Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑ No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☑ No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐No☑

As of ~~April~~July 29, 2022, ~~112,002,322~~128,688,372 shares of $0.0001 par value common stock were outstanding.


	March 31,			December 31,			June 30,			December 31,
	2022			2021			2022			2021
Assets
Current assets:
Cash and cash equivalents	$	152,829		$	145,913		$	163,993		$	145,913
Accounts receivable, net of allowances of $1,127 and $894, respectively		42,102			37,730
Accounts receivable, net of allowances of $1,311 and $894, respectively								44,570			37,730
Inventories		36,467			33,976			42,543			33,976
Prepaid expenses and other current assets		39,654			32,295			48,895			32,295
Total current assets		271,052			249,914			300,001			249,914
Non-current assets:
Property and equipment, net		71,596			63,672			84,586			63,672
Intangible assets, net		49,159			49,554			48,842			49,554
Operating lease right-of-use assets		70,973			70,989			72,384			70,989
Other non-current assets, net of allowances of $515 and $455, respectively		44,561			28,425
Other non-current assets, net of allowances of $524 and $455, respectively								41,980			28,425
Deferred income taxes		177,934			185,133			175,773			185,133
Total non-current assets		414,223			397,773			423,565			397,773
Total assets	$	685,275		$	647,687		$	723,566		$	647,687
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	18,119		$	17,203		$	20,662		$	17,203
Accrued liabilities		58,683			59,868			62,254			59,868
Deferred revenue		1,599			1,825			1,507			1,825
Current portion of long-term debt		109,897			109,620			7,250			109,620
Total current liabilities		188,298			188,516			91,673			188,516
Non-current liabilities:
Long-term debt		693,617			694,760			692,482			694,760
Non-current operating lease liabilities		77,074			77,329			77,744			77,329
Other non-current liabilities		7,326			7,236			7,293			7,236
Total non-current liabilities		778,017			779,325			777,519			779,325
Total liabilities		966,315			967,841			869,192			967,841
Stockholders’ deficit
Common stock, par value $0.0001 per share; 500,000,000 shares authorized at March 31, 2022 and December 31, 2021; 118,399,731 and 117,407,468 shares issued at March 31, 2022 and December 31, 2021, respectively; and 111,784,217 and 110,791,954 shares outstanding at March 31, 2022 and December 31, 2021, respectively		11			11
Common stock, par value $0.0001 per share; 500,000,000 shares authorized at June 30, 2022 and December 31, 2021; 135,878,986 and 117,407,468 shares issued at June 30, 2022 and December 31, 2021, respectively; and 128,688,372 and 110,791,954 shares outstanding at June 30, 2022 and December 31, 2021, respectively								13			11
Additional paid-in capital		1,259,223			1,258,477			1,379,356			1,258,477
Accumulated other comprehensive income		17,961			1,789			22,420			1,789
Treasury stock, at cost		(128,803	)		(128,803	)		(140,000	)		(128,803	)
Accumulated deficit		(1,429,432	)		(1,451,628	)		(1,407,415	)		(1,451,628	)
Total stockholders’ deficit		(281,040	)		(320,154	)		(145,626	)		(320,154	)
Total liabilities and stockholders’ deficit	$	685,275		$	647,687		$	723,566		$	647,687


