Gogo Inc
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
GOGO$3.89+71.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0000950170-24-054469
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0000950170-24-092730
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 140 previous paragraphs and 146 current paragraphs.
106 unchanged; 29 reworded; 9 added; 5 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Total revenue decreased to $102.1 million for the three-month period ended June 30, 2024 as compared with $103.2 million for the prior-year period, due to a decrease in equipment revenue, partially offset by an increase in service revenue. Total revenue increased to $206.4 million for the six-month period ended June 30, 2024 as compared with $201.8 million for the prior-year period due to an increase in service revenue, partially offset by a decrease in equipment revenue.
Current report
Engineering, design and development expenses increased 12% and 14% to $10.3 million and $19.5 million, respectively, for the three- and six-month periods ended June 30, 2024, as compared with $9.2 million and $17.1 million, respectively, for the prior-year periods due to personnel costs.
Current report
General and administrative expenses increased 66% and 33% to $21.8 million and $36.5 million, respectively, for the three- and six-month periods ended June 30, 2024, as compared with $13.2 million and $27.4 million, respectively, for the prior-year periods due to increased legal expenses.
Current report
Depreciation and amortization expense decreased 14% to $3.9 million for the three-month period ended June 30, 2024 as compared with $4.5 million for the prior-year period due to amortization of capitalized software. Depreciation and amortization expense increased 5% to $7.7 million for the six-month period ended June 30, 2024 as compared with $7.3 million for the prior-year period due to depreciation of network equipment.
Current report
Total other expense increased to $20.7 million for the three-month period ended June 30, 2024 as compared with $8.0 million for the prior-year period, due to the unrealized holding loss on the Investment in Convertible Note, partially offset by the loss on extinguishment of debt in the prior year resulting from the $100 million prepayment of the outstanding principal amount of the Term Loan Facility on May 3, 2023. Total other expense decreased to $14.0 million for the six-month period ended June 30, 2024 as compared with $15.1 million for the prior-year period, due to the loss on extinguishment of debt in the prior year, partially offset by the unrealized holding loss on the Investment in Convertible Note.
Current report
We believe it is useful for an understanding of our operating performance to exclude the loss on extinguishment of debt from Adjusted EBITDA because of the infrequently occurring nature of this activity.
Current report
Adjusted EBITDA does not reflect the loss on extinguishment of debt;
Current report
Changes in accrued interest due to the change in timing of payments;
Current report
Changes in inventories due to the timing of purchases;
Removed paragraphs (5)
Previous report
Total revenue increased to $104.3 million for the three-month period ended March 31, 2024 as compared with $98.6 million for the prior-year period, due to an increase in service revenue and equipment revenue.
Previous report
Engineering, design and development expenses increased 17% to $9.2 million for the three-month period ended March 31, 2024, as compared with $7.9 million for the prior-year period due to Gogo Galileo development costs.
Previous report
General and administrative expenses increased 3% to $14.7 million for the three-month period ended March 31, 2024, as compared with $14.2 million for the prior-year period.
Previous report
Depreciation and amortization expense increased 38% to $3.8 million for three-month period ended March 31, 2024, as compared with $2.8 million for the prior-year period, due to accelerated depreciation expense for certain network equipment related to the FCC Reimbursement Program. See Note 1, “Basis of Presentation,” to our Unaudited Condensed Consolidated Financial Statements for additional information on the accelerated depreciation expense.
Previous report
Total other (income) expense changed to $6.7 million of income for the three-month period ended March 31, 2024 as compared with $7.1 million of expense for the prior-year period, due to an unrealized holding gain on the Investment in Convertible Note.
