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What changed in Gogo Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Gogo Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+445 added−421 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in Gogo Inc.'s 2023 10-K

445 paragraphs added · 421 removed · 285 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

85 edited+13 added−7 removed85 unchanged
Biggest changeOther states have enacted privacy laws: the Virginia Consumer Data Protection Act (“VCDPA”) went into effect on January 1, 2023, the Colorado Privacy Act and the Connecticut Data Privacy Act will take effect on July 1, 2023 and the Utah Consumer Privacy Act will take effect on December 31, 2023.
Biggest changeOther states have enacted privacy laws: the Virginia Consumer Data Protection Act (“VCDPA”) went into effect on January 1, 2023; the Colorado Privacy Act and the Connecticut Data Privacy Act took effect on July 1, 2023; the Utah Consumer Privacy Act took effect on December 31, 2023; the Oregon Consumer Privacy Act and the Texas Data Privacy and Security Act will take effect July 1, 2024; the Montana Consumer Data Privacy Act will take effect October 1, 2024; the Delaware Personal Data Privacy Act and the Iowa Consumer Data Protection Act will take effect on January 1, 2025; the Tennessee Information Protection Act and the New Jersey Data Privacy Law will take effect July 1, 2025; and the Indiana Consumer Data Protection Act will take effect January 1, 2026.
Any future coordination agreement with Mexico and/or a Mexican ATG licensee could affect our ability to provide our broadband Internet service in the border areas using our current cell sites at current operating power levels and could affect our ability to establish or maintain ATG service in the border areas as aircraft fly into and out of Mexican airspace.
Any future coordination agreement with Mexico and/or a future Mexican ATG licensee could affect our ability to provide our broadband Internet service in the border areas using our current cell sites at current operating power levels and could affect our ability to establish or maintain ATG service in the border areas as aircraft fly into and out of Mexican airspace.
The NOC monitors daily network operations, conducts network diagnostics and coordinates responses to any performance issues. We augment our ability to monitor, maintain and update our in-flight systems while aircraft are on the ground with a terrestrial modem utilizing 3G, 4G and Wi-Fi wireless service. Support Organizations . We strive to deliver a premium customer experience.
The NOC monitors daily network operations, conducts network diagnostics and coordinates 6 responses to any performance issues. We augment our ability to monitor, maintain and update our in-flight systems while aircraft are on the ground with a terrestrial modem utilizing 3G, 4G and Wi-Fi wireless service. Support Organizations . We strive to deliver a premium customer experience.
We have established employee resource groups led by employees with diverse backgrounds, experiences or characteristics who share a common interest in professional development and improving corporate culture. Other key initiatives include building awareness of unconscious bias and investing in and seeking to expand our engagement with diverse students at targeted colleges and universities.
We have also established employee resource groups led by employees with diverse backgrounds, experiences or characteristics who share a common interest in professional development and improving corporate culture. Other key initiatives include building awareness of unconscious bias and investing in and seeking to expand our engagement with diverse students at targeted colleges and universities.
Our employees have the opportunity to learn more about our business strategy and ask questions of our leadership team during Town Hall meetings we host quarterly. • Diversity, Equity & Inclusion (DEI): Gogo seeks to create an environment where each individual’s uniqueness is respected and which allows for a sense of inclusion and belonging.
Our employees have the opportunity to learn more about our business strategy and ask questions of our leadership team during Town Hall meetings we host quarterly. 12 • Diversity, Equity & Inclusion (DEI): Gogo seeks to create an environment where each individual’s uniqueness is respected and which allows for a sense of inclusion and belonging.
In general, each initial PMA is an approval of a manufacturing or modification facility’s production quality control system. PMA supplements are obtained to authorize the manufacture of a particular part in accordance with the requirements of the pertinent PMA, including its production quality control system. We routinely apply for and receive such PMAs and supplements.
In general, each initial PMA is an 7 approval of a manufacturing or modification facility’s production quality control system. PMA supplements are obtained to authorize the manufacture of a particular part in accordance with the requirements of the pertinent PMA, including its production quality control system. We routinely apply for and receive such PMAs and supplements.
For example, the California Consumer Privacy Act (“CCPA”) took effect January 1, 2020 and provides broad new privacy rights for California consumers, including, among others, the right to obtain copies of their personal information collected in the past 12 months, the ability to opt out from the sale of personal information and the right to demand deletion of personal information.
For example, the California Consumer Privacy Act (“CCPA”) took effect January 1, 2020, and provides broad privacy rights for California consumers, including, among others, the right to obtain copies of their personal information collected in the past 12 months, the ability to opt out from the sale of personal information and the right to demand the deletion of personal information.
In 2012, Industry Canada issued to our Canadian subsidiary a subordinate license that allows us to use Canadian ATG spectrum of which SkySurf Communications Inc. is the primary licensee, and in 2019 the primary license was renewed for an eight-year term expiring June 29, 2027.
In 2012, Industry Canada issued to our Canadian subsidiary a subordinate license that allows us to use Canadian ATG spectrum for which SkySurf Communications Inc. is the primary licensee, and in 2019 the primary license was renewed for an eight-year term expiring June 29, 2027.
For customers operating AVANCE-equipped aircraft in North America, AVANCE’s unique multi-bearer capability will allow Gogo to combine capacity from its ATG network and the OneWeb LEO satellite network to provide more capacity than stand-alone LEO satellite networks can provide.
For customers operating AVANCE-equipped aircraft in North America, AVANCE’s unique multi-bearer capability will allow Gogo to combine capacity from its ATG network and the Eutelsat OneWeb LEO satellite network to provide more capacity than stand-alone LEO satellite networks can provide.
Our business depends on our continuing access to, or use of, these FAA certifications, authorizations and other approvals, and our employment of, or access to, FAA-certified engineering and other professionals. 8 In accordance with these certifications, authorizations and other approvals, the FAA requires that we maintain, review and document our quality assurance processes.
Our business depends on our continuing access to, or use of, these FAA certifications, authorizations and other approvals, and our employment of, or access to, FAA-certified engineering and other professionals. In accordance with these certifications, authorizations and other approvals, the FAA requires that we maintain, review and document our quality assurance processes.
Because of this extensibility, we can add new products, features and options; we can increase connectivity speeds by augmenting spectrum; and we can add proprietary or third-party ATG or satellite networks, all with minimal or no hardware or aircraft modifications.
Because of this extensibility, we can add new products, features and options; we can 5 increase connectivity speeds by augmenting spectrum; and we can add proprietary or third-party ATG or satellite networks, all with minimal or no hardware or aircraft modifications.
We have specialized support for our OEM distribution partners and dealers who are responsible for obtaining the FAA certifications required for installation of our equipment on aircraft, and we support them in obtaining such certifications and installing the equipment through our aircraft 7 application engineers.
We have specialized support for our OEM distribution partners and dealers, who are responsible for obtaining the FAA certifications required for installation of our equipment on aircraft, and we support them in obtaining such certifications and installing the equipment through our aircraft application engineers.
Further corporate governance information, including our certificate of incorporation, bylaws, corporate governance guidelines, board committee charters, and code of business conduct, is also available on our investor relations website under the heading “Corporate Governance.” The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 14
Further corporate governance information, including our certificate of incorporation, bylaws, corporate governance guidelines, board committee charters, and code of business conduct, is also available on our investor relations website under the heading “Corporate Governance.” The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 13
Our agreements for modems, base stations and antennas do not renew automatically 12 and thus require periodic renegotiation. Such agreements, as well as certain licenses to commercially available software, are material to our business.
Our agreements for modems, base stations and antennas do not renew automatically and thus require periodic renegotiation. Such agreements, as well as certain licenses to commercially available software, are material to our business.
The ESA is expected to be delivered in the second half of 2024 and will operate on OneWeb’s high speed, low latency LEO satellite network. Airborne Equipment and Software .
The ESA is expected to be delivered in the second half of 2024 and will operate on Eutelsat OneWeb’s high speed, low latency LEO satellite network. Airborne Equipment and Software .
The regulation of data privacy and security in other jurisdictions continues to evolve. In addition, certain countries have laws that restrict the transfer of personal information outside of such countries.
The regulation of data privacy and security in other jurisdictions continues to evolve. 10 In addition, certain countries have laws that restrict the transfer of personal information outside of such countries.
As of December 31, 2022, this network supported 3.1 Mbps 3G service and 9.8 Mbps 4G service. Our proprietary ATG network provides lower latency and requires less powerful antennas than the networks operated by our geosynchronous (“GEO”) satellite competitors and enables us to avoid the interference issues that can accompany use of shared, unlicensed spectrum.
As of December 31, 2023, this network supported 3.1 Mbps 3G service and 9.8 Mbps 4G service. Our proprietary ATG network provides lower latency and requires less powerful antennas than the networks operated by our geosynchronous (“GEO”) satellite competitors and enables us to avoid the interference issues that can accompany use of shared, unlicensed spectrum.
Pursuant to the FCC Reimbursement Program, the FCC approved up to approximately $333 million in reimbursements to the Company to cover documented and approved costs to (i) remove and securely destroy all ZTE communications equipment and services in the Company’s terrestrial U.S. networks and replace such equipment and (ii) remove and replace certain equipment installed on aircraft operated by the Company’s ATG customers that is not compatible with the terrestrial equipment that will replace ZTE equipment.
Pursuant to the FCC Reimbursement Program, the FCC approved up to approximately $334 million in reimbursements to the Company to cover documented and approved costs to (i) remove and securely destroy all ZTE communications equipment and services in the Company’s terrestrial U.S. networks and replace such equipment and (ii) remove and replace certain equipment installed on aircraft operated by the Company’s ATG customers that is not compatible with the terrestrial equipment that will replace ZTE equipment.
For example, we provide some of our voice and data services (not including Gogo Biz or AVANCE) by reselling the telecommunications services of two satellite operators.
For example, we provide some of our voice and data services (not including Gogo Biz or AVANCE) by reselling the services of two satellite operators.
Gogo started in analogue air-to-ground (“ATG”) technology in the late 1990s, then, as analogue cellular backhaul disappeared, migrated to narrowband satellite connectivity in the early 2000s, then back to ATG with our digital broadband 3G and 4G networks beginning in 2010. We expect to commercially launch our fourth ATG network – Gogo 5G – in the fourth quarter of 2023.
Gogo started in analogue air-to-ground (“ATG”) technology in the late 1990s, then, as analogue cellular backhaul disappeared, migrated to narrowband satellite connectivity in the early 2000s, then back to ATG with our digital broadband 3G and 4G networks beginning in 2010. We expect to commercially launch our fourth ATG network – Gogo 5G – in the fourth quarter of 2024.
In addition to carefully calibrated salaries and bonuses, which are reviewed annually, our employees benefit from a generous benefit package, including employee stock purchase and 401(k) programs. Additionally, in 2022 and 2021 all of our employees were eligible for equity awards through our annual equity program as a part of their compensation.
In addition to carefully calibrated salaries and bonuses, which are reviewed annually, our employees benefit from a generous benefit package, including employee stock purchase and 401(k) programs. Additionally, in 2023 and 2022, all of our employees were eligible for equity awards through our annual equity program as part of their compensation.
Our large in-house ED&D operation is responsible for translating business requirements into products that comply with rigorous avionics certification requirements.
Our in-house ED&D operation is responsible for translating business requirements into products that comply with rigorous avionics certification requirements.
Due to a shortfall in the amount appropriated by Congress to fund the FCC Reimbursement Program, approximately $131 million of the approved amount is currently allocated to the Company under the program. If Congress appropriates additional funds for this purpose, the allocations of the Company and other approved applicants will be increased pro rata .
Due to a shortfall in the amount appropriated by Congress to fund the FCC Reimbursement Program, approximately $132 million of the approved amount is currently allocated to the Company under the program. If Congress appropriates additional funds for this purpose, the allocations of the Company and other approved applicants will be increased pro rata .
Our registered trademarks in the United States and certain other countries include, among others, “Gogo,” “Gogo Biz” and “Gogo Vision,” although we have not yet obtained registrations for our most important marks in all markets in which we currently do business or intend to do business in the future.
Our registered trademarks in the United States and certain other countries include, among others, “Gogo,” “Gogo 5G,” “Gogo Galileo,” “Gogo Biz” and “Gogo Vision,” although we have not yet obtained registrations for our most important marks in all markets in which we currently do business or intend to do business in the future.
We pioneered and have led innovation in our industry for nearly 30 years, as evidenced by the three proprietary ATG network technologies that we have deployed for the business aviation market. We expect to commercially launch our fourth ATG network – Gogo 5G – in the fourth quarter of 2023.
We pioneered and have led innovation in our industry for nearly 30 years, as evidenced by the three proprietary ATG network technologies that we have deployed for the business aviation market. We expect to commercially launch our fourth ATG network – Gogo 5G – in the fourth quarter of 2024.
Our networks and systems are designed to provide the best in-flight Internet experience and highest network and system availability across the broadest range of aircraft wherever they fly, and a growing number of our installed aircraft are on the AVANCE platform.
Our networks and systems are designed to provide the best in-flight connectivity experience and highest network and system availability across the broadest range of aircraft wherever they fly, and a growing number of our installed aircraft are on the AVANCE platform.
Our Internet access service is also subject to the FCC’s data roaming rules, which require commercial mobile data service (“CMDS”) providers like Gogo to negotiate roaming arrangements with any requesting facilities-based, technologically compatible providers of CMDS.
Our Internet connectivity service is also subject to the FCC’s data roaming rules, which require commercial mobile data service (“CMDS”) providers like Gogo to negotiate roaming arrangements with any requesting facilities-based, technologically compatible providers of CMDS.
We also invest in various professional development and leadership training initiatives and conduct quarterly forums relevant to our business that provide unique learning and networking opportunities across all business functions. • Recognition: Our employees’ success is celebrated.
We also invest in various professional development and leadership training initiatives and conduct periodic forums relevant to our business that provide unique learning and networking opportunities across all business functions. • Recognition: Our employees’ success is celebrated.
Certain states have also enacted specific privacy laws to which we may be subject.
Certain states have also enacted specific comprehensive privacy laws to which we may be subject.
In connection with the launch of Gogo 5G, Gogo will introduce the MB-13 antenna, which is capable of accessing Gogo’s 4 MHz of licensed spectrum in the 800 MHz band and unlicensed spectrum in the 2.4 GHz band at the same time, enabling greater throughput than our omni-directional and dual directional antennas.
In connection with the launch of Gogo 5G, Gogo introduced the MB-13 antenna, which is capable of accessing Gogo’s 4 MHz of licensed spectrum in the 800 MHz band and unlicensed spectrum in the 2.4 GHz band at the same time, enabling greater throughput than our omni-directional and dual directional antennas.
Provided that the primary spectrum license agreement issued by Industry Canada (now Innovation, Science and Economic Development Canada or “ISED”) to SkySurf remains in effect on July 24, 2032, the License Agreement is renewable at our option for a further five-year term.
Provided that the primary spectrum license issued by Industry Canada (now Innovation, Science and Economic Development Canada or “ISED”) to SkySurf remains in effect as of July 24, 2032, the License Agreement is renewable at our option for a further five-year term.
The service will use an electronically steered antenna (“ESA”), specifically designed with Hughes Network Systems, LLC (“Hughes”) to address a broad range of business aviation aircraft, operating on a LEO satellite network operated by Network Access Associates, Ltd. (“OneWeb”).
The service will use an electronically steered antenna (“ESA”), specifically designed with Hughes Network Systems, LLC (“Hughes”) to address a broad range of business aviation aircraft, operating on a LEO satellite network operated by Network Access Associates, Ltd. (“Eutelsat OneWeb”).
In connection with the launch of Global Broadband, Gogo is working with Hughes to design an ESA that will fit on a very broad range of business aviation aircraft – from light jets and turboprops to large-cabin jets.
In connection with the launch of Gogo Galileo, Gogo is working with Hughes to design an ESA that will fit on a very broad range of business aviation aircraft – from light jets and turboprops to large-cabin jets.
We offer connectivity service in the United States to business aviation aircraft and, pursuant to the ATG Network Sharing Agreement, to certain commercial aircraft operated by Intelsat’s airline customers, through our own facilities, using our ATG License, a nationwide commercial air-ground radiotelephone license in the 800 MHz band.
We offer connectivity service in the United States to business aviation aircraft and, pursuant to an ATG network sharing agreement with Intelsat, to certain commercial aircraft operated by Intelsat’s airline customers, through our own facilities, using our 8 ATG License, a nationwide commercial air-ground radiotelephone license in the 800 MHz band.
As of December 31, 2022, we had 422 employees. No employee is a member of a labor union. Corporate Information Gogo Inc. is a holding company that does business through its subsidiaries. Our principal operating subsidiary is Gogo Business Aviation LLC, which is a direct, wholly-owned subsidiary of Gogo Intermediate Holdings LLC.
As of December 31, 2023, we had 457 employees. No employee is a member of a labor union. Corporate Information Gogo Inc. is a holding company that does business through its subsidiaries. Our principal operating subsidiary is Gogo Business Aviation LLC, which is a direct, wholly owned subsidiary of Gogo Intermediate Holdings LLC.
We offer a variety of connectivity services tailored to our various networks and technologies that are generally priced on a per-aircraft per-month basis. We offer service plans ranging from unlimited data usage to a pay-as-you-go monthly consumption plan and offer alongside these data plans voice rates, inflight entertainment options such as Gogo Vision, and other service features.
We offer a variety of connectivity services tailored to our various networks and technologies that are generally priced on a per-aircraft per-month basis. We offer service plans ranging from unlimited data usage to an hourly monthly consumption plan and offer alongside these data plans voice rates, inflight entertainment options such as Gogo Vision, and other service features.
After an STC is obtained, a manufacturer desiring to manufacture components to be used in the modification covered by the STC must apply to the FAA for a PMA, which permits the holder to manufacture and sell components manufactured in conformity with the PMA and its approved design and data package.
After an STC is obtained, a manufacturer desiring to manufacture components to be used in the modification covered by the STC must apply to the FAA for a Parts Manufacturing Approval (“PMA”), which permits the holder to manufacture and sell components manufactured in conformity with the PMA and its approved design and data package.
We believe that Global Broadband, in combination with or as an alternative to our ATG systems, will allow us to increase our penetration of the North American heavy jet market and provide an upgrade path for our existing ATG customer base.
We believe that Gogo Galileo, in combination with or as an alternative to our ATG systems, will allow us to increase our penetration of the North American heavy jet market and provide an upgrade path for our existing ATG customer base.
Further, 66% of business aircraft in North America were manufactured before IFC was available as a linefit option. We expect approximately 25% of these aircraft will be replaced in the next five to seven years with new aircraft coming pre-installed with in-flight connectivity given customer expectations today.
Further, 69% of business aircraft in North America were manufactured before in-flight connectivity was available as a linefit option. We expect approximately 21% of these aircraft will be replaced in the next five to seven years, with new aircraft coming pre-installed with in-flight connectivity given customer expectations today.
Our 1 MHz ATG license obtained in 2013 from LiveTV Airfone, LLC was also originally issued on October 31, 2006, for a renewable 10-year term, although there is no “substantial service” obligation that attaches to this license. Our application to renew our license was subsequently granted for an additional 10-year term.
Our 1 MHz ATG license obtained in 2013 from LiveTV Airfone, LLC was also originally issued on October 31, 2006, for a renewable 10-year term, although there was no specific “substantial service” obligation attached to this license. Our application to renew this license was subsequently granted for an additional 10-year term.
For example, existing AVANCE customers who wish to add Global Broadband service will only have to install an ESA on top of their aircraft and run a power cable and ethernet cable to the AVANCE box inside the aircraft.
For example, existing AVANCE customers who wish to add Gogo Galileo service will only have to install an ESA on top of their aircraft and run a power cable and ethernet cable to the AVANCE box inside the aircraft.