	For the Three Months Ended March 31,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2022			2021			2022			2021			2022			2021
Revenue:
Service revenue	$	70,667		$	59,355		$	73,064		$	64,767		$	143,731		$	124,122
Equipment revenue		22,083			14,514			24,772			17,608			46,855			32,122
Total revenue		92,750			73,869			97,836			82,375			190,586			156,244
Operating expenses:
Cost of service revenue (exclusive of amounts shown below)		14,634			14,095			15,752			15,177			30,386			29,272
Cost of equipment revenue (exclusive of amounts shown below)		14,281			8,282			16,868			10,932			31,149			19,214
Engineering, design and development		5,406			5,493			7,952			6,541			13,358			12,034
Sales and marketing		6,231			3,729			6,068			4,826			12,299			8,555
General and administrative		13,458			10,373			15,357			11,746			28,815			22,119
Depreciation and amortization		3,791			4,117			3,499			3,547			7,290			7,664
Total operating expenses		57,801			46,089			65,496			52,769			123,297			98,858
Operating income		34,949			27,780			32,340			29,606			67,289			57,386
Other (income) expense:
Interest income		(47	)		(57	)		(194	)		(54	)		(241	)		(111	)
Interest expense		10,889			29,294			9,772			16,340			20,661			45,634
Loss on settlement of convertible notes		0			4,397
Other income, net		(26	)		(5	)
Loss on extinguishment of debt and settlement of convertible notes								0			79,564			0			83,961
Other expense (income), net								43			(127	)		17			(132	)
Total other expense		10,816			33,629			9,621			95,723			20,437			129,352
Income (loss) from continuing operations before income taxes		24,133			(5,849	)		22,719			(66,117	)		46,852			(71,966	)
Income tax provision		1,937			35			702			277			2,639			312
Net income (loss) from continuing operations		22,196			(5,884	)		22,017			(66,394	)		44,213			(72,278	)
Net loss from discontinued operations, net of tax		0			(1,801	)		0			(2,854	)		0			(4,655	)
Net income (loss)	$	22,196		$	(7,685	)	$	22,017		$	(69,248	)	$	44,213		$	(76,933	)

Net income (loss) attributable to common stock per share - basic:
Continuing operations	$	0.20		$	(0.07	)	$	0.18		$	(0.61	)	$	0.38		$	(0.74	)
Discontinued operations		0			(0.02	)		0			(0.02	)		0			(0.05	)
Net income (loss) attributable to common stock per share - basic	$	0.20		$	(0.09	)	$	0.18		$	(0.63	)	$	0.38		$	(0.79	)

Net income (loss) attributable to common stock per share - diluted:
Continuing operations	$	0.18		$	(0.07	)	$	0.17		$	(0.61	)	$	0.35		$	(0.74	)
Discontinued operations		0			(0.02	)		0			(0.02	)		0			(0.05	)
Net income (loss) attributable to common stock per share - diluted	$	0.18		$	(0.09	)	$	0.17		$	(0.63	)	$	0.35		$	(0.79	)

Weighted average number of shares
Basic		111,414			84,649			123,252			109,060			117,375			96,884
Diluted		134,095			84,649			134,718			109,060			134,474			96,884


