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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

 

OR

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

 

 

img233914753_0.jpg 

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). YesNo

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

 

 

 

1


 

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

2


 

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

3


 

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

4


 

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

)

Cash flows from discontinued operations:

 

 

 

 

 

 

Cash used in operating activities

 

 

 

 

 

(809

)

Cash used in investing activities