10-Q 1 gogo-20230930.htm 10-Q 10-Q
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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, 2023

 

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

 

 

img234838274_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 November 2, 2023, 128,841,372 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

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

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

Item 4.

Controls and Procedures

40

 

Part II.

Other Information

 

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

43

Item 3.

Defaults Upon Senior Securities

43

Item 4.

Mine Safety Disclosures

43

Item 5.

Other Information

43

Item 6.

Exhibits

44

Signatures

45

 

 

 

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,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

86,157

 

 

$

150,550

 

Short-term investments

 

 

24,655

 

 

 

24,796

 

Total cash, cash equivalents and short-term investments

 

 

110,812

 

 

 

175,346

 

Accounts receivable, net of allowances of $1,884 and $1,778, respectively

 

 

49,356

 

 

 

54,210

 

Inventories

 

 

62,792

 

 

 

49,493

 

Prepaid expenses and other current assets

 

 

63,873

 

 

 

45,100

 

Total current assets

 

 

286,833

 

 

 

324,149

 

Non-current assets:

 

 

 

 

 

 

Property and equipment, net

 

 

100,982

 

 

 

104,595

 

Intangible assets, net

 

 

52,719

 

 

 

49,509

 

Operating lease right-of-use assets

 

 

71,539

 

 

 

75,261

 

Other non-current assets, net of allowances of $545 and $501, respectively

 

 

37,239

 

 

 

43,355

 

Deferred income taxes

 

 

217,976

 

 

 

162,657

 

Total non-current assets

 

 

480,455

 

 

 

435,377

 

Total assets

 

$

767,288

 

 

$

759,526

 

Liabilities and stockholders’ equity (deficit)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

15,328

 

 

$

13,646

 

Accrued liabilities

 

 

38,219

 

 

 

60,056

 

Deferred revenue

 

 

1,704

 

 

 

3,418

 

Current portion of long-term debt

 

 

7,250

 

 

 

7,250

 

Total current liabilities

 

 

62,501

 

 

 

84,370

 

Non-current liabilities:

 

 

 

 

 

 

Long-term debt

 

 

588,733

 

 

 

690,173

 

Non-current operating lease liabilities

 

 

74,481

 

 

 

79,241

 

Other non-current liabilities

 

 

8,031

 

 

 

7,611

 

Total non-current liabilities

 

 

671,245

 

 

 

777,025

 

Total liabilities

 

 

733,746

 

 

 

861,395

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders’ equity (deficit)

 

 

 

 

 

 

Common stock, par value $0.0001 per share; 500,000,000 shares authorized at September 30, 2023 and December 31, 2022; 137,530,365 and 136,531,362 shares issued at September 30, 2023 and December 31, 2022, respectively; and 128,839,816 and 127,840,813 shares outstanding at September 30, 2023 and December 31, 2022, respectively

 

 

14

 

 

 

14

 

Additional paid-in capital

 

 

1,396,348

 

 

 

1,385,933

 

Accumulated other comprehensive income

 

 

23,913

 

 

 

30,128

 

Treasury stock, at cost

 

 

(158,375

)

 

 

(158,375

)

Accumulated deficit

 

 

(1,228,358

)

 

 

(1,359,569

)

Total stockholders’ equity (deficit)

 

 

33,542

 

 

 

(101,869

)

Total liabilities and stockholders’ equity (deficit)

 

$

767,288

 

 

$

759,526

 

 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

 

$

79,546

 

 

$

75,252

 

 

$

237,107

 

 

$

218,983

 

Equipment revenue

 

 

18,403

 

 

 

30,066

 

 

 

62,660

 

 

 

76,921

 

Total revenue

 

 

97,949

 

 

 

105,318

 

 

 

299,767

 

 

 

295,904

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of service revenue (exclusive of amounts shown below)

 

 

18,116

 

 

 

17,297

 

 

 

51,732

 

 

 

47,683

 

Cost of equipment revenue (exclusive of amounts shown below)

 

 

12,320

 

 

 

