Gogo Inc. (NASDAQ:GOGO) Q3 2021 Earnings Conference Call November 4, 2021 8:00 AM ET Company Participants Will Davis - Vice President, Investor Relations Oakleigh Thorne - Chairman & Chief Executive Officer Barry Rowan - Executive Vice President & Chief Financial Officer Conference Call Participants Scott Searle - Roth Capital Brent - Raymond James Louie DiPalma - William Blair Jonnathan Navarrete - Cowen Chris Sakai - Singular Research Operator Good day, and thank you for standing by and welcome to the Thi ...

Part I. Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Gogo Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and stockholders' equity, with accompanying notes on key accounting policies and events [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2021, total assets decreased to **$443.2 million** from **$673.6 million**, liabilities decreased to **$1.00 billion** from **$1.31 billion**, and stockholders' deficit improved to **$(560.2) million** Condensed Consolidated Balance Sheet Data (in thousands) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $133,233 | $435,345 | | Total current assets | $240,472 | $512,226 | | Total assets | $443,205 | $673,588 | | **Liabilities & Stockholders' Deficit** | | | | Current portion of long-term debt | $109,348 | $341,000 | | Long-term debt | $695,894 | $827,968 | | Total liabilities | $1,003,442 | $1,314,702 | | Total stockholders' deficit | $(560,237) | $(641,114) | [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2021 total revenue increased **31%** to **$87.2 million**, resulting in **$19.7 million** net income from continuing operations, while nine-month revenue grew **26.7%** to **$243.4 million** with a **$52.5 million** net loss due to debt extinguishment Q3 2021 vs Q3 2020 Performance (in thousands, except EPS) | Metric | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Total Revenue | $87,172 | $66,525 | | Operating Income | $30,913 | $22,220 | | Net Income (Loss) from Continuing Operations | $19,730 | $(8,890) | | Diluted EPS from Continuing Operations | $0.16 | $(0.11) | Nine Months 2021 vs 2020 Performance (in thousands, except EPS) | Metric | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | | Total Revenue | $243,416 | $192,084 | | Operating Income | $88,299 | $60,655 | | Net Loss from Continuing Operations | $(52,548) | $(32,479) | | Loss on extinguishment of debt | $83,961 | $0 | | Diluted EPS from Continuing Operations | $(0.52) | $(0.40) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, operating cash flow increased to **$36.4 million**, while significant financing activities, primarily debt redemption, led to a **$302.3 million** decrease in cash and cash equivalents Cash Flow Summary - Nine Months Ended Sept 30 (in thousands) | Cash Flow Activity (Continuing Operations) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $36,355 | $20,315 | | Net cash used in investing activities | $(11,633) | $(6,363) | | Net cash provided by (used in) financing activities | $(326,223) | $16,041 | | **Decrease in cash, cash equivalents and restricted cash** | **$(302,282)** | **$(54,531)** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Key notes include the sale of the Commercial Aviation business as a discontinued operation, adoption of ASU 2020-06, a **$725 million** debt refinancing, and a tentative **$17.3 million** securities class action settlement - On December 1, 2020, the company completed the sale of its Commercial Aviation (CA) business to Intelsat for **$400 million**. The CA business is now reported as a discontinued operation in all presented periods[32](index=32&type=chunk)[33](index=33&type=chunk) - In April 2021, the company entered into a new credit agreement for a **$725 million** Term Loan Facility and a **$100 million** Revolving Facility. Proceeds were used to redeem the 9.875% Senior Secured Notes due 2024, resulting in a loss on extinguishment of debt of **$84.0 million** for the nine-month period[85](index=85&type=chunk)[91](index=91&type=chunk)[114](index=114&type=chunk) - The company reached a tentative settlement in a securities class action lawsuit for a cash payment of **$17.3 million**, which will be funded by D&O insurance carriers. A corresponding liability and insurance receivable have been accrued[141](index=141&type=chunk) - The company adopted ASU 2020-06 for convertible instruments, which simplified the accounting by removing the separation of liability and equity components. This resulted in a reclassification on the balance sheet as of January 1, 2021[45](index=45&type=chunk)[46](index=46&type=chunk) [Management's Discussion and Analysis (MD&A)](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance, highlighting strong recovery and revenue growth in business aviation, covering key metrics, results of operations, non-GAAP