FCC Secure and Trusted Communications Networks Reimbursement Program (the “FCC Reimbursement Program”) ​ On July 15, 2022, the Company was notified that it was approved for participation in the FCC Reimbursement Program, designed to reimburse providers of advanced communications services for reasonable costs incurred in the required removal, replacement, and disposal of covered communications equipment or services, that have been deemed to pose a national security risk, from their networks.
FCC Reimbursement Program In July 2022, the Company was notified that it was approved for participation in the FCC Reimbursement Program, designed to reimburse providers of advanced communications services for reasonable costs incurred in the required removal, replacement, and disposal of covered communications equipment or services, that have been deemed to pose a national security risk, from their networks.
We retain the intellectual property associated with the airborne LRUs. We also rely on third parties to manufacture our antennas and we generally share antenna design responsibilities and intellectual property with these vendors. Our manufacturing processes include internally designed test fixtures and software that we and our third-party manufacturers employ at all levels of manufacturing.
We also rely on third parties to manufacture our antennas and we generally share antenna design responsibilities and intellectual property with these vendors. Our manufacturing processes include internally designed test fixtures and software that we and our third-party manufacturers employ at all levels of manufacturing.
The principal elements of our Now and Next Strategy include the following: • Leveraging our deep understanding of the business aviation in-flight connectivity market to accelerate growth by (i) expanding our total addressable market through the broadening of the Gogo product line to meet the needs of every segment of the business aviation market; (ii) extending customer use of our services by driving penetration of our AVANCE platform, enhancing ATG networks, and providing easy upgrade paths to Global Broadband and other new technologies; and (iii) providing equivalent or better service at a lower cost of ownership than competitive products to all segments of the business aviation market; • Preserving and expanding our relationships with Original Equipment Manufacturers (“OEMs”), our aftermarket dealers, and fractional jet operators by providing superior customer support, products and services; • Maintaining a continuous culture of improvement by, among other things, building knowledge and maintaining flexibility to migrate to new hardware and network technologies as they evolve; and • Pursuing a balanced capital allocation strategy focused on maintaining adequate liquidity, investing in strategic initiatives to drive competitive positioning and financial value, maintaining an appropriate level of leverage and enhancing shareholder value. 5 In executing the Now and Next Strategy, we will continue to adhere to the product development principles that have guided us historically.
The principal elements of our Now and Next Strategy include the following: • Leveraging our deep understanding of the business aviation in-flight connectivity market to accelerate growth by (i) expanding our total addressable market through the broadening of the Gogo product line to meet the needs of every segment of the business aviation market; (ii) extending customer use of our services by driving penetration of our AVANCE platform, enhancing ATG networks, and providing easy upgrade paths to Gogo Galileo and other new technologies; and (iii) providing equivalent or better service at a lower cost of ownership than competitive products to all segments of the business aviation market; 4 • Preserving and expanding our relationships with Original Equipment Manufacturers (“OEMs”), our aftermarket dealers, and fractional jet operators by providing superior customer support, products and services; • Maintaining a continuous culture of improvement by, among other things, building knowledge and maintaining flexibility to migrate to new hardware and network technologies as they evolve; and • Pursuing a balanced capital allocation strategy focused on maintaining adequate liquidity, investing in strategic initiatives to drive competitive positioning and financial value, maintaining an appropriate level of leverage and enhancing shareholder value.
We currently operate a terrestrial network using 3 MHz of licensed spectrum in the 800 MHz band and approximately 260 terrestrial cell sites in the lower 48 states and parts of Alaska and Canada. All but one of our cell sites are leased from tower operators. Our terrestrial network targets approximately 24,700 business aircraft based in North America.
We currently operate a terrestrial network using 3 MHz of licensed spectrum in the 800 MHz band (“ATG License”) and approximately 260 terrestrial cell sites in the lower 48 states and parts of Alaska and Canada. All but one of our cell sites are leased from tower operators. Our terrestrial network targets approximately 25,000 business aircraft based in North America.
According to the Agency Rule List – Spring 2022 posted by the Office of Information and Regulatory Affairs, Office of Management and Budget, the rulemaking about accessible IFE is a long-term action.
According to the Agency Rule List – Fall 2023 posted by the Office of Information and Regulatory Affairs, Office of Management and Budget, the rulemaking about accessible IFE is a long-term action.
Of the 6 AVANCE aircraft online at December 31, 2022, approximately 2,100 were equipped with AVANCE L5 and approximately 1,200 with AVANCE L3. In-Flight Services (Service Plans) . We provide a wide range of in-flight services for passengers, flight and cabin crews and our aviation partners.
Of the AVANCE aircraft online at December 31, 2023, approximately 2,500 were equipped with AVANCE L5 and approximately 1,500 with AVANCE L3. In-Flight Services (Service Plans) . We provide a wide range of in-flight services for passengers, flight and cabin crews and our aviation partners.
Our Innovative Culture . We continuously innovate and have a strong track record of innovation in our networks. As of February 24, 2023, we held approximately 457 U.S. and international patents, most of which relate to network technology.
Our Innovative Culture . We continuously innovate and have a strong track record of innovation in our networks. As of February 23, 2024, we held approximately 512 U.S. and international patents, most of which relate to network technology.
Under the terms of the Transaction, we retained ownership of the entire patent portfolio held by Gogo Inc. and its affiliates, including patents developed and obtained in connection with our former commercial aviation business.
Under the terms of the sale of our commercial aviation (“CA”) business to Intelsat, we retained ownership of the entire patent portfolio held by Gogo Inc. and its affiliates, including patents developed and obtained in connection with our former CA business.
For example, Section 5 of the Federal Trade Commission (“FTC”) Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” Although the FTC’s authority to regulate the non-common carrier services offered by communications common carriers has not been fully delineated, the FTC may have jurisdiction over some or all of our services.
For example, Section 5 of the Federal Trade Commission (“FTC”) Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” The FTC has been found to have authority to regulate the non-common carrier services offered by communications common carriers, meaning that the FTC may have jurisdiction over some of our services.
We also continue to provide narrowband satellite services to customers in North America and internationally through distribution agreements with satellite providers. As of December 31, 2022, we had approximately 6,900 ATG business aircraft online of which approximately 3,300 were equipped with our AVANCE platform and approximately 3,600 with Gogo Biz, our legacy ATG broadband system.
We also continue to provide narrowband satellite services to customers in North America and internationally through distribution agreements with satellite providers. As of December 31, 2023, we had approximately 7,200 ATG business aircraft online, of which approximately 4,000 were equipped with our AVANCE platform and approximately 3,200 with Gogo Biz, our legacy ATG broadband system.
We have formed a Diversity Council consisting of a diverse, cross-functional group of employees who provide input to our DEI initiatives. Most recently, Gogo named an individual as Vice President, Diversity, Equity and Inclusion who dedicates time and effort toward evolving and driving our DEI strategy and associated initiatives.
We have formed a Diversity Council consisting of a diverse, cross-functional group of employees who provide input to our DEI initiatives. In addition to the Diversity Council, we have a Vice President, Diversity, Equity and Inclusion, who dedicates time and effort toward evolving and driving our DEI strategy and associated initiatives.
Our distribution partners include every OEM of business aviation aircraft and an aftermarket network of approximately 120 dealers, many of whom we have worked with for decades.
Our distribution partners include every OEM of business aviation aircraft and a global aftermarket network of approximately 110 dealers with approximately 200 locations, many of whom we have worked with for decades.
We also have a number of patent applications pending both in and outside of the United States and we will continue to seek patent protection in the United States and certain other countries to the extent we believe such protection is appropriate and cost-effective.
We also have a number of patent applications pending both in and outside of the United States and we will continue to seek patent protection in the United States and certain other countries to the extent we believe such protection is appropriate and cost-effective. 11 We consider our brands to be important to the success of our business and our competitive position.
We also publish an annual Diversity and Inclusion report that includes a summary of our various DEI initiatives, together with data highlighting certain DEI metrics relative to our employee population. A copy of the annual Diversity and Inclusion Report can be found on our website under the heading “Diversity”.
We also publish an annual Diversity and Inclusion Report that includes a summary of our various DEI initiatives, together with data highlighting certain DEI metrics relative to our employee population.
As outlined below, we have refined our strategy to capture these opportunities, including an announcement in May 2022 that we are preparing to launch the first global broadband service designed for business aviation (“Global Broadband”).
As outlined below, we have refined our strategy to capture these opportunities, including an announcement in May 2022 that we are preparing to launch the first global broadband service designed for business aviation (“Gogo Galileo”). We expect to commercially launch Gogo Galileo in the fourth quarter of 2024.
As of December 31, 2022, our market was comprised of approximately 24,700 business aircraft in North America, of which approximately 30% have broadband connectivity, and approximately 14,400 business aircraft in the rest of the world, of which fewer than 6% have broadband connectivity. As of December 31, 2022, we had approximately 4,200 customers.
As of December 31, 2023, our market was comprised of approximately 25,000 business aircraft in North America, of which approximately 34% have broadband connectivity, and approximately 14,500 business aircraft in the rest of the world, of which approximately 6% have broadband connectivity. As of December 31, 2023, we had approximately 4,200 customers.
Privacy and Data Security-Related Regulations We collect personal information, such as name, address, e-mail address and credit card information, directly from our users when they register to use our services, along with certain identifiers associated with devices using our services.
All certifications required for equipment currently used in the provision of our services have been obtained. 9 Privacy and Data Security-Related Regulations We collect personal information, such as name, address, e-mail address and credit card information, directly from our users when they register to use our services, along with certain identifiers associated with devices using our services.
Our customers also include fractional jet operators such as Flexjet and NetJets, charter operators such as Wheels Up, corporate flight departments and individuals owning aircraft. Infrastructure . The infrastructure supporting our in-flight connectivity services consists of our networks, towers, and data centers, each of which is described in greater detail below. Networks and Towers .
Our independent dealers market, resell and obtain FAA-required supplemental type certificates (“STC”) for our equipment. Our customers also include fractional jet operators such as NetJets, charter operators, corporate flight departments and individuals owning aircraft. Infrastructure . The infrastructure supporting our in-flight connectivity services consists of our networks, towers, and data centers, each of which is described in greater detail below.
The California Office of the Attorney General has published final regulations to implement portions of the CCPA. In addition, in November 2020 California voters passed the California Privacy Rights Act (“CPRA”) ballot initiative, which introduced significant amendments to the CCPA. The CPRA went into effect on January 1, 2023, and new regulations are expected to take effect in 2023.
The California Office of the Attorney General has published final regulations to implement portions of the CCPA. In addition, in November 2020 California voters passed the California Privacy Rights Act (“CPRA”) ballot initiative, which introduced significant amendments to the CCPA.
Competition We compete against both equipment-providers and GEO- and LEO- satellite based telecommunications service providers, as well as resellers of the above, to the business aviation market, including Honeywell Aerospace, Collins Aerospace, Satcom Direct, Inmarsat, ViaSat and Starlink.
Competition We compete against both equipment-providers and GEO- and LEO-satellite based telecommunications service providers, as well as resellers of the above, to the business aviation market, including Honeywell Aerospace, Collins Aerospace, Satcom Direct, ViaSat, SmartSky Networks and Starlink. A number of our competitors are focused on servicing the heavy jet market through GEO satellite services.
Because we provide these services on a common carrier basis, we are subject to the provisions of Title II of the Communications Act, which require, among other things, that the charges and practices of common carriers be just, reasonable and non-discriminatory. In addition, we provide an interconnected voice over Internet protocol (“VoIP”) service.
Where we offer telecommunications services on a common carrier basis, we are subject to the provisions of Title II of the Communications Act, which require, among other things, that the charges and practices of common carriers be just, reasonable and non-discriminatory.
The FCC applies many, but not all, of the same regulatory requirements to interconnected VoIP services as it does to common carrier telecommunications services.
In addition, where we provide an interconnected voice over Internet protocol (“VoIP”) service, the FCC applies many, but not all, of the same regulatory requirements to interconnected VoIP services as it does to common carrier telecommunications services.
Equipment Certification We may not lease, sell, market or distribute any radio transmission equipment used in the provision of our services unless such equipment is certified by the FCC as compliant with the FCC’s technical rules. All certifications required for equipment currently used in the provision of our services have been obtained.
Equipment Certification We may not operate, lease, sell, market or distribute any radio transmission equipment used in the provision of our services unless such equipment is compliant with the FCC’s equipment authorization and relevant technical rules.
Intellectual Property We rely on a combination of intellectual property rights, including trade secrets, patents, copyrights, trademarks and domain names, as well as contractual restrictions to protect intellectual property and proprietary technology owned or used by us. We have patented certain of our technologies in the United States and certain countries outside of the United States.
As of December 31, 2023, the Company has filed a total of $1.7 million in claims and received $1.7 million in reimbursements. Intellectual Property We rely on a combination of intellectual property rights, including trade secrets, patents, copyrights, trademarks and domain names, as well as contractual restrictions to protect intellectual property and proprietary technology owned or used by us.
In addition to the significant performance enhancements provided by the LEO network, Global Broadband expands our total addressable market by approximately 14,400 aircraft in the rest of the world. Ground Network and Data Centers .
They completed the launch of their network in March 2023 and are prepared to offer aero service in 2024. In addition to the significant performance enhancements provided by the LEO network, Gogo Galileo expands our total addressable market by approximately 14,500 aircraft in the rest of the world. Ground Network and Data Centers .
The rules permit participants to petition the FCC for one or more six-month extensions of the completion deadline. The Company has not yet determined whether it will participate in the FCC Reimbursement Program.
The rules permit participants to petition the FCC for one or more six-month extensions of the completion deadline.
Depending on the supplementary measures that may need to be taken to support transfers and implement the SCC, our ability to lawfully transfer personally identifiable information out of relevant jurisdictions to the United States or other jurisdictions may be impacted. 11 Other countries, such as Australia, Brazil, China, India and Russia have also implemented, amended or been considering legislation regarding data protection, data security, breach notification and data transfers/localization.
Depending on the supplementary measures that may need to be taken to support transfers and implement the SCC, our ability to lawfully transfer personally identifiable information out of relevant jurisdictions to the United States or other jurisdictions may be impacted.
Customers who elect to not upgrade to Gogo 5G may continue to use our 3G and 4G service over our ATG networks in North America. The 3G and 4G service will also serve as a redundancy network and performance enhancement mechanism for Gogo 5G.
We expect to commercially launch our fourth ATG network – Gogo 5G – in the fourth quarter of 2024. Customers who elect to not upgrade to Gogo 5G may continue to use our 3G and 4G service over our ATG networks in North America.
Our collection, protection, disclosure and use of such information are required in some circumstances to comply with our privacy policies, applicable law, and our contractual obligations to aviation partners and other third parties, as well as industry standards such as the Payment Card Industry Data Security Standard. 10 Notwithstanding that broadband Internet access is currently classified as a Title I information service, we must continue to comply with certain Communications Act and FCC privacy and data security rules for our services, including certain provisions applicable to customer proprietary network information (“CPNI”).
Our collection, protection, disclosure and use of such information are required in some circumstances to comply with our privacy policies, applicable law, and our contractual obligations to aviation partners and other third parties, as well as industry standards such as the Payment Card Industry Data Security Standard.
Production Operations. Our manufacturing objective is to produce superior quality products that conform to avionics specifications while providing the best value to our customers. Given our highly specialized technology and required production levels, we design, assemble and test our airborne LRUs in-house, while relying on third parties to manufacture specific components based on our design specifications to maximize production efficiencies.
Given our highly specialized technology and required production levels, we design, assemble and test our airborne line replaceable units (“LRUs”) in-house, while relying on third parties to manufacture specific components based on our design specifications to maximize production efficiencies. We retain the intellectual property associated with the airborne LRUs.
The Now and Next Strategy positions Gogo to penetrate the rest of the world business aviation market while maintaining and strengthening our leadership position in North America.
Now and Next Strategy Given the industry evolution described above, we have refined our strategy, ultimately creating what we refer to as the “Now and Next Strategy.” The Now and Next Strategy positions Gogo to penetrate the business aviation market outside of North America while maintaining and strengthening our leadership position in North America.
We have developed, deployed and operated our own networks for more than 25 years, resulting in experience and know-how that we believe is unmatched by any other provider in our industry. We hold the exclusive license to 4MHz of U.S. nationwide spectrum dedicated to ATG use, as well as the exclusive rights to the same spectrum in Canada.
Networks and Towers . We have developed, deployed and operated networks for more than 15 years, resulting in experience and know-how that we believe is unmatched by any other provider in our industry.
The FCC is currently considering additional CPNI and cybersecurity requirements, which may subject the Company to additional compliance obligations. We are also subject to other federal and state consumer privacy and data security requirements.
We are also subject to other federal and state consumer privacy and data security requirements.
As of February 24, 2023, we held U.S. patents expiring on dates ranging from June 2023 to January 2041 and foreign patents expiring on dates ranging from November 2024 to August 2039. We do not believe that our business is dependent to any material extent on any single patent or group of patents that we own.
We do not believe that our business is dependent to any material extent on any single patent or group of patents that we own.
CALEA The FCC has determined that facilities-based broadband Internet access providers, which include Gogo, are subject to the Communications Assistance for Law Enforcement Act, or CALEA, which requires covered service providers to build certain law enforcement surveillance assistance capabilities into their communications networks and to maintain CALEA-related system security policies and procedures.
CALEA The Communications Assistance for Law Enforcement Act, (“CALEA”), requires covered service providers to build certain law enforcement surveillance assistance capabilities into their communications networks or equipment and to maintain CALEA-related system security policies and procedures. Where applicable, we have implemented such policies and procedures and, based upon our periodic self-assessments, we believe that our network is compliant with CALEA.
We consider our brands to be important to the success of our business and our competitive position. We rely on both trademark registrations and common law protection for trademarks.
We rely on both trademark registrations and common law protection for trademarks.
In addition, Global Broadband will allow us to penetrate the business aviation market outside of North America, where fewer than 6% of business aviation aircraft are installed with in-flight connectivity systems. Now and Next Strategy Given the industry evolution described above, we have refined our strategy, ultimately creating what we refer to as the “Now and Next Strategy”.
In addition, we believe that Gogo Galileo will allow us to penetrate the business aviation market outside of North America, where approximately 6% of business aviation aircraft are installed with in-flight connectivity systems.
Depending on these developments, the measures we are required to take to comply with these laws may be significant. Congress and other state legislatures have also been considering additional legislation relating to privacy and data breaches. Should any additional laws be enacted, they could affect our business.
These laws provide broad new privacy rights for consumers in these states, including the right to opt out of targeted advertising and certain profiling activities. Congress and other state legislatures have also been considering additional legislation relating to privacy, artificial intelligence and data breaches. Should any additional laws be enacted, they could affect our business.
In the aftermarket, we sell through a global distribution network of approximately 120 independent dealers who are certified by the Federal Aviation Administration (“FAA”) as Maintenance and Repair Organizations. Our independent dealers market, resell and obtain FAA-required supplemental type certificates (“STC”) for our equipment.
We also sell directly to every OEM of business aviation aircraft including Bombardier, Dassault Falcon, Embraer, Gulfstream, Pilatus and Textron Aviation. In the aftermarket, we sell through a global distribution network of approximately 110 independent dealers with approximately 200 locations who are certified by the Federal Aviation Administration (“FAA”) as Maintenance and Repair Organizations.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThere can be no assurance that we will launch Gogo 5G or any other next generation technology in sufficient time to meet growing user expectations regarding the in-flight connectivity experience and to effectively compete in the business aviation market, due to, among other things, risks associated with: (i) our failure to design and develop a technology that provides the features and performance we require; (ii) integrating the solution with our existing ATG network; (iii) the availability of adequate spectrum; (iv) the failure of spectrum to perform as expected; (v) the failure of equipment and software to perform as expected; (vi) problems arising in the manufacturing process; (vii) our ability to negotiate contracts with suppliers on acceptable commercial and other terms; (viii) our reliance on single-source suppliers for the development and manufacturing of the core elements of the network and on other suppliers to provide certain components and services; and (ix) delays in obtaining or failures to obtain the required regulatory approvals for installation and operation of such equipment and the provision of service to passengers.