19,261

 

 

 

47,983

 

 

 

50,410

 

Engineering, design and development

 

 

9,154

 

 

 

7,988

 

 

 

26,259

 

 

 

21,346

 

Sales and marketing

 

 

7,015

 

 

 

6,240

 

 

 

21,748

 

 

 

18,539

 

General and administrative

 

 

13,336

 

 

 

15,474

 

 

 

40,734

 

 

 

44,289

 

Depreciation and amortization

 

 

4,692

 

 

 

2,716

 

 

 

12,022

 

 

 

10,006

 

Total operating expenses

 

 

64,633

 

 

 

68,976

 

 

 

200,478

 

 

 

192,273

 

Operating income

 

 

33,316

 

 

 

36,342

 

 

 

99,289

 

 

 

103,631

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(1,622

)

 

 

(690

)

 

 

(5,509

)

 

 

(931

)

Interest expense

 

 

8,025

 

 

 

8,781

 

 

 

24,807

 

 

 

29,442

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

2,224

 

 

 

 

Other (income) expense, net

 

 

(728

)

 

 

95

 

 

 

(733

)

 

 

112

 

Total other expense

 

 

5,675

 

 

 

8,186

 

 

 

20,789

 

 

 

28,623

 

Income before income taxes

 

 

27,641

 

 

 

28,156

 

 

 

78,500

 

 

 

75,008

 

Income tax (benefit) provision

 

 

6,728

 

 

 

7,980

 

 

 

(52,711

)

 

 

10,619

 

Net income

 

$

20,913

 

 

$

20,176

 

 

$

131,211

 

 

$

64,389

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stock per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

 

$

0.16

 

 

$

1.01

 

 

$

0.53

 

Diluted

 

$

0.16

 

 

$

0.15

 

 

$

0.98

 

 

$

0.50

 

Weighted average number of shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

129,951

 

 

 

129,914

 

 

 

129,632

 

 

 

121,762

 

Diluted

 

 

133,320

 

 

 

134,221

 

 

 

133,382

 

 

 

134,454

 

 

See the Notes to Unaudited Condensed Consolidated Financial Statements

3


 

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Income

(in thousands)

 

 

 

For the Three Months
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

20,913

 

 

$

20,176

 

 

$

131,211

 

 

$

64,389

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustments

 

$

(136

)

 

$

(247

)

 

$

123

 

 

$

(256

)

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

Amount recognized in other comprehensive income

 

 

3,517

 

 

 

13,068

 

 

 

8,405

 

 

 

34,227

 

Less: income realized and reclassified to earnings

 

 

4,620

 

 

 

1,786

 

 

 

14,743

 

 

 

2,305

 

Changes in fair value of cash flow hedges

 

 

(1,103

)

 

 

11,282

 

 

 

(6,338

)

 

 

31,922

 

Other comprehensive income (loss), net of tax

 

 

(1,239

)

 

 

11,035

 

 

 

(6,215

)

 

 

31,666

 

Comprehensive income

 

$

19,674

 

 

$

31,211

 

 

$

124,996

 

 

$

96,055

 

 

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,

 

 

 

2023

 

 

2022

 

Operating activities:

 

 

 

 

 

 

Net income

 

$

131,211

 

 

$

64,389

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

12,022

 

 

 

10,006

 

Loss on asset disposals, abandonments and write-downs

 

 

285

 

 

 

166

 

Provision for expected credit losses

 

 

541

 

 

 

855

 

Deferred income taxes

 

 

(53,255

)

 

 

10,470

 

Stock-based compensation expense

 

 

15,729

 

 

 

14,101

 

Amortization of deferred financing costs and interest rate caps

 

 

2,671

 

 

 

2,486

 

Accretion of debt discount

 

 

304

 

 

 

345

 

Changes in fair value of equity investment

 

 

(773

)

 

 

 

Loss on extinguishment of debt

 

 

2,224

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

4,356

 

 

 

(12,289

)

Inventories

 

 

(13,299

)

 

 

(12,622

)

