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): November 12, 2014
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.) |
| 1250 North Arlington Heights Rd. Itasca, IL |
60143 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
630-647-1400
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)) |
| Item 7.01 | REGULATION FD DISCLOSURE. |
Representatives of Gogo Inc. (the “Company”) will use the attached presentation in various meetings with investors from time to time. A copy of the investor presentation is attached hereto as Exhibit 99.1.
| Item 9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
(d) Exhibits
| Exhibit |
Description | |
| 99.1 | Investor Presentation | |
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/ Norman Smagley | |
| Norman Smagley | ||
| Executive Vice President and | ||
| Chief Financial Officer | ||
Date: November 12, 2014
EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Dated November 12, 2014
| 99.1 | Investor Presentation |
 Exhibit 99.1
November 2014
Investor
Presentation |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
2
DISCLAIMER
Safe Harbor Statement
This presentation contains “forward-looking statements” that are based on
management’s beliefs and assumptions and on information currently available to management.
Most forward-looking statements contain words that identify them as
forward-looking, such as “anticipates,” “believes,” “continues,” “could,” “seeks,” “estimates,” “expects,”
“intends,” “may,” “plans,” “potential,”
“predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms that relate to future events.
Forward-looking statements involve known and unknown risks, uncertainties and other
factors that may cause Gogo’s actual results, performance or achievements to be
materially different from any projected results, performance or achievements expressed
or implied by the forward-looking statements. Forward-looking statements represent
the beliefs and assumptions of Gogo only as of the date of this presentation and Gogo
undertakes no obligation to update or revise publicly any such forward-looking
statements, whether as a result of new information, future events or otherwise. As
such, Gogo’s future results may vary from any expectations or goals expressed in, or
implied by, the forward-looking statements included in this presentation, possibly
to a material degree.
Gogo cannot assure you that the assumptions made in preparing any of the
forward-looking statements will prove accurate or that any long-term financial or operational
goals and targets will be realized. In particular, the availability and performance of
certain technology solutions yet to be implemented by the Company set forth in this
presentation represent aspirational long-term goals based on current
expectations. For a discussion of some of the important factors that could cause Gogo’s results to
differ materially from those expressed in, or implied by, the forward-looking
statements included in this presentation, investors should refer to the disclosure contained under
the heading “Risk Factors” in the Company’s Annual Report on Form
10-K filed with the SEC on March 14, 2014 and “Special Note Regarding Forward-Looking Statements”
in the Company’s Quarterly Report on Form 10-Q filed with the SEC on November
10, 2014.
Note to Certain Operating and Financial Data
In addition to disclosing financial results that are determined in accordance with U.S.
generally accepted accounting principles (“GAAP”), Gogo also discloses in this
presentation certain non-GAAP financial information, including Adjusted EBITDA and
Cash CapEx. These financial measures are not recognized measures under GAAP and
are not intended to be, and should not be, considered in isolation or as a substitute
for, or superior to, the financial information prepared and presented in accordance with
GAAP. In addition, this presentation contains various customer metrics and operating
data, including numbers of aircraft or units online, that are based on internal company
data, as well as information relating to the commercial and business aviation market,
and our position within those markets. While management believes such information
and data are reliable, they have not been verified by an independent source and there
are inherent challenges and limitations involved in compiling data across various
geographies and from various sources.
|
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
3
GOGO’S MISSION
Advance aviation by connecting every aircraft with
the most trusted communications services on and
above our planet |
 4
WHY INVEST IN GOGO
Gogo
is
a
leading
aero
communications
service
provider
for
the
global aviation
industry.
Our
scale
position
supports
superior
unit
economics,
operational
excellence,
and
industry-leading R&D investments.
Gogo
is
a
pure
play.
We
are
the
only
telecom
company
that
focuses
solely
on
the
unique requirements of connecting aircraft.
Our
growth
opportunity
is
large,
well-defined
and
early
stage.