Reworded paragraphs (29)
Previous wording
The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under “Risk Factors” in the 2023 10-K and in Item 1A and “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Current wording
The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under “Risk Factors” in the 2023 10-K, in Item 1A of the 2024 Q1 10-Q and in Item 1A and “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Previous wording
Gogo is the world’s largest provider of broadband connectivity services for the business aviation market. We have served this market for more than 25 years. Our mission is to enrich the lives of passengers and the efficiency of operators with the world’s best business aviation in-flight connectivity and customer support. We have always sought to provide the best connectivity for the business aviation market regardless of technology, and we have a successful history of doing so. Until recently, we focused primarily on business aviation aircraft in North America, which comprise approximately 63% of the worldwide business aviation fleet, and we are the leading provider of in-flight connectivity in that market. Gogo started in analogue air-to-ground (“ATG”) technology in the late 1990s, then, as analogue cellular backhaul disappeared, migrated to narrowband satellite connectivity in the early 2000s, then back to ATG with our digital broadband 3G and 4G networks beginning in 2010. We are currently developing our fourth ATG network – Gogo 5G – that we expect to commercially launch a few months later than the previously stated fourth quarter 2024 launch date, and we are working with our vendors to finalize the schedule. Simultaneous with the development of Gogo 5G, we are actively working with a subset of AVANCE customers and customers utilizing our legacy Gogo Biz ATG airborne system operating on our ground 3G and 4G networks to upgrade to an AVANCE system compatible with a new LTE network. We anticipate this subset of customers will see improved performance because of this network transition, which is expected to occur in early 2026. The cost for the transition to the new LTE network is partially being reimbursed through our participation in the FCC Reimbursement Program.
Current wording
Gogo is the world’s largest provider of broadband connectivity services for the business aviation market. We have served this market for more than 25 years. Our mission is to enrich the lives of passengers and the efficiency of operators with the world’s best business aviation in-flight connectivity and customer support. We have always sought to provide the best connectivity for the business aviation market regardless of technology, and we have a successful history of doing so. Until recently, we focused primarily on business aviation aircraft in North America, which comprise approximately 63% of the worldwide business aviation fleet, and we are the leading provider of in-flight connectivity in that market. Gogo started in analogue air-to-ground (“ATG”) technology in the late 1990s, then, as analogue cellular backhaul disappeared, migrated to narrowband satellite connectivity in the early 2000s, then back to ATG with our digital broadband 3G and 4G networks beginning in 2010. We are currently developing our fourth ATG network – Gogo 5G – that we expect to commercially launch in the second quarter of 2025. Simultaneous with the development of Gogo 5G, we are actively working with a subset of AVANCE customers and customers utilizing our legacy Gogo Biz ATG airborne system operating on our ground 3G and 4G networks to upgrade to an AVANCE system compatible with a new LTE network. We anticipate this subset of customers will see improved performance because of this network transition, which is expected to occur in early 2026. The cost for the transition to the new LTE network is partially being reimbursed through our participation in the FCC Reimbursement Program.
Previous wording
Average monthly connectivity service revenue per ATG aircraft online. We define average monthly connectivity service revenue per ATG aircraft online as the aggregate ATG connectivity service revenue for the period divided by the number of months in the period, divided by the number of ATG aircraft online during the period (expressed as an average of the month end figures for each month in such period). Revenue share earned from Intelsat is excluded from this calculation.
Current wording
Average monthly connectivity service revenue per ATG aircraft online (“ARPU”). We define ARPU as the aggregate ATG connectivity service revenue for the period divided by the number of months in the period, divided by the number of
Previous wording
Three Months Ended March 31, 2024 and 2023
Current wording
Three and Six Months Ended June 30, 2024 and 2023
Previous wording
Revenue and percent change for the three-month periods ended March 31, 2024 and 2023 were as follows(in thousands, except for percent change):
Current wording
Revenue and percent change for the three- and six-month periods ended June 30, 2024 and 2023 were as follows(in thousands, except for percent change):
Previous wording
Service revenue increased to $81.7 million for the three-month period ended March 31, 2024, as compared with $78.5 million for the prior-year period, due to increases in ATG aircraft online.
Current wording
Service revenue increased to $81.9 million and $163.6 million, respectively, for the three- and six-month periods ended June 30, 2024, as compared with $79.1 million and $157.6 million, respectively, for the prior-year periods, due to increases in ARPU.
Previous wording
Equipment revenue increased to $22.6 million for the three-month period ended March 31, 2024, as compared with $20.1 million for the prior-year period, due to an increase in the number of ATG units sold, with 258 units sold during the three-month period ended March 31, 2024 as compared with 223 units sold during the prior-year period.
Current wording
Equipment revenue decreased to $20.1 million and $42.8 million, respectively, for the three- and six-month periods ended June 30, 2024, as compared with $24.2 million and $44.3 million, respectively, for the prior-year periods, due to a decrease in the number of ATG units sold, with 231 units and 489 units, respectively, sold during the three- and six-month periods ended June 30, 2024 as compared with 277 units and 500 units, respectively, sold during the prior-year periods.
