Gogo Announces Third Quarter 2017 Financial Results

CHICAGO, Nov. 2, 2017 /PRNewswire/ -- Gogo (NASDAQ: GOGO), the leading global provider of broadband connectivity products and services for aviation, today announced its financial results for the quarter ended September 30, 2017.

Third Quarter 2017 Consolidated Financial Results

    --  Revenue increased to $172.9 million, up 17% from Q3 2016. Service
        revenue increased to $153.3 million, up 19% from Q3 2016, due to a 10%
        increase in commercial aircraft online to 3,169, a 15% increase in ATG
        business aircraft online to 4,567, and increased customer usage across
        all segments.
    --  Net loss increased to $45.3 million, a 36% increase from Q3 2016, and
        Adjusted EBITDA((1)) decreased to $13.0 million, down 15% from Q3 2016.
        Excluding $4.5 million in charges related to write-downs of legacy
        product lines and the retirement of Gogo test aircraft, net loss
        increased to $40.8 million and Adjusted EBITDA increased to $17.5
        million.
    --  Capital expenditures increased to $68.5 million from $43.7 million in Q3
        2016. Cash CapEx((1)) increased to $53.1 million from $35.6 million in
        Q3 2016 due to the planned increase in success-based airborne equipment
        purchases during this period of heavy 2Ku installations.
    --  Cash, cash equivalents and short-term investments were $410.9 million as
        of September 30, 2017. Gogo issued an additional $100.0 million of
        senior secured notes at 113% of par value on September 25, 2017 raising
        $110.0 million in net proceeds.

"With 2Ku installations accelerating, high bandwidth is arriving in North America and globally," said Michael Small, Gogo's President and CEO. "More bandwidth enables us to improve customer experience, engage more users, and offer new products and services."

"North American satellite aircraft generated a robust $220,000 in annualized ARPA in our commercial aviation business with take rates increasing across our fleet," said Barry Rowan, Gogo's Executive Vice President and CFO. "We expect Adjusted EBITDA to increase substantially in Q4 2017 and in 2018 as we execute on our plan."

Third Quarter 2017 Business Segment Financial Results

Commercial Aviation - North America (CA-NA)

CA-NA aircraft online increased to more than 2,800 aircraft in the quarter, of which approximately 9% utilize the satellite network. CA-NA Satellite ARPA grew to more than $220,000 on an annualized basis and CA-NA ATG ARPA was approximately $125,000 on an annualized basis. High bandwidth is rapidly arriving in North America with satellite equipment installations accelerating and our next generation ATG network on track for 2018 commercial availability.

    --  Aircraft online reached 2,817, up 188 aircraft from September 30, 2016.
        As of September 30, 2017, CA-NA had approximately 900 awarded but not
        yet installed 2Ku aircraft of which 100 are net new aircraft.
    --  Take rate reached 7.5%, up from 6.5% in Q3 2016 driven by an increase in
        passenger engagement from airline and third party paid offerings.
    --  Total revenue increased to $95.7 million, up 6% from Q3 2016, driven
        primarily by more aircraft online.
    --  Segment profit increased to $16.0 million, up 10% from Q3 2016,
        representing a 17% segment profit margin. Excluding $2.4 million in
        charges related to the write-down of a legacy product line and the
        retirement of Gogo test aircraft, segment profit margin would have been
        approximately 19% in Q3 2017.

Commercial Aviation - Rest of World (CA-ROW)

CA-ROW revenue doubled year-over-year for the third quarter in a row and ARPA grew 30% to approximately $226,000 on an annualized basis as passenger demand continued to grow, with take rate reaching 13.5% in Q3 2017. Sequentially, CA-ROW ARPA remained flat as growth in ARPA on existing aircraft was offset by lower ARPA on newly installed fleets.

    --  Aircraft online reached 352, up 96 aircraft from September 30, 2016.
        CA-ROW currently has approximately 680 net new 2Ku awarded but not yet
        installed aircraft including the 100 aircraft recently awarded by LATAM
        Airlines.
    --  Total revenue increased to $16.6 million, up 119% from Q3 2016, driven
        primarily by higher ARPA and an increase in aircraft online.
    --  Segment loss increased to $24.1 million from $19.9 million in Q3 2016,
        but improved by more than $7.0 million from Q2 2017. The sequential
        improvement was driven by lower spend on OEM programs in the quarter and
        increased utilization of satellite network capacity.

Business Aviation (BA)

BA service revenue grew 30% year-over-year to $43.2 million with demand continuing to build for ATG systems across customer segments. In the quarter, BA ATG aircraft online increased to 4,567, up 15% year-over-year with ATG average monthly ARPA rising 13% to $2,874. As of September 30, 2017, BA had more than 10,000 narrowband satellite and ATG systems online.

    --  Equipment revenue increased to $17.3 million, up 11% from Q3 2016.
    --  Total segment revenue increased to $60.5 million, up 24% from Q3 2016.
    --  Segment profit increased to $21.3 million, up 3% from Q3 2016,
        representing a 35% segment profit margin. Excluding a $2.1 million
        charge related to the write-down of a legacy product line, segment
        profit margin would have been approximately 39% in Q3 2017, down from
        42% in Q3 2016. Segment profit was also impacted by increased support
        from engineering, design and development as well as sales and marketing
        for new market and technology launches.