Biggest changeFactors heightening the risk of future delays in our 5G network or other next generation technologies, or a failure of such technologies to perform once commercialized, include: (i) our failure to design and develop a technology that provides the features and performance we require; (ii) integrating the solution with our existing ATG network; (iii) the availability of adequate spectrum; (iv) the failure of spectrum to perform as expected; (v) the failure of equipment and software to perform as expected; (vi) problems arising in the manufacturing process; (vii) our ability to negotiate contracts with suppliers on acceptable commercial and other terms; (viii) our reliance on single-source suppliers and their ability to continue as a going concern with adequate access to capital for the development and manufacturing of the core elements of the network and on other suppliers to provide certain components and services; and (ix) delays in obtaining or failures to obtain the required regulatory approvals for installation and operation of such equipment and the provision of service to passengers.
The amount of our debt or such other obligations could have important consequences for holders of our common stock, including, but not limited to: • a meaningful portion of our cash flows from operations is expected to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes; • our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes may be limited, and our ability to satisfy our obligations with respect to our indebtedness may be impaired in the future; • we may be at a competitive disadvantage compared to our competitors with less debt or with comparable debt at more favorable interest rates and which, as a result, may be better positioned to withstand economic downturns; • our ability to refinance indebtedness may be limited or the associated costs may increase; • our ability to engage in acquisitions without raising additional equity or obtaining additional debt financing may be impaired in the future; • it may be difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on and acceleration of such indebtedness; • we may be more vulnerable to general adverse economic and industry conditions; and • our flexibility to adjust to changing market conditions and our ability to withstand competitive pressures could be limited, or we may be prevented from making capital investments that are necessary or important to our operations in general, our growth strategy and our efforts to improve operating margins of our business units.
The amount of our indebtedness or such other obligations could have important consequences for holders of our common stock, including, but not limited to: • a meaningful portion of our cash flows from operations is expected to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes; • our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes may be limited, and our ability to satisfy our obligations with respect to our indebtedness may be impaired in the future; • we may be at a competitive disadvantage compared to our competitors with less indebtedness or with comparable indebtedness at more favorable interest rates and which, as a result, may be better positioned to withstand economic downturns; • our ability to refinance indebtedness may be limited or the associated costs may increase; • our ability to engage in acquisitions without raising additional equity or obtaining additional debt financing may be impaired in the future; • it may be difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on and acceleration of such indebtedness; • we may be more vulnerable to general adverse economic and industry conditions; and • our flexibility to adjust to changing market conditions and our ability to withstand competitive pressures could be limited, or we may be prevented from making capital investments that are necessary or important to our operations in general, our growth strategy and our efforts to improve operating margins of our business units.
They include: • aviation industry or general market conditions, including those related to disruptions to supply chains and installations; • domestic and international economic factors unrelated to our performance; • changes in technology or customer usage of Wi-Fi and Internet broadband services; • any inability to timely and efficiently roll out Gogo 5G, Global Broadband or other components of our technology roadmap; • new regulatory pronouncements and changes in regulatory guidelines; • actual or anticipated fluctuations in our quarterly operating results and any inability to generate positive cash flows on a consolidated basis in the future or to obtain additional financing; • changes in or failure to meet publicly disclosed expectations as to our future financial performance; • changes in securities analysts’ estimates of our financial performance or lack of research and reports by industry analysts; • action by institutional stockholders or other large stockholders, including future sales; • short-selling or other transactions involving derivatives of our securities; • speculation in the press or investment community; • investor perception of us and our industry; • changes in market valuations or earnings of similar companies; 30 • announcements by us or our competitors of significant products, contracts, contract amendments, acquisitions or strategic partnerships; • developments or disputes concerning patents or proprietary rights, including increases or decreases in litigation expenses associated with intellectual property lawsuits we may initiate, or in which we may be named as defendants; • failure to complete significant sales; • any future sales of our common stock or other securities; • renewal of our FCC licenses and our ability to obtain additional spectrum; and • additions or departures of key personnel.
They include: • aviation industry or general market conditions, including those related to disruptions to supply chains and installations; • domestic and international economic factors unrelated to our performance; • changes in technology or customer usage of Wi-Fi and Internet broadband services; • any inability to timely and efficiently roll out Gogo 5G, Gogo Galileo or other components of our technology roadmap; • new regulatory pronouncements and changes in regulatory guidelines; • actual or anticipated fluctuations in our quarterly operating results and any inability to generate positive cash flows on a consolidated basis in the future or to obtain additional financing; • changes in or failure to meet publicly disclosed expectations as to our future financial performance; • changes in securities analysts’ estimates of our financial performance or lack of research and reports by industry analysts; • action by institutional stockholders or other large stockholders, including future sales; • short-selling or other transactions involving derivatives of our securities; • speculation in the press or investment community; • investor perception of us and our industry; • changes in market valuations or earnings of similar companies; • announcements by us or our competitors of significant products, contracts, contract amendments, acquisitions or strategic partnerships; • developments or disputes concerning patents or proprietary rights, including increases or decreases in litigation expenses associated with intellectual property lawsuits we may initiate, or in which we may be named as defendants; • failure to complete significant sales; 30 • any future sales of our common stock or other securities; • renewal of our FCC licenses and our ability to obtain additional spectrum; and • additions or departures of key personnel.
We have implemented policies and procedures intended to ensure that we timely anticipate technology and product transitions and have access to sufficient inventory and services, but if such policies prove ineffective and we are unable to continue to engage suppliers with the capabilities or capacities required by our business to effect a transition, or if such suppliers fail to deliver quality products, parts, equipment and services in sufficient quantities or on a timely basis consistent with our schedule, our business, financial condition and results of operations may be materially adversely affected.
We have implemented policies and procedures intended to ensure that we timely anticipate technology and product transitions and have access to sufficient inventory and services, but if such policies prove ineffective and we are unable to continue to engage suppliers with the capabilities or capacities required by our business to effect a transition, or if such suppliers fail to deliver quality products, parts, equipment and services in sufficient quantities or on a timely basis 22 consistent with our schedule, our business, financial condition and results of operations may be materially adversely affected.
If we are required for any reason (including expiration of the contract, termination by one party for material breach or other termination events) to find one or more alternative suppliers, we estimate that the replacement process could take up to two years depending upon the component or service, and we may not be able to contract with such alternative suppliers on a timely basis, on commercially reasonable terms, or at all.
If we are required for any reason (including expiration of the contract, termination by one party for material breach or other termination events) to find one or more alternative suppliers, we estimate that the replacement process could take up to two years depending upon the component or service, and we may not be able to contract with such alternative suppliers on a timely basis, on commercially 15 reasonable terms, or at all.
As discussed in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates—Deferred Income Taxes - Valuation Allowance,” our determination that we are more likely than not to realize a portion of our deferred tax assets represents our best estimate and considers both positive and negative factors.
As discussed in more detail in the section 18 entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates—Deferred Income Taxes - Valuation Allowance,” our determination that we are more likely than not to realize a portion of our deferred tax assets represents our best estimate and considers both positive and negative factors.
These corporate governance guidelines and code of business ethics do not, by themselves, prohibit transactions with the Thorne Entities. Fulfilling our obligations associated with being a public company is expensive and time-consuming, and any delays or difficulties in satisfying these obligations may have a material adverse effect on our results of operations and our stock price.
These corporate governance guidelines and code of business ethics do not, by themselves, prohibit transactions with the Thorne Entities. 31 Fulfilling our obligations associated with being a public company is expensive and time-consuming, and any delays or difficulties in satisfying these obligations may have a material adverse effect on our results of operations and our stock price.
See “ — Risks Related to Litigation and Regulation — We may be affected by global climate change or by legal and regulatory responses to such change. ” Increased awareness and any adverse publicity in the global marketplace about the GHGs emitted by companies in the airline and transportation industries could harm our 19 reputation and reduce customer demand for our services.
See “ — Risks Related to Litigation and Regulation — We may be affected by global climate change or by legal and regulatory responses to such change. ” Increased awareness and any adverse publicity in the global marketplace about the GHGs emitted by companies in the airline and transportation industries could harm our reputation and reduce customer demand for our services.
Such individuals have acquired specialized knowledge and skills with respect to Gogo and its operations. As a result, if any of our key personnel were to leave Gogo, we could face substantial difficulty in hiring qualified successors and could experience a loss of productivity while any such successor obtains the necessary training and expertise.
Such individuals have acquired specialized knowledge and skills with respect to Gogo and its operations. As a result, if any of our key personnel were to leave Gogo, we could face substantial difficulty in hiring qualified successors and could experience a loss of 17 productivity while any such successor obtains the necessary training and expertise.
Prior to installation 24 of our equipment, any inability to obtain, delay in obtaining (including as a result of a government shutdown or funding shortages), or change in, needed FAA certifications, authorizations, or approvals, could have an adverse effect on our ability to meet our installation commitments, manufacture and sell parts for installation on aircraft, or expand our business.
Prior to installation of our equipment, any inability to obtain, delay in obtaining (including as a result of a government shutdown or funding shortages), or change in, needed FAA certifications, authorizations, or approvals, could have an adverse effect on our ability to meet our installation commitments, manufacture and sell parts for installation on aircraft, or expand our business.
Such spectrum may not be available to us on commercially reasonable terms or at all. Our failure to obtain adequate spectrum could have a material adverse effect on our business, financial condition and results of operations. Additional ATG spectrum, whether licensed or unlicensed, is or may become available in the future.
Such spectrum may not be available to us on commercially reasonable terms or at all. Our failure to obtain adequate spectrum could have a material adverse effect on our business, financial condition and results of operations. 20 Additional ATG spectrum, whether licensed or unlicensed, is or may become available in the future.
Non-U.S. citizens should consider carefully the redemption provisions in our certificate of incorporation prior to investing in our common stock. These restrictions may also decrease the liquidity and value of our stock by reducing the pool of potential investors in our company and making the acquisition of control of us by third parties more difficult.
Non-U.S. citizens should consider carefully the redemption provisions in our certificate of incorporation prior to investing in our common stock. 32 These restrictions may also decrease the liquidity and value of our stock by reducing the pool of potential investors in our company and making the acquisition of control of us by third parties more difficult.
Such consequences may materially adversely affect our business. The failure of our equipment or material defects or errors in our software may damage our reputation, result in claims against us that exceed our insurance coverage, thereby requiring us to pay significant damages, and impair our ability to sell our service.
Such consequences may materially adversely affect our business. 23 The failure of our equipment or material defects or errors in our software may damage our reputation, result in claims against us that exceed our insurance coverage, thereby requiring us to pay significant damages, and impair our ability to sell our service.
Events beyond our control can affect our ability to comply with these requirements. The 2021 Credit Agreement also limits the ability of Gogo Inc. to incur additional indebtedness under certain circumstances and limits the amount of cash that our subsidiaries may dividend, transfer or otherwise distribute to us.
Events beyond our control can affect our ability to comply with these requirements. The 2021 Credit 28 Agreement also limits the ability of Gogo Inc. to incur additional indebtedness under certain circumstances and limits the amount of cash that our subsidiaries may dividend, transfer or otherwise distribute to us.
The FAA could also change its policies regarding the delegation of inspection and certification responsibilities to private companies, which could adversely affect our business. To the extent that any such new regulations or amendments to existing regulations or policies apply to our activities, our compliance costs would likely increase.
The FAA could also change its policies regarding the delegation of inspection and certification responsibilities to private companies, which could adversely affect our business. To the 24 extent that any such new regulations or amendments to existing regulations or policies apply to our activities, our compliance costs would likely increase.
As a result of these security interests, such assets would only be available to satisfy claims of our general creditors or to holders of our equity securities, if we were to become insolvent, to the extent the value of such assets exceeded the amount of our secured indebtedness and other obligations.
As a result of these security interests, such assets would only be available to satisfy claims of our general creditors or to holders of our equity securities, if we 29 were to become insolvent, to the extent the value of such assets exceeded the amount of our secured indebtedness and other obligations.
The adoption and implementation of new or more stringent international, federal, regional, state or local legislation, regulations or other initiatives that impose more stringent standards for GHG emissions may have a material adverse effect on our results of operations and financial condition.
The adoption and implementation of new or more stringent international, federal, regional, state or local legislation, 27 regulations or other initiatives that impose more stringent standards for GHG emissions may have a material adverse effect on our results of operations and financial condition.
Our debt outstanding under the Term Loan Facility bears interest, and any indebtedness under our Revolving Facility would bear interest, at variable rates. While we have entered into interest rate caps to hedge a portion of our exposure, we remain subject to interest rate risk under these facilities.
Our indebtedness outstanding under the Term Loan Facility bears interest, and any indebtedness under our Revolving Facility would bear interest, at variable rates. While we have entered into interest rate caps to hedge a portion of our exposure, we remain subject to interest rate risk under these facilities.
The FCPA, the Bribery Act and similar applicable laws generally prohibit companies, their officers, 26 directors, employees and third-party intermediaries, business partners and agents from making improper payments or providing other improper things of value to government officials or other persons.
The FCPA, the Bribery Act and similar applicable laws generally prohibit companies, their officers, directors, employees and third-party intermediaries, business partners and agents from making improper payments or providing other improper things of value to government officials or other persons.
Risks Related to Our Indebtedness 27 For definitions of capitalized terms used and not defined in the following Risk Factors, see “Management's Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.
Risks Related to Our Indebtedness For definitions of capitalized terms used and not defined in the following Risk Factors, see “Management's Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.
Because the 1 MHz ATG license has no construction or substantial service requirement, it is currently not clear what level and length of service the FCC will find adequate when considering the next renewal of the 1 MHz ATG license in 2026.
Because the 1 MHz ATG license has no specific construction or substantial service requirement, it is currently not clear what level and length of service the FCC will find adequate when considering the next renewal of the 1 MHz ATG license in 2026.
These legal requirements are complex, 25 varied, rapidly evolving and often subject to interpretation, and there is a risk that, despite our efforts to comply, we may be found to be out of compliance with one or more of these requirements.
These legal requirements are complex, varied, rapidly evolving and often subject to interpretation, and there is a risk that, despite our efforts to comply, we may be found to be out of compliance with one or more of these requirements.
If our dealers are unable to eliminate or mitigate these labor shortages, our business, financial condition and results of operations may be materially adversely affected. 15 Our distribution partners may be materially adversely impacted by economic downturns and market disruptions.
If our dealers are unable to eliminate or mitigate these labor shortages, our business, financial condition and results of operations may be materially adversely affected. Our distribution partners may be materially adversely impacted by economic downturns and market disruptions.
We and our vendors, like other commercial entities, have been, and will likely continue to be, subject to a 21 variety of forms of cyberattacks with the objective of gaining unauthorized access to our systems and data or disrupting our operations.
We and our vendors, like other commercial entities, have been, and will likely continue to be, subject to a variety of forms of cyberattacks with the objective of gaining unauthorized access to our systems and data or disrupting our operations.
The FCC may grant one or more six-month extensions to a participant where it finds that due to factors beyond its control, the participant cannot complete the project by the deadline.
The FCC may also grant one or more six-month extensions to a participant where it finds that due to factors beyond its control, the participant cannot complete the project by the deadline.
If conditions of the general economy or markets in which we operate worsen from present levels, it could lead to a decrease in air travel, cause owners and operators of business aircraft to cut costs by reducing their purchases or use of private aircraft or their use of in-flight Internet access on such aircraft or reduce the number of airline passengers on commercial aircraft to which we supply ATG network access.
If conditions of the general economy or markets in which we operate worsen from present levels, it could lead to a decrease in air travel, cause owners and operators of business aircraft to cut costs by reducing their purchases or use of private aircraft or their use of in-flight connectivity on such aircraft or reduce the number of airline passengers on commercial aircraft to which we supply ATG network access.
As we expand internationally, we expect that we would be subject to additional risks related to conducting operations outside the United States, including, but not limited to: • difficulties in penetrating new markets due to established and entrenched competitors; • difficulties in developing products and services that are tailored to the needs of local customers; • the need to adapt and localize our products and services for specific countries; • lack of local acceptance or knowledge of our products and services; • changes in a specific country’s or region’s political or economic conditions; • difficulties in obtaining required regulatory or other governmental approvals; • greater difficulty in enforcing contracts and managing collections in countries where our recourse may be more limited, as well as longer collection periods; • multiple and possibly overlapping tax structures; • unexpected changes in laws and regulatory requirements, including with respect to taxes and trade laws; • more stringent regulations relating to communications; privacy and data security and the unauthorized use of, or access to, commercial and personal data; and aerospace and liability standards; • challenges inherent in efficiently managing employees over large geographic distances, including compliance with differing labor laws and the need to implement appropriate systems, policies and hiring, benefits and compliance programs; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems; • increased costs associated with international operations, including travel, real estate, infrastructure and legal compliance costs; 17 • currency exchange rate fluctuations and the resulting effect on our revenue and expenses and the cost and risk of entering into hedging transactions if we chose to do so in the future; • the effect of other economic factors, including inflation, pricing and currency devaluation; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general preferences for local vendors; • operating in new, developing or other markets in which there are significant uncertainties regarding the interpretation, application and enforceability of laws and regulations, including relating to contract and intellectual property rights; • limited or insufficient intellectual property protection or difficulties enforcing our intellectual property; • political instability, social unrest, terrorist activities, acts of civil or international hostility, such as the current military conflict and escalating tensions between Russia and Ukraine, natural disasters and regional or global outbreaks of contagious diseases, such as the COVID-19 pandemic; • restrictions on the ability of U.S. companies to do business in foreign countries; and • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
As we expand internationally, we expect that we would be subject to additional risks related to conducting operations outside the United States, including, but not limited to: • difficulties in penetrating new markets due to established and entrenched competitors; • difficulties in developing products and services that are tailored to the needs of local customers; • the need to adapt and localize our products and services for specific countries; • lack of local acceptance or knowledge of our products and services; • changes in a specific country’s or region’s political or economic conditions; • difficulties in obtaining required regulatory or other governmental approvals; • greater difficulty in enforcing contracts and managing collections in countries where our recourse may be more limited, as well as longer collection periods; • multiple and possibly overlapping tax structures; • unexpected changes in laws and regulatory requirements, including with respect to taxes and trade laws; • more stringent regulations relating to communications; privacy and data security and the unauthorized use of, or access to, commercial and personal data; and aerospace and liability standards; 16 • challenges inherent in efficiently managing employees over large geographic distances, including compliance with differing labor laws and the need to implement appropriate systems, policies and hiring, benefits and compliance programs; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems; • increased costs associated with international operations, including travel, real estate, infrastructure and legal compliance costs; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses and the cost and risk of entering into hedging transactions if we chose to do so in the future; • the effect of other economic factors, including inflation, pricing and currency devaluation; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general preferences for local vendors; • operating in new, developing or other markets in which there are significant uncertainties regarding the interpretation, application and enforceability of laws and regulations, including relating to contract and intellectual property rights; • limited or insufficient intellectual property protection or difficulties enforcing our intellectual property; • political instability, social unrest, terrorist activities, acts of civil or international hostility, such as the ongoing conflict between Russia and Ukraine, natural disasters and regional or global outbreaks of contagious diseases; • restrictions on the ability of U.S. companies to do business in foreign countries; and • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
In June 2006, we purchased at FCC auction an exclusive ten-year, 3 MHz license for ATG spectrum, and in April 2013, as part of our acquisition of LiveTV Airfone, LLC, we acquired an additional 1MHz ATG spectrum license. In 2017, our applications to renew our licenses were granted for additional ten-year terms without further payment.
