GOGO INC. The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with our unaudited condensed consolidated interim financial statements and the related notes contained elsewhere in this Report. Unless the context otherwise indicates or requires, the terms "we," "our," "us," "Gogo," and the "Company," as used in this Report, refer toGogo Inc. and its directly and indirectly owned subsidiaries as a combined entity, except where otherwise stated or where it is clear that the terms refer only toGogo Inc. exclusive of its subsidiaries. OnDecember 1, 2020 , we completed the previously announced sale of our commercial aviation ("CA") business to a subsidiary ofIntelsat Jackson Holdings S.A. ("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 Unaudited Condensed Consolidated Financial Statements and other portions of this Report have been conformed to present the CA business as discontinued operations. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under "Risk Factors" in the 2021 10-K, the 2022 Q1 10-Q, the 2022 Q2 10-Q and in Item 1A and "Special Note Regarding Forward-Looking Statements" in this Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Our fiscal year ends
Company Overview
Gogo is the world's largest provider of broadband connectivity services for the
business aviation market. Our mission is to provide ground-like connectivity to
every passenger on every flight around the globe, enabling superior passenger
experiences and efficient flight operations. To accomplish our mission, we
design, build and operate dedicated air-to-ground ("ATG") networks, engineer and
maintain in-flight systems of proprietary hardware and software, and deliver
customizable connectivity and wireless entertainment services and global support
capabilities to our aviation partners. Our services include narrowband
satellite-based voice and data services made available through strategic
partnerships with satellite providers. In May 2022 , in order to further serve
our existing clients and expand our target market, we announced plans to expand
our broadband offerings beyond ATG by launching the first global broadband
service in business aviation to use an electronically steered antenna ("ESA") on
a low earth orbit ("LEO") satellite network ("Global Broadband"). The antenna
will be designed with Hughes Network Systems, LLC ("Hughes") and utilized on a
LEO satellite network operated by OneWeb.
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 Quarterly Report on Form 10-Q.
Impact of COVID-19 Pandemic
The COVID-19 pandemic caused a significant decline in international and domestic business aviation travel, which materially and adversely affected our business in 2020. Beginning inMarch 2020 , our business saw a sharp decrease in flight activity, as well as an increase in requests for account suspensions and decreases in new plan activations. Although these and other key metrics began to recover in the third quarter of 2020 and have since reached pre-COVID levels or better, we continue to monitor the status of the pandemic inthe United States and internationally. We are unable to predict whether COVID-19 will have a material adverse effect on our business in the future or with what degree of severity or over what length of time such impact may occur.
Factors and Trends Affecting Our Results of Operations
We believe that our operating and business performance is driven by various factors that affect the business aviation industry, including trends affecting the travel industry and trends affecting the customer bases that we target, as well as factors that affect wireless Internet service providers and general macroeconomic factors. Key factors that may affect our future performance include:
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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, Global Broadband and any other next generation or other new technology;
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our ability to manage issues and related costs that may arise in connection with
the implementation of our technology roadmap, including technological issues and
related remediation efforts and failures or delays on the part of antenna and
other equipment developers and providers, some of which are single-source;
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our ability to license additional spectrum and make other improvements to our network and operations as technology and user expectations change;
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the number of aircraft in service in our markets, including consolidations or changes in fleet size by one or more of our large-fleet customers;
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the economic environment and other trends that affect both business and leisure aviation travel, including the impact of COVID-19 on restrictions on and demand for air travel;
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disruptions to supply chains and installations, including COVID-19-related shortages of electronic components that have resulted in longer lead times and delays in obtaining certain electronic components used in the airborne equipment that we manufacture;
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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;
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our ability to engage suppliers of equipment components and network services on a timely basis and on commercially reasonable terms;
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changes in laws, regulations and interpretations affecting telecommunications services, including those affecting our ability to maintain our licenses for ATG spectrum inthe United States , obtain sufficient rights to use additional ATG spectrum and/or other sources of broadband connectivity to deliver our services, expand our service offerings and manage our network; and
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changes in laws, regulations and policies affecting our business or the business of our customers and suppliers, including changes that impact the design of our equipment and our ability to obtain required certifications for our equipment.
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.
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2022 2021 2022 2021
Aircraft online (at period end)
ATG 6,777 6,154 6,777 6,154
Satellite 4,484 4,542 4,484 4,542
Average monthly connectivity service
revenue per aircraft online
ATG $ 3,376 $ 3,264 $ 3,342 $ 3,216
Satellite 297 257 263 248
Units sold
ATG 388 266 944 583
Satellite 43 22 144 169
Average equipment revenue per unit sold
(in thousands)
ATG $ 68 $ 66 $ 69 $ 72
Satellite 39 102 50 52
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ATG aircraft online. We define ATG aircraft online as the total number of
business aircraft for which we provide ATG services as of the last day of each
period presented. This number excludes aircraft receiving ATG service as part of
the ATG Network Sharing Agreement with Intelsat.
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Satellite aircraft online. 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.
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Average monthly connectivity service revenue per ATG aircraft online. We define
average monthly connectivity service revenue per ATG aircraft online as the
aggregate ATG connectivity service revenue for the period divided by the number
of months in the period, divided by the number of ATG aircraft online during the
period (expressed as an average of the month end figures for each month in such
period). Revenue share earned from the ATG Network Sharing Agreement with
Intelsat is excluded from this calculation.
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Average monthly connectivity service revenue per satellite aircraft online. We define average monthly connectivity service revenue per 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 satellite aircraft online during the period (expressed as an average of the month end figures for each month in such period).
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Units sold. We define units sold as the number of ATG or narrowband satellite units for which we recognized revenue during the period.
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Average equipment revenue per ATG unit sold. We define average equipment revenue per ATG unit sold as the aggregate equipment revenue from all ATG units sold during the period, divided by the number of ATG units sold.
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Average equipment revenue per satellite unit sold. We define average equipment revenue per 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.
Key Components of Consolidated Statements of Operations
There have been no material changes to our key components of Unaudited Condensed
Consolidated Statements of Operations as described in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" ("MD&A") in our
2021 10-K.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based on our Unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America ("GAAP"). The preparation of our Unaudited Condensed Consolidated Financial Statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount 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. In some instances, we could reasonably use different accounting estimates, and in some instances, results could differ significantly from our estimates. We evaluate our estimates and assumptions on an ongoing basis. 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. 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.
There have been no material changes to our critical accounting estimates described in the MD&A in our 2021 10-K.
Recent Accounting Pronouncements
See Note 2, "Recent Accounting Pronouncements," to our Unaudited Condensed Consolidated Financial Statements for additional information.
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