Recent Developments

    --  Alaska Airlines selected 2Ku for in-flight connectivity on more than 200
        of its existing Boeing and Airbus aircraft and 50 additional aircraft
        which include replacement of a competitor's systems. Installations will
        begin in the first half of 2018 and be completed by early 2020.
    --  LATAM Airlines Brazil selected 2Ku for in-flight connectivity on 100 of
        its A320 aircraft. The inflight connectivity service will begin in the
        first half of 2018 with full roll-out expected to be completed in the
        first half of 2019.
    --  Gogo conducted the first successful test flight on its Next Generation
        ATG network and began nationwide network rollout. Our Next Generation
        ATG network is on track for 2018 commercial availability.
    --  Gogo announced Gogo Vision Touch, its new product line to be initially
        launched on Delta Air Lines. Gogo Vision Touch delivers in-flight
        entertainment wirelessly to a seat back screen, enabling a low cost,
        light weight solution and disrupting the legacy in-flight entertainment
        market.
    --  Gogo Business Aviation's AVANCE L5 system, formerly Gogo Biz 4G, was
        selected by Dassault Aviation and Embraer as a factory option on a
        number of their new production aircraft. Gogo AVANCE seamlessly
        integrates connectivity and entertainment offerings, smart cabin
        control, and connected aircraft applications into one highly
        configurable technology platform.
    --  Gogo Business Aviation announced a global high throughput satellite
        solution for business aircraft. The service is expected to be available
        in the second half of 2018.

Business Outlook

For the full year ending December 31, 2017, the Company expects:

    --  2Ku installations of 450 to 550
    --  Total revenue at the high end of the $670 million to $695 million
        guidance range
    --  Adjusted EBITDA at the low end of the $60 million to $75 million
        guidance range, excluding $4.5 million in charges incurred in Q3 2017
    --  Gross capital expenditures of $290 million to $330 million. Cash CapEx
        at the low end of the $230 million to $260 million guidance range, of
        which approximately 70% is related to success-based airborne equipment
        purchases.

Gogo reaffirms all long-term guidance previously provided in the fourth quarter 2016 earnings press release.

(1) See Non-GAAP Financial Measures below

Conference Call

The third quarter conference call will be held on November 2nd, 2017 at 8:30 a.m. ET. A live webcast of the conference call, as well as a replay, will be available online on the Investor Relations section of the company's website at http://ir.gogoair.com. Participants can also access the call by dialing (844) 464-3940 (within the United States and Canada) or (765) 507-2646 (international dialers) and entering conference ID number 99717327.

Non-GAAP Financial Measures

We report certain non-GAAP financial measurements, including Adjusted EBITDA and Cash CapEx in the supplemental tables below. Management uses Adjusted EBITDA and Cash CapEx for business planning purposes, including managing our business against internally projected results of operations and measuring our performance and liquidity. These supplemental performance measures also provide another basis for comparing period to period results by excluding potential differences caused by non-operational and unusual or non-recurring items. These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies. Adjusted EBITDA and Cash CapEx are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance with Adjusted EBITDA or liquidity with Cash CapEx, as applicable, investors should (i) evaluate each adjustment in our reconciliation to net loss attributable to common stock, and the explanatory footnotes regarding those adjustments, (ii) use Adjusted EBITDA in addition to, and not as an alternative to, net loss attributable to common stock as a measure of operating results, and (iii) use Cash CapEx in addition to, and not as an alternative to, consolidated capital expenditures when evaluating our liquidity. No reconciliation of the forecasted range for Adjusted EBITDA for fiscal 2017 is included in this release because we are unable to quantify certain amounts that would be required to be included in the corresponding GAAP measure without unreasonable efforts and we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors. In particular, we are not able to provide a reconciliation for the forecasted range of Adjusted EBITDA due to variability in the timing of aircraft installations and deinstallations impacting depreciation expense and amortization of deferred airborne leasing proceeds.

Cautionary Note Regarding Forward-Looking Statements

Certain disclosures in this press release and related comments by our management include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding our business outlook, industry, business strategy, plans, goals and expectations concerning our market position, international expansion, future technologies, future operations, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words "anticipate," "assume," "believe," "budget," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will," "future" and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this press release.

Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: the loss of, or failure to realize benefits from, agreements with our airline partners or any failure to renew any existing agreements upon expiration or termination; the failure to maintain airline satisfaction with our equipment or our service; any inability to timely and efficiently deploy our 2Ku service or develop and deploy our next-generation ATG solution or other components of our technology roadmap for any reason, including regulatory delays or failures, or delays on the part of any of our suppliers, some of whom are single source, or the failure by our airline partners to roll out equipment upgrades, new services or adopt new technologies in order to support increased network capacity demands; the timing of deinstallation of our equipment from aircraft, including deinstallations resulting from aircraft retirements and other deinstallations permitted by certain airline contract provisions; the loss of relationships with original equipment manufacturers or dealers; our ability to develop or purchase ATG and satellite network capacity sufficient to accommodate current and expected growth in passenger demand in North America and internationally as we expand; our reliance on third-party suppliers, some of whom are single source, for satellite capacity and other services and the equipment we use to provide services to commercial airlines and their passengers and business aviation customers; unfavorable economic conditions in the airline industry and/or the economy as a whole; our ability to expand our international or domestic operations, including our ability to grow our business with current and potential future airline partners; an inability to compete effectively with other current or future providers of in-flight connectivity services and other products and services that we offer, including on the basis of price, service performance and line-fit availability; our ability to successfully develop and monetize new products and services such as Gogo Vision and Gogo TV, including those that were recently released, are currently being offered on a limited or trial basis, or are in various stages of development; our ability to certify and install our equipment and deliver our products and services, including newly developed products and services, on schedules consistent with our contractual commitments to customers; the failure of our equipment or material defects or errors in our software resulting in recalls or substantial warranty claims; a revocation of, or reduction in, our right to use licensed spectrum, the availability of other air-to-ground spectrum to a competitor or the repurposing by a competitor of other spectrum for air-to-ground use; our use of open source software and licenses; the effects of service interruptions or delays, technology failures and equipment failures or malfunctions arising from defects or errors in our software or defects in or damage to our equipment; the limited operating history of our CA-ROW segment; contract changes and implementation issues resulting from decisions by airlines to transition from the retail model to the airline directed model; increases in our projected capital expenditures due to, among other things, unexpected costs incurred in connection with the roll-out of our technology roadmap or our international expansion; compliance with U.S. and foreign government regulations and standards, including those related to regulation of the Internet, including e-commerce or online video distribution changes, and the installation and operation of satellite equipment and our ability to obtain and maintain all necessary regulatory approvals to install and operate our equipment in the United States and foreign jurisdictions; our, or our technology suppliers', inability to effectively innovate; costs associated with defending pending or future intellectual property infringement and other litigation or claims; our ability to protect our intellectual property; breaches of the security of our information technology network, resulting in unauthorized access to our customers' credit card information or other personal information; any negative outcome or effects of future litigation; our substantial indebtedness; limitations and restrictions in the agreements governing our indebtedness and our ability to service our indebtedness; our ability to obtain additional financing on acceptable terms or at all; fluctuations in our operating results; our ability to attract and retain customers and to capitalize on revenue from our platform; the demand for and market acceptance of our products and services; changes or developments in the regulations that apply to us, our business and our industry, including changes or developments affecting the ability of passengers or airlines to use our in-flight connectivity services, including the recent U.S. and U.K. bans on the use of certain personal devices such as laptops and tablets on certain aircraft flying certain routes; a future act or threat of terrorism, cyber-security attack or other events that could result in adverse regulatory changes or developments as referenced above, or otherwise adversely affect our business and industry; our ability to attract and retain qualified employees, including key personnel; the effectiveness of our marketing and advertising and our ability to maintain and enhance our brands; our ability to manage our growth in a cost-effective manner and integrate and manage acquisitions; compliance with anti-corruption laws and regulations in the jurisdictions in which we operate, including the Foreign Corrupt Practices Act and the (U.K.) Bribery Act 2010; restrictions on the ability of U.S. companies to do business in foreign countries, including, among others, restrictions imposed by the U.S. Office of Foreign Assets Control; difficulties in collecting accounts receivable; our ability to successfully implement our new enterprise resource planning system and other improvements to systems and procedures needed to support our growth.

Additional information concerning these and other factors can be found under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on February 27, 2017 and in our quarterly report on Form 10-Q for the quarter ended March 31, 2017 as filed with the SEC on May 4, 2017.

Any one of these factors or a combination of these factors could materially affect our financial condition or future results of operations and could influence whether any forward-looking statements contained in this report ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. All forward-looking statements speak only as of the date made and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

About Gogo

Gogo is the in-flight internet company. We are the leading global provider of broadband connectivity products and services for aviation. We design and source innovative network solutions that connect aircraft to the Internet, and develop software and platforms that enable customizable solutions for and by our aviation partners. Once connected, we provide industry leading reliability around the world. Our mission is to help aviation go farther by making planes fly smarter, so our aviation partners perform better and their passengers travel happier.

You can find Gogo's products and services on thousands of aircraft operated by the leading global commercial airlines and thousands of private aircraft, including those of the largest fractional ownership operators. Gogo is headquartered in Chicago, IL with additional facilities in Broomfield, CO and locations across the globe. Connect with us at gogoair.com.


    Investor Relations Contact:               Media Relations Contact:

    Varvara Alva                              Meredith Payette

    312-517-6460                              312-517-6216

    ir@gogoair.com                            pr@gogoair.com


                                                                                  Gogo Inc. and Subsidiaries

                                                                  Unaudited Condensed Consolidated Statements of Operations

                                                                           (in thousands, except per share amounts)


                                                                For the Three Months                                                      For the Nine Months

                                                                Ended September 30,                                                       Ended September 30,
                                                           -------------------                                                   -------------------

                                                  2017                                2016                                  2017                                   2016
                                                  ----                                ----                                  ----                                   ----

    Revenue:

    Service revenue                                      $153,347                                          $129,099                                           $453,918              $375,406

    Equipment revenue                                    19,527                                            18,168                                             57,162                61,146
                                                         ------                                            ------                                             ------                ------

