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): March 2, 2015
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, including on March 5, 2015, when Michael Small, Gogo’s Chief Executive Officer, will be participating in the Morgan Stanley Technology, Media and Telecom Conference at 9:20 a.m. Pacific Time. Please visit Gogo’s investor relations website at http://ir.gogoair.com for Webcast access information regarding this conference.
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: March 2, 2015
EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Dated March 2, 2015
| 99.1 | Investor Presentation |
| Exhibit 99.1
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Investor Presentation
March 3, 2015
Michael Small Norman Smagley
President and CEO EVP and CFO
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DISCLAIMER
Safe Harbor Statement
This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 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 headings “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2015.
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.
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 2
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WHY INVEST IN GOGO
LARGE GROWTH OPPORTUNITY
LEADING POSITION
EXPERIENCE & SCALE HIGH BARRIERS TO ENTRY ATTRACTIVE ECONOMICS
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 3
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MARKET & COMPANY OVERVIEW
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AVIATION INTERNET TRENDS
| 1 |
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Connected aircraft transform global aviation – the last frontier of internet connectivity |
| 2 |
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Cost, coverage, capacity and reliability are just now reaching critical inflection points |
3 Next gen technologies expected to increase speeds from 10 to 100Mbps within 5 years with a comparable reduction in costs
4 More bandwidth drives demand from business traveler connectivity today to every person and most ‘things’ on aircraft in 10 years
| 5 |
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Airlines will demand ‘Always Available Everywhere for Every Plane’ |
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 5
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A LARGE AND GROWING GLOBAL CONNECTED AVIATION MARKET
ADDRESSABLE CONNECTED AIRCRAFT
Commercial Aviation (“CA”)(1) Business Aviation (“BA”)(2)
CA—North America CA—Rest of World (“CA-NA”) (“CA-ROW”)
37,800
1.2x
2.3x 32,000
30,300
2.6x size of CA-NA
13,900
1.4x
7,300
5,300
2013 2033F 2013 2033F 2014 2024F
The connected aircraft industry is worth up to $30 billion
| (1) |
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Source: Boeing Current Market Outlook 2014 – 2033, excludes: cargo aircraft. |
(2) Source: JetNet iQ Report Q4 2014; General Aviation Manufacturers Association 2014 Statistical Databook, excludes Rest of World turbo props.
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 6
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GOGO’S IMPRESSIVE SCALE AND REACH
Largest Market Share in CA-NA Largest Market Share in BA Untapped CA-ROW market
Broadband Narrowband North America Rest of World
Total Aircraft(2) ~5,300 ~13,900
? 87% of broadband aircraft
? 69% of connected aircraft? 63% of Iridium satellite aircraft1 Not Awarded(3) 24% 80%
5,339 2,797
3,136 2,098
80%
524 400 269 152
24%
Global Eagle Thales/LiveTV Panasonic ViaSat Competitors
#1 Global in-flight connectivity provider Leader in North America and expanding internationally
Note: Data based on management estimates, trade publications and other public sources as of 12/31/2014
(1) Gogo satellite business aircraft includes 5,377 aircraft online comprised of 5,339 Iridium equipped aircraft and 38 SwiftBroadband equipped aircraft as of 12/31/14 (2) Based on Boeing Current Market Outlook 2014-2033 (3) Based on management estimates as of 12/31/2014
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 7
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LONG-TERM PARTNERSHIPS WITH OUR MAJOR AIRLINE PARTNERS
Commercial Aviation Business Aviation
North America Original Equipment Manufacturers
International Fractional Jet Operators
| (1) |
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| (1) |
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Letter of Intent |
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 8
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WHY WE WIN
| 1 |
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Specialize in aviation and telecom |
| 2 |
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Superior technology & economics |
| 3 |
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Excellent reliability |
| 4 |
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End-to-end service provider |
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 9
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WE SPECIALIZE IN AIRCRAFT AND HAVE A TRACK RECORD OF INNOVATION
| 1 |
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? First mover advantage
ATG / ATG-4
? Most efficient solution for small aircraft
| 2 |
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? 70-100Mbps
2Ku
? Cost advantage over existing satellite solutions
| 3 |
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Intellectual
? 100+ patents globally
Property
4? Enhanced protocols and wireless industry standards for in-flight connectivity Other Aviation ? Unique product offerings: Text & Talk, Gogo Vision, Innovations Universal Cabin System, etc.
