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 September 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 October 28, 2022, 127,270,258 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	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42

Part II.	Other Information
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
Signatures		47

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,
	2022			2021
Assets
Current assets:
Cash and cash equivalents	$	152,161		$	145,913
Accounts receivable, net of allowances of $1,634 and $894, respectively		49,234			37,730
Inventories		46,598			33,976
Prepaid expenses and other current assets		42,415			32,295
Total current assets		290,408			249,914
Non-current assets:
Property and equipment, net		98,688			63,672
Intangible assets, net		50,220			49,554
Operating lease right-of-use assets		75,694			70,989
Other non-current assets, net of allowances of $526 and $455, respectively		49,505			28,425
Deferred income taxes		164,124			185,133
Total non-current assets		438,231			397,773
Total assets	$	728,639		$	647,687
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	18,413		$	17,203
Accrued liabilities		50,677			59,868
Deferred revenue		1,604			1,825
Current portion of long-term debt		7,250			109,620
Total current liabilities		77,944			188,516
Non-current liabilities:
Long-term debt		691,337			694,760
Non-current operating lease liabilities		80,123			77,329
Other non-current liabilities		7,523			7,236
Total non-current liabilities		778,983			779,325
Total liabilities		856,927			967,841
Stockholders’ deficit
Common stock, par value $0.0001 per share; 500,000,000 shares authorized at September 30, 2022 and December 31, 2021; 135,960,807 and 117,407,468 shares issued at September 30, 2022 and December 31, 2021, respectively; and 127,270,193 and 110,791,954 shares outstanding at September 30, 2022 and December 31, 2021, respectively		13			11
Additional paid-in capital		1,383,858			1,258,477
Accumulated other comprehensive income		33,455			1,789
Treasury stock, at cost		(158,375	)		(128,803	)
Accumulated deficit		(1,387,239	)		(1,451,628	)
Total stockholders’ deficit		(128,288	)		(320,154	)
Total liabilities and stockholders’ deficit	$	728,639		$	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 September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue:
Service revenue	$	75,252		$	66,204		$	218,983		$	190,326
Equipment revenue		30,066			20,968			76,921			53,090
Total revenue		105,318			87,172			295,904			243,416
Operating expenses:
Cost of service revenue (exclusive of amounts shown below)		17,297			12,985			47,683			42,257
Cost of equipment revenue (exclusive of amounts shown below)		19,261			12,368			50,410			31,582
Engineering, design and development		7,988			5,958			21,346			17,992
Sales and marketing		6,240			5,538			18,539			14,093
General and administrative		15,474			15,250			44,289			37,369
Depreciation and amortization		2,716			4,160			10,006			11,824
Total operating expenses		68,976			56,259			192,273			155,117
Operating income		36,342			30,913			103,631			88,299
Other (income) expense:
Interest income		(690	)		(34	)		(931	)		(145	)
Interest expense		8,781			10,943			29,442			56,577
Loss on extinguishment of debt and settlement of convertible notes		—			—			—			83,961
Other expense, net		95			143			112			11
Total other expense		8,186			11,052			28,623			140,404
Income (loss) from continuing operations before income taxes		28,156			19,861			75,008			(52,105	)
Income tax provision		7,980			131			10,619			443
Net income (loss) from continuing operations		20,176			19,730			64,389			(52,548	)
Net loss from discontinued operations, net of tax		—			(8,771	)		—			(13,426	)
Net income (loss)	$	20,176		$	10,959		$	64,389		$	(65,974	)

Net income (loss) attributable to common stock per share - basic:
Continuing operations	$	0.16		$	0.18		$	0.53		$	(0.52	)
Discontinued operations		—			(0.08	)		—			(0.13	)
Net income (loss) attributable to common stock per share - basic	$	0.16		$	0.10		$	0.53		$	(0.65	)

Net income (loss) attributable to common stock per share - diluted:
Continuing operations	$	0.15		$	0.16		$	0.50		$	(0.52	)
Discontinued operations		—			—			—			(0.13	)
Net income (loss) attributable to common stock per share - diluted	$	0.15		$	0.16		$	0.50		$	(0.65	)

Weighted average number of shares
Basic		129,914			109,345			121,762			101,189
Diluted		134,221			133,160			134,454			101,189

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 September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Net income (loss)	$	20,176		$	10,959		$	64,389		$	(65,974	)
Other comprehensive income (loss), net of tax
Currency translation adjustments	$	(247	)	$	(32	)	$	(256	)	$	106
Cash flow hedges:
Amount recognized in other comprehensive income (loss)		13,068			(2	)		34,227			(432	)
Less: income realized and reclassified to earnings		1,786			—			2,305			—
Changes in fair value of cash flow hedges		11,282			(2	)		31,922			(432	)
Other comprehensive income (loss), net of tax		11,035			(34	)		31,666			(326	)
Comprehensive income (loss)	$	31,211		$	10,925		$	96,055		$	(66,300	)

See the Notes to Unaudited Condensed Consolidated Financial Statements

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	For the Nine Months Ended September 30,
	2022			2021
Operating activities from continuing operations:
Net income (loss)	$	64,389		$	(52,548	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization		10,006			11,824
Loss on asset disposals, abandonments and write-downs		166			121
Provision for expected credit losses		855			55
Deferred income taxes		10,470			147
Stock-based compensation expense		14,101			10,144
Amortization of deferred financing costs and interest rate caps		2,486			3,718
Accretion of debt discount		345			303
Loss on extinguishment of debt and settlement of convertible notes		—			83,961
Changes in operating assets and liabilities:
Accounts receivable		(12,289	)		(520	)
Inventories		(12,622	)		(1,850	)
Prepaid expenses and other current assets		12,862			(26,794	)
Contract assets		(2,836	)		(4,689	)
Accounts payable		1,116			2,474
Accrued liabilities		(16,245	)		16,245
Deferred revenue		(222	)		(849	)
Accrued interest		1,720			(7,034	)
Other non-current assets and liabilities		(2,363	)		1,647
Net cash provided by operating activities from continuing operations		71,939			36,355
Investing activities from continuing operations:
Proceeds from sale of property and equipment		—			1,000
Purchases of property and equipment		(35,187	)		(2,833	)
Acquisition of intangible assets—capitalized software		(4,745	)		(1,171	)
Proceeds from (purchase of) interest rate caps		803			(8,629	)
Net cash used in investing activities from continuing operations		(39,129	)		(11,633	)
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		(5,438	)		(1,813	)
Payment of debt issuance costs		—			(20,251	)
Repurchases of common stock		(18,375	)		—
Payments on financing leases		(136	)		(154	)
Stock-based compensation activity		(2,703	)		(2,234	)
Net cash used in financing activities from continuing operations		(26,652	)		(326,223	)