©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
|
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
5
INDUSTRY LEADING SCALE
Market Position
(1)
CA–NA
CA–ROW
BA ATG
#1
#3
#1
Market Share
(1)
71%
4%
87%
Gogo Installed
Aircraft
2,044
35
2,637
2,500+
305
2,637
Total Awarded
Aircraft
(2)
BA Satellite
(Iridium)
#1
63%
5,294
5,294
(1) Market share is as of 9/30/2014 and based on following: CA-NA –
based on publicly available information as of 9/30/14 for Panasonic, Thales / LiveTV, Global Eagle Entertainment, and ViaSat;
CA-ROW – based on backlog of awarded aircraft that may include aircraft that fly both North
American and International routes and management estimates of Panasonic, Global Eagle, LiveTV
and ViaSat backlog;
BA ATG – based on aircraft online and estimated ViaSat Yonder aircraft online in
North America;
BA Satellite – based on management estimates of Iridium telecommunication systems and TrueNorth
and ICG aircraft online
(2) Net of de-installs
|
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
6
LARGEST MARKET SHARE IN CA NORTH
AMERICA
Aircraft Online as of September 30, 2014
(1) Based on management estimates, trade publications and other public sources as of
9/30/2014. 2,044
477
208
152
Gogo
Global Eagle
LiveTV
Panasonic
(1)
(1)
(1)
71% of connected aircraft
>4x the closest competitor |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
7
THE INTERNATIONAL MARKET IS LARGE &
UNTAPPED
(1) Based on Boeing Current Market Outlook 2013
(2) Based on management estimates as of 9/30/2014
Total Aircraft
~4,000
~13,000
Uncommitted
13%
79%
Committed to IFC
87%
21%
North America
Rest of World
13%
79%
(1)
(2)
…and growing at 2x the rate of the North American market
|
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
8
VALUABLE LONG-TERM PARTNERSHIPS
(1)
(1) Letter of Intent
(1)
NORTH AMERICA
COMMERCIAL AVIATION
BUSINESS AVIATION
ORIGINAL EQUIPMENT MANUFACTURER
INTERNATIONAL
FRACTIONAL JET OPERATORS
Subsidiary of |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
9
OUR VERSATILE, PROPRIETARY PLATFORM ENGAGES
EVERY PASSENGER, AIRCRAFT OWNER & OPERATOR
AIRCRAFT
OWNERS &
OPERATORS
PASSENGERS,
AIRLINES &
MEDIA
PARTNERS
Gogo Connectivity
& Gogo Biz
Gogo
Vision
Gogo
Text & Talk
Gogo
Signature
Services
Operations-Oriented
Communication
Services
PASENGERS |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
10
LARGE MARKET OF GLOBAL
AIRCRAFT TO CONNECT
(1) Includes 36,000 aircraft for CA in 2033 and 37,000 aircraft for BA in
2023. Sources:
Boeing
Current
Market
Outlook
2013
–
2032,
excludes:
cargo
aircraft
JetNet
iQ
Report
Q1
2014;
General
Aviation
Manufacturers
Association
2012
Statistical
Databook; excludes rest of world turbo props.
17,000
27,000
44,000
Global
Commercial
Aircraft
Global
Business
Aircraft
Global
Aircraft
Today
~73,000
(1)
Future
Global
Aircraft |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
11
WHY WE WIN
Specialize in aviation
Specialize in aviation
Superior technology and roadmap
Superior technology and roadmap
End-to-end service provider
End-to-end service provider
Deliver excellent reliability
Deliver excellent reliability
Flexible business model
Flexible business model
1
2
3
4
5 |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
12
SPECIALIZED END-TO-END SERVICE
PROVIDER
AIRCRAFT
AIRCRAFT
OPERATIONS
OPERATIONS
REGULATORY
REGULATORY
APPROVAL
APPROVAL
NETWORK &
NETWORK &
BANDWIDTH
BANDWIDTH
MANAGEMENT
MANAGEMENT
CUSTOMER CARE
CUSTOMER CARE
& MARKETING
& MARKETING
SUPPORT
SUPPORT
NETWORK
NETWORK
ENGINEERING
ENGINEERING
& DESIGN
& DESIGN
AIRCRAFT
AIRCRAFT
CONNECTIVITY
CONNECTIVITY
SOLUTIONS
SOLUTIONS
ENGINEERING
ENGINEERING
AIRLINE
AIRLINE
CONNECTIVITY
CONNECTIVITY
PRODUCTS &
PRODUCTS &
SERVICES
SERVICES
DEVELOPMENT
DEVELOPMENT
COMPLETE
BACK-OFFICE
INFRASTRUCTURE
AND SUPPORT |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
13
SUPERIOR TECHNOLOGY AND
ROADMAP
Technology
Region
Peak
Speed
Key Attributes
Iridium
Global
2.4 Kbps
-
Primarily telecom service
-
Low data speeds
-
Satellite
SwiftBroadband
Global
432 Kbps
-
Low data speeds
-
