Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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 unaudited condensed consolidated interim financial statements and the related notes contained elsewhere in this Quarterly Report on Form 10-Q. Unless the context otherwise indicates or requires, the terms "we," "our," "us," "Gogo," and the "Company," as used in this Quarterly Report on Form 10-Q, refer to Gogo 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 to Gogo Inc. exclusive of its subsidiaries.

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 2024 10-K. 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

The Company's acquisition of Satcom Direct, as described in Note 2, "Acquisition of Satcom Direct," created a combined organization which currently is the only multi-orbit, multi-band in-flight connectivity provider offering connectivity technology purpose-built for business and military/government aviation. The transaction united two industry-leading brands, creating a product portfolio that offers best-in-class solutions for small to large aircraft and heavy jets. As a combined organization, the Company has a holistic approach of providing broadband connectivity services to its customers through Gogo's air-to-ground ("ATG") technology and access to multiple satellite constellations aiming to deliver consistent, global tip-to-tail connectivity with a suite of software, hardware, and advanced infrastructure supported by a 24/7/365 customer support team.

Segments

As a result of the Company's acquisition of Satcom Direct, the Company has two reportable segments: (i) the legacy pre-acquisition operations of the Company ("Gogo BA") and (ii) the acquired entity, Satcom Direct. The consolidated financial statements and the related notes contained elsewhere in this Quarterly Report on Form 10-Q report the results of the Gogo BA segment and, for the 2025 period and the Consolidated Balance Sheets as of December 31, 2024, the Satcom Direct segment. The Gogo BA segment provides in-flight connectivity for business aviation via ATG and satellite networks. The Satcom Direct segment primarily provides global satellite-based communication solutions for business and military/government aircraft. Satcom Direct is managed as a separate reportable segment, but in the future, we may realign our reportable segments after integrating the Satcom Direct business. This "Management's Discussion and Analysis of Financial Condition and Results of Operations" discusses the results of both segments for the periods in which they are covered by the consolidated financial statements, except that, for the reasons described below, it does not reflect the impact of the Satcom Direct segment in "Key Operating Metrics" and "Results of Operations-Three and Six Months Ended June 2025 and 2024."

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 and military/government aviation industries, 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:

Key Operating 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. The metrics below are only for the Gogo BA segment and do not include metrics for the Satcom Direct segment for the periods in which it is reflected in the Company's consolidated financial statements, with the exception of the GEO aircraft online (which includes the Satcom Direct business aviation broadband GEO aircraft online but excludes military/government GEO aircraft online), because these reporting periods provided insufficient time for management to review, test and select meaningful metrics that would be useful on a standalone basis to both management and investors. Additionally, the below metrics are different in scope than those previously presented for the Gogo BA segment given the impact of the Satcom Direct acquisition. As previously disclosed, as part of the integration of the Satcom Direct business into the Company's operations, management plans to develop a set of key financial and operating metrics for use by management and investors to reflect the major aspects of the combined Gogo BA and Satcom Direct business.

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 2024 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 in the 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 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. 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. 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 fair value of service customer relationships and software acquired in the acquisition of Satcom Direct 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 2024 10-K.

Recent Accounting Pronouncements

See Note 1, "Basis of Presentation," to our Unaudited Condensed Consolidated Financials Statements for additional information.

Results of Operations

The following tables set forth, for the periods presented, certain data from our Unaudited Condensed Consolidated Statements of Operations. The information contained in the table below should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and related notes.

Gogo Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands)

Three and Six Months Ended June 30, 2025 and 2024

Below is a discussion of changes in the results in operations for the three- and six-month periods ended June 30, 2025 and 2024, which as discussed above are for the Gogo BA segment only. The acquisition of Satcom Direct was completed in the fourth quarter of 2024 and as a result, there is no meaningful prior period comparison point. Unless otherwise noted below, we expect consolidated revenue and expenses to increase in 2025 compared to 2024 as a result of a full year of activity for Satcom Direct.

Revenue:

Revenue and percent change for the three- and six-month periods ended June 30, 2025 and 2024 were as follows (in thousands, except for percent change):

Total Gogo BA revenue increased to $103.3 million for the three-month period ended June 30, 2025, as compared with $102.1 million for the prior-year period due to an increase in equipment revenue, partially offset by a decrease in service revenue. Total Gogo BA revenue decreased to $204.6 million for the six-month period ended June 30, 2025, as compared with $206.4 million for the prior-year period, due to a decrease in service revenue, partially offset by an increase in equipment revenue.