In June 2006, we purchased at FCC auction an exclusive ten-year, 3 MHz license for ATG spectrum, and in April 2013, as part of our acquisition of LiveTV Airfone, LLC, we acquired an additional 1 MHz ATG spectrum license. In 2017, our applications to renew our licenses were granted for additional ten-year terms without further payment.
A few significant stockholders, including affiliates of Oakleigh Thorne, our Chairman of the Board and CEO, and GTCR LLC and its affiliates, could exert influence over our company, and if the ownership of our common stock continues to be concentrated, or becomes more concentrated in the future, it could prevent our other stockholders from influencing significant corporate decisions.
A few significant stockholders, including affiliates of Oakleigh Thorne, our Chair of the Board and CEO, and GTCR LLC and its affiliates, could exert influence over our company, and if the ownership of our common stock continues to be concentrated, or becomes more concentrated in the future, it could prevent our other stockholders from influencing significant corporate decisions.
In particular, although inflation in the United States has been relatively low in recent years, the U.S. economy has recently experienced a significant inflationary effect from, among other things, supply chain disruptions and governmental stimulus or fiscal policies adopted in response to the COVID-19 pandemic.
In particular, although inflation in the United States has been relatively low in recent years, the U.S. economy has recently experienced a significant inflationary effect from, among other things, supply chain disruptions and governmental stimulus or fiscal policies adopted in response to the COVID-19 pandemic and the war in Ukraine.
Certain of our contracts with our OEMs also include provisions that, under specified circumstances, entitle them to the benefit of certain more favorable provisions in other equipment contracts, including with respect to pricing. These provisions, some of which have retroactive effect, may limit the benefits we realize from contracts containing such provisions.
Certain of our contracts with our OEMs also include provisions that, under specified circumstances, entitle them to the benefit of certain more favorable provisions than included in other equipment contracts, including with respect to pricing. These provisions, some of which have retroactive effect, may limit the benefits we realize from contracts containing such provisions.
Regulation by United States and foreign government agencies, including the FCC, which issued our exclusive ATG spectrum license, and the FAA, which regulates the civil aviation manufacturing and repair industries in the United States, may increase our costs of providing service or require us to change our services.
Regulation by United States and foreign government agencies, including the FCC, which issued our exclusive ATG spectrum licenses, and the FAA, which regulates the civil aviation manufacturing and repair industries in the United States, may increase our costs of providing service or require us to change our services.
Our operations and services depend upon the extent to which our and our suppliers’ equipment is protected against damage or interruption from fire, floods, earthquakes, tornadoes, power loss, solar flares, telecommunication failures, break-ins, acts of war or terrorism and similar events.
Our operations and services depend upon the extent to which our and our suppliers’ equipment is protected against damage or interruption from fire, floods, earthquakes, tornadoes, power loss, solar flares, communication failures, break-ins, acts of war or terrorism and similar events.
See “— Global supply chain challenges and logistics issues as well as increasing inflation have had, and may continue to have, an adverse effect on our business, financial condition and results of operations .” Adverse economic conditions, including economic slowdowns, may have a material adverse effect on our business.
See, for example, “— Global supply chain challenges and logistics issues as well as increasing inflation have had, and may continue to have, an adverse effect on our business, financial condition and results of operations .” Adverse economic conditions, including economic slowdowns, may have a material adverse effect on our business.
We believe that our future success depends in large part on our continued ability to hire, train, retain and leverage the skills of qualified engineers and other highly skilled personnel needed to maintain and grow our ATG networks and related technology and develop and successfully deploy Gogo 5G, Global Broadband and other elements of our technology roadmap and new wireless telecommunications products and technology.
We believe that our future success depends in large part on our continued ability to hire, train, retain and leverage the skills of qualified engineers and other highly skilled personnel needed to maintain and grow our ATG networks and related technology and develop and successfully deploy Gogo 5G, Gogo Galileo and other elements of our technology roadmap and new wireless telecommunications products and technology.
In addition, such incidents may disrupt our operations and the services we provide to customers, result in the loss of value of trade secrets, require expensive efforts to investigate, remediate or resolve, damage our reputation, and cause a loss of confidence in our products and services, all of which may have a material adverse effect on our business prospects, financial condition and results of operations.
In addition, such incidents may disrupt our operations and the services we provide to customers, result in the loss of value of trade secrets, require expensive efforts to investigate, remediate or resolve, damage our reputation, and cause a loss of revenue, reputational harm or a loss of confidence in our products and services, all of which may have a material adverse effect on our business prospects, financial condition and results of operations.
Our ability to generate positive cash flows from operating activities and the extent and timing of certain capital and other necessary expenditures are subject to numerous variables, such as costs related to execution of our current technology roadmap, including continuing development and deployment of Gogo 5G, Global Broadband and other future technologies.
Our ability to generate positive cash flows from operating activities and the extent and timing of certain capital and other necessary expenditures are subject to numerous variables, such as costs related to execution of our current technology roadmap, including continuing development and deployment of Gogo 5G, Gogo Galileo and other future technologies.
The availability of additional spectrum in the marketplace that is available for ATG use may increase the possibility that we may face competition from one or more other ATG service providers in the future. For example, a prospective competitor has announced that its ATG network in the continental U.S. is available on a nationwide basis.
The availability of additional spectrum in the marketplace that is available for ATG use may increase the possibility that we may face competition from one or more other ATG service providers in the future. For example, a competitor announced in 2022 that its ATG network in the continental U.S. is available on a nationwide basis.
Under the Communications Act and applicable FCC regulations, we are effectively restricted from having more than 25% of our capital stock owned or voted directly or indirectly by non-U.S. persons, including individuals and entities organized outside the United States or controlled by non-U.S. persons.
Under the Communications Act and applicable FCC regulations, we are effectively restricted from having more than 25% of our capital stock owned or voted directly or indirectly by non-U.S. persons, including individuals and entities organized outside the United States or controlled by non-U.S. persons, without prior FCC approval.
Pandemics or other outbreaks of contagious diseases, including the COVID-19 pandemic, and the measures implemented to combat them have had, and may continue to have, a material adverse effect on our business. We face various risks related to public health issues, including epidemics, pandemics and other outbreak of infectious disease.
Pandemics or other outbreaks of contagious diseases and the measures implemented to combat them have had, and may continue to have, a material adverse effect on our business. We face various risks related to public health issues, including epidemics, pandemics and other outbreak of infectious disease.
Our ability to offer in-flight broadband Internet access through our ATG service currently depends on our ability to maintain rights to use the 3 MHz ATG spectrum in the U.S., and our failure to do so may have a material adverse effect on our business, financial condition and results of operations.
Our ability to offer in-flight broadband connectivity through our ATG service currently depends on our ability to maintain rights to use the 3 MHz ATG spectrum in the U.S., and our failure to do so may have a material adverse effect on our business, financial condition and results of operations.
In addition, if any of the Company’s customers do not replace their airborne equipment with equipment that is compatible with the replacement terrestrial network equipment prior to the date on which the replacement terrestrial network equipment goes into effect, the Company will be unable to provide service to such customers until the airborne equipment is replaced.
In addition, if any of the Company’s customers do not replace their airborne equipment with equipment that is compatible with the replacement terrestrial network equipment prior to the date on which the replacement terrestrial network equipment goes into effect, the Company will be unable to provide service to these legacy-equipment customers until the airborne equipment is replaced.
If Global Broadband fails to perform as expected or its commercial availability is significantly delayed as compared to the timelines we establish, our ability to meet customers’ or end users’ expectations regarding our systems’ performance and to effectively compete in our market may be impaired and our business, financial condition and results of operations may be materially adversely affected.
If Gogo Galileo fails to perform as expected or its commercial availability is significantly delayed as compared to the timelines we establish, our ability to meet customers’ or end users’ expectations regarding our systems’ performance and to effectively compete in our market may be impaired and our business, financial condition and results of operations may be materially adversely affected.
Revenue from equipment sales accounted for approximately 27%, 23% and 21% of our revenue from continuing operations for the fiscal years ended December 31, 2022, 2021 and 2020, respectively. More than 90% of our equipment revenue in each such fiscal year was generated from contracts with OEMs and after-market dealers.
Revenue from equipment sales accounted for approximately 20%, 27% and 23% of our revenue from continuing operations for the fiscal years ended December 31, 2023, 2022 and 2021, respectively. More than 90% of our equipment revenue in each such fiscal year was generated from contracts with OEMs and after-market dealers.
In addition to directly impacting demand for air travel, COVID-19 has had, and future pandemics and other outbreaks of contagious diseases and any resultant restrictions may have, a material and adverse impact on other aspects of our business, including: • delays and difficulties in completing installations on certain aircraft; and 18 • limitations on our ability to market and grow our business and to promote technological innovation.
In addition to directly impacting demand for air travel, future pandemics and other outbreaks of contagious diseases and any resultant restrictions may have a material and adverse impact on other aspects of our business, including: • delays and difficulties in completing installations on certain aircraft; and • limitations on our ability to market and grow our business and to promote technological innovation.
While we do not currently use this license, changes in technology may enable its use in our network in the future. An ambiguous renewal requirement could impair our flexibility to use or otherwise realize the value of such spectrum beyond 2026.
While we do not currently rely upon this license for our ATG network, changes in technology may enable its use in our network in the future. An ambiguous renewal requirement could impair our flexibility to use or otherwise realize the value of such spectrum beyond 2026.
The 2021 Credit Agreement contains covenants that, among other things, limit the ability of our subsidiaries and, in certain circumstances, us to: • incur additional debt; • pay dividends, redeem stock or make other distributions; • make certain investments; • create liens; • transfer or sell assets; • merge or consolidate with other companies; and • enter into certain transactions with our affiliates.
The 2021 Credit Agreement contains covenants that, among other things, limit the ability of our subsidiaries and, in certain circumstances, us to: • incur certain non-permitted indebtedness; • pay dividends, redeem stock or make other distributions; • make certain investments; • create liens; • transfer or sell assets; • merge or consolidate with other companies; and • enter into certain transactions with our affiliates.
Certain data protection laws that apply to the Company establish a private right of action. In addition, non-compliance with certain of these requirements could lead to class action or other litigation based on theories that may include breach of contract or negligence, among others. Such litigation could result in material costs to the Company.
Certain data protection laws that apply to the 25 Company establish a private right of action. In addition, non-compliance with certain of these requirements could lead to investigations, regulatory enforcement actions, class actions or other private litigation based on theories that may include breach of contract or negligence, among others. Such litigation could result in material costs to the Company.
SmartSky recently announced that its ATG network in the continental United States, originally targeted for launch in 2016, is now “live nationwide.” This is the first time that we have faced competition from a nationwide ATG network, and should such competitor be successful in entering our market, other competitors could be prompted to enter this business using the same or other ATG spectrum.
In late 2022, SmartSky Networks announced that its ATG network in the continental United States, originally targeted for launch in 2016, was “live nationwide.” This is the first time that we have faced competition from a nationwide ATG network, and should such competitor be successful in entering our market, other competitors could be prompted to enter this business using the same or other ATG spectrum.
Even if we are able to 28 obtain additional financing, we may be required to use the proceeds from any such financing to repay a portion of our outstanding debt.
Even if we are able to obtain additional financing, we may be required to use the proceeds from any such financing to repay a portion of our outstanding indebtedness.
Components for which we rely on single-source suppliers include, among others, the antennas and modems for all systems, the equipment used at our ATG cell site base stations and the ESA for our Global Broadband network. We plan to launch Global Broadband using OneWeb as our sole LEO satellite network provider.
Components for which we rely on single-source suppliers include, among others, the antennas and modems for all systems, the equipment used at our ATG cell site base stations and the ESA for our Gogo Galileo network. We plan to launch Gogo Galileo using Eutelsat OneWeb as our sole LEO satellite network provider.
We amended our 2021 Credit Agreement on February 2, 2023 to transition to the secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”) in anticipation of LIBOR’s discontinuation. Any indebtedness under our 2021 Credit Agreement may bear interest at variable rates that use the forward-looking term rate based on SOFR.
We amended our 2021 Credit Agreement on February 2, 2023, to transition from LIBOR to the secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”) in anticipation of LIBOR’s discontinuation. Any indebtedness under our 2021 Credit Agreement now bears interest at variable rates that use the forward-looking term rate based on SOFR.
For the fiscal years ended December 31, 2022, 2021 and 2020, the Gogo service we provided on business aircraft (which excludes service provided on commercial aircraft under the ATG Network Sharing Agreement) generated approximately 71%, 75% and 78% of our revenue from continuing operations, respectively.
For the fiscal years ended December 31, 2023, 2022 and 2021, the Gogo service we provided on business aircraft (which excludes service provided on commercial aircraft under an ATG network sharing agreement with Intelsat) generated approximately 78%, 71% and 75% of our revenue from continuing operations, respectively.
Starlink, a division of Space Exploration Technologies Corp. that operates a LEO satellite network, has been awarded an ESIM (Earth Stations in Motion) license by the FCC that would cover aircraft and other moving vehicles. In October 2022, Starlink announced that it is taking orders for its planned global in-flight connectivity service, with equipment deliveries expected to begin in 2023.
Starlink, a division of Space Exploration Technologies Corp. that operates a LEO satellite network, has been awarded an ESIM (Earth Stations in Motion) license by the FCC that would cover aircraft and other moving vehicles. In October 2022, Starlink announced that it is taking orders for its planned global in-flight connectivity service, and equipment installations began in 2023.
As of December 31, 2022, we had total consolidated indebtedness of approximately $714.1 million, all of which was borrowed under the Term Loan Facility. We and our subsidiaries may incur additional debt in the future, including up to $100.0 million under the Revolving Facility, which could increase the risks described below and lead to other risks.
As of December 31, 2023, we had total consolidated indebtedness of approximately $606.9 million, all of which was borrowed under the Term Loan Facility. We and our subsidiaries may incur additional debt in the future, including up to $100.0 million under the Revolving Facility, which could increase the risks described below and lead to other risks.
Unanticipated problems with, or failures of, our disaster recovery systems and business continuity plans could have a material impact on our ability to conduct business and on our results of operations and financial condition. The failure of our disaster recovery systems and business continuity plans could adversely impact our profitability and our business.
Unanticipated problems with, or failures of, our disaster recovery systems and business continuity plans could have a material impact on our ability to conduct business and on our results of operations and financial condition.
If we are not successful in launching Global Broadband, we may nonetheless, depending on the circumstances, be required to honor these commitments. Our business is dependent on the availability of spectrum.
If we are not successful in launching Gogo Galileo, we may nonetheless, depending on the circumstances, be required to honor these commitments. Our business is dependent on the availability of spectrum.
There can be no assurance that we will launch Global Broadband in sufficient time to effectively compete in the global business aviation market, if at all, due to, among other things, risks associated with: (i) OneWeb’s failure to launch or delay in launching its LEO satellite network; (ii) the failure of our equipment and software to perform as expected; (iii) the failure of the OneWeb network to perform as expected; (iv) integrating our hardware and software with the OneWeb network; (v) problems arising in the manufacturing process; (vi) our ability to negotiate contracts with suppliers on acceptable commercial and other terms; (vii) our reliance on single-source suppliers for the development and manufacturing of the antenna and access to a LEO network; and (viii) delays in obtaining or failures to obtain the required regulatory approvals for installation and operation of such equipment and the provision of service to passengers.
There can be no assurance that we will launch Gogo Galileo in sufficient time to effectively compete in the global business aviation market, if at all, due to, among other things, risks associated with: (i) the failure of our equipment and software to perform as expected; (ii) the failure of the Eutelsat OneWeb network to perform as expected; (iii) difficulties in integrating our hardware and software with the Eutelsat OneWeb network; (iv) problems arising in the manufacturing process; (v) our inability to negotiate contracts with suppliers on acceptable commercial and other terms; (vi) our reliance on single-source suppliers for the development and manufacturing of the antenna and access to a LEO network; and (vii) delays in obtaining or failures to obtain the required regulatory approvals for installation and operation of such equipment and the provision of service to passengers.
We may be unsuccessful or delayed in developing and deploying our Global Broadband service. In May 2022, we announced our plans to launch Global Broadband using an ESA designed with Hughes and utilized on a LEO satellite network operated by OneWeb.
We may be unsuccessful or delayed in developing and deploying our Gogo Galileo service. In May 2022, we announced our plans to launch Gogo Galileo using an ESA designed with Hughes and utilized on a LEO satellite network operated by Eutelsat OneWeb.
When we expand our business outside the United States with Global Broadband, we will be exposed to a variety of risks associated with international operations that could adversely affect our business.
When we expand our business outside the United States with Gogo Galileo, we will be exposed to a variety of risks associated with international operations that could adversely affect our business.
Although our operations and business are currently predominately located in the United States, a component of our growth strategy involves the launch and expansion of our Global Broadband operations and customer base internationally.
Although our operations and business are currently predominately located in the United States, a component of our growth strategy involves the launch and expansion of our Gogo Galileo operations and customer base internationally.
In February 2022, a competitor filed a patent infringement suit against us and also filed a motion for a preliminary injunction, which, if granted, would have prevented us from proceeding with Gogo 5G until the infringement suit is resolved. The court denied the competitor’s motion for preliminary injunction but the competitor is appealing the denial.
In February 2022, a competitor filed a patent infringement suit against us and also filed a motion for a preliminary injunction, which, if granted, would have prevented us from proceeding with Gogo 5G until the infringement suit is resolved. The District Court denied the competitor’s motion for preliminary injunction, and the U.S.
Future pandemics and other outbreaks of contagious diseases could result in similar or worse impacts and significant business and operational disruptions, including business closures, supply chain disruptions, travel restrictions, stay-at-home orders and limitations on the availability of workforces.
Pandemics and other outbreaks of contagious diseases could result in significant business and operational disruptions, including business closures, supply chain disruptions, travel restrictions, stay-at-home orders and limitations on the availability of workforces.
From the IPO date through February 24, 2023, the price of our common stock has ranged from a closing low of $1.40 per share to a closing high of $34.34 per share.
From the IPO date through February 23, 2024, the price of our common stock has ranged from a closing low of $1.40 per share to a closing high of $34.34 per share.
Further, other events outside of our control, including natural disasters, climate change-related events and regional or global outbreaks of contagious diseases, such as the COVID-19 pandemic, may arise from time to time and be accompanied by governmental actions that may increase international tension.
Further, other events outside of our control, including natural disasters, climate change-related events and regional or global outbreaks of contagious diseases may arise from time to time and be accompanied by governmental actions that may increase international tension.
See “ Risks Related to Our Business — Competition could result in price reduction, reduced revenue and loss of market position and could harm our results of operations .” Furthermore, under our agreement with Hughes we have committed to purchase, over a seven-year period, antennas with an aggregate purchase price of approximately $170 million, and we may make additional financial commitments in connection with Global Broadband.
See “ Risks Related to Our Business — Competition could result in price reduction, reduced revenue and loss of market position and could harm our results of operations .” Furthermore, under our agreement with Hughes we have committed to purchase, over a seven-year period, half duplex and full duplex antennas with an aggregate purchase price of approximately $170 million and $102 million, respectively, and we may make additional financial commitments in connection with Gogo Galileo.
As discussed in more detail in the section entitled “Business—Licenses and Regulation—Privacy and Data Security-Related Regulations,” we could also be subject to certain state laws, federal and non-U.S. laws that impose data breach notification requirements, specific data security obligations, or other consumer privacy-related requirements.
Additionally, as discussed in more detail in the section titled “Business—Licenses and Regulation—Privacy and Data Security-Related Regulations,” we are subject to certain state laws, federal and non-U.S. laws that impose data breach notification requirements, specific data security obligations, or other consumer privacy-related requirements.
