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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 June 30, 2022

 

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/20353e01c022a6474d5e2148b6fb4733-img233911870_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.)

 

 

105 Edgeview Dr., Suite 300

Broomfield, CO 80021

(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 July 29, 2022, 128,688,372 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 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

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.

Controls and Procedures

39

 

 

 

Part II.

Other Information

 

Item 1.

Legal Proceedings

40

Item 1A.

Risk Factors

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

43

Item 3.

Defaults Upon Senior Securities

43

Item 4.

Mine Safety Disclosures

43

Item 5.

Other Information

43

Item 6.

Exhibits

44

Signatures

45

 

 

 

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)

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

163,993

 

 

$

145,913

 

Accounts receivable, net of allowances of $1,311 and $894, respectively

 

 

44,570

 

 

 

37,730

 

Inventories

 

 

42,543

 

 

 

33,976

 

Prepaid expenses and other current assets

 

 

48,895

 

 

 

32,295

 

Total current assets

 

 

300,001

 

 

 

249,914

 

Non-current assets:

 

 

 

 

 

 

Property and equipment, net

 

 

84,586

 

 

 

63,672

 

Intangible assets, net

 

 

48,842

 

 

 

49,554

 

Operating lease right-of-use assets

 

 

72,384

 

 

 

70,989

 

Other non-current assets, net of allowances of $524 and $455, respectively

 

 

41,980

 

 

 

28,425

 

Deferred income taxes

 

 

175,773

 

 

 

185,133

 

Total non-current assets

 

 

423,565

 

 

 

397,773

 

Total assets

 

$

723,566

 

 

$

647,687

 

Liabilities and stockholders’ deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

20,662

 

 

$

17,203

 

Accrued liabilities

 

 

62,254

 

 

 

59,868

 

Deferred revenue

 

 

1,507

 

 

 

1,825

 

Current portion of long-term debt

 

 

7,250

 

 

 

109,620

 

Total current liabilities

 

 

91,673

 

 

 

188,516

 

Non-current liabilities:

 

 

 

 

 

 

Long-term debt

 

 

692,482

 

 

 

694,760

 

Non-current operating lease liabilities

 

 

77,744

 

 

 

77,329

 

Other non-current liabilities

 

 

7,293

 

 

 

7,236

 

Total non-current liabilities

 

 

777,519

 

 

 

779,325

 

Total liabilities

 

 

869,192

 

 

 

967,841

 

Stockholders’ deficit

 

 

 

 

 

 

Common stock, par value $0.0001 per share; 500,000,000 shares authorized at June 30, 2022 and December 31, 2021; 135,878,986 and 117,407,468 shares issued at June 30, 2022 and December 31, 2021, respectively; and 128,688,372 and 110,791,954 shares outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

13

 

 

 

11

 

Additional paid-in capital

 

 

1,379,356

 

 

 

1,258,477

 

Accumulated other comprehensive income

 

 

22,420

 

 

 

1,789

 

Treasury stock, at cost

 

 

(140,000

)

 

 

(128,803

)

Accumulated deficit

 

 

(1,407,415

)

 

 

(1,451,628

)

Total stockholders’ deficit

 

 

(145,626

)

 

 

(320,154

)

Total liabilities and stockholders’ deficit

 

$

723,566

 

 

$

647,687

 

 

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 June 30,

 

 

For the Six Months
Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

$

73,064

 

 

$

64,767

 

 

$

143,731

 

 

$

124,122

 

Equipment revenue

 

 

24,772

 

 

 

17,608

 

 

 

46,855

 

 

 

32,122

 

Total revenue

 

 

97,836

 

 

 

82,375

 

 

 

190,586

 

 

 

156,244

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of service revenue (exclusive of amounts shown below)

 

 

15,752

 

 

 

15,177

 

 

 

30,386

 

 

 

29,272

 

Cost of equipment revenue (exclusive of amounts shown below)

 

 

16,868

 

 

 

10,932

 

 

 

31,149

 

 

 

19,214

 

Engineering, design and development

 

 

7,952

 

 

 

6,541

 

 

 

13,358

 

 

 

12,034

 

Sales and marketing

 

 

6,068

 

 

 

4,826

 

 

 

12,299

 

 

 

8,555

 

General and administrative

 

 

15,357

 

 

 

11,746

 

 

 

28,815

 

 

 

22,119

 

Depreciation and amortization

 

 

3,499

 

 

 

3,547

 

 

 

7,290

 

 

 

7,664

 

Total operating expenses

 

 

65,496

 

 

 

52,769

 

 

 

123,297

 

 

 

98,858

 

Operating income

 

 

32,340

 

 

 

29,606

 

 

 

67,289

 

 

 

57,386

 

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(194

)

 

 

(54

)

 

 

(241

)

 

 

(111

)

Interest expense

 

 

9,772

 

 

 

16,340

 

 

 

20,661

 

 

 

45,634

 

Loss on extinguishment of debt and settlement of convertible notes

 

 

 

 

 

79,564

 

 

 

 

 

 

83,961

 

Other expense (income), net

 

 

43

 

 

 

(127

)

 

 

17

 

 

 

(132

)

Total other expense

 

 

9,621

 

 

 

95,723

 

 

 

20,437

 

 

 

129,352

 

Income (loss) from continuing operations before income taxes

 

 

22,719

 

 

 

(66,117

)

 

 

46,852

 

 

 

(71,966

)

Income tax provision

 

 

702

 

 

 

277

 

 

 

2,639

 

 

 

312

 

Net income (loss) from continuing operations

 

 

22,017

 

 

 

(66,394

)

 

 

44,213

 

 