Gogo BA's service revenue decreased to $77.6 million and $157.1 million, respectively, for the three- and six-month periods ended June 30, 2025, as compared with $81.9 million and $163.6 million, respectively, for the prior-year periods due to a decrease in ATG units online.

Gogo BA's equipment revenue increased to $25.7 million and $47.5 million, respectively, for the three- and six-month periods ended June 30, 2025, as compared with $20.1 million and $42.8 million, respectively, for the prior-year periods due to an increase in shipments of AVANCE units.

Cost of Revenue:

Cost of revenue and percent change for the three- and six-month periods ended June 30, 2025 and 2024 were as follows (in thousands, except for percent change):

Gogo BA's cost of service revenue decreased 6.1% and 1.8% to $17.7 million and $36.1 million, respectively, for the three- and six-month periods ended June 30, 2025, as compared with $18.9 million and $36.7 million for the prior-year periods due to a decrease in net credit card processing fees.

Gogo BA's cost of equipment revenue increased 32.0% and 29.4% to $21.7 million and $41.7 million, respectively, for the three-month period ended June 30, 2025, as compared with $16.4 million and $32.2 million, respectively, for the prior-year periods due to higher sales of lower margin products.

Engineering, Design and Development Expenses:

Gogo BA's engineering, design and development expenses decreased 28.1% and 16.5% to $7.4 million and $16.3 million, respectively, for the three- and six-month periods ended June 30, 2025, as compared with $10.3 million and $19.5 million, respectively, for the prior-year periods due to a decrease in Gogo Galileo and Gogo 5G development costs.

Sales and Marketing Expenses:

Gogo BA's sales and marketing expenses decreased 31.7% and 24.2% to $6.2 million and $13.1 million, respectively, for the three- and six-month periods ended June 30, 2025, as compared with $9.0 million and $17.3 million, respectively, for the prior-year periods due to lower personnel costs.

General and Administrative Expenses:

Gogo BA's general and administrative expenses increased 6.7% and 30.4% to $23.3 million and $47.6 million, respectively, for the three- and six-month periods ended June 30, 2025, as compared with $21.8 million and $36.5 million, respectively, for the prior-year periods. The increase for the three-month period is due to acquisition and integration-related costs of $3.1 million and increased personnel costs of $5.2 million, partially offset by lower legal fees of $6.8 million. The increase in for the six-month period is due to acquisition and integration-related costs of $7.5 million and increased personnel costs of $7.9 million, partially offset by lower legal fees of $6.5 million.

Depreciation and Amortization:

Gogo BA's depreciation and amortization expense decreased 11.7% and 15.6% to $3.4 million and $6.5 million, respectively, for the three- and six-month periods ended June 30, 2025, as compared with $3.9 million and $7.7 million, respectively, for the prior-year periods due to depreciation expense.

Other Expense (Income):

Other expense (income) and percent change for the three- and six-month periods ended June 30, 2025 and 2024 were as follows (in thousands, except for percent change):

Total other expense decreased to $19.0 million for the three-month period ended June 30, 2025 as compared with $20.7 million for the prior-year period due to an unrealized holding loss on the Investment in Convertible Note during the prior-year period, partially offset by an increase in interest expense in the current-year period due to the HPS Term Loan Facility and the change in fair value of the earnout liability. Total other expense increased to $35.2 million for the six-month period ended June 30, 2025 as compared with $14.0 million for the prior-year period due to increased interest expense on the HPS Term Loan Facility and the change in fair value of the earnout liability.

Income Taxes:

The effective income tax rate for the three- and six-month periods ended June 30, 2025 was 24.6% and 30.9%, respectively, as compared with 13.6% and 26.1%, respectively, for the prior-year periods. For the three- and six-month periods ended June 30, 2025, our income tax provision was $4.2 million and $11.1 million, respectively, due to consolidated pre-tax income. For the three- and six-month periods ended June 30, 2024, our income tax provision was $0.1 million and $11.1 million, respectively, due to consolidated pre-tax income. See Note 14, "Income Tax," to our Unaudited Condensed Consolidated Financial Statements for additional information.

We expect our income tax provision to increase in the long term as we continue to generate positive pre-tax income.