Previous wording
We expect service revenue to increase in the future as additional aircraft come online, including the expected impact of the launch of Gogo 5G and Gogo Galileo. We expect equipment revenue to increase in the future driven by additional sales of ATG units including Gogo 5G, and Gogo Galileo units.
Current wording
We expect service revenue to remain relatively flat in the near term as we prepare to launch Gogo 5G and Gogo Galileo and increase in the future as additional aircraft come online after the launch of those products. We expect equipment revenue to increase in the future driven by growth in sales of ATG units including Gogo 5G, and Gogo Galileo units.
Previous wording
Cost of revenue and percent change for the three-month periods ended March 31, 2024 and 2023 were as follows(in thousands, except for percent change):
Current wording
Cost of revenue and percent change for the three- and six-month periods ended June 30, 2024 and 2023 were as follows(in thousands, except for percent change):
Previous wording
Cost of service revenue increased 6% to $17.9 million for the three-month period ended March 31, 2024, as compared with $16.8 million for the prior-year period due to an increase in ATG network costs .
Current wording
Cost of service revenue increased 12% and 9% to $18.9 million and $36.7 million, respectively, for the three- and six-month periods ended June 30, 2024, as compared with $16.8 million and $33.6 million, respectively, for the prior-year periods due to an increase in ATG network costs.
Previous wording
Cost of equipment revenue decreased 13% to $15.8 million for the three-month period ended March 31, 2024 as compared with $18.1 million for the prior-year period due to non-reimbursable costs related to the FCC Reimbursement Program in the prior year.
Current wording
Cost of equipment revenue decreased 6% and 10% to $16.4 million and $32.2 million, respectively, for the three- and six-month periods ended June 30, 2024, as compared with $17.5 million and $35.7 million, respectively, for the prior-year periods due to non-reimbursable costs related to the FCC Reimbursement Program in the prior year.
Previous wording
We expect that our cost of equipment revenue will increase with growth in ATG units sold, including Gogo 5G, and Gogo Galileo units, following the launch of those products. Additionally, we expect to incur additional costs associated with the FCC Reimbursement Program which we expect to be partially offset by the reimbursements from the FCC.
Current wording
We expect that our cost of equipment revenue will increase with growth in units sold, including Gogo 5G and Gogo Galileo units, following the launch of those products. Additionally, we expect to incur additional costs associated with the FCC Reimbursement Program which we expect to be partially offset by the reimbursements from the FCC.
Previous wording
We expect engineering, design and development expenses as a percentage of service revenue to increase in 2024, driven by Gogo Galileo development costs and Gogo 5G program spend, and decrease thereafter as the programs are completed and the level of investment decreases and revenue increases.
Current wording
We expect engineering, design and development expenses as a percentage of service revenue to increase in 2024, driven by Gogo Galileo development costs and Gogo 5G program spend, and decrease thereafter as these developmental projects are completed and the level of investment decreases and revenue from these product roll-outs increases.
Previous wording
Sales and marketing expenses increased 20% to $8.3 million for the three-month period ended March 31, 2024, as compared with $6.9 million for the prior-year period due to personnel costs.
Current wording
Sales and marketing expenses increased 15% and 18% to $9.0 million and $17.3 million, respectively, for the three- and six-month periods ended June 30, 2024, as compared with $7.9 million and $14.7 million, respectively, for the prior-year periods due to personnel costs.
Previous wording
Other expense (income) and percent change for the three-month periods ended March 31, 2024 and 2023 were as follows(in thousands, except for percent change):
Current wording
Other expense (income) and percent change for the three- and six-month periods ended June 30, 2024 and 2023 were as follows(in thousands, except for percent change):
Previous wording
We expect our interest expense to fluctuate in the future based on changes in the variable rates associated with the Facilities, partially offset by the impact of the interest rate caps. We expect these fluctuations to be impacted by the decrease in the hedge benefit as our hedge notional amount decreases and the strike rate increases. See Note 8, “Long-Term Debt and Other Liabilities,” to our Unaudited Condensed Consolidated Financial Statements for additional information. Subsequent to March 31, 2024, the Company observed a significant decrease in the publicly available stock price related to the Investment in Convertible Note. Should the decrease be sustained, the fair value of the Investment in Convertible Note could be materially and negatively impacted.