measures, and liquidity, including the 2021 debt refinancing [Key Business Metrics](index=42&type=section&id=Key%20Business%20Metrics) Key operating metrics for Q3 2021 show strong growth, with ATG aircraft online increasing to **6,154**, ARPU rising to **$3,264**, and ATG units sold reaching **266** Key Operating Metrics (Q3 2021 vs Q3 2020) | Metric | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | ATG aircraft online (at period end) | 6,154 | 5,577 | | Average monthly service revenue per ATG aircraft | $3,264 | $2,996 | | ATG Units Sold | 266 | 167 | [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Q3 2021 total revenue increased **31.0%** to **$87.2 million**, driven by **24.2%** service revenue growth and **58.8%** equipment revenue growth, leading to improved operating income and lower other expenses - Q3 2021 service revenue grew to **$66.2 million**, up **24.2%** YoY, due to an increase in ATG aircraft online and higher average monthly service revenue per aircraft[197](index=197&type=chunk)[198](index=198&type=chunk) - Q3 2021 equipment revenue increased **58.8%** YoY to **$21.0 million**, primarily due to selling **266** ATG units compared to **167** units in the prior-year period[197](index=197&type=chunk)[199](index=199&type=chunk) - Total other expense for Q3 2021 decreased to **$11.1 million** from **$31.2 million** in Q3 2020, mainly due to lower interest expense after the debt refinancing[211](index=211&type=chunk) [Non-GAAP Measures](index=48&type=section&id=Non-GAAP%20Measures) Key non-GAAP measures show Q3 2021 Adjusted EBITDA at **$40.8 million** and nine-month free cash flow at **$32.4 million**, both significantly improved year-over-year Adjusted EBITDA Reconciliation (in thousands) | | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Net income (loss) attributable to common stock | $10,959 | $(80,124) | | Adjustments (Interest, Taxes, D&A, etc.) | $15,200 | $34,418 | | EBITDA | $26,159 | $(45,706) | | Other Adjustments (Stock Comp, Discontinued Ops, etc.) | $14,624 | $75,914 | | **Adjusted EBITDA** | **$40,783** | **$30,208** | Free Cash Flow (in thousands) | | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $36,355 | $20,315 | | Consolidated capital expenditures | $(4,004) | $(6,363) | | **Free cash flow** | **$32,351** | **$13,952** | [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2021, the company had **$133.2 million** in cash, with sufficient liquidity for the next twelve months, following a **$725 million** debt refinancing, and anticipates increased capital expenditures for Gogo 5G - The company believes its cash of **$133.2 million** and operating cash flows are sufficient to meet its operating and capital obligations for at least the next twelve months[228](index=228&type=chunk)[229](index=229&type=chunk) - In April 2021, the company refinanced its debt, entering into a **$725 million** Term Loan Facility and a **$100 million** Revolving Facility, using the proceeds to redeem its 2024 Senior Secured Notes[230](index=230&type=chunk)[244](index=244&type=chunk) - Capital expenditures are expected to increase in the near-term to fund the build-out of the Gogo 5G network[245](index=245&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk on variable rate debt, mitigated by **$650 million** in interest rate caps, with a **1%** LIBOR increase estimated to raise annual interest expense by **$0.3 million** - The main market risk is interest rate risk from variable rate debt. This is partially hedged by interest rate cap agreements with a notional value of **$650 million**[252](index=252&type=chunk) - A hypothetical **1 percentage point** increase in the three-month LIBOR rate would increase annual interest expense by an estimated **$0.3 million**, including the impact of the interest rate caps[253](index=253&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[255](index=255&type=chunk) - No material changes were made to the internal control over financial reporting during the most recent fiscal quarter[255](index=255&type=chunk) Part II. Other Information [Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various lawsuits arising from its business operations; detailed discussion is provided in Note 14 of the financial statements - The company is subject to a number of lawsuits. For a detailed discussion, refer to Note 14, "Commitments and Contingencies," in the financial statements[257](index=257&type=chunk) [Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the 2020 Annual Report on Form 10-K and subsequent quarterly reports - There have been no material changes to the risk factors previously disclosed in the 2020 10-K and subsequent 10-Q filings[258](index=258&type=chunk) [Exhibits](index=59&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101 series)[262](index=262&type=chunk)

