash used in discontinued operations			—				(748	)
Effect of exchange rate changes on cash			(16	)			3
Increase in cash, cash equivalents and restricted cash			6,916				19,807
Cash, cash equivalents and restricted cash at beginning of period			146,268				435,870
Cash, cash equivalents and restricted cash at end of period		$	153,184			$	455,677
Cash, cash equivalents and restricted cash at end of period		$	153,184			$	455,677
Less: current restricted cash			25				525
Less: non-current restricted cash			330				—
Cash and cash equivalents at end of period		$	152,829			$	455,152
Supplemental Cash Flow Information:
Cash paid for interest		$	8,577			$	31
Cash paid for taxes		$	—			$	1
Non-cash investing activities:
Purchases of property and equipment in current liabilities		$	7,993			$	663

 

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Gogo Inc. and Subsidiaries

Supplemental Information – Key Operating Metrics

		For the Three Months Ended March 31,
		2022				2021
Aircraft online (at period end)
ATG			6,526				5,892
Satellite			4,522				4,614
Average monthly connectivity service revenue per aircraft online
ATG		$	3,321			$	3,085
Satellite			235				239
Units Sold
ATG			246				135
Satellite			69				80
Average equipment revenue per unit sold (in thousands)
ATG		$	73			$	78
Satellite			46				46

 

 

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Gogo Inc. and Subsidiaries

Supplemental Information – Revenue and Cost of Revenue

(in thousands, unaudited)

		For the Three Months Ended March 31,								% Change
		2022				2021				2022 over 2021
Service revenue		$	70,667			$	59,355				19.1	%
Equipment revenue			22,083				14,514				52.1	%
Total revenue		$	92,750			$	73,869				25.6	%

 

		For the Three Months Ended March 31,								% Change
		2022				2021				2022 over 2021
Cost of service revenue (1)		$	14,634			$	14,095				3.8	%
Cost of equipment revenue (1)		$	14,281			$	8,282				72.4	%

 

 

 

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Gogo Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, unaudited)

		For the Three Months Ended March 31,								For the Three Months Ended December 31,
		2022				2021				2021
Adjusted EBITDA:
Net income (loss) attributable to common stock (GAAP)		$	22,196			$	(7,685	)		$	218,709
Interest expense			10,889				29,294				10,895
Interest income			(47	)			(57	)			(46	)
Income tax provision (benefit)			1,937				35				(187,673	)
Depreciation and amortization			3,791				4,117				3,658
EBITDA			38,766				25,704				45,543
Stock-based compensation expense			4,007				1,849				3,201
Loss (income) from discontinued operations			—				1,801				(9,572	)
Loss on settlement of convertible notes			—				4,397				—
Separation costs related to CA sale			—				145				380
Adjusted EBITDA		$	42,773			$	33,896			$	39,552
Free Cash Flow:
Net cash provided by operating activities (GAAP) (1)		$	17,866			$	24,574			$	30,342
Consolidated capital expenditures (1)			(9,055	)			(702	)			(4,656	)
Free cash flow		$	8,811			$	23,872			$	25,686

Gogo Inc. and Subsidiaries

Reconciliation of Estimated Full-Year GAAP Net Cash

Provided by Operating Activities to Non-GAAP Measures

(in millions, unaudited)

	FY 2022
Free Cash Flow:
Net cash provided by operating activities (GAAP)	$	100		to	$	110
Consolidated capital expenditures		(65	)	to		(65	)
Free cash flow	$	35		to	$	45

 

Definition of Non-GAAP Measures

EBITDA represents net income (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 and the gain on the sale of CA, (iii) loss on 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 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.

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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 settlement of convertible notes from Adjusted EBITDA because this activity is not related to our operating performance.

 

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 during 2021 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 consolidated 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.

 

Adjusted EBITDA Margin represents Adjusted EBITDA divided by total revenue. We present Adjusted EBITDA Margin as a supplemental performance measure because we believe that it provides meaningful information regarding our operating efficiency.

 

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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