Current wording
We expect our interest expense to fluctuate in the future based on changes in the variable rates associated with the Facilities, partially offset by the impact of the interest rate caps. We expect these fluctuations to be impacted by the decrease in the hedge benefit as our hedge notional amount decreases and the strike rate increases. See Note 8, “Long-Term Debt and Other Liabilities,” to our Unaudited Condensed Consolidated Financial Statements for additional information.
Previous wording
The effective income tax rate for the three-month period ended March 31, 2024 was 26.4%, as compared to 17.7% for the prior-year period. For the three-month period ended March 31, 2024, our income tax provision was $10.9 million due to pre-tax income. For the three-month period ended March 31, 2023, our income tax provision was $4.4 million, due to pre-tax income. See Note 13, “Income Tax,” to our Unaudited Condensed Consolidated Financial Statements for additional information.
Current wording
The effective income tax rates for the three- and six-month periods ended June 30, 2024 were 13.6% and 26.1%, respectively, as compared to (245.3)% and (116.9)%, respectively, for the prior-year periods. For the three- and six-month periods ended June 30, 2024, our income tax provision was $0.1 million and $11.1 million, respectively, due to pre-tax income. For the three- and six-month periods ended June 30, 2023, our income tax benefit was $63.8 million and $59.4 million, respectively, due to a partial release of the valuation allowance on our deferred income tax assets. See Note 13, “Income Tax,” to our Unaudited Condensed Consolidated Financial Statements for additional information.
Previous wording
Adjusted EBITDA represents EBITDA adjusted for (i) stock-based compensation expense and (ii) change in fair value of Investment in Convertible Note. Our management believes that the use of Adjusted EBITDA eliminates items that management believes have less bearing on our operating performance, thereby highlighting trends in our core business which may not otherwise be apparent. It also provides an assessment of controllable expenses, which are indicators management uses to determine whether current spending decisions need to be adjusted in order to meet financial goals and achieve optimal financial performance.
Current wording
Adjusted EBITDA represents EBITDA adjusted for (i) stock-based compensation expense, (ii) change in fair value of Investment in Convertible Note and (iii) loss on extinguishment of debt. Our management believes that the use of Adjusted EBITDA eliminates items that management believes have less bearing on our operating performance, thereby highlighting trends in our core business which may not otherwise be apparent. It also provides an assessment of controllable expenses, which are indicators management uses to determine whether current spending decisions need to be adjusted in order to meet financial goals and achieve optimal financial performance.
Previous wording
On September 5, 2023, we announced a share repurchase program that grants the Company authority to repurchase up to $50 million of shares of the Company’s common stock. Repurchases may be made at management's discretion from time to time on the open market, through privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act, as amended, in accordance with applicable securities laws and other restrictions, including Rule 10b-18 under the Securities Exchange Act. The repurchase program has no time limit and may be suspended for periods or discontinued at any time and does not obligate us to purchase any shares of our common stock. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. We do not expect to incur debt to fund the share repurchase program. During the three-month period ended March 31, 2024, we repurchased an aggregate 1.1 million shares of our common stock for $10.1 million.
Current wording
On September 5, 2023, we announced a share repurchase program that grants the Company authority to repurchase up to $50 million of shares of the Company’s common stock. Repurchases may be made at management's discretion from time to time on the open market, through privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act, as amended, in accordance with applicable securities laws and other restrictions, including Rule 10b-18 under the Securities Exchange Act. The repurchase program has no time limit and may be suspended for periods or discontinued at any time and does not obligate us to purchase any shares of our common stock. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. We do not expect to incur debt to fund the share repurchase program. During the six-month period ended June 30, 2024, we repurchased an aggregate 2.6 million shares of our common stock for $23.2 million. As of June 30, 2024, the remaining amount available to be repurchased under the program was $22.1 million.
Previous wording
The Term Loan Facility bears annual interest at a floating rate measured by reference to, at GIH’s option, either (i) an adjusted term SOFR rate (subject to a floor of 0.75%) plus an applicable margin of 3.75% and a credit spread adjustment recommended by the Alternative Reference Rates Committee of 0.11%, 0.26% or 0.43% per annum based on 1-month, 3-month or 6-month term SOFR, respectively or (ii) an alternate base rate plus an applicable margin of 2.75%.
