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): May 23, 2016
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.) | ||
| 111 North Canal, Suite 1500 Chicago, IL |
60606 | |||
| (Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code:
312-517-5000
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. (“Gogo”) will use the attached presentation in various meetings with investors from time to time, including on May 23, 2016, when Michael Small, Gogo’s President and Chief Executive Officer, will be participating in the J.P. Morgan Global Technology, Media & Telecom Conference in Boston at 3:40 p.m. Eastern 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: May 23, 2016
EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Dated May 23, 2016
99.1 Investor Presentation
May 23, 2016 Investor Presentation Exhibit 99.1
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 and other filings with the Securities and Exchange Commission. 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 when analyzing our performance or liquidity, as applicable, investors should (i) use Adjusted EBITDA in addition to, and not as an alternative to, net loss attributable to common stock as a measure of operating results, and (ii) use Cash CAPEX in addition to, and not as an alternative to, consolidated capital expenditures when evaluating our liquidity. 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.
High revenue growth High operating leverage ~10,000 Uncommitted Aircraft $134,000 Annualized ARPA Global scale Specialize in Connected Aircraft Leading technology WHY INVEST IN GOGO Leading Position, Experience & Scale Large Growth Opportunity Attractive Model Competitive Advantages (1) (1) Global connected commercial aircraft based on management estimates, trade publications and other public sources as of 12/31/2015 (2) ARPA is defined as the aggregate service revenue plus monthly service fees included as a reduction to cost of service revenue for that segment for the period divided by the number of months in the period, divided by the number of aircraft equivalents for that segment during the period. The number presented above is annualized based off of Q1’16 financial results and using aircraft online equivalent. 6X more connected aircraft than closest competitor (2) (1)
Revenue ($M) Adjusted EBITDA ($M) GOGO LEADS GLOBAL AVIATION MARKET Gogo is the global leader in providing broadband connectivity and wireless entertainment to the aviation industry Top tier domestic and global airline and business jet customers Uniquely qualified to serve global aviation industry by bringing together in-flight connectivity network technology, aircraft operations and product & services platform 100+ patents and industry-leading research and development Over 1,000 passionate and specialized employees +88M 5.6x Total Broadband Aircraft 5,044 ~6x that of nearest competitor (45) 43 2010 LTM Q1'16 1,374 6,418 2010 Q1 '16 95 527 2010 LTM Q1'16
BUSINESS DEPTH AND EXPERTISE Reached scale, strong revenue growth and operating leverage, upgrading to satellite 67% market share Exclusive Air-to-Ground (ATG) broadband spectrum (4 MHz) 14% margin Mature margins, strong revenue growth, attractive cash flow profile 90% market share Relationships with all leading original equipment manufacturers, after-market dealers, and fractional jet operators Strong backlog, expansion mode, significant opportunity for growth 13% market share Global satellite network established – operating leverage expected with scale Strong market adoption with 850+ awarded aircraft 40% margin $M (1) (1) (1) Based on company reported results as well as management estimates, trade publications and other public sources as of 3/31/2016 As of 5/5/2016 $M $M Business Aviation Commercial Aviation – North America Commercial Aviation – Rest of World #1 #1 #2 (2) 325 46 LTM Q1'16 Revenue LTM Q1'16 Segment Profit 187 75 LTM Q1'16 Revenue LTM Q1'16 Segment Profit
MOST EXPERIENCE AND SCALE IN THE INDUSTRY – GLOBAL Global Eagle* Panasonic* Others* Total Gogo Broadband Aircraft Online Gogo BA ATG Aircraft Online Gogo CA Aircraft Online * Data based on management estimates, trade publications and other public sources as of 3/31/2016 and include both commercial and business broadband connected aircraft Number of Aircraft Q1’16