While we believe that we have adequate inventory or will be able to acquire sufficient electronic components to meet customer demand as currently forecasted, increases in demand combined with a continued shortage of electronic components could cause product delays or shortages.
While we believe that we have adequate inventory or will be able to acquire sufficient electronic components to meet customer demand as currently forecasted, increases in demand combined with a continued shortage of electronic components from the various macroeconomic factors described above could cause product delays or shortages.
For the year ended December 31, 2022, our determination that we are more likely than not to realize a portion of our deferred tax assets resulted in a release of approximately $11.4 million of our valuation allowance.
For the year ended December 31, 2023, our determination that we are more likely than not to realize a portion of our deferred tax assets resulted in a release of approximately $72.8 million of our valuation allowance.
The utilization of our tax losses could be substantially limited if we experienced an “ownership change” as defined in the Internal Revenue Code. As of December 31, 2022, we had approximately $562 million in federal and $448 million in state net operating losses (“NOLs”). The federal NOLs will begin to expire in 2032.
The utilization of our tax losses could be substantially limited if we experienced an “ownership change” as defined in the Internal Revenue Code. As of December 31, 2023, we had approximately $446 million in federal and $377 million in state net operating losses (“NOLs”). The federal NOLs will begin to expire in 2034.
As a broadband Internet provider, we must comply with the CALEA, which requires communications carriers to ensure that their equipment, facilities and services can accommodate certain technical capabilities in executing authorized wiretapping and other electronic surveillance. Currently, our CALEA solution is fully deployed in our network.
We must comply with the CALEA, which requires applicable communications companies to ensure that their equipment, facilities and services can accommodate certain technical capabilities in executing authorized wiretapping and other electronic surveillance. Currently, our CALEA solution is fully deployed in our network.
The state NOLs expire in various tax years beginning in 2023.
The state NOLs expire in various tax years beginning in 2024.
If we are unable to protect our intellectual property from unauthorized use, our ability to exploit our proprietary technology or our brand image may be harmed, which may materially adversely affect our business and results of operations. 23 Our use of open-source software could limit our ability to commercialize our technology.
If we are unable to protect our intellectual property from unauthorized use, our ability to exploit our proprietary technology or our brand image may be harmed, which may materially adversely affect our business and results of operations.
Further, to the extent the FCC adopts additional capability requirements applicable to broadband Internet providers, its decision may increase the costs we incur to comply with such regulations.
Further, to the extent the FCC adopts additional capability requirements applicable to communications companies, its decision may increase the costs we incur to comply with such regulations.
As of December 31, 2022, Oakleigh Thorne, our CEO and the Chairman of our Board of Directors, and the entities affiliated with Mr.
As of December 31, 2023, Oakleigh Thorne, our CEO and the Chair of our Board of Directors, and the entities affiliated with Mr.
Adverse results in the appeal, the underlying infringement suit or other infringement suits could require us to develop non-infringing technology, pay damages, enter into royalty or licensing agreements, cease providing certain products or services, adjust our sales, marketing and advertising activities 22 or take other actions to resolve the claims.
Federal Circuit Court of Appeals affirmed the District Court’s decision. Adverse results in the underlying infringement suit or other infringement suits could require us to develop non-infringing technology, pay damages, enter into royalty or licensing agreements, cease providing certain products or services, adjust our sales, marketing and advertising activities or take other actions to resolve the claims.
We could be adversely affected if we or our third party suppliers or service providers suffer service interruptions or delays, technology failures, damage to equipment or system disruptions or failures arising from, among other things, force majeure events, cyber-attacks or other malicious activities.
We periodically are and could in the future be adversely affected if we or our third party suppliers or service providers suffer service interruptions or delays, technology failures, damage to equipment or system disruptions or failures arising from, among other things, force majeure events, cyberattacks or other malicious activities.
If Gogo 5G or any other next generation technology fails to perform as expected or its commercial availability is significantly delayed as compared to the timelines we establish, our ability to meet users' expectations regarding our systems' performance and to effectively compete in our market may be impaired and our business, financial condition and results of operations may be materially adversely affected.
If Gogo 5G or any other next generation technology fails to perform as expected, our ability to meet users’ expectations regarding our systems' performance and to effectively compete in our market may be impaired and our business, financial condition and results of operations may be materially adversely affected.
We have in the past, and may in the future, experience periods of reduced usage of our services by our customers or allow customers to suspend their accounts, which could adversely impact our results of operations and profitability.
We have in the past, and may in the future, experience periods of reduced usage of our services by our customers or allow customers to suspend their accounts, which could adversely impact our results of operations and profitability. We are reliant on our key OEMs and dealers for equipment sales.
Our failure to comply with any of these rules or regulations, or an allegation or finding that we failed to comply, may have a material adverse effect on our business, financial condition and results of operations.
Our failure to comply with any of these rules or regulations, or an allegation or finding that we failed to comply, could result in litigation, investigations or regulatory enforcement actions, fines or penalties, which may have a material adverse effect on our business, financial condition and results of operations.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We are subject to several lawsuits arising out of the conduct of our business. See Note 17, “Commitments and Contingencies,” to our consolidated financial statements for a discussion of litigation matters. From time to time we may become involved in legal proceedings arising in the ordinary course of our business.
Biggest changeItem 3. Legal Proceedings We are subject to several lawsuits arising out of the conduct of our business. See Note 15, “Commitments and Contingencies,” to our consolidated financial statements for a discussion of litigation matters. From time to time we may become involved in legal proceedings arising in the ordinary course of our business.
Item 4. Mine Saf ety Disclosures Not applicable. 34 Part II
Item 4. Mine Saf ety Disclosures Not applicable. 35 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeBecause many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. Repurchases of Equity Securities None. Recent Sale of Unregistered Securities None. Use of Proceeds from Registered Securities None.
Biggest changeBecause many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
The S&P SmallCap 600 was chosen because we do not believe we can reasonably identify an industry index or specific peer issuer that would offer a meaningful comparison. The S&P SmallCap 600 35 represents a broad-based index of companies with similar market capitalization.
The S&P SmallCap 600 was chosen because we do not believe we can reasonably identify an industry index or specific peer issuer that would offer a meaningful comparison. The S&P SmallCap 600 represents a broad-based index of companies with similar market 36 capitalization.
The graph assumes that $100 was invested at the market close on December 31, 2017 in our common stock, the S&P 500, the NASDAQ Composite and the S&P SmallCap 600 and assumes reinvestments of dividends, if any.
The graph assumes that $100 was invested at the market close on December 31, 2018 in our common stock, the NASDAQ Composite and the S&P SmallCap 600 and assumes reinvestments of dividends, if any.
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. Item 6. [Reserved] 36
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. Item 6. [Reserved] 37 Item 7.
The following graph shows a comparison of cumulative total return for our common stock, the Standard & Poor’s 500 Stock Index (“S&P 500”), the Nasdaq Composite Index (“NASDAQ Composite”) and Standard & Poor’s SmallCap 600 Index (“S&P SmallCap 600”) for the period from December 31, 2017 through December 30, 2022, the last trading day of 2022.
The following graph shows a comparison of cumulative total return for our common stock, the Nasdaq Composite Index (“NASDAQ Composite”) and Standard & Poor’s SmallCap 600 Index (“S&P SmallCap 600”) for the period from December 31, 2018 through December 29, 2023, the last trading day of 2023.
Holders of Record As of February 24, 2023, there were 33 stockholders of record of our common stock, and the closing price of our common stock was $14.50 per share as reported on the NASDAQ.
Holders of Record As of February 23, 2024, there were 32 stockholders of record of our common stock, and the closing price of our common stock was $8.50 per share as reported on the NASDAQ.
Securities Authorized for Issuance Under Equity Compensation Plans See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” for information regarding securities authorized for issuance.
Recent Sales of Unregistered Securities None. Use of Proceeds from Registered Securities Not applicable. Securities Authorized for Issuance Under Equity Compensation Plans See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” for information regarding securities authorized for issuance.
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Repurchases of Equity Securities On September 5, 2023, we announced a share repurchase program that grants the Company authority to repurchase up to $50 million of shares of the Company’s common stock.
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Repurchases may be made at management's discretion from time to time on the open market, through privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in accordance with applicable securities laws and other restrictions, including Rule 10b-18 under the Exchange Act.
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The repurchase program has no time limit and may be suspended for periods or discontinued at any time and does not obligate us to purchase any shares of our common stock. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations.
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The following table summarizes our purchases of common stock during the three month period ended December 31, 2023.
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Period Total Number of Shares Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands) October 1-31, 2023 — $ — — $ — November 1-30, 2023 80,928 $ 10.15 80,928 $ 49,180 December 1-31, 2023 398,464 $ 10.04 398,464 $ 45,187 (1) Average price paid per share includes transaction costs associated with the repurchases.
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Management’s Discussion and Analysis o f Financial Condition and Results of Operations 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 consolidated financial statements and the related notes contained in this Annual Report on Form 10-K.
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On December 1, 2020, we completed the previously announced sale of our commercial aviation (“CA”) business to a subsidiary of Intelsat Jackson Holdings S.A. (“Intelsat”) for a purchase price of $400.0 million in cash, subject to certain adjustments (the “Transaction”).
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As a result, all periods presented in our consolidated financial statements and other portions of this Annual Report on Form 10-K have been conformed to present the CA business as discontinued operations. There was no discontinued operations activity for the CA business after December 31, 2021.
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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 this report.
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Our actual results may differ materially from those contained in or implied by any forward-looking statements. Our fiscal year ends December 31 and, unless otherwise noted, references to years or fiscal are for fiscal years ended December 31. See “— Results of Operations.” Company Overview Gogo is the world’s largest provider of broadband connectivity services for the business aviation market.
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We have served this market for more than 25 years. Our mission is to enrich the lives of passengers and the efficiency of operators with the world’s best business aviation in-flight connectivity and customer support.
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We have always sought to provide the best connectivity for the business aviation market regardless of technology, and we have a successful history of doing so. Until recently, we focused primarily on business aviation aircraft in North America, which comprise approximately 63% of the worldwide business aviation fleet, and we are the leading provider of in-flight connectivity in that market.
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Gogo started in analogue air-to-ground (“ATG”) technology in the late 1990s, then, as analogue cellular backhaul disappeared, migrated to narrowband satellite connectivity in the early 2000s, then back to ATG with our digital broadband 3G and 4G networks beginning in 2010. We expect to commercially launch our fourth ATG network – Gogo 5G – in the fourth quarter of 2024.
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We also continue to provide narrowband satellite services to customers in North America and internationally through distribution agreements with satellite providers.
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In May 2022, in order to further serve our existing customers and expand our target market, we announced plans to expand our broadband offerings beyond ATG by launching the first global broadband service designed for all models of business aircraft (“Gogo Galileo”).
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The service will use an electronically steered antenna (“ESA”), specifically designed to address a broad range of business aviation aircraft, operating on a low earth orbit (“LEO”) satellite network and is targeted for commercial launch in the fourth quarter of 2024.
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Our chief operating decision maker evaluates performance and business results for our operations, and makes resource and operating decisions, on a consolidated basis. As we do not have multiple segments, we do not present segment information in this Annual Report on Form 10-K.
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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.
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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, Gogo Galileo 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, chipset, and other equipment developers and providers or satellite network 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; • 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; 38 • disruptions to supply chains in the aviation industry and installations of our equipment driven by, among other things, labor shortages; • 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; • our ability to fully utilize portions of our deferred income tax assets; • changes in laws, regulations and interpretations affecting telecommunications services globally, including those affecting our ability to maintain our licenses for ATG spectrum in the United States, obtain sufficient rights to use additional ATG spectrum and/or other sources of broadband connectivity to deliver our services, including Gogo Galileo, 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 globally, including changes that impact the design of our equipment and our ability to obtain required certifications for our equipment.
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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.
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For the Years Ended December 31, 2023 2022 2021 Aircraft online (at period end) ATG AVANCE 3,976 3,279 2,504 Gogo Biz 3,229 3,656 3,896 Total ATG 7,205 6,935 6,400 Narrowband satellite 4,341 4,475 4,567 Average monthly connectivity service revenue per aircraft online ATG $ 3,380 $ 3,349 $ 3,238 Narrowband satellite 298 268 250 Units sold ATG 894 1,334 869 Narrowband satellite 174 206 205 Average equipment revenue per unit sold (in thousands) ATG $ 72 $ 68 $ 71 Narrowband satellite 46 49 54 • ATG AVANCE aircraft online.
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We define ATG AVANCE aircraft online as the total number of business aircraft equipped with our AVANCE L5 or L3 system for which we provide ATG services as of the last day of each period presented. • Gogo Biz aircraft online.
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We define Gogo Biz aircraft online as the total number of business aircraft not equipped with our AVANCE L5 or L3 system for which we provide ATG services as of the last day of each period presented. This number excludes commercial aircraft operated by Intelsat’s airline customers receiving ATG service. • Narrowband satellite aircraft online .
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We define satellite aircraft online as the total number of business aircraft for which we provide narrowband satellite services as of the last day of each period presented. • Average monthly connectivity service revenue per ATG aircraft online.
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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).
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Revenue share earned from Intelsat is excluded from this calculation. • Average monthly connectivity service revenue per narrowband satellite aircraft online .
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We define average monthly connectivity service revenue per narrowband satellite aircraft online as the aggregate narrowband satellite connectivity service revenue for the period divided by the number of months in the period, divided by the number of narrowband 39 satellite aircraft online during the period (expressed as an average of the month end figures for each month in such period). • Units sold .
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We define units sold as the number of ATG or narrowband satellite units for which we recognized revenue during the period. • Average equipment revenue per ATG unit sold.
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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 narrowband satellite unit sold .
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We define average equipment revenue per narrowband satellite unit sold as the aggregate equipment revenue earned from all narrowband satellite units sold during the period, divided by the number of narrowband satellite units sold.
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Key Components of Consolidated Statements of Operations As a result of the Transaction, all periods presented in this Annual Report on Form 10-K have been conformed to present the CA business as a discontinued operation. We report the financial results of discontinued operations separately from continuing operations to distinguish the financial impact of disposal transactions from ongoing operations.
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The results of operations and cash flows of a discontinued operation are restated for all comparative periods presented. Refer to Note 19, “Discontinued Operations,” to our consolidated financial statements for further information. The following briefly describes certain key components of revenue and expenses as presented in our consolidated statements of operations.
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Revenue: We generate two types of revenue: service revenue and equipment revenue. Service revenue primarily consists of monthly subscription and usage fees paid by aircraft owners and operators for telecommunication, data, and in-flight entertainment services. Service revenue is recognized as the services are provided to the customer.
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Equipment revenue primarily consists of proceeds from the sale of ATG and narrowband satellite connectivity equipment and is recognized when control of the equipment is transferred to OEMs and dealers, which generally occurs when the equipment is shipped.
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Cost of Revenue: Cost of service revenue consists of ATG network costs, satellite provider service costs, transaction costs and costs related to network operations. Cost of equipment revenue primarily consists of the costs of purchasing component parts used in the manufacture of our equipment and the production, installation, technical support and quality assurance costs associated with the equipment sales.
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Engineering, Design and Development Expenses: Engineering, design and development expenses include the costs incurred to design and develop our technologies and products. This includes the design, development and integration of our ATG ground networks and airborne line replaceable units, the design and development of products and enhancements thereto, and program management activities.
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Engineering, design and development expenses also include costs associated with enhancements to existing products. Sales and Marketing Expenses: Sales and marketing expenses consist of costs associated with activities related to customer sales (including sales commissions), digital marketing and lead generation, advertising and promotions, product management, trade shows and customer service support for end users.
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General and Administrative Expenses: General and administrative expenses include personnel and related operating costs of the business support functions, including finance and accounting, legal, human resources, administrative, information technology, facilities and executive groups. 40 Depreciation and Amortization: Depreciation expense includes expense associated with the depreciation of our network equipment, office equipment and furniture, fixtures and leasehold improvements, which is recorded over their estimated useful lives.
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Amortization expense includes the amortization of our finite-lived intangible assets on a straight-line basis over their estimated useful lives. Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
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The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related exposures. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances.
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In some instances, we could reasonably use different accounting estimates, and in some instances actual results could differ significantly from our estimates. We evaluate our estimates and assumptions on an ongoing basis.
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To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
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We believe that the assumptions and estimates associated with the valuation allowance related to our deferred income tax assets have the greatest potential impact on and are the most critical to fully understanding and evaluating our reported financial results, and that they require our most difficult, subjective or complex judgments.
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For a discussion of our significant accounting policies to which many of these estimates relate, see Note 1, “Summary of Significant Accounting Policies,” to our consolidated financial statements. Note that these critical accounting estimates relate solely to our continuing operations. The accounting policies related to our discontinued operations are discussed in Note 19, “Discontinued Operations,” to our consolidated financial statements.
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Deferred Income Taxes - Valuation Allowance: We account for the valuation allowance on our deferred income tax assets in accordance with Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”).
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On a recurring basis, we assess the need for a valuation allowance related to our deferred income tax assets, which includes consideration of both positive and negative evidence to determine, based on the weight of the available evidence, whether it is more likely than not that some or all of our deferred tax assets will not be realized.
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In our assessment, we consider recent financial operating results, the scheduled expiration of our net operating losses, potential sources of future taxable income, the reversal of existing taxable differences, taxable income in prior carryback years, if permitted under tax law, and tax planning strategies.
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Our determination that we are more likely than not to realize a portion of our deferred tax assets represents our best estimate and considers both positive and negative factors. This estimate involves significant management judgment and is inherently subjective.
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We considered positive factors including our recent history of pre-tax income, the sale of our CA business, the reduction in interest expense resulting from the Refinancing (as defined herein) and the settlement of the 6% Convertible Senior Notes due 2022 (the “2022 Convertible Notes”) and our projected future taxable income.
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The negative factors included no carryback potential due to historical pre-tax losses, not enough current taxable temporary differences to utilize the existing deferred tax assets and no available significant, prudent and feasible tax planning strategies.
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It is possible that there will be changes in our business, our performance, our industry or otherwise that cause actual results to differ materially from this estimate.
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If those changes result in significant and sustained reductions in our pre-tax income or utilization of existing tax carryforwards in future periods, additional valuation allowances may have to be recorded with corresponding adverse impacts on earnings and/or other comprehensive income. Such adverse impacts may be material.
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For the year ended December 31, 2023, our determination that we are more likely than not to realize a portion of our deferred tax assets resulted in a release of approximately $72.8 million of our valuation allowance.
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The remaining valuation allowance is still required for deferred tax assets related to certain state tax credits, foreign net operating losses and capital losses, as we determined that it was more likely than not that, as of December 31, 2023, these deferred tax assets will not be realized.
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See Note 13, “Income Tax,” to our consolidated financial statements for additional information. Recent Accounting Pronouncements See Note 1, “Summary of Significant Accounting Policies,” to our consolidated financial statements for additional information. 41 Results of Operations The following table sets forth, for the periods presented, certain data from our consolidated statements of operations.
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The information contained in the table below should be read in conjunction with our consolidated financial statements and related notes.