Current wording
The Term Loan Facility bears annual interest at a floating rate measured by reference to, at GIH’s option, either (i) an adjusted term SOFR rate (subject to a floor of 0.75%) plus an applicable margin of 3.75% and a credit spread adjustment recommended by the
Previous wording
The Facilities may be prepaid at GIH’s option at any time without premium or penalty (other than customary breakage costs), subject to minimum principal payment amount requirements.
Current wording
The Facilities may be prepaid at GIH’s option at any time without premium or penalty (other than customary breakage costs), subject to minimum principal payment amount requirements. On May 3, 2023, the Company prepaid $100 million of the outstanding principal amount of the Term Loan Facility.
Previous wording
For the three-month period ended March 31, 2024, net cash provided by operating activities was $29.7 million as compared with $18.5 million in the prior-year period. The principal contributors to the year-over-year change in operating cash flows were:
Current wording
For the six-month period ended June 30, 2024, net cash provided by operating activities was $54.6 million as compared with $34.1 million in the prior-year period. The principal contributors to the year-over-year change in operating cash flows were:
Previous wording
A $4.4 million improvement in net income and non-cash charges and credits, as noted above under “Results of Operations.”
Current wording
A $8.7 million decrease in net income and non-cash charges and credits, as noted above under “Results of Operations.”
Previous wording
A $6.7 million improvement in cash flows related to operating assets and liabilities resulting from:
Current wording
A $29.1 million improvement in cash flows related to operating assets and liabilities resulting from:
Previous wording
Cash used in investing activities was $2.6 million for the three-month period ended March 31, 2024, due to $4.2 million of capital expenditures noted below and a $5.0 million convertible note investment, partially offset by $6.5 million of proceeds from interest rate caps and an immaterial amount of proceeds received from the FCC Reimbursement Program associated with the reimbursement of capital expenditures.
Current wording
Cash used in investing activities was $2.7 million for the six-month period ended June 30, 2024, due to $10.7 million of capital expenditures noted below and a $5.0 million convertible note investment, partially offset by $12.9 million of proceeds from interest rate caps and $0.1 million of proceeds received from the FCC Reimbursement Program associated with the reimbursement of capital expenditures.
Previous wording
Cash provided by investing activities was $1.6 million for the three-month period ended March 31, 2023, due to $6.1 million of proceeds from interest rate caps and $0.1 million of net proceeds from short-term investments, partially offset by $4.6 million of capital expenditures noted below.
Current wording
Cash provided by investing activities was $23.9 million for the six-month period ended June 30, 2023, due to $24.8 million of net proceeds from short-term investments and $12.5 million of proceeds from interest rate caps, partially offset by $13.4 million of capital expenditures noted below.
Previous wording
Cash used in financing activities for the three-month period ended March 31, 2024 was $13.3 million due to share repurchases, principal payments on the Term Loan Facility and stock-based compensation activities.
Current wording
Cash used in financing activities for the six-month period ended June 30, 2024 was $29.5 million due to share repurchases, principal payments on the Term Loan Facility and stock-based compensation activities.
Previous wording
Cash used in financing activities for the three-month period ended March 31, 2023 was $7.4 million, due to stock-based compensation activities and principal payments on the Term Loan Facility.
Current wording
Cash used in financing activities for the six-month period ended June 30, 2023 was $111.5 million, due to principal payments on the Term Loan Facility and stock-based compensation activities.
Previous wording
Capital expenditures for the three-month periods ended March 31, 2024 and 2023 were $4.2 million and $4.6 million, respectively.
Current wording
Capital expenditures for the six-month periods ended June 30, 2024 and 2023 were $10.7 million and $13.4 million, respectively.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
ATG aircraft online during the period (expressed as an average of the month end figures for each month in such period). Revenue share earned from Intelsat is excluded from this calculation.
Current report — wording carried from elsewhere
Alternative Reference Rates Committee of 0.11%, 0.26% or 0.43% per annum based on 1-month, 3-month or 6-month term SOFR, respectively or (ii) an alternate base rate plus an applicable margin of 2.75%.