THE GOGO ADVANTAGE GOGOAIR.COM | Comprehensive products and services (e.g., custom portals, IPTV, Text and Talk, crew apps) easily customized and integrated with airline systems Leading scale and expertise with 6,000 broadband aircraft and 100 million sessions Robust R&D and 20 year history of innovation in both air-to-ground and satellite, including latest 2Ku solution Reliability and redundancy engineered into our solutions and overall architecture Open architecture leverages innovations from large ecosystem for most cost efficient global bandwidth solutions now and in the future Industry-leading certification and installation timelines and expertise, and global maintenance capabilities Industry Leadership Network Technology Products & Services Platform Aircraft Operations
Connected Aircraft Peak Speed per Aircraft Mbps CONTINUOUS TECHNOLOGY INNOVATION ENABLES STRONG ECONOMICS BANDWIDTH PRODUCTS & SERVICES CA Connectivity BA Connectivity ARPA Gogo Vision BA Talk & Text Universal Cabin System CA Texting First Global 100+ Mbps Solution ATG ATG-4 Ku 2Ku 2Ku w/ Spot Beams* OneWeb* *Expected
ATG AND SATELLITE TECHNOLOGIES ADDRESS LARGE MARKET OPPORTUNITY Technology ATG (Air to Ground) Satellite – 2Ku Current State Achieved Scale, Yielding Benefits Game Changing Growth Antenna Coverage North America Global Market Business Jets, Smaller Commercial (i.e. RJs) Commercial Capacity Limited to 4 MHz of spectrum today Unlimited Speed 3 Mbps on ATG 10 Mbps on ATG-4 >10 Mbps on next gen ATG 50 Mbps on Ku 70 Mbps on 2Ku 100+ Mbps on 2Ku HTS Latency 200 ms 800 ms Installation Time Overnight for CA 3 - 5 days Market Opportunity(1) 21,700 20,400 Economics 25% profit margins(2) and strong free cash flow(3) Strong economics and free cash flow(3) at scale Market Opportunity for ATG is defined as total available business jets and CA-NA regional jets and for 2Ku is global commercial aircraft excluding regional jets and larger business jets Combined segment profit of CA-NA and BA Q1-16 Free cash flow is defined as cash from operations and cash from investing based of financial information for BA and CA-NA as of 12/31/2015
(1) Based on management estimates and include satellites operated by Inmarsat, Viasat, Eutelsat, and Yahsat as of 12/31/2015. We estimate that there are approximately 10 Ka satellites in the world, but due to lack of interoperability between Ka satellite providers, only 2 to 5 can currently be used for a given Ka antenna. (2) Based on management estimates and include satellites operated by SES, Intelsat, Eutelsat, Echostar, and Telesat as of 12/31/2015 Ka (2 to 5)(1) 2Ku Gimbaled Record market acceptance, backlog exceeding 1,000+ aircraft, will fuel growth for the next decade Ku (~180 in orbit today)(2) SATELLITE ANTENNA 2Ku BEST IN CLASS GLOBAL IFC SOLUTION RADOME PROFILE Open Architecture Reliability Speed Capacity Cost Coverage Aero Performance 2Ku Differentiators
SIGNIFICANT GROWTH OPPORTUNITIES IN AIRCRAFT AND ARPA ARPA Growth ARPA Suite Of Offerings Passenger Crew Aircraft Passenger Connectivity Airline / Owner / Operator Services Connected Aircraft Services More connected aircraft, more applications, more revenue $134k(3) (CA-NA) Global broadband aircraft online as of 3/31/2016 based on management estimates, public filings and trade publications. Market size as of June-2015, source Boeing Current Market Outlook 2015 – 2034, excludes: cargo aircraft Q1’16 ARPA annualized JetNet iQ Report Q4 2015; General Aviation Manufacturers Association 2015 Statistical Databook, excludes Rest of World turbo props Market Opportunity Commercial Aircraft ~7x Business Aviation ~8x 2,700 19,900 3,700 30,000 (2) (1) (4) (1) Passenger Entertainment
Global Network Technology Record Financial Results STRONG TRACK RECORD & MOMENTUM Recent Airline Wins Large satellite capacity commitments to Intelsat, SES and OneWeb Next generation modem enables speeds of 400+ Mbps, expected to be available in 2017. Gogo surpassed $500M in revenue in 2015 2Ku awarded aircraft exceeds 1,000+ Strong Q1 ‘16 financial and operating results Revenue up 23% to $142M Adjusted EBITDA up 76% to $14M
Note: Business Aviation numbers represent the difference in ATG units online from year to year 12 airlines on 4 continents have awarded 1,000+ aircraft to Gogo for 2Ku 2016 Net Installation Guidance 200+ CA NA and ~75 CA ROW Annual Net Aircraft Installations 2Ku Awarded Aircraft + (1) As of February 25, 2016 (1) Business Aviation CA Rest of World CA North America STRONG AND CONSISTENT EXECUTION