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Consolidated Statements of Operations (in thousands) For the Years Ended December 31, 2023 2022 2021 Revenue: Service revenue $ 318,015 $ 296,329 $ 259,583 Equipment revenue 79,562 107,738 76,133 Total revenue 397,577 404,067 335,716 Operating expenses: Cost of service revenue (exclusive of items shown below) 69,568 64,427 56,103 Cost of equipment revenue (exclusive of items shown below) 63,383 71,473 46,092 Engineering, design and development 36,683 29,587 24,874 Sales and marketing 29,797 25,471 20,985 General and administrative 57,280 58,203 51,554 Depreciation and amortization 16,701 12,580 15,482 Total operating expenses 273,412 261,741 215,090 Operating income 124,165 142,326 120,626 Other expense (income): Interest income (7,403 ) (2,386 ) (191 ) Interest expense 33,056 38,872 67,472 Loss on extinguishment of debt and settlement of convertible notes 2,224 — 83,961 Other (income) expense, net (1,315 ) 123 25 Total other expense 26,562 36,609 151,267 Income (loss) from continuing operations before income taxes 97,603 105,717 (30,641 ) Income tax (benefit) provision (48,075 ) 13,658 (187,230 ) Net income from continuing operations 145,678 92,059 156,589 Net loss from discontinued operations, net of tax — — (3,854 ) Net income $ 145,678 $ 92,059 $ 152,735 Years Ended December 31, 2023 and 2022 Revenue: Revenue and percent change for the years ended December 31, 2023 and 2022 were as follows (in thousands, except for percent change) : For the Years Ended December 31, % Change 2023 2022 2023 over 2022 Service revenue $ 318,015 $ 296,329 7.3 % Equipment revenue 79,562 107,738 (26.2 )% Total revenue $ 397,577 $ 404,067 (1.6 )% Total revenue decreased to $397.6 million for the year ended December 31, 2023, as compared with $404.1 million for the prior year, due to a decrease in equipment revenue, partially offset by an increase in service revenue.
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Service revenue increased to $318.0 million for the year ended December 31, 2023, as compared with $296.3 million for the prior year, primarily due to increases in ATG aircraft online.
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Equipment revenue decreased to $79.6 million for the year ended December 31, 2023, as compared with $107.7 million for the prior year, primarily due to decreases in the number of ATG units sold, with 894 units sold during the year ended December 31, 2023 as compared with 1,334 units for the prior year.
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We expect service revenue to increase in the future as additional aircraft come online, including the expected impact of the launch of Gogo 5G and Gogo Galileo.
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We expect equipment revenue to increase in the future driven by additional sales of ATG units including Gogo 5G, and Gogo Galileo units. 42 Cost of Revenue: Cost of service revenue and percent change for the years ended December 31, 2023 and 2022 were as follows (in thousands, except for percent change) : For the Years Ended December 31, % Change 2023 2022 2023 over 2022 Cost of service revenue $ 69,568 $ 64,427 8.0 % Cost of equipment revenue $ 63,383 $ 71,473 (11.3 )% Cost of service revenue increased to $69.6 million for the year ended December 31, 2023, as compared with $64.4 million for the prior year, primarily due to an increase in personnel costs and network and data center costs.
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We expect cost of service revenue to increase over time, primarily due to service revenue growth and increasing network costs including Gogo 5G and Gogo Galileo, as well as data center costs.
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Cost of equipment revenue decreased to $63.4 million for the year ended December 31, 2023, as compared with $71.5 million for the prior year, primarily due to a decrease in ATG units sold.
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We expect that our cost of equipment revenue will increase with growth in ATG units sold, including Gogo 5G, and Gogo Galileo units, following the launch of those products. Additionally, we expect to incur additional costs associated with the FCC Reimbursement Program which we expect to be partially offset by the reimbursements from the FCC.
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Engineering, Design and Development Expenses: Engineering, design and development expenses increased to $36.7 million for the year ended December 31, 2023, as compared with $29.6 million for the prior year, primarily due to the Gogo Galileo development program and increased personnel costs.
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We expect engineering, design and development expenses as a percentage of service revenue to increase in 2024, driven by Gogo Galileo development costs and Gogo 5G program spend, and decrease thereafter as the programs are completed and the level of investment decreases and revenue increases.
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Sales and Marketing Expenses: Sales and marketing expenses increased to $29.8 million for the year ended December 31, 2023, as compared with $25.5 million for the prior year, primarily due to increased personnel costs. We expect sales and marketing expenses as a percentage of service revenue to remain relatively flat in the future.
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General and Administrative Expenses: General and administrative expenses decreased to $57.3 million for the year ended December 31, 2023, as compared with $58.2 million for the prior year, primarily due to decreased personnel costs tied to a reduction in bonus expense, partially offset by an increase in legal fees resulting primarily from the costs incurred in the SmartSky litigation.
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We expect general and administrative expenses as a percentage of service revenue to decrease over time.
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Depreciation and Amortization: Depreciation and amortization expense increased to $16.7 million for the year ended December 31, 2023, as compared with $12.6 million for the prior year, primarily due to accelerated depreciation expense for certain network equipment related to the FCC Reimbursement Program, partially offset by decreased amortization expense for capitalized software.
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See Note 1, “Summary of Significant Accounting Policies,” to our Consolidated Financial Statements for additional information on the accelerated depreciation expense.
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We expect that our depreciation and amortization expense will increase in the future as we launch our Gogo 5G network. 43 Other (Income) Expense: Other (income) expense and percent change for the years ended December 31, 2023 and 2022 were as follows (in thousands, except for percent change) : For the Years % Change Ended December 31, 2023 over 2023 2022 2022 Interest income $ (7,403 ) $ (2,386 ) 210.3 % Interest expense 33,056 38,872 (15.0 )% Loss on extinguishment of debt 2,224 — nm Other (income) expense, net (1,315 ) 123 (1169.1 )% Total $ 26,562 $ 36,609 (27.4 )% Percentage changes that are considered not meaningful are denoted with nm.
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Total other expense decreased to $26.6 million for the year ended December 31, 2023, as compared with $36.6 million for the prior year, primarily due to an increase in interest income, a decrease in interest expense as a result of the 2022 Convertible Notes no longer being outstanding during the current-year period, an increase in capitalized interest, gain on sale of an equity investment and the benefit from the interest rate caps, partially offset by an increase in interest expense related to the Term Loan Facility and the loss on extinguishment of debt resulting from the $100 million prepayment of the outstanding principal amount of the Term Loan Facility on May 3, 2023.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe believe it is useful for an understanding of our liquidity to include the cash flows associated with interest rate caps to facilitate a more consistent comparison of net cash paid for interest and the interest rate changes for which we are hedged. 44 Gogo Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Measures (in thousands, except per share amounts) (unaudited) For the Years Ended December 31, 2022 2021 2020 Adjusted EBITDA: Net income (loss) attributable to common stock (GAAP) $ 92,059 $ 152,735 $ (250,036 ) Interest expense 38,872 67,472 125,787 Interest income (2,386 ) (191 ) (722 ) Income tax provision (benefit) 13,658 (187,230 ) (146 ) Depreciation and amortization 12,580 15,482 14,166 EBITDA 154,783 48,268 (110,951 ) Stock-based compensation expense 19,065 13,345 7,808 Loss from discontinued operations — 3,854 201,477 Loss on extinguishment of debt and settlement of convertible notes — 83,961 — Separation costs related to CA sale — 1,550 — Adjusted EBITDA $ 173,848 $ 150,978 $ 98,334 Free Cash Flow: Net cash provided by operating activities (GAAP) $ 103,405 $ 66,697 $ 4,513 Consolidated capital expenditures (49,914 ) (8,660 ) (8,990 ) Proceeds from (purchase of) interest rate caps 4,292 (8,629 ) — Free cash flow $ 57,783 $ 49,408 $ (4,477 ) Material limitations of Non-GAAP measures Although EBITDA, Adjusted EBITDA and Free Cash Flow are measurements frequently used by investors and securities analysts in their evaluations of companies, EBITDA, Adjusted EBITDA and Free Cash Flow each have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for, or more meaningful than, amounts determined in accordance with GAAP.
Biggest changeManagement believes that Free Cash Flow is useful for investors because it provides them with an important perspective on the cash available for strategic measures, after making necessary capital investments in property and equipment to support the Company’s ongoing business operations and provides them with the same measures that management uses as the basis of making capital allocation decisions. 45 Gogo Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Measures (in thousands, unaudited) For the Years Ended December 31, 2023 2022 2021 Adjusted EBITDA: Net income attributable to common stock (GAAP) $ 145,678 $ 92,059 $ 152,735 Interest expense 33,056 38,872 67,472 Interest income (7,403 ) (2,386 ) (191 ) Income tax provision (benefit) (48,075 ) 13,658 (187,230 ) Depreciation and amortization 16,701 12,580 15,482 EBITDA 139,957 154,783 48,268 Stock-based compensation expense 21,288 19,065 13,345 Loss on extinguishment of debt and settlement of convertible notes 2,224 — 83,961 Gain on sale of equity investment (1,343 ) — — Loss from discontinued operations — — 3,854 Separation costs related to CA sale — — 1,550 Adjusted EBITDA $ 162,126 $ 173,848 $ 150,978 Free Cash Flow: Net cash provided by operating activities (GAAP) $ 78,970 $ 103,405 $ 66,697 Consolidated capital expenditures (24,088 ) (49,914 ) (8,660 ) Proceeds from FCC Reimbursement Program for property, equipment and intangibles 1,130 — — Proceeds from (purchase of) interest rate caps 26,675 4,292 (8,629 ) Free cash flow $ 82,687 $ 57,783 $ 49,408 Material limitations of Non-GAAP measures Although EBITDA, Adjusted EBITDA and Free Cash Flow are measurements frequently used by investors and securities analysts in their evaluations of companies, EBITDA, Adjusted EBITDA and Free Cash Flow each have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for, or more meaningful than, amounts determined in accordance with GAAP.
However, our Directors’ and Officers’ insurance does provide coverage for certain of these losses. In the ordinary course of business, we may occasionally enter into agreements pursuant to which we may be obligated to pay for the failure of performance of others, such as the use of corporate credit cards issued to employees.
However, our Directors’ and Officers’ insurance does provide coverage for certain of these losses. In the ordinary course of business, we may occasionally enter into agreements pursuant to which we may be obligated to pay for the failure of the performance of others, such as the use of corporate credit cards issued to employees.
Bank National Association, as trustee. The Issuers issued an additional $20.0 million of 2024 Senior Secured Notes on May 7, 2019, which were issued at a price equal to 100.5% of their face value, and $50.0 million of 2024 Senior Secured Notes on November 13, 2020, which were issued at a price equal to 103.5% of their face value.
Bank National Association, as trustee. On May 7, 2019, the Issuers issued an additional $20.0 million of 2024 Senior Secured Notes, which were issued at a price equal to 100.5% of their face value, and $50.0 million of 2024 Senior Secured Notes on November 13, 2020, which were issued at a price equal to 103.5% of their face value.
The obligations under the ABL Credit Agreement were guaranteed by Gogo and all of its existing and future subsidiaries, subject to certain exceptions and secured by certain collateral of the Company. On April 30, 2021, the ABL Credit Agreement and all commitments thereunder were terminated.
The obligations under the ABL Credit Agreement were guaranteed by Gogo and all of its existing and future subsidiaries, subject to certain exceptions and secured by collateral of the Company. On April 30, 2021, the ABL Credit Agreement and all commitments thereunder were terminated.
The principal contributors to the increase in operating cash flows were: • A $55.6 million improvement in net income and non-cash charges and credits, as noted above under “—Results of Operations.” • An $18.9 million decrease in cash flows related to operating assets and liabilities resulting from: o A decrease in cash flows primarily due to the following: ▪ Changes in accounts receivable due to higher revenue; ▪ Changes in inventories due to additional purchases to meet increased demand and manage supply chain disruptions; and ▪ Changes in accounts payable and non-current assets and liabilities primarily due to the timing of payments. o Partially offset by an increase in cash flows due to the following: ▪ Changes in accrued interest primarily due to the timing of interest payments as compared with the prior year and lower interest expense resulting from the Refinancing; and ▪ Changes in contract assets and deferred revenue due to the timing of revenue recognition and payment or collection of cash.
The principal contributors to the increase in operating cash flows were: • A $55.6 million improvement in net income and non-cash charges and credits, as noted above under “—Results of Operations.” • An $18.9 million decrease in cash flows related to operating assets and liabilities resulting from: o A decrease in cash flows primarily due to the following: ▪ Changes in accounts receivable due to higher revenue; ▪ Changes in inventories due to additional purchases to meet increased demand and manage supply chain disruptions; and ▪ Changes in accounts payable and non-current assets and liabilities primarily due to the timing of payments. 49 o Partially offset by an increase in cash flows due to the following: ▪ Changes in accrued interest primarily due to the timing of interest payments as compared with the prior year and lower interest expense resulting from the Refinancing; and ▪ Changes in contract assets and deferred revenue due to the timing of revenue recognition and payment or collection of cash.
While the interest rate caps are intended to limit our interest rate exposure under our variable rate indebtedness, which includes the Facilities, if our variable rate indebtedness does not decrease in proportion to the periodic decreases in the notional amount hedged under the interest rate caps, then the portion of such indebtedness that will be effectively hedged against possible increases in interest rates will decrease.
While the interest rate caps are intended to limit our interest rate exposure under our variable rate indebtedness, which includes the Facilities, if our variable rate indebtedness does not decrease in 47 proportion to the periodic decreases in the notional amount hedged under the interest rate caps, then the portion of such indebtedness that will be effectively hedged against possible increases in interest rates will decrease.
Non-GAAP Measures In our discussion below, we discuss Adjusted EBITDA and Free Cash Flow, as defined below, which are non-GAAP financial measurements. Management uses Adjusted EBITDA and Free Cash Flow for business planning purposes, including managing our business against internally projected results of operations and measuring our performance and liquidity.
Non-GAAP Measures In our discussion below, we discuss EBITDA, Adjusted EBITDA and Free Cash Flow, as defined below, which are non-GAAP financial measures. Management uses EBITDA, Adjusted EBITDA and Free Cash Flow for business planning purposes, including managing our business against internally projected results of operations and measuring our performance and liquidity.
ABL Credit Facility On August 26, 2019, Gogo Inc., GIH and Gogo Finance entered into a credit agreement (the “ABL Credit Agreement”) with the other loan parties party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Morgan Stanley Senior Funding, Inc., as syndication agent, which provides for an asset-based revolving credit facility (the “ABL Credit Facility”) of up to $30.0 million, subject to borrowing base availability, and includes letter of credit and swingline sub-facilities.
ABL Credit Facility On August 26, 2019, Gogo, GIH and Gogo Finance entered into a credit agreement (the “ABL Credit Agreement”) with the other loan parties party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Morgan Stanley Senior Funding, Inc., as syndication agent, which provided for an asset-based revolving credit facility (the “ABL Credit Facility”) of up to $30.0 million, subject to borrowing base availability, and includes letter of credit and swingline sub-facilities.
Some of these limitations include: • EBITDA and Adjusted EBITDA do not reflect interest income or expense; · EBITDA and Adjusted EBITDA do not reflect cash requirements for our income taxes; · EBITDA and Adjusted EBITDA do not reflect depreciation and amortization, which are significant and unavoidable operating costs given the level of capital expenditures needed to maintain our business; · Adjusted EBITDA does not reflect non-cash components of employee compensation; · Adjusted EBITDA does not reflect the results of discontinued operations; · Adjusted EBITDA for the year ended December 31, 2021 does not reflect the separation costs related to the sale of CA; · Adjusted EBITDA does not reflect the loss on extinguishment of debt and settlement of convertible notes; · Free Cash Flow does not represent the total increase or decrease in our cash balance for the period; and · since other companies in our industry or related industries may calculate these measures differently from the way we do, their usefulness as comparative measures may be limited.
Some of these limitations include: • EBITDA and Adjusted EBITDA do not reflect interest income or expense; · EBITDA and Adjusted EBITDA do not reflect cash requirements for our income taxes; · EBITDA and Adjusted EBITDA do not reflect depreciation and amortization, which are significant and unavoidable operating costs given the level of capital expenditures needed to maintain our business; · Adjusted EBITDA does not reflect non-cash components of employee compensation; · Adjusted EBITDA does not reflect the gain on sale of equity investment; · Adjusted EBITDA does not reflect the results of discontinued operations; · Adjusted EBITDA for the year ended December 31, 2021 does not reflect the separation costs related to the sale of CA; · Adjusted EBITDA does not reflect the loss on extinguishment of debt and settlement of convertible notes; · Free Cash Flow does not represent the total increase or decrease in our cash balance for the period; and · since other companies in our industry or related industries may calculate these measures differently from the way we do, their usefulness as comparative measures may be limited.
As detailed in Note 9, “Long-Term Debt and Other Liabilities,” on April 30, 2021, GIH entered into the 2021 Credit Agreement with Gogo, the lenders and issuing banks party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent, which provides for the Term Loan Facility in an aggregate principal amount of $725.0 million, issued with a discount of 0.5%, and the Revolving Facility, which includes a letter of credit sub-facility.
As detailed in Note 8, “Long-Term Debt and Other Liabilities,” on April 30, 2021, GIH entered into the 2021 Credit Agreement with Gogo, the lenders and issuing banks party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent, which provides for the Term Loan Facility in an aggregate principal amount of $725.0 million, issued with a discount of 0.5%, and the Revolving Facility, which includes a letter of credit sub-facility.
On February 2, 2023, Gogo and GIH entered into an amendment to the Original 2021 Credit Agreement with Morgan Stanley Senior Funding, Inc., as administrative agent, which replaced all references in the Original 2021 Credit Agreement to LIBOR in respect of the applicable interest rates for the Facilities with an adjusted term SOFR rate, plus a credit spread adjustment based on the Alternative Reference Rates Committee recommended spread adjustment.
On February 2, 2023, Gogo and GIH entered into an amendment to the Original 2021 Credit Agreement with Morgan Stanley Senior Funding, Inc., as administrative agent, which replaced all references in the Original 2021 Credit Agreement to LIBOR in respect of the applicable interest rates for the Facilities with an adjusted term SOFR rate, plus a credit spread adjustment recommended by the Alternative Reference Rates Committee.
Adjusted EBITDA and Free Cash Flow are not recognized measurements under GAAP; when analyzing our performance with Adjusted EBITDA or liquidity with Free Cash Flow, as applicable, investors should (i) evaluate each adjustment in our reconciliation to the corresponding GAAP measure, and the explanatory footnotes regarding those adjustments, (ii) use Adjusted EBITDA in addition to, and not as an alternative to, net income (loss) attributable to common stock as a measure of operating results and (iii) use Free Cash Flow in addition to, and not as an alternative to, consolidated net cash provided by operating activities when evaluating our liquidity. 43 Definition and Reconciliation of Non-GAAP Measures EBITDA represents net income (loss) attributable to common stock before interest expense, interest income, income taxes and depreciation and amortization expense.
EBITDA, Adjusted EBITDA and Free Cash Flow are not recognized measurements under GAAP; when analyzing our performance with EBITDA or Adjusted EBITDA or liquidity with Free Cash Flow, as applicable, investors should (i) evaluate each adjustment in our reconciliation to the corresponding GAAP measure, and the explanatory footnotes regarding those adjustments, (ii) use EBITDA or Adjusted EBITDA in addition to, and not as an alternative to, net income attributable to common stock as a measure of operating results and (iii) use Free Cash Flow in addition to, and not as an alternative to, consolidated net cash provided by operating activities when evaluating our liquidity. 44 Definition and Reconciliation of Non-GAAP Measures EBITDA represents net income attributable to common stock before interest expense, interest income, income taxes and depreciation and amortization expense.
Additionally, unused commitments under the Revolving Facility are subject to a fee ranging from 0.25% to 0.50% per annum depending on GIH’s senior secured first lien net leverage ratio. As of December 31, 2022, the fee for unused commitments under the Revolving Facility was 0.25% and the applicable margin was 3.25%.
Additionally, unused commitments under the Revolving Facility are subject to a fee ranging from 0.25% to 0.50% per annum depending on GIH’s senior secured first lien net leverage ratio. As of December 31, 2023, the fee for the unused commitments under the Revolving Facility was 0.25% and the applicable margin was 3.25%.
For additional information on the 2021 Credit Agreement, the 2022 Convertible Notes, the 2024 Senior Secured Notes, the ABL Credit Facility and the 2020 Convertible Notes, see Note 9, “Long-Term Debt and Other Liabilities,” to our consolidated financial statements.
