SEC Filing | Gogo Inc.

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10-Q

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


☐	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.)

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). Yes☐No☑

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

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

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

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

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