STRONG GROWTH AND PROFITABILITY TRENDS Note: Minor differences exist due to rounding (1) Please see reconciliation of Adjusted EBITDA in appendix Adjusted EBITDA(1) ($M) $49 Revenue ($M) 33% CAGR $89 CA-ROW Segment Loss Adjusted EBITDA $113 $24 $121
STRONG Q1’16 RESULTS Consolidated Quarterly Performance ($M) Q1’16 Q1’15 ∆$ ∆% Service Revenue 119 95 23 24% Equipment Revenue 23 20 3 15% Total Revenue 142 116 26 23% Adjusted EBITDA* 14 8 6 76% Cash Capex* 24 32 (8) (25%) Commercial Aircraft Online 2,737 2,316 421 18% BA Broadband Aircraft Online 3,681 2,983 698 23% Segment Quarterly Performance ($M) Q1’16 Q1’15 ∆$ ∆% CA-NA Revenue 87 73 15 20% CA-NA Segment Profit 14 10 4 44% CA-ROW Revenue 5 1 3 227% CA-ROW Segment Profit (20) (18) (1) 8% BA Revenue 50 42 9 21% BA Segment Profit 20 17 3 20% Note: Minor differences may exist due to rounding * See reconciliation in Appendix
KEY PRIORITIES FOR GOGO Win more aircraft Install backlog ~10,000 uncommitted commercial aircraft globally & growing ~ 16,000 uncommitted business aircraft in North America & growing Develop open communications platforms to enable: Tailored passenger experience Digitized front line employees Improved operations Aggressive rollout of 2Ku Continue ATG-4 upgrades Open platform for next generation solutions Deliver Gogo Biz 4G in 2017 1. Increase Aircraft Online 3. Enable Connected Aircraft 2. Bring More Bandwidth to Aviation (1) (1) Based on management estimates as of 3/31/16 and JetNet iQ Report Q4 2015; General Aviation Manufacturers Association 2015 Statistical Databook
Business Segments
BA: ESTABLISHED INDUSTRY LEADER Founded in 1991 and pioneered air-to-ground connectivity for planes Established OEM and dealer relationships Track record of innovation: Universal Cabin System, Gogo Cloud, Gogo Vision, Text & Talk....4G ATG connectivity expected to be available in 2017 The only equipment and service provider of all three primary networks North American broadband connectivity Inexpensive, light weight, & fast Market opportunity of 20,700 Leading North America Market Share Untapped Global Opportunity (1) Largest Reseller (1) Global voice Standard or option on all leading airframes Trusted service provider Global narrowband connectivity New Gogo service Complements ATG and Iridium product offerings 1) North American Broadband 3) SwiftBroadband 2) Iridium Overview (1) Customers Based on company reported results as well as management estimates, trade publications and other public sources as of 3/31/2016 JetNet iQ Report Q4 2015; General Aviation Manufacturers Association 2015 Statistical Databook (2) (2) 3,681 5,331 2,115 1,015 17,000
Segment Profit ($M) Revenue ($M) 24% Total CAGR Satellite ATG BA: HIGH MARGIN SERVICE REVENUE DRIVES PROFITABILITY Units Online Monthly Average Revenue Per Unit (ARPU) 48% Service CAGR 30% CAGR Note: Minor differences may exist due to rounding
GOGOAIR.COM | CA-NA: STRONG INCUMBENT POSITION 67% market share in North America, awarded aircraft of 230(1) Nearly 50% of installed fleet on ATG-4 with more upgrades coming ~600 Delta aircraft (primarily NA fleet) awarded to 2Ku Strong revenue growth and operating leverage, achieved scale and profitability in 2014 Overview Airline Partners Aircraft Online(2) >4x Awarded but not yet installed as of 3/31/2016 Based on company reported results as well as management estimates, trade publications and other public sources as of 3/31/2016
Segment Profit ($M) Revenue ($M) 37% CAGR Note: Minor differences may exist due to rounding. For 2011 and 2013 ARPA is based on aircraft online and for 2015 and LTM Q1’16 ARPA is based on aircraft online equivalent. Aircraft Online ARPA ($k) CA-NA: STRONG REVENUE AND SEGMENT PROFIT GROWTH (1) Profit Margin Segment Profit
2Ku is a game changer Global satellite network established to provide international connectivity 2Ku service launched on Aeromexico with “ground-like” performance Gogo is focused on signing airlines and investing for growth CA-REST OF WORLD: GAINING MOMENTUM Overview Airline Wins (1) (1) (1) Letter of intent 2015 2016 2014 2012-2013 Awarded Aircraft + (1) (1) (1) (1) May 5, 2016
ON A MISSION TO CONNECT GLOBAL AVIATION 237 Aircraft Online 60+ Airline Partner Country Destinations 33 Global Maintenance Locations Teleports Offices Install Locations Maintenance Locations Gogo Partner Destinations 11 Country Installation Sites 6 Offices Worldwide 12 Global Teleport Locations Note: Graphic indicates current partner destinations, including partners that have selected Gogo connectivity, but have not yet been installed. Information is as of 3/31/2016.