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. These supplemental performance measures also provide another basis for comparing period-to-period results by excluding potential differences caused by non-operational and unusual or non-recurring items. These supplemental performance measures may vary from and may not be comparable to similarly titled measures used by other companies. 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.

Definition and Reconciliation of Non-GAAP Measures

EBITDArepresents net income attributable to common stock before interest expense, interest income, income taxes and depreciation and amortization expense.

Adjusted EBITDArepresents EBITDA adjusted for (i) stock-based compensation expense, (ii) acquisition and integration-related costs, including amortization of acquisition-related inventory step-up costs and changes in fair value of the earnout liability, and (iii) change in fair value of convertible note investment. Our management believes that the use of Adjusted EBITDA eliminates items that management believes have less bearing on our operating performance, thereby highlighting trends in our core business which may not otherwise be apparent. It also provides an assessment of controllable expenses, which are indicators management uses to determine whether current spending decisions need to be adjusted in order to meet financial goals and achieve optimal financial performance.

We believe 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. While we believe that investors should have information about any dilutive effect of outstanding options and the cost of that compensation, we also believe that stockholders should have the ability to consider our performance using a non-GAAP financial measure that excludes these costs and that management uses to evaluate our business.

Acquisition and integration-related costs include direct transaction costs, such as due diligence and advisory fees and certain compensation and integration-related expenses as well as the amortization of acquisition-related inventory step-up costs. We believe it is useful for an understanding of our operating performance to exclude acquisition and integration-related costs from Adjusted EBITDA because they are infrequent, are outside of the ordinary course of our operations and do not reflect our operating performance.

We believe it is useful for an understanding of our operating performance to exclude the changes in fair value of the earnout liability related to the acquisition of Satcom Direct from Adjusted EBITDA because this activity is outside of the ordinary course of our operations and does not reflect our operating performance.

We believe it is useful for an understanding of our operating performance to exclude the change in fair value of convertible note investment from Adjusted EBITDA because this activity is not related to our operating performance.

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

Free Cash Flowrepresents 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. We believe that Free Cash Flow provides meaningful information regarding our liquidity. Management 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.

Gogo Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, unaudited)

(1)For the three months ended June 30, 2025, figure consists of integration-related advisory fees of $1.5 million and severance and other compensation-related costs of $2.2 million. For the six months ended June 30, 2025, figure consists of integration-related advisory fees of $5.4 million and severance and other compensation-related costs of $4.7 million.

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.

Some of these limitations include:

Liquidity and Capital Resources

The following table presents a summary of our cash flow activity for the periods set forth below (in thousands):

We have historically financed our growth and cash needs primarily through the issuance of common stock, debt and cash from operating activities. We continually evaluate our ongoing capital needs in light of increasing demand for our services, capacity requirements, evolving user expectations regarding the in-flight connectivity experience, evolving technologies in our industry and related strategic, operational and technological opportunities. Our capital management activities include the assessment of 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.

Liquidity:

Based on our current plans, we expect our cash and cash equivalents, cash flows provided by operating activities and access to the Revolving Facility and capital markets will be sufficient to meet the cash requirements of our business, capital expenditure requirements and debt maturities for at least the next twelve months and thereafter for the foreseeable future.

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. 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 Securities Exchange Act of 1934, as amended (the "Exchange Act") in accordance with applicable securities laws and other restrictions, including Rule 10b-18 under the Exchange Act. 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. We do not expect to incur debt to fund the share repurchase program. No shares were repurchased during the six-month period ended June 30, 2025. During the six-month period ended June 30, 2024, we repurchased an aggregate 2.6 million shares of our common stock for $23.2 million. As of June 30, 2025, approximately $12.1 million remains available under the share repurchase program.

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 2021 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. The 2021 Term Loan Facility matures on April 30, 2028.

On December 3, 2024, Gogo and GIH entered into a second amendment to the 2021 Credit Agreement with Morgan Stanley Senior Funding, Inc., as administrative agent, and the lenders party thereto to, among other purposes, (a) increase the aggregate principal amount of revolving commitments available under the 2021 Credit Agreement to an aggregate amount of revolving commitments equal to $122 million and (b) extend the maturity date of the Revolving Facility to December 3, 2029 (subject to such maturity date springing to the date that is 90 days prior to the then-current maturity date of (a) the 2021 Term Loan Facility under the 2021 Credit Agreement and (b) the HPS Term Loan Facility under the HPS Credit Agreement under certain conditions).

