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): June 14, 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 June 14, 2016, when Michael Small, Gogo’s President and Chief Executive Officer, will be participating in the William Blair Growth Stock Conference in Chicago at 12:50 p.m. Central 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: June 14, 2016
EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Dated June 14, 2016
| 99.1 Investor Presentation |
June 14, 2016 Investor Presentation GOGOAIR.COM | ©2016 Gogo Inc. and Affiliates. Proprietary & Confidential. 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 $134,000 Annualized ARPA Global scale Specialize in Connected Aircraft Leading technology WHY INVEST IN GOGO Leading Position, Experience & Scale Large Growth Opportunity Attractive Model Competitive Advantages (1) (1) Global connected commercial aircraft based on management estimates, trade publications and other public sources as of 12/31/2015 (2) ARPA is defined as the aggregate service revenue plus monthly service fees included as a reduction to cost of service revenue for that segment for the period divided by the number of months in the period, divided by the number of aircraft equivalents for that segment during the period. The number presented above is annualized based off of Q1’16 financial results and using aircraft online equivalent. 6X more connected aircraft than closest competitor (2) (1)
STRONG GROWTH AND PROFITABILITY TRENDS Note: Minor differences exist due to rounding (1) Please see reconciliation of Adjusted EBITDA in appendix Adjusted EBITDA(1) ($M) $49 Revenue ($M) 33% CAGR $89 CA-ROW Segment Loss Adjusted EBITDA $113 $24 $121
More Bandwidth GOGOAIR.COM | PROFITABILITY PATH FOR ALL SEGMENTS 14% margin 40% margin $M 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 Note: Revenue and Segment Profit/Loss figures are LTM as of 3/31/16 $M $M CA-NA CA-ROW BA #2 #1 2,500 Aircraft Online 67% Market Share 237 Aircraft Online 13% Market Share 3,681 ATG Aircraft Online 90% Market Share More Aircraft More Aircraft #1 Profitability Drivers (1) (1) (1) (2) (2) (2)
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 1,200 Strong Q1 ‘16 financial and operating results Revenue up 23% to $142M Adjusted EBITDA up 76% to $14M (1) (1) (1) (1) (1) (1) (1) 1) Letter of Intent
AMERICAN AGREEMENT IS REACHED GOGOAIR.COM | Completed negotiations with American Airlines on May 27th to continue long term relationship and begin deploying 2Ku technology American diversified its In-Flight Connectivity supplier base to include Gogo, ViaSat and Panasonic Of the currently over 1,000 Gogo-connected aircraft: Gogo will continue to provide ATG/ATG-4 service on approximately 420 aircraft, predominately regional jets In addition, Gogo will upgrade nearly 140 mainline aircraft to 2Ku Gogo will continue to operate the remaining 500+ mainline aircraft with ATG/ATG-4 service unless and until AA exercises its right to de-install. Non-Gogo service on 100 new aircraft that begin to arrive in September 2017 is the only announcement to date Constructive outcome for Gogo: Uncertainty with American is materially reduced Gogo received another major airline endorsement for 2Ku technology, bringing Gogo’s total awarded aircraft to over 1,200 across a dozen airlines
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
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.