Bandwidth and more aircraft drives revenue International expansion is in early stage, market opportunity is 3x of CA-NA Revenue Visibility REVENUE VISIBILITY AND CLEAR PATH TO FREE CASH FLOW Increased utilization of satellite network Global scale Free Cash Flow + Current Awarded(2) Total 2,500 230 2,730 + = 237 600 837 + = NA: ROW: x ATG ARPA x 2Ku ARPA 1,200 = 837 = ATG à 2Ku Install Awarded Aircraft Convert ATG to 2Ku(1) Grow ARPA Operating Leverage Note: Free cash flow is defined as cash from operations and cash from investing based of financials as of 12/31/2015 ATG to 2Ku conversion is a notional amount used simply for illustrative purposes only Awarded but not yet installed as of 5/5/2016 x 2Ku ARPA 1,530 =
High revenue growth High operating leverage ~10,000 Uncommitted Aircraft $134,000 Annualized ARPA Global scale Specialize in Connected Aircraft Leading technology WHY INVEST IN GOGO Leading Position, Experience & Scale Large Growth Opportunity Attractive Model Competitive Advantages (1) 6X more connected aircraft than closest competitor (2) (1) Global connected commercial aircraft based on management estimates, trade publications and other public sources as of 12/31/2015 (2) ARPA is defined as the aggregate service revenue plus monthly service fees included as a reduction to cost of service revenue for that segment for the period divided by the number of months in the period, divided by the number of aircraft equivalents for that segment during the period. The number presented above is annualized based off of Q1’16 financial results and using aircraft online equivalent. (1)
APPENDIX
GOGOAIR.COM | ADJUSTED EBITDA RECONCILIATION ($M) 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 Net Income (18) (96) (146) (85) (20) (25) (29) (34) (24) Interest Expense 1 9 29 33 10 16 17 16 16 Income Tax Provision 1 1 1 1 – – – – – Depreciation & Amortization 33 37 56 64 19 21 22 25 24 EBITDA 16 (49) (60) 14 9 12 10 8 17 Fair Value Derivative Adjustments (59) (10) 36 – – – – – – Class A and Class B Senior Conv. Preferred Stock Return 31 52 29 – – – – – – Accretion of Preferred Stock 10 10 5 – – – – – – Stock-based Compensation Expense 2 4 6 10 3 3 5 4 4 Adjustment of deferred financing costs – 5 – – – – – 2 (1) Amortization of Deferred Airborne Lease Incentives (1) (4) (8) (13) (4) (5) (5) (6) (6) Adjusted EBITDA (1) 9 8 11 8 11 10 8 14 Note: Minor differences may exist due to rounding
GOGOAIR.COM | Note: Minor differences may exist due to rounding CASH CAPEX RECONCILIATION ($M) 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 Purchases of Property and Equipment (33) (67) (105) (132) (53) (33) (19) (30) (31) Acquisition of Intangible Assets (Capitalized Software) (10) (12) (16) (17) (4) (4) (4) (5) (6) Consolidated Capital Expenditures (43) (79) (121) (150) (57) (37) (24) (35) (37) Change in Deferred Airborne Lease Incentives 11 18 9 30 9 7 7 14 8 Amortization of Deferred Airborne Lease Incentives 1 4 8 13 4 5 5 6 6 Landlord Incentives – – – 10 12 3 – 1 – Cash CapEx (31) (58) (104) (98) (32) (23) (12) (13) (24)