 

(72,278

)

Net loss from discontinued operations, net of tax

 

 

 

 

 

(2,854

)

 

 

 

 

 

(4,655

)

Net income (loss)

 

$

22,017

 

 

$

(69,248

)

 

$

44,213

 

 

$

(76,933

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stock per share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.18

 

 

$

(0.61

)

 

$

0.38

 

 

$

(0.74

)

Discontinued operations

 

 

 

 

 

(0.02

)

 

 

 

 

 

(0.05

)

Net income (loss) attributable to common stock per share - basic

 

$

0.18

 

 

$

(0.63

)

 

$

0.38

 

 

$

(0.79

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stock per share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.17

 

 

$

(0.61

)

 

$

0.35

 

 

$

(0.74

)

Discontinued operations

 

 

 

 

 

(0.02

)

 

 

 

 

 

(0.05

)

Net income (loss) attributable to common stock per share - diluted

 

$

0.17

 

 

$

(0.63

)

 

$

0.35

 

 

$

(0.79

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

123,252

 

 

 

109,060

 

 

 

117,375

 

 

 

96,884

 

Diluted

 

 

134,718

 

 

 

109,060

 

 

 

134,474

 

 

 

96,884

 

 

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 June 30,

 

 

For the Six Months
Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

22,017

 

 

$

(69,248

)

 

$

44,213

 

 

$

(76,933

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustments

 

$

(120

)

 

$

37

 

 

$

(9

)

 

$

138

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gain

 

 

5,106

 

 

 

(430

)

 

 

21,159

 

 

 

(430

)

Less: income realized and reclassified to earnings

 

 

527

 

 

 

 

 

 

519

 

 

 

 

Changes in fair value of cash flow hedges

 

 

4,579

 

 

 

(430

)

 

 

20,640

 

 

 

(430

)

Other comprehensive income, net of tax

 

 

4,459

 

 

 

(393

)

 

 

20,631

 

 

 

(292

)

Comprehensive income (loss)

 

$

26,476

 

 

$

(69,641

)

 

$

64,844

 

 

$

(77,225

)

 

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 Six Months
Ended June 30,

 

 

 

2022

 

 

2021

 

Operating activities from continuing operations:

 

 

 

 

 

 

Net income (loss)

 

$

44,213

 

 

$

(72,278

)

Adjustments to reconcile net income (loss) to cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

7,290

 

 

 

7,664

 

Loss (gain) on asset disposals, abandonments and write-downs

 

 

114

 

 

 

(2

)

Provision for expected credit losses

 

 

498

 

 

 

(15

)

Deferred income taxes

 

 

2,540

 

 

 

90

 

Stock-based compensation expense

 

 

9,411

 

 

 

4,741

 

Amortization of deferred financing costs and interest rate caps

 

 

1,777

 

 

 

2,781

 

Accretion of debt discount

 

 

231

 

 

 

188

 

Loss on extinguishment of debt and settlement of convertible notes

 

 

 

 

 

83,961

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(7,270

)

 

 

871

 

Inventories

 

 

(8,567

)

 

 

692

 

Prepaid expenses and other current assets

 

 

(79

)

 

 

(2,238

)

Contract assets

 

 

(2,748

)

 

 

(3,314

)

Accounts payable

 

 

858

 

 

 

3,349

 

Accrued liabilities

 

 

(2,043

)

 

 

(6,483

)

Deferred revenue

 

 

(318

)

 

 

(632

)

Accrued interest

 

 

(164

)

 

 

(8,576

)

Other non-current assets and liabilities

 

 

(1,503

)

 

 

(1,198

)

Net cash provided by operating activities from continuing operations

 

 

44,240

 

 

 

9,601

 

Investing activities from continuing operations:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(17,481

)

 

 

(1,284

)

Acquisition of intangible assets—capitalized software

 

 

(2,469

)

 

 

(542

)

Purchase of interest rate cap

 

 

 

 

 

(8,629

)

Net cash used in investing activities from continuing operations

 

 

(19,950

)

 

 

(10,455

)

Financing activities from continuing operations:

 

 

 

 

 

 

Redemption of senior secured notes

 

 

 

 

 

(1,023,146

)

Proceeds from term loan, net of discount

 

 

 

 

 

721,375

 

Payments on term loan

 

 

(3,625

)

 

 

 

Payment of debt issuance costs

 

 

 

 

 

(20,251

)

Payments on financing leases

 

 

(103

)

 

 

(154

)

Stock-based compensation activity

 

 

(2,515

)

 

 

(2,752

)

Net cash used in financing activities from continuing operations

 

 

(6,243

)

 

 

(324,928

)

Cash flows from discontinued operations:

 

 

 

 

 

 

Cash used in operating activities

 

 

 

 

 

(800

)

Cash used in investing activities

 

 

 

 

 

 

Cash used in financing activities

 

 

 

 

 

 

Net cash used in discontinued operations

 

 

 

 

 

(800

)

Effect of exchange rate changes on cash

 

 

8

 

 

 

(89

)

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

 

 

18,055

 

 

 

(326,671

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

146,268

 

 

 

435,870

 

Cash, cash equivalents and restricted cash at end of period

 

$

164,323

 

 

$

109,199

 

Cash, cash equivalents and restricted cash at end of period

 

$

164,323

 

 

$

109,199

 

Less: current restricted cash

 

 

 

 

 

25

 

Less: non-current restricted cash

 

 

330

 

 

 

 

Cash and cash equivalents at end of period

 

$

163,993

 

 

$

109,174

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

Cash paid for interest

 

$

19,680

 

 

$

51,259

 

Cash paid for taxes