    Total revenue                                       172,874                                           147,267                                            511,080               436,552
                                                        -------                                           -------                                            -------               -------


    Operating expenses:

    Cost of service revenue (exclusive of items
     shown below)                                        67,854                                            56,365                                            201,794               164,615

    Cost of equipment revenue (exclusive of items
     shown below)                                        15,326                                            10,527                                             41,623                36,752

    Engineering, design and development                  31,313                                            25,835                                            103,262                72,201

    Sales and marketing                                  16,294                                            14,874                                             47,253                46,366

    General and administrative                           24,064                                            21,661                                             70,162                65,038

    Depreciation and amortization                        35,824                                            26,779                                             96,821                76,042
                                                         ------                                            ------                                             ------                ------

    Total operating expenses                            190,675                                           156,041                                            560,915               461,014
                                                        -------                                           -------                                            -------               -------

    Operating loss                                     (17,801)                                          (8,774)                                          (49,835)             (24,462)
                                                        -------                                            ------                                            -------               -------


    Other (income) expense:

    Interest income                                       (683)                                            (852)                                           (1,999)              (1,064)

    Interest expense                                     27,585                                            24,848                                             81,754                58,701

    Loss on extinguishment of debt                   -                                               -                                                -                 15,406

    Adjustment of deferred financing costs           -                                               -                                                -                  (792)

    Other (income) expense                                  228                                                34                                                322                 (137)
                                                            ---                                               ---                                                ---                  ----

    Total other expense                                  27,130                                            24,030                                             80,077                72,114
                                                         ------                                            ------                                             ------                ------


    Loss before income taxes                           (44,931)                                         (32,804)                                         (129,912)             (96,576)

    Income tax provision                                    350                                               469                                                945                   997
                                                            ---                                               ---                                                ---                   ---

    Net loss                                            $(45,281)                                        $(33,273)                                        $(130,857)            $(97,573)
                                                         ========                                          ========


    Net loss attributable to common
     stock per share-basic and diluted                    $(0.57)                                          $(0.42)                                           $(1.65)              $(1.24)
                                                           ======                                            ======                                             ======                ======


    Weighted average number of shares-basic and
     diluted                                             79,543                                            79,003                                             79,340                78,864
                                                         ======                                            ======                                             ======                ======


                                                                Gogo Inc. and Subsidiaries

                                                      Unaudited Condensed Consolidated Balance Sheets

                                                      (in thousands, except share and per share data)


                                                                               September 30,                December 31,

                                                                                        2017                         2016
                                                                                        ----                         ----

    Assets

    Current assets:

    Cash and cash equivalents                                                                      $222,378                   $117,302

    Short-term investments                                                                        188,496                    338,477
                                                                                                  -------                    -------

    Total cash, cash equivalents and short-term investments                                       410,874                    455,779

    Accounts receivable, net of allowances of $729 and $499,
     respectively                                                                                 112,029                     73,743

    Inventories                                                                                    48,621                     50,266

    Prepaid expenses and other current assets                                                      20,414                     24,942
                                                                                                   ------                     ------

    Total current assets                                                                          591,938                    604,730
                                                                                                  -------                    -------


    Non-current assets:

    Property and equipment, net                                                                   614,311                    519,810

    Intangible assets, net                                                                         90,661                     85,175

    Goodwill                                                                                          620                        620

    Long-term restricted cash                                                                       6,873                      7,773

    Other non-current assets                                                                       58,508                     28,088
                                                                                                   ------                     ------

    Total non-current assets                                                                      770,973                    641,466
                                                                                                  -------                    -------

    Total assets                                                                                 $1,362,911                 $1,246,196
                                                                                                 ==========                 ==========


    Liabilities and Stockholders' deficit

    Current liabilities:

    Accounts payable                                                                                $23,845                    $31,689

    Accrued liabilities                                                                           148,264                    132,055

    Accrued airline revenue share                                                                  16,714                     15,521

    Deferred revenue                                                                               39,062                     32,722

    Deferred airborne lease incentives                                                             39,071                     36,277

    Current portion of capital leases                                                               2,149                      2,799
                                                                                                    -----                      -----

    Total current liabilities                                                                     269,105                    251,063
                                                                                                  -------                    -------


    Non-current liabilities:

    Long-term debt                                                                                995,546                    800,715

    Deferred airborne lease incentives                                                            121,588                    135,879

    Deferred tax liabilities                                                                        9,001                      8,264

    Other non-current liabilities                                                                 123,198                     90,668
                                                                                                  -------                     ------

    Total non-current liabilities                                                               1,249,333                  1,035,526
                                                                                                ---------                  ---------

    Total liabilities                                                                           1,518,438                  1,286,589
                                                                                                ---------                  ---------




    Stockholders' deficit

    Common stock                                                                                        9                          9

    Additional paid-in-capital                                                                    893,713                    879,135

    Accumulated other comprehensive loss                                                          (1,018)                   (2,163)

    Accumulated deficit                                                                       (1,048,231)                 (917,374)
                                                                                               ----------                   --------

    Total stockholders' deficit                                                                 (155,527)                  (40,393)
                                                                                                 --------                    -------

    Total liabilities and stockholders' deficit                                                  $1,362,911                 $1,246,196
                                                                                                 ==========                 ==========