Prepaid expenses and other current assets

 

 

(37,454

)

 

 

12,862

 

Contract assets

 

 

2,822

 

 

 

(2,836

)

Accounts payable

 

 

2,526

 

 

 

1,116

 

Accrued liabilities

 

 

(5,091

)

 

 

(16,245

)

Deferred revenue

 

 

(1,708

)

 

 

(222

)

Accrued interest

 

 

(9,565

)

 

 

1,720

 

Other non-current assets and liabilities

 

 

(728

)

 

 

(2,363

)

Net cash provided by operating activities

 

 

52,818

 

 

 

71,939

 

Investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(14,006

)

 

 

(35,187

)

Acquisition of intangible assets—capitalized software

 

 

(4,711

)

 

 

(4,745

)

Proceeds from FCC Reimbursement Program

 

 

3

 

 

 

 

Proceeds from interest rate caps

 

 

20,165

 

 

 

803

 

Redemptions of short-term investments

 

 

49,524

 

 

 

 

Purchases of short-term investments

 

 

(49,383

)

 

 

 

Purchase of equity investment

 

 

(5,000

)

 

 

 

Net cash used in investing activities

 

 

(3,408

)

 

 

(39,129

)

Financing activities:

 

 

 

 

 

 

Payments on term loan

 

 

(105,438

)

 

 

(5,438

)

Repurchases of common stock

 

 

 

 

 

(18,375

)

Payments on financing leases

 

 

(117

)

 

 

(136

)

Stock-based compensation activity

 

 

(8,326

)

 

 

(2,703

)

Net cash used in financing activities

 

 

(113,881

)

 

 

(26,652

)

Effect of exchange rate changes on cash

 

 

78

 

 

 

65

 

(Decrease) increase in cash, cash equivalents and restricted cash

 

 

(64,393

)

 

 

6,223

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

150,880

 

 

 

146,268

 

Cash, cash equivalents and restricted cash at end of period

 

$

86,487

 

 

$

152,491

 

Cash, cash equivalents and restricted cash at end of period

 

$

86,487

 

 

$

152,491

 

Less: non-current restricted cash

 

 

330

 

 

 

330

 

Cash and cash equivalents at end of period

 

$

86,157

 

 

$

152,161

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

53,911

 

 

$

28,841

 

Cash paid for taxes

 

 

429

 

 

 

289

 

Non-cash investing activities:

 

 

 

 

 

 

Purchases of property and equipment in current liabilities

 

$

5,425

 

 

$

11,549

 

 

See the Notes to Unaudited Condensed Consolidated Financial Statements

5


 

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share data)

 

 

 

For the Three Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Treasury Stock

 

 

 

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Shares

 

 

Amount

 

 

Total

 

Balance at June 30, 2023

 

 

128,696,883

 

 

$

14

 

 

$

1,391,692

 

 

$

25,152

 

 

$

(1,249,271

)

 

 

8,690,549

 

 

$

(158,375

)

 

$

9,212

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,913

 

 

 

 

 

 

 

 

 

20,913

 

Currency translation adjustments, net of tax

 

 

 

 

 

 

 

 

 

 

 

(136

)

 

 

 

 

 

 

 

 

 

 

 

(136

)

Fair value adjustments of cash flow hedges, net of tax

 

 

 

 

 

 

 

 

 

 

 

(1,103

)

 

 

 

 

 

 

 

 

 

 

 

(1,103

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,235

 

Issuance of common stock upon exercise of stock options

 

 

25,370

 

 

 

 

 

 

62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62

 

Issuance of common stock upon vesting of restricted stock units

 

 

117,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax withholding related to vesting of restricted stock units

 

 

 

 

 

 

 

 

(641

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(641

)

Balance at September 30, 2023

 

 

128,839,816

 

 

$

14

 

 

$

1,396,348

 

 

$

23,913

 

 

$

(1,228,358

)

 

 

8,690,549

 

 

$

(158,375

)

 

$

33,542

 

 

 

 

For the Three Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In