Satellite
Air-to-Ground
(EvDo Rev A)
Regional
3.1 Mbps
-
Overnight install
-
Suits all aircraft types
Air-to-Ground 4
(EvDo Rev B)
Regional
9.8 Mbps
-Triples the peak speed
-
More reliable than ATG
-
Overnight install
Ku Band
Global
50 Mbps
-
Global coverage
-
Multiple suppliers
-
Available today
Ka Band
Global
50 Mbps
-
High data speeds
-
Spot beam
-
Next Generation
Expected
2015
Launch
Expected
2015
Launch
(Regional)
(Regional)
Ground-to-Orbit
(Hybrid)
Regional
70 Mbps+
-
More spectrally efficient
-
Lower profile
-
More robust & reliable
Expected
2015
Launch
2Ku
Global
70 Mbps+
-
More spectrally efficient
-
Lower profile
-
More robust & reliable
Expected
2015
Launch
Global Eagle |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
14
RECENT DEVELOPMENTS –
EXTENDING OUR
TECHNOLOGY LEAD
Revolutionary 2Ku and GTO connectivity systems announced
Strong results from ATG-4 upgrade program
Operationalized International: network, STCs, aircraft online
Boeing line-fit program progressing well
Launched Delta Studio with Delta Air Lines powered by Gogo Vision platform
Launched in-flight text messaging with T-Mobile
Introduced
next
generation
Gogo
Vision
system
that
works
without
connectivity
to
the
Launched next generation Iridium satellite communication solution by BA
Announced Future Air Navigation System (FANS)
over Iridium solutions
Introduced SwiftBroadband airtime service plans for BA
ground for digital rights management |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
15
DELIVER EXCELLENT RELIABILITY
65+ million
sessions
8,000+ flights
per day
98% +
ATG End-to-End
System Availability |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
16
FLEXIBLE BUSINESS MODEL
Gogo
Per session to the
passenger
% of revenue, paid by
Gogo to airline
Included
Airline
Per megabyte & per
aircraft to the airline
No revenue share
between parties
Charged per service
to airline
TURNKEY
MODEL
AIRLINE DIRECTED
MODEL
Passenger Integration
Pricing
Revenue Share
Back-end Services |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
17
FORMULA FOR REVENUE GROWTH:
REVENUE = AIRCRAFT X ARPA
TODAY
North America
In-Flight Connectivity
Global
In-Flight Connectivity
Wireless In-Flight Entertainment
Text Messaging
Operations-Oriented
Communications Services
TOMORROW
INCREASE
AIRCRAFT
INCREASE
ARPA
$
Business Passengers
All Passengers
Advertising, eCommerce partners
Aircraft Operators |
 FINANCIALS |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
19
GROWING REVENUE DRIVES
PROFITABILITY
* Please see reconciliation of Adjusted EBITDA in appendix.
Note: Minor differences exist due to rounding.
Adjusted EBITDA*
($M)
$49
$24
CA-ROW
Segment Loss
Revenue
($M)
$79
$37
$95
$160
$234
$328
$392
2009
2010
2011
2012
2013
2014 Q3
LTM
73%
CAGR
($89)
($45)
($1)
2009
2010
2011
2012
2013
2014 Q3
LTM
$14
$9
$8
$41
$69
$9 |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
20
PROVEN OPERATING LEVERAGE
Consolidated COGS
Consolidated COGS excl. CA-ROW
Consolidated COGS excl. CA-ROW and
assuming no change to Rev Share %
(1)
Cost of Goods
Sold
(% of revenue)
Engineering, Design
& Development
(% of revenue)
General &
Administrative
(% of revenue)
Sales &
Marketing
(% of revenue)
2011
(1) Revenue share percentage earned by our airline partners was 11.6% or $9.7 million for the year
ended December 31, 2011, 18.5% or $24.5 million for the year ended December 31, 2012, 20.9% or
$41.1 million for the year ended December 31, 2013, and 20.6% or $48.4 million for the twelve months ended September 30, 2014. The line footnoted above represents Cost of
Goods Sold as Percentage of Revenue using the average revenue share percentage earned by our airline
partners during the year ended December 31, 2011 for all subsequent years. We expect the
revenue share percentages under certain of our connectivity agreements to increase in future periods due to the occurrence of contractually stipulated triggering events that have
yet to occur. We currently estimate that such increases will amount to approximately 2% of the
CA-NA segment’s service revenue.