                                                            Gogo Inc. and Subsidiaries

                                            Unaudited Condensed Consolidated Statements of Cash Flows

                                                                  (in thousands)


                                                                                               For the Nine Months

                                                                                          Ended September 30,
                                                                                          -------------------

                                                                               2017                                2016
                                                                               ----                                ----

    Operating activities:

    Net loss                                                                          $(130,857)                                    $(97,573)

    Adjustments to reconcile net loss to cash provided by (used
     in) operating activities:

    Depreciation and amortization                                                       96,821                                        76,042

    Loss on asset disposals, abandonments and write-downs                                7,540                                         1,619

    Deferred income taxes                                                                  737                                           630

    Stock-based compensation expense                                                    15,007                                        12,986

    Loss of extinguishment of debt                                                -                                        15,406

    Amortization of deferred financing costs                                             2,718                                         2,981

    Accretion and amortization of debt discount and premium                             13,872                                        12,940

    Adjustment of deferred financing costs                                        -                                         (792)

    Changes in operating assets and liabilities:

    Accounts receivable                                                               (38,130)                                        6,874

    Inventories                                                                          1,645                                      (14,653)

    Prepaid expenses and other current assets                                            4,928                                      (18,106)

    Accounts payable                                                                   (1,246)                                        2,174

    Accrued liabilities                                                                 20,521                                         2,750

    Deferred airborne lease incentives                                                  11,722                                         8,635

    Deferred revenue                                                                    11,080                                        19,690

    Deferred rent                                                                          336                                           317

    Accrued airline revenue share                                                        1,169                                         1,525

    Accrued interest                                                                  (17,742)                                       16,025

    Other non-current assets and liabilities                                           (4,330)                                      (4,322)
                                                                                        ------                                        ------

    Net cash provided by (used in) operating activities                                (4,209)                                       45,148
                                                                                        ------                                        ------


    Investing activities:

    Proceeds from the sale of property and equipment                              -                                            84

    Purchases of property and equipment                                              (190,479)                                    (107,108)

    Acquisition of intangible assets-capitalized software                             (23,759)                                     (21,586)

    Purchases of short-term investments                                              (213,651)                                    (278,961)

    Redemptions of short-term investments                                              363,632                                       159,727

    Other, net                                                                         (2,486)                                          136

    Net cash used in investing activities                                             (66,743)                                    (247,708)
                                                                                       -------                                      --------


    Financing activities:

    Proceeds from the issuance of senior secured notes                                 181,843                                       525,000

    Payments on amended and restated credit agreement                             -                                     (310,132)

    Payment of issuance costs                                                          (3,602)                                     (10,610)

    Payments on capital leases                                                         (2,340)                                      (1,875)

    Stock-based compensation activity                                                    (429)                                           43

    Net cash provided by financing activities                                          175,472                                       202,426
                                                                                       -------                                       -------


    Effect of exchange rate changes on cash                                                556                                         (378)


    Increase (decrease) in cash and cash equivalents                                   105,076                                         (512)

    Cash and cash equivalents at beginning of period                                   117,302                                       147,342
                                                                                       -------                                       -------

    Cash and cash equivalents at end of period                                          $222,378                                      $146,830
                                                                                        ========                                      ========


                                                                     Gogo Inc. and Subsidiaries

                                                          Supplemental Information - Key Operating Metrics

                                                                 Commercial Aviation North America
                                                                 ---------------------------------


                                             For the Three Months                                                    For the Nine Months

                                         Ended September 30,                                                Ended September 30,
                                         -------------------                                                -------------------

                                 2017                              2016                                  2017                               2016
                                 ----                              ----                                  ----                               ----


    Aircraft online (at period
     end)                               2,817                                           2,629                                           2,817      2,629


    Total aircraft equivalents
     (average during the period)        2,859                                           2,663                                           2,816      2,599

    Satellite                             252                                              55                                             201         55

    ATG                                 2,607                                           2,608                                           2,615      2,544


    Average monthly
     service revenue
     per aircraft
     equivalent (ARPA)
     (in thousands)                       $11.1                                           $11.1                                           $11.6      $11.3

    Satellite (in
     thousands)                           $18.4                                               -                                          $19.1          -

    ATG (in thousands)                    $10.4                                               -                                          $11.0          -


    Gross passenger opportunity
     (GPO) (in thousands)             110,792                                         108,351                                         314,880    298,812

    Total average
     revenue per
     session (ARPS)                      $10.49                                          $11.46                                          $10.83     $12.43

    Connectivity take rate               7.5%                                           6.5%                                           7.8%      6.4%


                                                         Commercial Aviation Rest of World
                                                         ---------------------------------


                                        For the Three Months                                                For the Nine Months

                                         Ended September 30,                                                Ended September 30,
                                         -------------------                                                -------------------

                                 2017                              2016                                  2017                               2016
                                 ----                              ----                                  ----                               ----


    Aircraft online (at period
     end)                                 352                                             256                                             352        256

    Aircraft equivalents
     (average during the period)          295                                             209                                             250        193

    ARPA (in thousands)                   $18.8                                           $14.5                                           $18.3      $12.8

