The following discussion and analysis is intended to help the reader understand
our business, financial condition, results of operations, liquidity and capital
resources. You should read this discussion in conjunction with our unaudited
condensed consolidated interim financial statements and the related notes
contained elsewhere in this Quarterly Report on Form 10-Q. Unless the context
otherwise indicates or requires, the terms "we," "our," "us," "Gogo," and the
"Company," as used in this report, refer to
On
The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under "Risk Factors" in the 2020 10-K and in Item 1A and "Special Note Regarding Forward-Looking Statements" in this report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Our fiscal year ends
Company Overview
Gogo is the world's largest provider of broadband connectivity services for the business aviation market. Our mission is to provide ground-like connectivity to every passenger on every flight around the globe, enabling superior passenger experiences and efficient flight operations. To accomplish our mission, we design, build and operate dedicated air-to-ground ("ATG") networks, engineer, install and maintain in-flight systems of proprietary hardware and software, and deliver customizable connectivity and wireless entertainment services and global support capabilities to our aviation partners. Our services include satellite-based voice and data services made available through strategic partnerships with satellite providers.
Our chief operating decision maker evaluates performance and business results for our operations, and makes resource and operating decisions, on a consolidated basis. As such, we do not present segment information in this Quarterly Report on Form 10-Q.
Impact of COVID-19 Pandemic
The COVID-19 pandemic caused a significant decline in international and domestic
business aviation travel, which materially and adversely affected our business
in 2020. Beginning in
Factors and Trends Affecting Our Results of Operations
We believe that our operating and business performance is driven by various factors that affect the business aviation industry, including trends affecting the travel industry and trends affecting the customer bases that we target, as well as factors that affect wireless Internet service providers and general macroeconomic factors. Key factors that may affect our future performance include:
• costs associated with the implementation of, and our ability to implement, on a timely basis, our technology roadmap, including upgrades to and installation of the ATG technologies we currently offer, Gogo 5G, and any other next generation or other new technology; • our ability to manage issues and related costs that may arise in connection with the implementation of our technology roadmap, including technological issues and related remediation efforts and failures or delays on the part of antenna and other equipment developers and providers, some of which are single source; • our ability to license additional spectrum and make other improvements to our network and operations as technology and user expectations change; 30
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• the number of aircraft in service in our markets, including consolidations or changes in fleet size by one or more of our large-fleet customers; • the economic environment and other trends that affect both business and leisure aviation travel, including the impact of COVID-19 on restrictions on and demand for air travel, as well as disruptions to supply chains and installations; • the extent of our customers' adoption of our products and services, which is affected by, among other things, willingness to pay for the services that we provide, the quality and reliability of our products and services, changes in technology and competition from current competitors and new market entrants; • our ability to engage suppliers of equipment components and network services on a timely basis and on commercially reasonable terms; • changes in laws, regulations and interpretations affecting telecommunications services, including those affecting our ability to maintain our licenses for ATG spectrum inthe United States , obtain sufficient rights to use additional ATG spectrum and/or other sources of broadband connectivity to deliver our services, expand our service offerings and manage our network; and • changes in laws, regulations and policies affecting our business or the business of our customers and suppliers, including changes that impact the design of our equipment and our ability to obtain required certifications for our equipment. Recent Developments
2021 Credit Agreement - On
Redemption - On
Convertible Note Exchanges - On
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Exchange Agreement, on
Key Business Metrics
Our management regularly reviews financial and operating metrics, including the following key operating metrics, to evaluate the performance of our business and our success in executing our business plan, make decisions regarding resource allocation and corporate strategies, and evaluate forward-looking projections.
Business Aviation For the Three Months Ended March 31, 2021 2020 Aircraft online (at period end) ATG 5,892 5,713 Satellite 4,614 4,939 Average monthly connectivity service revenue per aircraft online ATG $ 3,085 $ 3,143 Satellite 239 223 Units Sold ATG 135 125 Satellite 80 56 Average equipment revenue per unit sold (in thousands) ATG $ 78 $ 77 Satellite 46 60 • 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. This number excludes aircraft receiving ATG service as part of the ATG Network Sharing Agreement with Intelsat. • 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. • Average monthly connectivity service revenue per ATG aircraft online. We define average monthly connectivity service revenue per ATG aircraft online as the aggregate ATG connectivity service revenue for the period divided by the number of months in the period, divided by the number of ATG aircraft online during the period (expressed as an average of the month end figures for each month in such period). Revenue share earned from the ATG Network Sharing Agreement with Intelsat is excluded from this calculation. • 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). • Units sold. We define units sold as the number of ATG or satellite units for which we recognized revenue during the period. • 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. • 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. 32
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Key Components of Consolidated Statements of Operations
There have been no material changes to our key components of unaudited condensed consolidated statements of operations as described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") in our 2020 10-K.
Off-Balance Sheet Arrangements
We do not have any obligations that meet the definition of an off-balance sheet arrangement.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations
are based on our unaudited condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in
We believe that the assumptions and estimates associated with revenue recognition, long-lived assets, indefinite-lived assets and stock-based compensation have the greatest potential impact on our unaudited condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in MD&A in our 2020 10-K.
Recent Accounting Pronouncements
See Note 3, "Recent Accounting Pronouncements," to our unaudited condensed consolidated financial statements for additional information.
Results of Operations
The following table sets forth, for the periods presented, certain data from our unaudited condensed consolidated statements of operations. The information contained in the table below should be read in conjunction with our unaudited condensed consolidated financial statements and related notes.
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