130%
48%
51%
52%
44%
39%
2009
2012
2013
2014 Q3 LTM
59%
15%
15%
15%
2009
2012
2013
2014 Q3
LTM
77%
21%
21%
20%
2009
2012
2013
2014 Q3
LTM
75%
11%
9%
10%
2009
2012
2013
2014 Q3
LTM |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
21
Q3 FINANCIAL RESULTS
$104
$85
2013 Q3
2014 Q3
Note: Minor differences exist due to rounding.
CA-NA
BA
CA-ROW
CA-NA
BA CA-ROW Total
Revenue
($M)
Segment Profit (Loss)
($M)
2013 Q3
2014 Q3
$35
$40
$51
$63
22%
($2)
$15
($11)
$2
$6
$15
($19)
$1 |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
22
OUR SEGMENTS ARE IN DIFFERENT
PHASES
BA:
CA-NA:
CA-ROW:
Strong revenue growth
Strong segment profitability and FCF
Strong revenue growth
Segment profitability
Start-up phase
Focusing on signing airlines and
investing for growth |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
23
BA HIGH-MARGIN SERVICE REVENUE DRIVES
SEGMENT PROFITABILITY AND CASH FLOW
ATG Aircraft Online
(1)
Note: Minor differences exist due to rounding.
Service Revenue
($M)
Segment Profit
($M)
(1) End of period.
1,455
2,047
2,637
2009
2012
2013
2014 Q3
49
69%
CAGR
107%
CAGR
54x
Increase
2009
2012
2013
2014 Q3
2009
2012
2013
2014 Q3
$6
$34
$52
$67
$3
$36
$51
$63
LTM
LTM |
 24
CA NORTH AMERICA INCREASE IN AIRCRAFT ONLINE AND
REVENUE PER AIRCRAFT DRIVE REVENUE GROWTH
Aircraft
Online
(1)
ARPA ($
‘000s) Service Revenue
($M) (1) End of period.
(2) Annualized
Note: Minor differences exist due to rounding.
692
1,811
2,032
2,044
2009
2012
2013
2014 Q3
$24
$84
$101
$122
2009
2012
2013
2014 Q3
(2)
$9
$133
$197
$235
2009
2012
2013
2014 Q3
LTM
~3x
Increase
5x
Increase
115%
CAGR
©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
|
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
25
CA NORTH AMERICA SEGMENT DEMONSTRATES
SIGNIFICANT OPERATING LEVERAGE
Assuming constant
revenue share %
(1)
Cost of Goods Sold
(% of Revenue)
Segment Profit
(% of Revenue)
Other Operating
Expenses Excluding D&A
(% of Revenue)
Assuming constant
revenue share %
(1)
-30%
-9%
-1%
7%
16%
2011
2012
2013
2014
Q3 LTM
59%
56%
52%
49%
40%
2011
2012
2013
2014
Q3 LTM
71%
52%
47%
43%
2011
2012
2013
2014
Q3 LTM
(1) Revenue share percentage earned by our airline partners was 11.6% or $9.7 million for the year
ended December 31, 2011, 18.5% or $24.5 million for the year ended December 31, 2012, 20.9% or
$41.1 million for the year ended December 31, 2013, and 20.6% or $48.4 million for the twelve months ended September 30, 2014. The line footnoted above represents Cost of
Goods Sold as Percentage of Revenue using the average revenue share percentage earned by our airline
partners during the year ended December 31, 2011 for all subsequent years. We expect the
revenue share percentages under certain of our connectivity agreements to increase in future periods due to the occurrence of contractually stipulated triggering events that have
yet to occur. We currently estimate that such increases will amount to approximately 2% of the
CA-NA segment’s service revenue. |
 26
CA REST OF WORLD INVESTMENT
POSITIONS FOR FUTURE GROWTH
2012 –
Announced international expansion
2013 –
Established global Ku network, began
development of industry leading technology
solutions
2014 –
announced industry leading 2Ku, first
Ku equipped aircraft flying, multiple STCs
received
In-flight connectivity service launched on
Delta & Japan Airlines
Virgin Atlantic & Vietnam Airlines partners
announced
©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
$14
$41
$55
2012
2013
2014 Q3 YTD
CA-ROW Segment Loss
($M) |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
27
EVOLVING CAPEX MODEL
(1) Cash
CAPEX
represents
capital
expenditures
net
of
airborne
equipment
proceeds
received
from
the
airlines
and
incentives
paid
to
us
by
landlords
under
certain
facilities
leases.