? Leaders in wireless entertainment with the largest number of aircraft online
EXPERTISE IN INTERNET, AVIATION AND TELECOM
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 10
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GOGO’S TECHNOLOGY AGAIN DISRUPTS THE GLOBAL AVIATION INDUSTRY
ATG-4 Antenna 2Ku Antenna
ATG-4: North America coverage 2Ku: Global coverage
10 Mbps regional solution, North 70 Mbps at launch, 100 Mbps when spot beam Ku-band America coverage satellites are launched Proprietary solution enabling overnight Low cost producer – estimated half the bandwidth cost installs compared to other satellite solutions Years of experience delivering Most complete global coverage broadband service Half the height of traditional antenna – lower drag, fuel Gogo is the only ATG solution savings provider: network, equipment, service Leverages Gogo’s existing Ku-band network and future high throughput Ku satellites
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 11
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LARGEST TECHNOLOGY PORTFOLIO
? Broadest suite of technologies and full fleet connectivity solutions
? Proprietary 2Ku technology: higher peak speed (70-100 Mbps) than competitors at half the bandwidth cost? ATG / ATG-4: fastest deployment time (overnight) and lightest equipment
Peak Global Eagle
Technology Region Speed Key Attributes
Iridium Global 2.4 Kbps—Low data speeds?
Swift Broadband Global 432 Kbps—Low data speeds???
- Overnight install 3.1 / 9.8
ATG / ATG-4 Regional—Suits all aircraft types? Mbps
- Lower latency vs. satellite
- 2x spectrally efficient vs.
Expected
70-100 Ku / Ka band
2Ku Global 2015 Mbps—Lower profile radome Launch
- More robust and reliable
- Global coverage
Ku Band Global 50 Mbps???
- Multiple suppliers
Expected Expected
- Spot beam technology? Ka Band Global 50 Mbps 2015 2015
- Next Generation
Launch Launch (Regional)
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 12
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EXCELLENT RELIABILITY
70+ million 7,800+ flights 98% +
sessions per day ATG End-to-End System Availability
Source: Company information 13 ©2015 Gogo Inc. and Affiliates. Proprietary & Confidential.
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THE MOST COMPLETE END-TO-END AVIATION SERVICE PROVIDER
Equipment and Equipment Passenger Services Related Services
? Airborne equipment for ATG and ? Connectivity and wireless satellite entertainment services across a ? Certification, installation, range of passenger devices maintenance, etc.
Airline / Owner / Operator Operations-Oriented Services Communications Services
? Dedicated customer support services
? Operations-focused connectivity ? Network monitoring and bandwidth services for airlines and crew management
Global Network Solutions
? ATG / ATG-4 for North America? 2Ku / Ku / Ka for global satellite service
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 14
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RECENT WINS
? 2Ku award for 250 existing domestic plus new international aircraft
Delta Airlines
? Next generation ATG launch partner
2Ku Award
? Contract extension
? American Airlines selected Gogo to provide in-flight connectivity on nearly 250 AA and United regional jet aircraft Regional Jets? United Airlines selected Gogo to provide in-flight connectivity on more than 200 regional jet aircraft and agreed to a 2Ku trial on 5 United Airlines PS fleet aircraft
Virgin Atlantic and ? Partnered with Virgin Atlantic to offer 2Ku in-flight connectivity services on Virgin’s existing fleet of aircraft
Vietnam Airlines
? Vietnam Airlines selected Gogo to provide in-flight connectivity services for a Awards majority of its fleet of Boeing 787 and Airbus A350 aircraft(1) Gogo Vision ? Alaska Airlines launched ‘Alaska Beyond Entertainment,’ its branded version of Gogo Vision technology
& Text & Talk
? In August 2014 Delta launched ‘Delta Studio’ powered by Gogo Vision
partnerships
? In September 2014 T-Mobile launched text messaging in-flight
? Record revenue of $408 million, up 24% over 2013
Announced Record ? Record combined CA-NA & BA segment profit of $89 million, up 80% year-over-year representing a 22% margin
Financial Results
? More than 1,000 commercial aircraft awarded but not yet installed as of December 31, 2014
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. (1) Pursuant to LOI 15
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FINANCIALS
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GROWING REVENUE DRIVES PROFITABILITY
Revenue ($MM) Adjusted EBITDA (1) ($MM)
$408 $89 62% $328
CAGR $49
$78
$24 $41 $234 $14
$9 $8 $11
($1)
$160 CA-ROW Segment Loss
$95 ($45)
Adjusted EBITDA
$37
($89)
2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014
Note: Minor differences exist due to rounding
| (1) |
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Please see reconciliation of Adjusted EBITDA in appendix |
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 17
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CA—NORTH AMERICA: AIRCRAFT ONLINE, ARPA GROWTH, AND OPERATING LEVERAGE DRIVE SEGMENT PROFITABILITY
Revenue ($MM) Annualized ARPA(1) ($000s)
87% 38%
26% YoY CAGR
CAGR $251 Growth 20% YoY $121 Growth
$199 $101
$24 $11
2009 2013 2014 2009 2013 2014
Aircraft Online Segment Profit ($MM) 10%
2,098 3% YoY Margin
2,032 Growth $26
$(1) 692
$(91)
2009 2013 2014 2009 2013 2014
Note: Minor differences exist due to rounding
(1) We define ARPA as the aggregate service revenue for the annual period divided by the number of aircraft online during that period
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 18
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BA: HIGH-MARGIN SERVICE REVENUE DRIVES SEGMENT PROFITABILITY AND CASH FLOW
Revenue ($MM) ATG Units Shipped
7% YoY
43% Growth 22% YoY
CAGR $156 Growth
880 943 $127 $84 $75
$26 $72 139
$20 $52 $6
2009 2013 2014 2009 2013 2014
Equipment Revenue Service Revenue
ATG Aircraft Online Segment Profit ($MM)
2,797 37% YoY 24% YoY
57x Growth Segment Profit $63 Growth Segment Profit $51
2,047 Margin
49 $3
11%
2009 2013 2014 2009 2013 2014
Note: Minor differences exist due to rounding. 19 ©2015 Gogo Inc. and Affiliates. Proprietary & Confidential.