    --  Aircraft online. We define aircraft online as the total number of
        commercial aircraft on which our equipment is installed and service has
        been made commercially available as of the last day of each period
        presented.  We assign aircraft to CA-NA or CA-ROW at the time of
        contract signing as follows: (i) all aircraft operated by North American
        airlines and under contract for ATG or ATG-4 service are assigned to
        CA-NA, (ii) all aircraft operated by North American airlines and under a
        contract for satellite service are assigned to CA-NA or CA-ROW based on
        whether the routes flown by such aircraft under the contract are
        anticipated to be predominantly within or outside of North America at
        the time the contract is signed, and (iii) all aircraft operated by
        non-North American airlines and under a contract are assigned to CA-ROW.
    --  Aircraft equivalents. We define aircraft equivalents for a segment as
        the number of commercial aircraft online (as defined above) multiplied
        by the percentage of flights flown by such aircraft within the scope of
        that segment, rounded to the nearest whole aircraft and expressed as an
        average of the month end figures for each month in the period.  This
        methodology takes into account the fact that during a particular period
        certain aircraft may fly routes outside the scope of the segment to
        which they are assigned for purposes of the calculation of aircraft
        online.
    --  Average monthly service revenue per aircraft equivalent ("ARPA").  We
        define ARPA as the aggregate service revenue plus monthly service fees,
        some of which are reported as a reduction to cost of service revenue for
        that segment for the period divided by the number of months in the
        period, and further divided by the number of aircraft equivalents (as
        defined above) for that segment during the period.  Satellite ARPA is
        calculated based on satellite revenue and satellite aircraft
        equivalents, within that segment. ATG ARPA is calculated based on ATG
        revenue and ATG aircraft equivalents
    --  Gross passenger opportunity ("GPO"). We define GPO as the aggregate
        number of passengers who board commercial aircraft on which Gogo service
        has been available at any time during the period presented. When actual
        passenger counts are available directly from our airline partners, we
        aggregate such counts across flights on Gogo-equipped aircraft.  When
        not available directly from our airline partners, we estimate GPO. 
        Estimated GPO is calculated by first estimating the number of flights
        occurring on each Gogo-equipped aircraft, then multiplying by the number
        of seats on that aircraft, and finally multiplying by a seat factor that
        is determined from historical information provided to us in arrears by
        our airline partners.  The estimated number of flights is derived from
        real-time flight information provided to our front-end systems by Air
        Radio Inc. (ARINC), direct airline feeds and supplementary third-party
        data sources.  These aircraft-level estimates are then aggregated with
        any available airline-provided passenger counts to obtain total GPO.
    --  Total average revenue per session ("ARPS"). We define ARPS as revenue
        from Passenger Connectivity, excluding non-session related revenue,
        divided by the total number of sessions during the period. A session, or
        a "use" of Passenger Connectivity, is defined as the use by a unique
        passenger of Passenger Connectivity on a flight segment. Multiple logins
        or purchases under the same user name during one flight segment count as
        only one session.

    --  Connectivity take rate. We define connectivity take rate as the number
        of sessions during the period expressed as a percentage of GPO. Included
        in our connectivity take-rate calculation are sessions for which we did
        not receive revenue, including those provided pursuant to free
        promotional campaigns and, to a lesser extent, as a result of
        complimentary passes distributed by our customer service representatives
        for unforeseen technical issues. For the periods listed above, the
        number of sessions for which we did not receive revenue was not
        material.


                                                     Business Aviation
                                                     -----------------


                           For the Three Months             For the Nine Months
                           Ended September 30,              Ended September 30,
                           -------------------              -------------------


                      2017                      2016                             2017   2016
                      ----                      ----                             ----   ----


    Aircraft online
     (at period end)

    Satellite                             5,474                            5,473      5,474  5,473

    ATG                                   4,567                            3,974      4,567  3,974

    Average monthly
     service revenue
     per aircraft
     online

    Satellite                              $235                             $211       $232   $217

    ATG                                   2,874                            2,535      2,848  2,521

    Units Sold

    Satellite                               116                              126        303    367

    ATG                                     210                              165        596    558

    Average equipment
     revenue per unit
     sold (in
     thousands)

    Satellite                               $38                              $45        $42    $44

    ATG                                      58                               54         55     57
    ---                                     ---                              ---        ---    ---

    --  Satellite aircraft online. We define satellite aircraft online as the
        total number of business aircraft for which we provide satellite
        services as of the last day of each period presented.
    --  ATG aircraft online. We define ATG aircraft online as the total number
        of business aircraft for which we provide ATG services as of the last
        day of each period presented.
    --  Average monthly service revenue per satellite aircraft online. We define
        average monthly service revenue per satellite aircraft online as the
        aggregate satellite service revenue for the period divided by the number
        of months in the period, divided by the number of satellite aircraft
        online during the period (expressed as an average of the month end
        figures for each month in such period).
    --  Average monthly service revenue per ATG aircraft online. We define
        average monthly service revenue per ATG aircraft online as the aggregate
        ATG 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).
    --  Units sold. We define units sold as the number of satellite or ATG units
        for which we recognized revenue during the period.  In the three and
        nine months ended September 30, 2017, we recognized revenue on four and
        seven Gogo Biz 4G units, respectively, that were previously deferred.
    --  Average equipment revenue per satellite unit sold. We define average
        equipment revenue per satellite unit sold as the aggregate equipment
        revenue earned from all satellite units sold during the period, divided
        by the number of satellite units sold.
    --  Average equipment revenue per ATG unit sold. We define average equipment
        revenue per ATG unit sold as the aggregate equipment revenue from all
        ATG units sold during the period, divided by the number of ATG units
        sold.