Gross CapEx
Cash CapEx
(1)
TRANSITION
N
E
T
W
O
R
K
I
N
S
T
A
L
L
GOGO
RENTS
GOGO
PAYS
AIRLINE
PAYS
GOGO
BUILDS
Capital Expenditures
($M)
$77
$79
$121
$137
$77
$58
$104
$109
2009
2012
2013
2014 Q3 LTM |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
28
GOGO FIVE POINT STRATEGY
TO INCRESE SHAREHOLDER VALUE
Gain global share
1
Grow ARPA in CA-NA
2
Evolve technology roadmap to
address market needs
3
Accelerate BA growth
4
Deliver consistent execution
5 |
 APPENDIX |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
30
ADJUSTED EBITDA RECONCILIATION
($MM)
2009
2010
2011
2012
2013
2013 Q4
2014 Q1
2014 Q2
2014 Q3
Net Income
(142)
(140)
(18)
(96)
(146)
(22)
(17)
(19)
(25)
Interest Income
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
(0)
Interest Expense
30
–
1
9
29
7
7
7
9
Income Tax Provision
–
3
1
1
1
–
–
–
–
Depreciation & Amortization
22
31
33
37
56
14
16
15
17
EBITDA
(91)
(106)
16
(49)
(60)
(0)
6
4
2
Fair Value Derivative Adjustments
–
33
(59)
(10)
36
–
–
–
–
Class
A and Class B Senior
Convertible Preferred Stock Return
–
18
31
52
29
–
–
–
–
Accretion of Preferred Stock
–
9
10
10
5
–
–
–
–
Stock-based Compensation
Expense
1
2
2
4
6
2
2
2
3
Loss on Extinguishment of Debt
2
–
–
–
–
–
–
–
–
Write Off of Deferred Equity
Financing Costs
–
–
–
5
–
–
–
–
–
Amortization of Deferred Airborne
Lease Incentives
–
(1)
(1)
(4)
(8)
(3)
(3)
(3)
(4)
Adjusted EBITDA
(89)
(45)
(1)
9
8
(0)
5
3
1
Note: Minor differences exist due to rounding |
 ©2014 Gogo Inc. and Affiliates. Proprietary & Confidential.
31
CASH CAPEX RECONCILIATION
($MM)
2009
2010
2011
2012
2013
2014
Q1
2014
Q2
2014
Q3
Purchases of Property
and Equipment
(69)
(33)
(33)
(67)
(105)
(32)
(28)
(35)
Acquisition of
Intangible Assets
(Capitalized Software)
(8)
(7)
(10)
(12)
(16)
(4)
(5)
(5)
Gross CapEx
(77)
(40)
(43)
(79)
(121)
(36)
(33)
(41)
Change in Deferred
Airborne Lease
Incentives
–
9
11
18
9
5
3
5
Amortization of
Deferred Airborne
Lease Incentives
–
1
1
4
8
3
3
3
Landlord Incentives
–
–
–
–
–
–
–
2
Cash CapEx
(77)
(30)
(31)
(58)
(104)
(29)
(27)
(30)
Note: Minor differences exist due to rounding |