Financial Data and Key Metrics Changes - Gogo reported total revenue of $82.4 million for Q2 2021, representing a 51% increase year-over-year and a 16% increase compared to Q2 2019 [7][40] - Adjusted EBITDA reached $36.7 million, a 70% increase from Q2 2020 and an 8% increase sequentially from Q1 2021 [11][54] - Service revenue was $64.8 million, up 47% year-over-year and 18% from Q2 2019 [40] - Average Revenue Per User (ARPU) hit $3,296, reflecting a 28% year-over-year growth [42] Business Line Data and Key Metrics Changes - The number of ATG aircraft online (AOL) reached 6,036, up nearly 12% year-over-year [41] - AVANCE units online grew 51% year-over-year to 2,067, comprising over 34% of total ATG aircraft online [44] - Equipment revenue was $17.6 million, a 66% increase year-over-year, driven by demand for AVANCE L5 and L3 units [40][44] Market Data and Key Metrics Changes - Flight activity for Gogo-equipped aircraft was 13% above pre-pandemic levels in Q2 2021, with significant growth across all segments [12][13] - Data consumption increased by 52% compared to Q2 2019, driven by a 26% increase in megabytes per flight hour [15][16] - The demand for new aircraft is rising, with Gulfstream reporting a book-to-bill ratio of 2.1 in Q2 2021 [14][15] Company Strategy and Development Direction - Gogo is focused on enhancing its ATG network and deploying a 5G network in the second half of 2022 [27][29] - The company aims to layer new products and services on top of the AVANCE platform to drive incremental revenue [28][32] - Gogo is well-positioned to leverage partnerships with LEO satellite companies to enhance its service offerings [18][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued growth of the business aviation market, with expectations for service revenue to grow approximately 20% in 2021 [35][59] - The company anticipates achieving sustainable positive net income beginning in Q3 2021 [54] - Gogo's stock is viewed as undervalued, with expectations for significant free cash flow growth post-2022 [36][62] Other Important Information - Gogo's liquidity position is strong, with $109.2 million in cash and no draws on its $100 million revolver as of June 30, 2021 [55] - The company has a robust backlog of equipment orders, which supports its revenue guidance for 2021 [45][46] - Gogo plans to allocate approximately $10 million in cash for additional inventory purchases during 2022 to meet demand [47] Q&A Session Summary Question: Guidance on EBITDA for the second half of the year - Management indicated that the guidance of at least $130 million for the second half is conservative, primarily due to increased 5G costs and other expenses [64][65] Question: Installation capacity and general aviation market - Management believes there is ample capacity to meet projections but is analyzing market inhibitors to accelerate AVANCE penetration [66][67] - The general aviation market presents a learning opportunity, with ongoing partnerships expected to enhance service offerings [68]

Gogo Inc. (NASDAQ:GOGO) Q1 2021 Earnings Conference Call May 6, 2021 8:30 AM ET Company Participants William Davis - Vice President of Investor Relations Oakleigh Thorne - President & Chief Executive Officer Barry Rowan - Executive Vice President & Chief Financial Officer Conference Call Participants Ric Prentiss - Raymond James Phil Cusick - JPMorgan Scott Searle - ROTH Capital Simon Flannery - Morgan Stanley Louie DiPalma - William Blair Operator Good day, and thank you for standing by. Welcome to the Gog ...

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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, 2020 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 Gogo Inc. (Exact name of registrant as specified in its charter) Delaware 27-1650905 (State ...

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