                                                 Gogo Inc. and Subsidiaries

                          Supplemental Information - Segment Revenue and Segment Profit (Loss)(1)

                                                 (in thousands, Unaudited)


                                                                                                                              For the Three Months Ended

                                                                                                                                  September 30, 2017
                                                                                                                                  ------------------

                                                                                                    CA-NA   CA-ROW    BA
                                                                                                    -----   ------    ---


    Service revenue                                                                                $94,436   $15,687  $43,224

    Equipment revenue                                                                                1,291       953   17,283

    Total revenue                                                                                  $95,727   $16,640  $60,507
                                                                                                   =======   =======  =======


    Segment profit (loss)                                                                          $15,966 $(24,110) $21,329
                                                                                                   =======  ========  =======


                                                                                                                              For the Three Months Ended

                                                                                                                                  September 30, 2016
                                                                                                                                  ------------------

                                                                                                    CA-NA   CA-ROW    BA
                                                                                                    -----   ------    ---


    Service revenue                                                                                $88,534    $7,235  $33,330

    Equipment revenue                                                                                2,191       360   15,617

    Total revenue                                                                                  $90,725    $7,595  $48,947
                                                                                                   =======    ======  =======


    Segment profit (loss)                                                                          $14,509 $(19,924) $20,655
                                                                                                   =======  ========  =======


                                                                                                                              For the Nine Months Ended

                                                                                                                                  September 30, 2017

                                                                                                    CA-NA   CA-ROW    BA
                                                                                                    -----   ------    ---


    Service revenue                                                                               $290,260   $38,243 $125,415

    Equipment revenue                                                                                5,234     2,756   49,172

    Total revenue                                                                                 $295,494   $40,999 $174,587
                                                                                                  ========   ======= ========


    Segment profit (loss)                                                                          $43,316 $(82,068) $72,646
                                                                                                   =======  ========  =======


                                                                                                                              For the Nine Months Ended

                                                                                                                                  September 30, 2016
                                                                                                                                  ------------------

                                                                                                    CA-NA   CA-ROW    BA
                                                                                                    -----   ------    ---


    Service revenue                                                                               $261,751   $17,213  $96,442

    Equipment revenue                                                                                8,708       731   51,707

    Total revenue                                                                                 $270,459   $17,944 $148,149
                                                                                                  ========   ======= ========


    Segment profit (loss)                                                                          $46,966 $(62,945) $59,895
                                                                                                   =======  ========  =======

    (1)              Segment profit (loss) is defined as
                     net income (loss) attributable to
                     common stock before interest
                     expense, interest income, income
                     taxes, depreciation and
                     amortization, certain non-cash
                     charges (including amortization of
                     deferred airborne lease incentives
                     and stock compensation expense)
                     and other income (expense).


                             Gogo Inc. and Subsidiaries

           Supplemental Information - Segment Cost of Service Revenue(1)

                             (in thousands, Unaudited)


                                                 For the Three Months

                                                 Ended September 30,
                                            -------------------

                                    2017                             2016
                                    ----                             ----


    CA-NA                                    $37,738                       $36,696

    BA                                      10,090                         8,374

    CA-ROW                                  20,026                        11,295

    Total                                    $67,854                       $56,365
                                             =======                       =======


                                            For the Nine Months

                                            Ended September 30,
                                            -------------------

                                    2017                             2016
                                    ----                             ----


    CA-NA                                   $112,439                      $107,067

    BA                                      29,476                        25,691

    CA-ROW                                  59,879                        31,857

    Total                                   $201,794                      $164,615
                                            ========                      ========

    (1) Excludes depreciation and
     amortization expense.


                             Gogo Inc. and Subsidiaries

           Supplemental Information - Segment Cost of Equipment Revenue(1)

                              (in thousands, Unaudited)


                                                 For the Three Months

                                                  Ended September 30,
                                             -------------------

                                     2017                            2016
                                     ----                            ----


    CA-NA                                     $1,065                         $1,526

    BA                                      13,414                          8,820

    CA-ROW                                     847                            181

    Total                                    $15,326                        $10,527
                                             =======                        =======


                                             For the Nine Months

                                             Ended September 30,
                                             -------------------

                                     2017                            2016
                                     ----                            ----


    CA-NA                                     $5,646                         $8,335

    BA                                      33,651                         27,986

    CA-ROW                                   2,326                            431

    Total                                    $41,623                        $36,752
                                             =======                        =======

    (1)     Excludes depreciation
     and amortization expense.


