Gogo(US:GOGO)2025-05-09 20:02Part I. Financial Information Financial Statements This section presents Gogo Inc.'s unaudited condensed consolidated financial statements for Q1 2025, reflecting the Satcom Direct acquisition and key financial positions and performance Unaudited Condensed Consolidated Balance Sheets The balance sheets show total assets at $1.238 billion and total liabilities at $1.155 billion as of March 31, 2025, with increased cash and stockholders' equity Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $70,282 | $41,765 | | Total current assets | $354,275 | $323,093 | | Total assets | $1,238,388 | $1,229,231 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $192,167 | $182,028 | | Long-term debt | $832,035 | $831,581 | | Total liabilities | $1,155,440 | $1,159,907 | | Total stockholders' equity | $82,948 | $69,324 | Unaudited Condensed Consolidated Statements of Operations Total revenue for Q1 2025 increased to $230.3 million due to the Satcom Direct acquisition, while net income decreased to $12.0 million due to higher expenses Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Service revenue | $198,612 | $81,673 | | Equipment revenue | $31,695 | $22,649 | | Total revenue | $230,307 | $104,322 | | Operating income | $35,187 | $34,674 | | Net income | $12,042 | $30,490 | | Diluted EPS | $0.09 | $0.23 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities was $32.5 million in Q1 2025, contributing to a $28.5 million increase in cash and cash equivalents Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $32,472 | $29,657 | | Net cash used in investing activities | ($2,435) | ($2,604) | | Net cash used in financing activities | ($1,574) | ($13,296) | | Increase in cash, cash equivalents and restricted cash | $28,518 | $13,784 | Notes to Unaudited Condensed Consolidated Financial Statements These notes detail significant accounting policies, the Satcom Direct acquisition impact, revenue recognition, FCC Reimbursement Program, debt structure, and ongoing litigation with SmartSky - The company completed its acquisition of Satcom Direct on December 3, 2024, for a total consideration including $375 million in cash, 5 million restricted shares, and up to $225 million in potential earnout payments, creating two reportable segments: Gogo BA and Satcom Direct212830 - As of March 31, 2025, the company had approximately $595 million in remaining performance obligations (RPO), primarily from connectivity and entertainment service revenues expected to be recognized over the next ten years42 - The company is participating in an FCC Reimbursement Program to replace certain network equipment, with up to approximately $334 million in approved reimbursements, with the completion deadline extended to May 8, 20264647 - Gogo is involved in multiple lawsuits with SmartSky Networks, LLC, including patent infringement allegations against Gogo 5G and a countersuit by Gogo, with a trial for the initial suit scheduled for November 17, 2025119121122 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Satcom Direct acquisition's impact, Q1 2025 results for the Gogo BA segment, key operating metrics, liquidity, capital resources, and non-GAAP measures Key Operating Metrics Key operating metrics for the Gogo BA segment show a decrease in total ATG aircraft online to 6,902, while AVANCE aircraft online increased to 4,716 Gogo BA Segment Key Operating Metrics | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total ATG aircraft online | 6,902 | 7,136 | | - AVANCE aircraft online | 4,716 | 4,110 | | - Gogo Biz aircraft online | 2,186 | 3,026 | | GEO aircraft online | 1,280 | 9 | | Average monthly connectivity service revenue per ATG aircraft (ARPU) | $3,451 | $3,458 | | ATG units sold | 317 | 258 | - The reported metrics are for the Gogo BA segment only, with management planning to develop new metrics for the combined business in the future137 Results of Operations Gogo BA segment's total revenue decreased by 2.9% to $101.3 million in Q1 2025, with increased cost of equipment revenue and general and administrative expenses Gogo BA Segment Revenue (in thousands) | Revenue Type | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Service revenue | $79,515 | $81,673 | (2.6)% | | Equipment revenue | $21,799 | $22,649 | (3.8)% | | Total revenue | $101,314 | $104,322 | (2.9)% | - Gogo BA's cost of service revenue increased 2.8% due to higher personnel costs, while cost of equipment revenue increased 26.8% due to higher sales of lower margin products152153 - General and administrative expenses for Gogo BA increased by 65.7% to $24.3 million, primarily due to $4.4 million in acquisition and integration-related costs156 Non-GAAP Measures Non-GAAP measures show Adjusted EBITDA increased to $62.1 million in Q1 2025, while Free Cash Flow was $30.0 million Reconciliation of GAAP to Non-GAAP Measures (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income (GAAP) | $12,042 | $30,490 | | EBITDA | $49,096 | $51,614 | | Adjusted EBITDA | $62,055 | $43,322 | | Net cash provided by operating activities (GAAP) | $32,472 | $29,657 | | Free cash flow | $30,037 | $32,053 | - Adjusted EBITDA adds back stock-based compensation, acquisition/integration costs, and changes in the fair value of a convertible note investment165167168 Liquidity and Capital Resources The company's liquidity is supported by $70.3 million in cash and a $122 million undrawn revolving credit facility, with capital expenditures expected to increase for network build-outs - The company believes its cash, operating cash flows, and access to its revolving facility will be sufficient to meet cash requirements for at least the next twelve months176 - No shares were repurchased in Q1 2025, with $12.1 million remaining available under the share repurchase program as of March 31, 2025177 - Capital expenditures are expected to increase in the near term due to the build-out of the LTE network (related to the FCC Reimbursement Program) and Gogo 5G, before decreasing in 2026191192 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk on variable-rate debt, mitigated by interest rate cap agreements, with a $5.7 million impact from a 1% rate increase - The company is exposed to interest rate risk on its variable rate debt, where a hypothetical 1% rate change would impact annual interest expense by approximately $5.7 million, net of interest rate cap effects199200 - The company has interest rate cap agreements with a notional amount of $350.0 million as of March 31, 2025, to hedge a portion of its variable rate debt199200 Controls and Procedures Disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting related to the Satcom Direct acquisition, with a remediation plan underway - Disclosure controls and procedures were deemed ineffective as of March 31, 2025, due to material weaknesses in internal control over financial reporting203 - The material weaknesses relate to the Satcom Direct acquisition, including ineffective general IT controls, lack of control activities for financial reporting at Satcom Direct, and ineffective implementation of controls over purchase accounting207208211 - A remediation plan is underway, focusing on implementing new controls over IT and financial reporting at Satcom Direct, strengthening acquisition accounting processes, and hiring additional qualified personnel209212 Part II. Other Information Legal Proceedings The company is involved in ongoing patent infringement and antitrust litigation with SmartSky Networks, LLC, and is vigorously defending its position - Gogo is defending against a patent infringement suit from SmartSky regarding Gogo 5G, with a trial scheduled for November 17, 2025119 - SmartSky has also filed an antitrust lawsuit against Gogo, alleging illegal monopoly practices, for which Gogo has filed a motion to dismiss122 - Gogo has filed its own patent infringement counterclaims against SmartSky, with a trial date set for March 8, 2027121 Risk Factors No material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - No material changes to risk factors from the 2024 10-K report215 Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or issuer repurchases reported during the quarter - There were no unregistered sales of equity securities or issuer repurchases during the period216 Other Information The company's EVP and COO adopted a Rule 10b5-1 trading plan for the potential sale of up to 107,136 shares of common stock - EVP & COO Mike Begler adopted a Rule 10b5-1 trading plan for the potential sale of up to 107,136 shares219