For additional information on the 2021 Credit Agreement, the 2022 Convertible Notes, the 2024 Senior Secured Notes, the ABL Credit Facility and the 2020 Convertible Notes, see Note 8, “Long-Term Debt and Other Liabilities,” to our consolidated financial statements.
The proceeds of the Term Loan Facility were used, together with cash on hand, (i) to redeem in full and pay the outstanding principal amount of the 2024 Senior Secured Notes together with accrued and unpaid interest and redemption premiums and to pay fees associated with the termination of the ABL Credit Agreement (together with the redemption of the 2024 Senior Secured Notes, the “Refinancing”), and (ii) to pay fees and expenses incurred in connection with the Refinancing and the Facilities (the “Transaction Costs”).
The proceeds of the Term Loan Facility were used, together with cash on hand, (i) to redeem in full and pay the outstanding principal amount of the 2024 Senior Secured Notes together with accrued and unpaid interest and redemption premiums and to pay fees associated with the termination of the ABL Credit Agreement (together with the redemption of the 2024 Senior Secured Notes, the “Refinancing”), and (ii) to pay the other fees and expenses incurred in connection with the Refinancing and the Facilities.
The Revolving Facility is available for working capital and general corporate purposes of Gogo and its subsidiaries and was undrawn as of December 31, 2022. In May 2022, the remaining $102.8 million aggregate principal amount of the 2022 Convertible Notes was converted by holders into 17,131,332 shares of common stock.
The Revolving Facility is available for working capital and general corporate purposes of GIH and its subsidiaries and was undrawn as of December 31, 2023. In May 2022, the remaining $102.8 million aggregate principal amount of the 2022 Convertible Notes was converted by holders into 17,131,332 shares of common stock.
The Term Loan Facility amortizes in nominal quarterly installments equal to 1% of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity on April 30, 2028. There are no amortization payments under the Revolving Facility, and all borrowings under the Revolving Facility mature on April 30, 2026.
The Term Loan Facility amortizes in nominal quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity of the Term Loan Facility on April 30, 2028. There are no amortization payments under the Revolving Facility, and all borrowings under the Revolving Facility mature on April 30, 2026.
Net cash provided by (used in) financing activities from continuing operations: Cash used in financing activities from continuing operations for the year ended December 31, 2022 was $28.4 million, primarily due to the repurchase of 1.5 million shares of common stock in a private transaction and principal repayments on the Term Loan Facility.
Cash used in financing activities from continuing operations for the year ended December 31, 2022 was $28.4 million, primarily due to the repurchase of 1.5 million shares of common stock in a private transaction and principal repayments on the Term Loan Facility.
Adjusted EBITDA represents EBITDA adjusted for (i) stock-based compensation expense included in the results of continuing operations, (ii) the results of discontinued operations, including stock-based compensation expense and the gain on the sale of CA, (iii) loss on extinguishment of debt and settlement of convertible notes and (iv) separation costs related to the sale of CA.
Adjusted EBITDA represents EBITDA adjusted for (i) stock-based compensation expense included in the results of continuing operations, (ii) loss on extinguishment of debt and settlement of convertible notes, (iii) gain on sale of equity investment, (iv) the results of discontinued operations, including stock-based compensation expense and the gain on the sale of CA and (v) separation costs related to the sale of CA.
(5) Other long-term obligations consist of estimated payments (undiscounted) for our asset retirement obligations, network transmission services and monthly payments of C$0.1 million (using the December 31, 2022 exchange rate) to the licensor of our Canadian ATG spectrum license over the estimated 25-year term of the agreement.
(6) Other long-term obligations consist of estimated payments (undiscounted) for our asset retirement obligations, network transmission services and monthly payments of C$0.1 million (using the December 31, 2023 exchange rate) to the licensor of our Canadian ATG spectrum license over the estimated 25-year term of the agreement.
Free Cash Flow represents net cash provided by operating activities, plus the proceeds from our interest rate caps, less purchases of property and equipment and the acquisition of intangible assets and cash paid to purchase our interest rate caps. We believe that Free Cash Flow provides meaningful information regarding our liquidity.
Free Cash Flow represents net cash provided by operating activities, plus the proceeds received from the FCC Reimbursement Program and the interest rate caps, less purchases of property and equipment and the acquisition of intangible assets and cash paid to purchase our interest rate caps. We believe that Free Cash Flow provides meaningful information regarding our liquidity.
Based on our current plans, we expect that our cash and cash equivalents, cash flows provided by operating activities and access to capital markets will be sufficient to meet the cash requirements of our business, including capital expenditure requirements and debt maturities, for at least the next twelve months and thereafter for the foreseeable future.
Based on our current plans, we expect our cash and cash equivalents, cash flows provided by operating activities and access to capital markets will be sufficient to meet the cash requirements of our business, including capital expenditure requirements, debt maturities and share repurchases, if any, for at least the next twelve months and thereafter for the foreseeable future.
Loans outstanding under the Revolving Facility bear annual interest at a floating rate measured by reference to, at GIH’s option, either (i) an adjusted term SOFR rate (subject to a floor of 0.00%) plus an applicable margin ranging from 3.25% to 3.75% per annum depending on GIH’s senior secured first lien net leverage ratio and a credit spread adjustment based on the Alternative Reference Rates Committee recommended spread adjustments or (ii) an alternate base rate plus an applicable margin ranging from 2.25% to 2.75% per annum depending on GIH’s senior secured first lien net leverage ratio.
Loans outstanding under the Revolving Facility bear annual interest at a floating rate measured by reference to, at GIH’s option, either (i) an adjusted term SOFR rate (subject to a floor of 0.00%) plus an applicable margin ranging from 3.25% to 3.75% per annum depending on GIH’s senior secured first lien net leverage ratio and a credit spread adjustment recommended by the Alternative Reference Rates Committee of 0.11%, 0.26% or 0.43% per annum based on 1-month, 3-month or 6-month term SOFR, respectively or (ii) an alternate base rate plus an applicable margin ranging from 2.25% to 2.75% per annum depending on GIH’s senior secured first lien net leverage ratio.
See Note 17, “Commitments and Contingencies,” to our consolidated financial statements for additional information. Leases and Cell Site Contracts: We have lease agreements relating to certain facilities and equipment, which are considered operating leases. See Note 16, “Leases,” to our consolidated financial statements for additional information.
See Note 15, “Commitments and Contingencies,” to our consolidated financial statements for additional information. Leases and Cell Site Contracts: We have lease agreements relating to certain facilities and equipment, which are considered operating leases. See Note 14, “Leases,” to our consolidated financial statements for additional information.
We expect that our capital expenditures will decrease over time as we complete the Gogo 5G program. 49 Debt Instruments Following is a discussion of the debt instruments we had in place as of December 31, 2022 as well as those we utilized during the years ended December 31, 2022, 2021 and 2020. 2021 Credit Agreement On April 30, 2021, Gogo Intermediate Holdings LLC (a wholly owned subsidiary of Gogo Inc.) (“GIH”) entered into a credit agreement (the “Original 2021 Credit Agreement,” and, as it may be amended, supplemented or otherwise modified from time to time, the “2021 Credit Agreement”) among Gogo, GIH, the lenders and issuing banks party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent, which provides for (i) a term loan credit facility (the “Term Loan Facility”) in an aggregate principal amount of $725.0 million, issued with a discount of 0.5%, and (ii) a revolving credit facility (the “Revolving Facility” and together with the Term Loan Facility, the “Facilities”) of up to $100.0 million, which includes a letter of credit sub-facility.
We expect that our capital expenditures will decrease starting in 2026 as these programs are completed. 50 Debt Instruments Following is a discussion of the debt instruments we had in place as of December 31, 2023 as well as those we utilized during the years ended December 31, 2023, 2022 and 2021. 2021 Credit Agreement On April 30, 2021, Gogo and Gogo Intermediate Holdings LLC (“GIH”) (a wholly owned subsidiary of Gogo Inc.) entered into a credit agreement (the “Original 2021 Credit Agreement,” and, as it may be amended, supplemented or otherwise modified from time to time, the “2021 Credit Agreement”) among Gogo, GIH, the lenders and issuing banks party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent, which provides for (i) a term loan credit facility (the “Term Loan Facility”) in an aggregate principal amount of $725.0 million, issued with a discount of 0.5%, and (ii) a revolving credit facility (the “Revolving Facility” and together with the Term Loan Facility, the “Facilities”) of up to $100.0 million, which includes a letter of credit sub-facility.
Cash paid for taxes totaled $0.4 million for each of the years ended December 31, 2022, 2021 and 2020. We expect cash tax payments to be immaterial for an extended period of time, subject to the availability of our net operating losses.
Cash paid for taxes totaled $1.0 million, $0.4 million and $0.4 million, respectively, for the years ended December 31, 2023, 2022 and 2021. We expect cash tax payments to be immaterial for an extended period of time, subject to the availability of our net operating losses.
We believe it is useful for an understanding of our operating performance to exclude the loss on extinguishment of debt and settlement of convertible notes from Adjusted EBITDA because this activity is not related to our operating performance.
We believe it is useful for an understanding of our operating performance to exclude the loss on extinguishment of debt and settlement of convertible notes from Adjusted EBITDA because of the infrequently occurring nature of this activity.
Restricted Cash Our restricted cash balances were $0.3 million and $0.4 million, respectively, as of December 31, 2022 and 2021, and consisted primarily of a letter of credit issued for the benefit of the landlord of our office location in Chicago, IL.
Restricted Cash Our restricted cash balances were $0.3 million as of both December 31, 2023 and 2022, and consisted primarily of a letter of credit issued for the benefit of the landlord of our office location in Chicago, IL.
In April 2021, approximately 1.5 million shares of common stock were delivered to us in connection with the Amended and Restated Forward Transaction. In May 2022, the approximately 0.6 million shares that were remaining under the Amended and Restated Forward Transactions were delivered to us. As of December 31, 2022, there were no prepaid forward stock repurchase transactions outstanding.
In April 2021, approximately 1.5 million shares of common stock were delivered to us in connection with the Amended and Restated Forward Transaction. In May 2022, the approximately 0.6 million shares that were remaining under the Amended and Restated Forward Transaction were delivered to us. There are no longer any additional prepaid forward stock repurchase transactions outstanding.
Subject to certain exceptions and de minimis thresholds, the Term Loan Facility is subject to mandatory prepayments in an amount equal to: (i) 100% of the net cash proceeds of certain asset sales, insurance recovery and condemnation events, subject to reduction to 50% and 0% if specified senior secured first lien net leverage ratio targets are met; (ii) 100% of the net cash proceeds of certain debt offerings; and (iii) 50% of annual excess cash flow (as defined in the 2021 Credit Agreement), subject to reduction to 25% and 0% if specified senior secured first lien net leverage ratio targets are met.
The Term Loan Facility is subject to mandatory prepayment of the proceeds of certain non-permitted asset sales, insurance recoveries and condemnation events in an amount equal to: (i) 100% of the net cash proceeds of such certain non-permitted asset sales, insurance recoveries and condemnation events, subject to reduction to 50% and 0% if specified senior secured first lien net leverage ratio targets are met; (ii) 100% of the net cash proceeds of certain debt offerings; and (iii) 50% of annual excess cash flow (as defined in the 2021 Credit Agreement), subject to reduction to 25% and 0% if specified senior secured first lien net leverage ratio targets are met.
For the year ended December 31, 2021, cash provided by operating activities from continuing operations was $66.7 million, as compared with cash provided by operating activities from continuing operations of $4.5 million for the prior year.
For the year ended December 31, 2022, cash provided by operating activities from continuing operations was $103.4 million, as compared with $66.7 million for the prior year.
The Term Loan Facility bears annual interest at a floating rate measured by reference to, at GIH’s option, either (i) an adjusted term SOFR rate (subject to a floor of 0.75%) plus an applicable margin of 3.75% and a credit spread adjustment based on the Alternative Reference Rates Committee recommended spread adjustments or (ii) an alternate base rate plus an applicable margin of 2.75%.
The Term Loan Facility bears annual interest at a floating rate measured by reference to, at GIH’s option, either (i) an adjusted term SOFR rate (subject to a floor of 0.75%) plus an applicable margin of 3.75% and a credit spread adjustment recommended by the Alternative Reference Rates Committee of 0.11%, 0.26% or 0.43% per annum based on 1-month, 3-month or 6-month term SOFR, respectively or (ii) an alternate base rate plus an applicable margin of 2.75%.
The make-whole premium paid in connection with the redemption was $48.1 million and we wrote off the remaining unamortized deferred financing costs of $15.2 million and the remaining debt discount of $1.3 million, which together are included in Loss on extinguishment of debt and settlement of convertible notes in our consolidated statements of operations for the year ended December 31, 2021.
We wrote off the remaining unamortized deferred financing costs of $15.2 million and the remaining debt discount of $1.3 million, which together are included in Loss on extinguishment of debt and settlement of convertible notes in our consolidated statements of operations for the year ended December 31, 2021.
The maximum potential amount of future payments we could be required to make under these indemnification agreements is uncertain and is typically not limited by the terms of the agreements. 47 Cash Flows The following table presents a summary of our cash flow activity for the periods set forth below (in thousands) : For the Years Ended December 31, 2022 2021 2020 Cash flows from continuing operations: Net cash provided by operating activities $ 103,405 $ 66,697 $ 4,513 Net cash used in investing activities (70,418 ) (16,289 ) (8,990 ) Net cash provided by (used in) financing activities (28,388 ) (331,037 ) 44,479 Net cash provided by (used in) discontinued operations — (9,013 ) 220,139 Effect of foreign exchange rate changes on cash 13 40 (1,946 ) Increase (decrease) in cash, cash equivalents and restricted cash 4,612 (289,602 ) 258,195 Cash, cash equivalents and restricted cash at beginning of period 146,268 435,870 177,675 Cash, cash equivalents and restricted cash at end of period $ 150,880 $ 146,268 $ 435,870 Supplemental information: Cash, cash equivalents and restricted cash at end of period $ 150,880 $ 146,268 $ 435,870 Less: current restricted cash — 25 525 Less: non-current restricted cash 330 330 — Cash and cash equivalents at end of period $ 150,550 $ 145,913 $ 435,345 Following is a discussion of the year-over-year changes in cash flow activities.
The maximum potential amount of future payments we could be required to make under these indemnification agreements is uncertain and is typically not limited by the terms of the agreements. 48 Cash Flows The following table presents a summary of our cash flow activity for the periods set forth below (in thousands) : For the Years Ended December 31, 2023 2022 2021 Cash flows from continuing operations: Net cash provided by operating activities $ 78,970 $ 103,405 $ 66,697 Net cash provided by (used in) investing activities 29,856 (70,418 ) (16,289 ) Net cash used in financing activities (120,434 ) (28,388 ) (331,037 ) Net cash used in discontinued operations — — (9,013 ) Effect of foreign exchange rate changes on cash 94 13 40 Increase (decrease) in cash, cash equivalents and restricted cash (11,514 ) 4,612 (289,602 ) Cash, cash equivalents and restricted cash at beginning of period 150,880 146,268 435,870 Cash, cash equivalents and restricted cash at end of period $ 139,366 $ 150,880 $ 146,268 Supplemental information: Cash, cash equivalents and restricted cash at end of period $ 139,366 $ 150,880 $ 146,268 Less: current restricted cash — — 25 Less: non-current restricted cash 330 330 330 Cash and cash equivalents at end of period $ 139,036 $ 150,550 $ 145,913 Following is a discussion of the year-over-year changes in cash flow activities.
On February 2, 2023, Gogo and GIH entered into an amendment to the Original 2021 Credit Agreement with Morgan Stanley Senior Funding, Inc., as administrative agent, which replaced all references in the Original 2021 Credit Agreement to LIBOR in respect of the applicable interest rates for the Facilities with an adjusted term SOFR rate, plus a credit spread adjustment based on the Alternative Reference Rates Committee recommended spread adjustment.
On February 2, 2023, Gogo and GIH entered into an amendment to the Original 2021 Credit Agreement with Morgan Stanley Senior Funding, Inc., as administrative agent, which replaced all references in the Original 2021 Credit Agreement to LIBOR in respect of the applicable interest rates for the Facilities with an adjusted term secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”), plus a credit spread adjustment recommended by the Alternative Reference Rates Committee.
Liquidity and Capital Resources We have historically financed our growth and cash needs primarily through the issuance of common stock, non-convertible debt, senior convertible preferred stock, convertible debt, credit facilities and cash from operating activities.
Liquidity and Capital Resources We have historically financed our growth and cash needs primarily through the issuance of common stock, debt and cash from operating activities.
The 2024 Senior Secured Notes and the related guarantees were secured by certain liens on the Company’s collateral, certain of which were released upon the closing of the Transaction and the remainder on the Redemption Date as defined below.
The 2024 Senior Secured Notes and the related guarantees were secured by certain liens on the Company’s collateral, certain of which were released upon the closing of the sale of our CA business to Intelsat and the remainder on the Redemption Date as defined below.
The 2024 Senior Secured Notes were redeemed on May 1, 2021 (the “Redemption Date”) at a redemption price equal to 104.938% of the principal amount of the 2024 Senior Secured Notes redeemed, plus accrued and unpaid interest to (but not including) the Redemption Date.
The 2024 Senior Secured Notes were redeemed on May 1, 2021 (the “Redemption Date”), at a redemption price equal to 104.938% of the principal amount of the 2024 Senior Secured Notes redeemed, plus accrued and unpaid interest to (but not including) the Redemption Date. The make-whole premium paid in connection with the redemption was $48.1 million.
Net cash provided by operating activities from continuing operations: The following table presents a summary of our cash flows from operating activities from continuing operations for the periods set forth below (in thousands) : For the Years Ended December 31, 2022 2021 2020 Net income (loss) $ 92,059 $ 156,589 $ (48,559 ) Non-cash charges and credits 51,110 (69,027 ) 42,677 Changes in operating assets and liabilities (39,764 ) (20,865 ) 10,395 Net cash provided by operating activities from continuing operations $ 103,405 $ 66,697 $ 4,513 For the year ended December 31, 2022, cash provided by operating activities from continuing operations was $103.4 million, as compared with cash provided by operating activities from continuing operations of $66.7 million for the prior year.
Net cash provided by operating activities from continuing operations: The following table presents a summary of our cash flows from operating activities from continuing operations for the periods set forth below (in thousands) : For the Years Ended December 31, 2023 2022 2021 Net income $ 145,678 $ 92,059 $ 156,589 Non-cash charges and credits (4,410 ) 51,110 (69,027 ) Changes in operating assets and liabilities (62,298 ) (39,764 ) (20,865 ) Net cash provided by operating activities from continuing operations $ 78,970 $ 103,405 $ 66,697 For the year ended December 31, 2023, cash provided by operating activities from continuing operations was $79.0 million, as compared with $103.4 million for the prior year.
In May 2022, the remaining $102,788,000 aggregate principal amount of 2022 Convertible Notes was converted by holders into 17,131,332 shares of common stock. As of December 31, 2022, there were no outstanding 2022 Convertible Notes. 2024 Senior Secured Notes On April 25, 2019 (the “Issue Date”), GIH and Gogo Finance Co. Inc.
In May 2022, the remaining $102.8 million aggregate principal amount of 2022 Convertible Notes was converted by holders into 17,131,332 shares of common stock. 2024 Senior Secured Notes On April 25, 2019, GIH and Gogo Finance Co. Inc.
Therefore, we believe that 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.
We believe that the exclusion of stock-based compensation expense from Adjusted EBITDA provides a clearer view of the operating performance of our business and is appropriate given that grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 3, 2022, includes a discussion of changes in our results of operations from fiscal year 2020 to fiscal year 2021.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023 and incorporated by reference herein, includes a discussion of changes in our results of operations from fiscal year 2021 to fiscal year 2022.