                                                                           Gogo Inc. and Subsidiaries

                                                                   Reconciliation of GAAP to Non-GAAP Measures

                                                                    (in thousands, except per share amounts)

                                                                                   (unaudited)


                                                               For the Three Months                                              For the Nine Months

                                                          Ended September 30,                                           Ended September 30,
                                                          -------------------                                           -------------------

                                                 2017                                2016                          2017                                   2016
                                                 ----                                ----                          ----                                   ----

    Adjusted EBITDA:

    Net loss attributable to common
     stock (GAAP)                                      $(45,281)                                        $(33,273)                                $(130,857)            $(97,573)

    Interest expense                                    27,585                                            24,848                                     81,754                58,701

    Interest income                                      (683)                                            (852)                                   (1,999)              (1,064)

    Income tax provision                                   350                                               469                                        945                   997

    Depreciation and amortization                       35,824                                            26,779                                     96,821                76,042
                                                        ------                                            ------                                     ------                ------

    EBITDA                                              17,795                                            17,971                                     46,664                37,103

    Stock-based compensation expense                     5,283                                             5,000                                     15,007                12,986

    Amortization of deferred airborne lease
     incentives                                       (10,121)                                          (7,765)                                  (28,099)             (20,650)

    Loss on extinguishment of debt                  -                                               -                                        -                 15,406

    Adjustment of deferred financing costs          -                                               -                                        -                  (792)
                                                  ---                                             ---

    Adjusted EBITDA                                      $12,957                                           $15,206                                    $33,572               $44,053
                                                         =======                                           =======                                    =======               =======


    Cash CAPEX:

    Consolidated capital expenditures
     (GAAP) (1)                                        $(68,495)                                        $(43,653)                                $(214,238)           $(128,694)

    Change in deferred airborne lease incentives
     (2)                                                 5,351                                               330                                      8,856                 8,674

    Amortization of deferred airborne lease
     incentives (2)                                     10,077                                             7,697                                     27,994                20,458
                                                        ------                                             -----

    Cash CAPEX                                         $(53,067)                                        $(35,626)                                $(177,388)            $(99,562)
                                                        ========                                          ========                                  =========              ========

    (1)               See unaudited condensed
                      consolidated statements of cash
                      flows.

    (2)               Excludes deferred airborne lease
                      incentives and related
                      amortization associated with STCs
                      for the three and nine-month
                      periods ended September 30, 2017
                      and 2016 as STC costs are expensed
                      as incurred as part of
                      Engineering, Design and
                      Development.


                                        For the Year Ending

                                         December 31, 2017
                                         -----------------

    Cash CapEx Guidance:    Low                             High
                            ---                             ----

    Consolidated capital
     expenditures (GAAP)        $(290,000)                       $(330,000)

    Deferred airborne lease
     incentives                     60,000                            70,000
                                    ------                            ------

    Cash CapEx                  $(230,000)                       $(260,000)
                                 =========                         =========

Definition of Non-GAAP Measures

EBITDA represents net income (loss) attributable to common stock before income taxes, interest income, interest expense, depreciation expense and amortization of other intangible assets.

Adjusted EBITDA represents EBITDA adjusted for (i) stock-based compensation expense, (ii) amortization of deferred airborne lease incentives (iii) loss on extinguishment of debt and (iv) adjustment of deferred financing costs. 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.

We believe the exclusion of stock-based compensation expense from Adjusted EBITDA is appropriate given the significant variation in expense that can result from using the Black-Scholes model to determine the fair value of such compensation. The fair value of our stock options is determined using the Black-Scholes model and varies based on fluctuations in the assumptions used in this model, including inputs that are not necessarily directly related to the performance of our business, such as the expected volatility, the risk-free interest rate and the expected life of the options. Therefore, we believe the exclusion of this cost provides a clearer view of the operating performance of our business. Further, stock option grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time. While we believe that investors should have information about any dilutive effect of outstanding options and the cost of that compensation, we also believe that stockholders should have the ability to consider our performance using a non-GAAP financial measure that excludes these costs and that management uses to evaluate our business.

We believe the exclusion of the amortization of deferred airborne lease incentives from Adjusted EBITDA is useful as it allows an investor to view operating performance across time periods in a manner consistent with how management measures segment profit and loss (see Note 14, "Business Segments and Major Customers," for a description of segment profit (loss) in our unaudited condensed consolidated financial statements). Management evaluates segment profit and loss in this manner, excluding the amortization of deferred airborne lease incentives, because such presentation reflects operating decisions and activities from the current period, without regard to the prior period decision or the form of connectivity agreements. See "--Key Components of Consolidated Statements of Operations--Cost of Service Revenue--Commercial Aviation North America and Rest of World" in our 2016 10-K for a discussion of the accounting treatment of deferred airborne lease incentives.

We believe it is useful to an understanding of our operating performance to exclude the loss on extinguishment of debt and adjustment of deferred financing costs from Adjusted EBITDA because of the non-recurring nature of these charges.

We also present Adjusted EBITDA as a supplemental performance measure because we believe that this measure provides investors, securities analysts and other users of our financial statements with important supplemental information with which to evaluate our performance and to enable them to assess our performance on the same basis as management.

Cash CAPEX represents capital expenditures net of airborne equipment proceeds received from the airlines and incentives paid to us by landlords under certain facilities leases. We believe Cash CAPEX provides a more representative indication of our liquidity requirements with respect to capital expenditures, as under certain agreements with our airline partners we are reimbursed for all or a substantial portion of the cost of our airborne equipment, thereby reducing our cash capital requirements.

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SOURCE Gogo