MOST EXPERIENCE AND SCALE IN THE INDUSTRY 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
UNPARALLELED ABILITY TO ADD AIRCRAFT 12 global airlines across 4 continents have awarded 1,200+ aircraft to Gogo for 2Ku service Cumulative 2Ku Awarded Aircraft + Note: Business Aviation numbers represent the difference in ATG units online from year to year 2016 Net Installation Guidance 200+ CA NA and 75+ CA ROW Annual Net Aircraft Installations (1) As of February 25, 2016 (1) Business Aviation CA Rest of World CA North America
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, 1,200+ awarded aircraft, brings ground like experience to aircraft around the world Ku (~180 in orbit today)(2) SATELLITE ANTENNA 2Ku BEST IN CLASS GLOBAL IFC SOLUTION Open Architecture Reliability Speed Capacity Cost Coverage Aero Performance 2Ku Differentiators
THE GOGO ADVANTAGE GOGOAIR.COM | Customizable and integrated products with airline systems Connected aircraft platforms Top tier customers 6,000+ broadband aircraft Industry leading aircraft connectivity solutions 100+ patents from industry leading R&D Open architecture, reliability and redundancy built into solutions 1,000+ annual installs Large portfolio of certifications 33 global maintenance locations Industry Leadership Network Technology Products & Services Platform Aircraft Operations Based on net installations of CA and BA aircraft for the year ended December 31, 2015. As of 12/31/2015 (1) (2)
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
Q&A GOGOAIR.COM | ©2016 Gogo Inc. and Affiliates. Proprietary & Confidential.
Appendix GOGOAIR.COM | ©2016 Gogo Inc. and Affiliates. Proprietary & Confidential.
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 ($M) 24% Total CAGR Satellite ATG BA: HIGH MARGIN SERVICE REVENUE DRIVES PROFITABILITY Units Online Monthly Average Revenue Per Unit (ARPU) 48% Service CAGR 30% CAGR Note: Minor differences may exist due to rounding
CA-NA: STRONG INCUMBENT POSITION 67% market share in North America, awarded aircraft of 230(1) Nearly 50% of installed fleet on ATG-4 with more upgrades coming ~600 Delta aircraft (primarily NA fleet) awarded to 2Ku Strong revenue growth and operating leverage, achieved scale and profitability in 2014 Overview Airline Partners Aircraft Online(2) >4x Awarded but not yet installed as of 3/31/2016 Based on company reported results as well as management estimates, trade publications and other public sources as of 3/31/2016
Segment Profit ($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
Revenue Visibility REVENUE VISIBILITY AND CLEAR PATH TO FREE CASH FLOW Increased utilization of satellite network Global scale Free Cash Flow + Current Awarded Total 2,500 230 2,730 + = 237 600 837 + = NA: ROW: x ATG ARPA x 2Ku ARPA 1,200 = 250 = ATG à 2Ku Grow ARPA Operating Leverage Note: Free cash flow is defined as cash from operations and cash from investing ATG to 2Ku conversion is a notional amount used simply for illustrative purposes only. Does not reflect current number of 2Ku awarded aircraft. Awarded but not yet installed as of 5/5/2016 Gogo will continue to operate the remaining 500+ mainline aircraft with ATG/ATG4 service unless and until AA exercises its right to de-install. To date, AA has announced non-Gogo service on 100 new aircraft that begin to arrive in September, 2017 x 2Ku ARPA 980 = x Ku ARPA 587 (2) = Grow Aircraft Online 2Ku Ku ATG 550 = (3) (1)
ADJUSTED EBITDA RECONCILIATION ($M) 2011 2012 2013 2014 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 Net Income (18) (96) (146) (85) (20) (25) (29) (34) (24) Interest Expense 1 9 29 33 10 16 17 16 16 Income Tax Provision 1 1 1 1 – – – – – Depreciation & Amortization 33 37 56 64 19 21 22 25 24 EBITDA 16 (49) (60) 14 9 12 10 8 17 Fair Value Derivative Adjustments (59) (10) 36 – – – – – – Class A and Class B Senior Conv. Preferred Stock Return 31 52 29 – – – – – – Accretion of Preferred Stock 10 10 5 – – – – – – Stock-based Compensation Expense 2 4 6 10 3 3 5 4 4 Adjustment of deferred financing costs – 5 – – – – – 2 (1) Amortization of Deferred Airborne Lease Incentives (1) (4) (8) (13) (4) (5) (5) (6) (6) Adjusted EBITDA (1) 9 8 11 8 11 10 8 14 Note: Minor differences may exist due to rounding
Note: Minor differences may exist due to rounding CASH CAPEX RECONCILIATION ($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)