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CA—REST OF WORLD: INVESTMENT POSITIONS GOGO FOR FUTURE GROWTH
International Aircraft Wins Operationalizing International (cumulative)(1)
? 85 aircraft online
1.6x
? Near global Ku-band satellite network
293
257 ? All Delta & Japan Airline STCs obtained 180 ? International service operationalized? 2Ku technology selected by 6 airlines for trial or adoption
2012 2013 2014
International Partners CA-ROW Segment Loss ($MM)
$78 $41 $14
| (2) |
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2012 2013 2014
| (1) |
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Figures reflect aircraft under non-binding agreements |
| (2) |
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Letter of Intent 20 ©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. |
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NORMALIZED CAPEX MODEL
Gross CapEx
Airborne Network Capitalized equipment equipment software
and landlord incentives
Over the past two years, Gogo’s Cash Cash CapEx(1) CapEx has been stable at ~$100 million
| (1) |
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Please see reconciliation of Cash CapEx in the Appendix |
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 21
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GOGO—A COMPELLING INVESTMENT OPPORTUNITY
Gogo is a leading aero communications service provider for the global aviation industry
Focused Strategy Why Does Gogo Win? Gain global share Specialize in aviation and telecom Increase bandwidth to aircraft Superior technology and cost Grow ARPA Deliver excellent reliability Deliver consistent execution End-to-end service provider
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 22
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Q&A
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APPENDIX
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ADJUSTED EBITDA RECONCILIATION ($MM)
2009 2010 2011 2012 2013 2014
Net Income (142) (140) (18) (96) (146) (85)
Interest Income (0) (0) (0) (0) (0) (0) Interest Expense 30 – 1 9 29 33 Income Tax Provision – 3 1 1 1 1 Depreciation & Amortization 22 31 33 37 56 64
EBITDA (91) (106) 16 (49) (60) 14
Fair Value Derivative Adjustments – 33 (59) (10) 36 –
Class A and Class B Senior Convertible
– 18 31 52 29 –Preferred Stock Return
Accretion of Preferred Stock – 9 10 10 5 –
Stock-based Compensation Expense 1 2 2 4 6 10
Loss on Extinguishment of Debt 2 – – – – –Write Off of Deferred Equity Financing
– – – 5 – –Costs Amortization of Deferred Airborne Lease
– (1) (1) (4) (8) (13) Incentives
Adjusted EBITDA (89) (45) (1) 9 8 11
Note: Minor differences exist due to rounding
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 25
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CASH CAPEX RECONCILIATION ($MM)
2009 2010 2011 2012 2013 2014
Purchases of Property and
| (69) |
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(33) (33) (67) (105) (132) |
Equipment
Acquisition of Intangible
| (8) |
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(7) (10) (12) (16) (17) |
Assets (Capitalized Software)
Gross CapEx (77) (40) (43) (79) (121) (150)
Change in Deferred
– 9 11 18 9 30
Airborne Lease Incentives Amortization of Deferred
– 1 1 4 8 13
Airborne Lease Incentives
Landlord Incentives – – – – – 10
Cash CapEx (77) (30) (31) (58) (104) (98)
Note: Minor differences exist due to rounding
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 26
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LEADER WITH ESTABLISHED TRACK RECORD
2006 August 2008 Fall 2012
Gogo wins bid for 3MHz Gogo begins offering April 2014 Gogo begins rollout of
ATG spectrum in-flight connectivity Gogo announces its new global 2Ku ATG-4 technology service on American in-flight connectivity technology Airlines Delta Air Lines selects Gogo for IFC in its October 2014 mainline domestic fleet June 2013 United Airlines
June 2012
Gogo IPO announces it selects Gogo wins Delta’s Gogo for regional jets international fleet
2006 2009 2012 2013 2014
November 2011 –
September 2012 October 2013 December 2014
Gogo commits to global Gogo launches Gogo Gogo awarded 250
2008 satellite coverage for Text & Talk, ATG 2000, American Airlines regional Gogo completes initial Ku/Ka (Intelsat, SES, Gogo Vision, and UCS jets build-out of ATG network and Inmarsat) 5000 for Business in record time Aviation
Q1 2012
Gogo initiates
Gogo awarded domestic international expansion fleet of Japan Airlines efforts
June 2009
July 2014
Gogo begins offering
Gogo launches satellite ATG service to Business service on Delta Air Lines Aviation customers and Japan Airlines
©2015 Gogo Inc. and Affiliates. Proprietary & Confidential. 27