The Facilities may be prepaid at GIH’s option at any time without premium or penalty (other than customary breakage costs), subject to minimum principal payment amount requirements.
The Facilities may be prepaid at GIH’s option at any time without premium or penalty (other than customary breakage costs), subject to minimum principal payment amount requirements. On May 3, 2023, the Company prepaid $100 million of the outstanding principal amount of the Term Loan Facility.
(2) See Note 9, “Long-Term Debt and Other Liabilities,” to our consolidated financial statements for more information. (3) Interest on the Term Loan Facility is calculated for future periods using the interest rate in effect as of December 31, 2022. (4) Amounts represent obligations to provide services for which we have already received cash from our customers.
(3) See Note 8, “Long-Term Debt and Other Liabilities,” to our consolidated financial statements for more information. (4) Interest on the Term Loan Facility is calculated for future periods using the interest rate in effect as of December 31, 2023 and excludes the impact of our interest rate caps.
In addition, the strike prices periodically increase over the life of the caps. As a result, the extent to which the interest rate caps will limit our interest rate exposure will decrease in the future.
In addition, the strike prices periodically increase over the life of the caps. As a result, the extent to which the interest rate caps will limit our interest rate exposure will decrease in the future. For additional information on the interest rate caps, see Note 9, “Derivative Instruments and Hedging Activities,” to our consolidated financial statements.
Forward Transactions In connection with the issuance of the 2020 Convertible Notes, we paid approximately $140.0 million to enter into prepaid forward stock repurchase transactions (the “Forward Transactions”) with certain financial institutions (the “Forward Counterparties”), pursuant to which we purchased approximately 7.2 million shares of common stock for settlement on or around the March 1, 2020 maturity date for the 2020 Convertible Notes, subject to the ability of each Forward Counterparty to elect to settle all or a portion of its Forward Transactions early. 51 On December 11, 2019, we entered into an amendment to one of the Forward Transactions (the “Amended and Restated Forward Transaction”) to extend the expected settlement date with respect to approximately 2.1 million shares of common stock held by one of the Forward Counterparties, JPMorgan Chase Bank, National Association (the “2022 Forward Counterparty”), to correspond with the May 15, 2022 maturity date for the 2022 Convertible Notes.
Forward Transactions In connection with the issuance of our 3.75% Convertible Senior Notes due 2020 (“the 2020 Convertible Notes”), we paid approximately $140.0 million to enter into prepaid forward stock repurchase transactions (the “Forward Transactions”) with certain financial institutions (the “Forward Counterparties”), pursuant to which we purchased approximately 7.2 million shares of common stock for settlement on or around the March 1, 2020 maturity date for the 2020 Convertible Notes, subject to the ability of each Forward Counterparty to elect to settle all or a portion of its Forward Transactions early.
The principal contributors to the increase in operating cash flows were: • A $93.4 million improvement in net income (loss) and non-cash charges and credits, as noted above under “—Results of Operations.” 48 • A $31.3 million decrease in cash flows related to operating assets and liabilities resulting from: o A decrease in cash flows primarily due to the following: ▪ Changes in inventories due to increased equipment purchases; ▪ Changes in accrued interest primarily due to the timing of payments as compared to the prior year and the reduced interest resulting from the Refinancing; and ▪ Changes in prepaid expenses, accounts payable and accrued liabilities due primarily to the timing of payments. o Partially offset by an increase in cash flows due to changes in contract assets as compared to the prior year.
The principal contributors to the decrease in operating cash flows were: • A $1.9 million decrease in net income and non-cash charges and credits, as noted above under “—Results of Operations.” • A $22.5 million decrease in cash flows related to operating assets and liabilities resulting from: o A decrease in cash flows primarily due to the following: ▪ Changes in prepaid expenses and other current assets primarily due to an interest rate caps receivable and receivables related to the FCC Reimbursement Program; and ▪ Changes in accrued interest due to the change in timing of payments. o Partially offset by an increase in cash flows primarily due to changes in accounts receivable due to the timing of collections.
As a result of the termination, the remaining unamortized deferred financing costs of $0.3 million were written off as of May 1, 2021 and included in Loss on extinguishment of debt and settlement of convertible notes in our consolidated statements of operations for the year ended December 31, 2021. 2020 Convertible Notes In March 2015, we issued $361.9 million aggregate principal amount of 3.75% Convertible Senior Notes due 2020 (the “2020 Convertible Notes”) in a private offering to qualified institutional buyers, pursuant to Rule 144A under the Securities Act.
As a result of the termination, the remaining unamortized deferred financing costs of $0.3 million were written off as of May 1, 2021, and included in Loss on extinguishment of debt and settlement of convertible notes in our consolidated statements of operations for the year ended December 31, 2021.
The increase in capital expenditures in 2022 as compared to 2021 was primarily due to the build out of Gogo 5G, and the decrease in capital expenditures in 2021 as compared with 2020 was primarily due a decrease in capitalized software, partially offset by an increase in network-related equipment.
The decrease in capital expenditures in 2023 as compared to 2022 was primarily due to the build out of the Gogo 5G network during 2022. The increase in capital expenditures in 2022 as compared to 2021 was primarily due to the build out of Gogo 5G.
The notional amounts of the interest rate caps periodically decrease over the life of the caps with the first reduction of $125 million occurring on July 31, 2023.
The termination date of the cap agreements is July 31, 2027. The notional amounts of the interest rate caps periodically decrease over the life of the caps with the first reduction of $125.0 million having occurred on July 31, 2023. The aggregate notional amount of the interest rate caps as of December 31, 2023 is $525.0 million.
If needed, we consider opportunities to raise additional capital in the public and private markets, utilizing one or more of the types of capital raising transactions through which we have historically financed our growth and cash needs, as well as other means of capital raising not previously used by us. 45 See the disclosure below under the heading “Debt Instruments” for the definitions of the debt and convertible debt instruments to which we refer in this section, as well as the indentures and other agreements that govern them.
Our capital management activities include the assessment of 46 opportunities to raise additional capital in the public and private markets, utilizing one or more of the types of capital raising transactions through which we have historically financed our growth and cash needs, as well as other means of capital raising not previously used by us.
In May 2021, we purchased interest rate caps with an aggregate notional amount of $650.0 million for $8.6 million. We receive payments in the amounts calculated pursuant to the caps for any period in which the three-month USD LIBOR rate increases beyond the applicable strike rate. The termination date of the cap agreements is July 31, 2027.
In May 2021, we purchased interest rate caps with an aggregate notional amount of $650.0 million for $8.6 million. We receive payments in the amount calculated pursuant to the caps for any period in which the daily compounded SOFR rate plus a credit spread adjustment recommended by the Alternative Reference Rates Committees of 0.26% increases beyond the applicable strike rate.
Capital expenditures for continuing operations for the years ended December 31, 2022, 2021 and 2020 were $49.9 million, $8.7 million and $9.0 million, respectively.
We also capitalized costs related to the build-out of our office locations. Capital expenditures for continuing operations for the years ended December 31, 2023, 2022 and 2021 were $24.1 million, $49.9 million and $8.7 million, respectively.
The 2021 Credit Agreement contains customary events of default, which, if any of them occurred, would permit or require the principal, premium, if any, and interest on all of the then outstanding obligations under the Facilities to be due and payable immediately and the commitments under the Revolving Facility to be terminated. 2022 Convertible Notes In November and December 2018, we issued a total of $237.8 million aggregate principal amount of 6.00% Convertible Senior Notes due 2022 (the “2022 Convertible Notes”) in private offerings to qualified institutional buyers, including pursuant to Rule 144A under the Securities Act, and in concurrent private placements.
The 2021 Credit Agreement contains customary events of default, which, if any of them occurred, would permit or require the principal, premium, if any, and interest on all of the then outstanding obligations under the Facilities to be due and payable immediately and the commitments under the Revolving Facility to be terminated.
For additional information on the interest rate caps, see Note 10, “Derivative Instruments and Hedging Activities,” to our consolidated financial statements. 46 Contractual Obligations and Commitments The following table summarizes our contractual obligations, comprised of our material future cash requirements and deferred revenue arrangements, as of December 31, 2022 (in thousands) .
Contractual Obligations and Commitments The following table summarizes our contractual obligations, comprised of our material future cash requirements and deferred revenue arrangements, as of December 31, 2023 (in thousands) .
In January 2021, $1.0 million aggregate principal amount of 2022 Convertible Notes was converted by holders and settled through the issuance of 166,666 shares of common stock. On March 17, 2021, Gogo entered into separate, privately negotiated exchange agreements (the “March 2021 Exchange Agreements”) with certain holders of 2022 Convertible Notes.
In 2021, $135.0 million aggregate principal amount of 2022 Convertible Notes was converted by holders and settled through the issuance of 24,353,006 shares of common stock.
Cash used in investing activities for the year ended December 31, 2022 included proceeds of $4.3 million from interest rate caps, while cash used in investing activities for the year ended December 31, 2021 included $8.6 million for the purchase of interest rate caps.
Cash used in investing activities from continuing operations was $70.4 million for the year ended December 31, 2022, primarily due to $49.9 million of capital expenditures noted below and $24.8 million purchase of short-term investments, partially offset by $4.3 million of proceeds from interest rate caps.
Cash provided by financing activities from continuing operations for the year ended December 31, 2020 was $44.5 million, primarily due to the $51.8 million of proceeds from the issuance of additional 2024 Senior Secured Notes, offset by the repurchase of convertible notes, payments on finance leases and stock-based compensation activity.
Net cash used in financing activities from continuing operations: Cash used in financing activities from continuing operations for the year ended December 31, 2023 was $120.4 million, primarily due to principal payments on the Term Loan Facility, stock-based compensation activities and share repurchases.
The negotiated exchange rate under the March 2021 Exchange Agreements was 181.40 shares of common stock per 50 $1,000 principal amount of the 2022 Convertible Notes, which resulted in a loss on settlement of $4.4 million, which is included in Loss on extinguishment of debt and settlement of convertible notes in our consolidated statements of operations for the year ended December 31, 2021.
As a result, we wrote off $2.2 million of the deferred financing costs and unaccreted debt discount, which are included in Loss on extinguishment of debt and settlement of convertible notes in our Consolidated Statements of Operations for the year ended December 31, 2023.
Net cash used in investing activities from continuing operations: Cash used in investing activities from continuing operations was $70.4 million, $16.3 million and $9.0 million, respectively, for the years ended December 31, 2022, 2021 and 2020. Investing activities are primarily comprised of capital expenditures related to software development, data center upgrades and cell site construction.
Cash used in investing activities from continuing operations was $16.3 million for the year ended December 31, 2021, primarily due to $8.7 million of capital expenditures noted below and $8.6 million purchase of interest rate caps, partially offset by $1.0 million of proceeds from sale of property and equipment.
Removed
Item 7. Management’s Discussion and Analysis o f Financial Condition and Results of Operations The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources.
Added
We believe it is useful for an understanding of our operating performance to exclude the gain on sale of equity investment from Adjusted EBITDA because this activity is not related to our operating performance.
Removed
You should read this discussion in conjunction with our consolidated financial statements and the related notes contained in this Annual Report on Form 10-K. On December 1, 2020, we completed the previously announced sale of our commercial aviation (“CA”) business to a subsidiary of Intelsat Jackson Holdings S.A.
Added
See the disclosure below under the heading “Debt Instruments” for the definitions of the debt and convertible debt instruments to which we refer in this section, as well as the indentures and other agreements that govern them.
Removed
(“Intelsat”) for a purchase price of $400.0 million in cash, subject to certain adjustments (the “Transaction”). As a result, all periods presented in our consolidated financial statements and other portions of this Annual Report on Form 10-K have been conformed to present the CA business as discontinued operations.
Added
On September 5, 2023, we announced a share repurchase program that grants the Company authority to repurchase up to $50 million of shares of the Company’s common stock.
Removed
There was no discontinued operations activity for the CA business after December 31, 2021. 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.
Added
Repurchases may be made at management's discretion from time to time on the open market, through privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in accordance with applicable securities laws and other restrictions, including Rule 10b-18 under the Exchange Act.
Removed
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 this report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Added
The repurchase program has no time limit and may be suspended for periods or discontinued at any time and does not obligate us to purchase any shares of our common stock. The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations.
Removed
Our fiscal year ends December 31 and, unless otherwise noted, references to years or fiscal are for fiscal years ended December 31. See “— Results of Operations.” Company Overview Gogo is the world’s largest provider of broadband connectivity services for the business aviation market. We have served this market for more than 25 years.
Added
We do not expect to incur debt to fund the share repurchase program. During the year ended December 31, 2023, we repurchased an aggregate 0.5 million shares of our common stock for $4.8 million.
Removed
Our mission is to enrich the lives of passengers and the efficiency of operators with the world’s best business aviation in-flight connectivity and customer support. We have always sought to provide the best connectivity for the business aviation market regardless of technology, and we have a successful history of doing so.
Added
On May 3, 2023, the Company prepaid $100 million of the outstanding principal amount of the Term Loan Facility.
Removed
Until recently, we focused primarily on business aviation aircraft in North America, which comprise approximately 63% of the worldwide business aviation fleet, and we are the leading provider of in-flight connectivity in that market.
Added
Less than 1-3 3-5 More than Total 1 year years years 5 years Contractual Obligations: Lease obligations (1) $ 104,804 $ 15,397 $ 30,888 $ 27,063 $ 31,456 Purchase obligations (2) 436,207 117,279 162,885 146,974 9,069 Term Loan Facility (3) 606,875 7,250 14,500 585,125 — Interest and fees on the Facilities (3)(4) 240,522 56,940 111,302 72,280 — Deferred revenue arrangements (5) 1,019 1,003 16 — — Other long-term obligations (6) 59,912 12,171 20,640 1,902 25,199 Total $ 1,449,339 $ 210,040 $ 340,231 $ 833,344 $ 65,724 (1) See Note 14, “Leases,” to our consolidated financial statements for more information.
Removed
Gogo started in analogue air-to-ground (“ATG”) technology in the late 1990s, then, as analogue cellular backhaul disappeared, migrated to narrowband satellite connectivity in the early 2000s, then back to ATG with our digital broadband 3G and 4G networks beginning in 2010. We expect to commercially launch our fourth ATG network – Gogo 5G – in the fourth quarter of 2023.
Added
(2) As of December 31, 2023, our outstanding purchase obligations represented obligations to vendors incurred in order to meet operational requirements in the normal course of business, including the build out of Gogo 5G, Gogo Galileo, information technology, research and development, sales and marketing, general and administrative and production related activities.
Removed
We also continue to provide narrowband satellite services to customers in North America and internationally through distribution agreements with satellite providers. In May 2022, in order to further serve our existing customers and expand our target market, we announced plans to expand our broadband offerings beyond ATG by launching the first global broadband service designed for business aviation (“Global Broadband”).
Added
(5) Amounts represent obligations to provide services for which we have already received cash from our customers.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur earnings are affected by changes in interest rates due to the impact those changes have on interest income generated from our cash, cash equivalents and short-term investments. Our cash and cash equivalents and short-term investments as of December 31, 2022 included amounts in bank deposit accounts, money market funds and U.S. Treasury securities.
Biggest changeOur earnings are affected by changes in interest rates due to the impact those changes have on interest income generated from our cash, cash equivalents and short-term investments.
Excluding the impact of our interest rate caps, a hypothetical one percentage point change in the applicable interest rate would impact our annual interest expense by approximately $7.1 million for the next twelve-month period.
Excluding the impact of our interest rate caps, a hypothetical one percentage point change in the applicable interest rate would impact our annual interest expense by approximately $6.1 million for the next twelve-month period.
We believe we have minimal interest rate risk as a 10% decrease in the average interest rate on our portfolio would have reduced interest income for the years ended December 31, 2022, 2021 and 2020 by immaterial amounts. 52 Inflation: We do not believe that inflation has had a material effect on our results of operations.
We believe we have minimal interest rate risk as a 10% decrease in the average interest rate on our portfolio would have reduced interest income for the years ended December 31, 2023, 2022 and 2021 by immaterial amounts. Inflation: We do not believe that inflation has had a material effect on our results of operations.
As of December 31, 2022, we had interest rate cap agreements to hedge a portion of our exposure to interest rate movements of our variable rate debt and to manage our interest expense.
As of December 31, 2023, we had interest rate cap agreements to hedge a portion of our exposure to interest rate movements of our variable rate debt and to manage our interest expense.
Treasury securities, U.S. government agency securities, and money market funds. Our cash and cash equivalents as of both December 31, 2022 and December 31, 2021 primarily included amounts in bank deposit accounts and money market funds. As of December 31, 2022, cash equivalents and short-term investments included U.S. Treasury securities.
Treasury securities, U.S. government agency securities, and money market funds. Our cash, cash equivalents and short-term investments as of both December 31, 2023 and December 31, 2022 primarily included amounts in bank deposit accounts, U.S. Treasury securities and money market funds with U.S. Government and U.S. Treasury securities.
Over the life of the interest rate caps, the notional amounts of the caps periodically decrease, while the applicable strike prices increase. The notional amount of outstanding debt associated with interest rate cap agreements as of December 31, 2022 was $650.0 million.
Over the life of the interest rate caps, the notional amounts of the caps periodically decrease, while the applicable strike prices increase. The notional amount of outstanding debt associated with interest rate cap agreements as of December 31, 2023 was $525.0 million.
Actual results may differ. Interest Rate Risk: We are exposed to interest rate risk on our variable rate indebtedness, which includes borrowings under the Term Loan Facility and Revolving Facility (if any).
Interest Rate Risk: We are exposed to interest rate risk on our variable rate indebtedness, which includes borrowings under the Term Loan Facility and Revolving Facility (if any).
Based on our December 31, 2022 outstanding variable rate debt balance, a hypothetical one percentage point change in the applicable interest rate would impact our annual interest expense by approximately $1.2 million for the next twelve-month period, which includes the impact of our interest rate caps at a strike rate of 0.75% and the $125 million reduction in the notional amount that will occur on July 31, 2023.
Based on our December 31, 2023 outstanding variable rate debt balance, a hypothetical one percentage point change in the applicable interest rate would impact our annual interest expense by approximately $1.5 million for the next twelve-month period, which includes the impact of our interest rate caps at a strike rate of 0.75% and the $175 million reduction in the notional amount and an increase of the strike rate to 1.25% that will occur on July 31, 2024.
Currently, we receive payments in the amounts calculated pursuant to the caps for any period in which the three-month USD LIBOR rate increases beyond the applicable strike rate. The termination date of the cap agreements is July 31, 2027.
Currently, we receive payments in the amounts calculated pursuant to the caps for any period in which the daily compounded SOFR rate plus a credit spread adjustment recommended by the Alternative Reference Rates Committee of 0.26% increases beyond the applicable strike rate. The termination date of the cap agreements is July 31, 2027.
The risk inherent in our market risk sensitive instruments and positions is the potential loss arising from interest rates as discussed below. The sensitivity analyses presented do not consider the effects that such adverse changes may have on the overall economic activity, nor do they consider additional actions we may take to mitigate our exposure to such changes.
The sensitivity analyses presented do not consider the effects that such adverse changes may have on the overall economic activity, nor do they consider additional actions we may take to mitigate our exposure to such changes. Actual results may differ.
Removed
We believe that a change in average interest rates would not affect our interest income and results of operations by a material amount. However, a change in interest rates could impact our interest income and results of operations to the extent that we invest in a material amount of interest-bearing securities.
Added
The primary objective of our investment policy is to preserve capital and maintain liquidity while limiting concentration and counterparty risk. The risk inherent in our market risk sensitive instruments and positions is the potential loss arising from interest rates as discussed below.
Removed
Our cash and cash equivalent accounts as of December 31, 2021 included amounts in bank deposit accounts and money market funds.

Other GOGO 10-K year-over-year comparisons