The 2021 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 of the 2021 Term Loan Facility. There are no amortization payments under the Revolving Facility. On May 3, 2023, the Company prepaid $100 million of the outstanding principal amount of

the 2021 Term Loan Facility. This prepayment satisfied the required amortization payments for the remaining term of the 2021 Term Loan Facility.

As detailed in Note 9, "Long-Term Debt and Other Liabilities," on December 3, 2024, the Company and GIH entered into a credit agreement (the "HPS Credit Agreement" and together with the 2021 Credit Agreement, the "Credit Agreements") with HPS Investment Partners, LLC, as the administrative agent, and the lenders party thereto, which provides for a term loan credit facility (the "HPS Term Loan Facility" and together with the 2021 Facilities, the "Facilities") in an aggregate principal amount of $250 million. The HPS Term Loan Facility amortizes in 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 HPS Term Loan Facility on April 30, 2028.

The Credit Agreements contain 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.

The Credit Agreements contains covenants that limit the ability of GIH and its subsidiaries to incur additional indebtedness. Further, market conditions and/or our financial performance may limit our access to additional sources of equity or debt financing, or our ability to pursue potential strategic alternatives. As a result, we may be unable to finance the growth of our business to the extent that our cash, cash equivalents and short-term investments and cash generated through operating activities prove insufficient or we are unable to raise additional financing through the issuance of equity, permitted incurrences of debt (by us or by GIH and its subsidiaries), or the pursuit of potential strategic alternatives.

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. The termination date of the cap agreements is July 31, 2027. The aggregate notional amount of the interest rate caps as of June 30, 2025 is $350.0 million. The notional amounts of the interest rate caps periodically decrease over the life of the caps with the latest reduction of $100.0 million having occurred on July 31, 2025. 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. 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 10, "Derivative Instruments and Hedging Activities," to our Unaudited Condensed Consolidated Financial Statements.

Cash flows provided by Operating Activities:

The following table presents a summary of our cash flows from operating activities for the periods set forth below (in thousands):

For the six-month period ended June 30, 2025, net cash provided by operating activities was $69.2 million as compared with $54.6 million in the prior-year period. The principal contributors to the year-over-year change in operating cash flows were:

Cash flows used in Investing Activities:

Cash used in investing activities was $7.2 million for the six-month period ended June 30, 2025, due to $12.1 million of capital expenditures noted below and a $1.6 million payment for net working capital adjustments relating to the purchase of Satcom Direct, partially offset by $6.1 million of proceeds from interest rate caps and $0.4 million of proceeds received from the FCC Reimbursement Program associated with the reimbursement of capital expenditures.

Cash used in investing activities was $2.7 million for the six-month period ended June 30, 2024, due to $10.7 million of capital expenditures noted below and a $5.0 million convertible note investment, partially offset by $12.9 million of proceeds from interest rate caps and $0.1 million of proceeds received from the FCC Reimbursement Program associated with the reimbursement of capital expenditures.

Cash flows used in Financing Activities:

Cash used in financing activities for the six-month period ended June 30, 2025 was $2.3 million due to principal payments on the HPS Term Loan Facility and stock-based compensation activities.

Cash used in financing activities for the six-month period ended June 30, 2024 was $29.5 million, due to share repurchases, principal payments on the 2021 Term Loan Facility and stock-based compensation activities.

Capital Expenditures

Our operations require capital expenditures associated with the expansion of our ATG network and data centers. We capitalize software development costs related to network technology solutions and new product/service offerings. We also capitalize costs related to the build-out of our office locations.

Capital expenditures for the six-month periods ended June 30, 2025 and 2024 were $12.1 million and $10.7 million, respectively, due to the build out of the Gogo 5G and LTE networks and Gogo Galileo.

We expect that our capital expenditures will increase in the near term due to the build out of the LTE network related to the FCC Reimbursement Program. This increase related to the LTE network may be partially offset by reimbursements from the FCC. We expect that our capital expenditures will decrease starting in 2026 as this program is expected to be completed.

Other

Contractual Commitments: We have agreements with various vendors under which we have remaining commitments to purchase hardware components and development services. Such commitments will become payable as we receive the hardware components or as development services are provided. See Note 17, "Commitments and Contingencies," to our Unaudited Condensed 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 Unaudited Condensed Consolidated Financial Statements for additional information.