	For the Three Months Ended March 31,						For the Six Months Ended June 30,
	2022			2021			2022			2021
Operating activities from continuing operations:
Net income (loss)	$	22,196		$	(5,884	)	$	44,213		$	(72,278	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization		3,791			4,117			7,290			7,664
Loss (gain) on asset disposals, abandonments and write-downs		14			(100	)		114			(2	)
Provision for expected credit losses		259			15			498			(15	)
Deferred income taxes		1,887			95			2,540			90
Stock-based compensation expense		4,007			1,849			9,411			4,741
Amortization of deferred financing costs and interest rate caps		947			1,703			1,777			2,781
Accretion of debt discount		115			84			231			188
Loss on settlement of convertible notes		0			4,397
Loss on extinguishment of debt and settlement of convertible notes								0			83,961
Changes in operating assets and liabilities:
Accounts receivable		(4,571	)		3,586			(7,270	)		871
Inventories		(2,491	)		(446	)		(8,567	)		692
Prepaid expenses and other current assets		392			(375	)		(79	)		(2,238	)
Contract assets		(2,407	)		(1,886	)		(2,748	)		(3,314	)
Accounts payable		(857	)		292			858			3,349
Accrued liabilities		(5,926	)		(10,424	)		(2,043	)		(6,483	)
Deferred revenue		(226	)		646			(318	)		(632	)
Accrued interest		1,349			27,559			(164	)		(8,576	)
Other non-current assets and liabilities		(613	)		(654	)		(1,503	)		(1,198	)
Net cash provided by operating activities from continuing operations		17,866			24,574			44,240			9,601
Investing activities from continuing operations:
Purchases of property and equipment		(7,598	)		(360	)		(17,481	)		(1,284	)
Acquisition of intangible assets—capitalized software		(1,457	)		(342	)		(2,469	)		(542	)
Purchase of interest rate cap								—			(8,629	)
Net cash used in investing activities from continuing operations		(9,055	)		(702	)		(19,950	)		(10,455	)
Financing activities from continuing operations:
Redemption of senior secured notes								0			(1,023,146	)
Proceeds from term loan, net of discount								0			721,375
Payments on term loan		(1,813	)		0			(3,625	)		0
Payment of debt issuance costs		0			(550	)		0			(20,251	)
Payments on financing leases		(43	)		(124	)		(103	)		(154	)
Stock-based compensation activity		(23	)		(2,646	)		(2,515	)		(2,752	)
Net cash used in financing activities from continuing operations		(1,879	)		(3,320	)		(6,243	)		(324,928	)
Cash flows from discontinued operations:
Cash used in operating activities		0			(748	)		0			(800	)
Cash used in investing activities		0			0			0			0
Cash used in financing activities		0			0			0			0
Net cash used in discontinued operations		0			(748	)		0			(800	)
Effect of exchange rate changes on cash		(16	)		3			8			(89	)
Increase in cash, cash equivalents and restricted cash		6,916			19,807
Increase (decrease) in cash, cash equivalents and restricted cash								18,055			(326,671	)
Cash, cash equivalents and restricted cash at beginning of period		146,268			435,870			146,268			435,870
Cash, cash equivalents and restricted cash at end of period	$	153,184		$	455,677		$	164,323		$	109,199
Cash, cash equivalents and restricted cash at end of period	$	153,184		$	455,677		$	164,323		$	109,199
Less: current restricted cash		25			525			0			25
Less: non-current restricted cash		330			0			330			0
Cash and cash equivalents at end of period	$	152,829		$	455,152		$	163,993		$	109,174
Supplemental Cash Flow Information:
Cash paid for interest	$	8,577		$	31		$	19,680		$	51,259
Cash paid for taxes		0			1			112			276
Non-cash investing activities
Purchases of property and equipment in current liabilities	$	7,993		$	663		$	13,089		$	97

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

5.4.

Earnings (Loss) Per Share

Basic and diluted earnings (loss) per share have been calculated using the weighted average number of common shares outstanding for the period.

The shares of common stock effectively repurchased in connection with the Forward Transactions (as defined and described in Note 9,8, “Long-Term Debt and Other Liabilities”) are considered participating securities requiring the two-class method to calculate basic and diluted earnings per share. Net earnings will be allocated between common shares and participating securities on a one-to-one basis. In periods of a net loss, the shares associated with the Forward Transactions ~~will~~did not receive an allocation of losses, as the counterparties to the Forward Transactions ~~are~~were not required to fund losses. The calculation of weighted average shares outstanding as of ~~March 31, 2022 and~~June 30, 2021 excludes approximately 0.6 million ~~and~~ ~~2.1~~ ~~million~~ shares ~~respectively,~~ associated with the Forward Transactions. As of June 30, 2022, there were 0 outstanding shares associated with the Forward Transactions. Refer to Note 8, “Long-Term Debt and Other Liabilities,” for further information.

The diluted earnings (loss) per share calculations exclude the effect of stock options, deferred stock units, restricted stock units and convertible notes when the computation is anti-dilutive. For both the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022, the weighted average number of shares excluded from the computation was ~~0.2~~0.1 ~~million shares.~~million. As a result of the net loss for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2021, all of the outstanding shares of common stock underlying stock options, deferred stock units, restricted stock units and convertible notes were excluded from the computation of diluted shares outstanding because they were anti-dilutive.

The following table sets forth the computation of basic and diluted earnings per share for the ~~three-month~~three- and six-month periods ended ~~March 31,~~June 30, 2022 and 2021; however, for the reasons and periods described above, the shares of common stock associated with the Forward Transactions are excluded from the computation of basic earnings per share (in thousands, except per share amounts):

For the Three Months Ended March 31,

2022

2021

Income (Numerator)

Shares (Denominator)

Per Share Amount

Income (Numerator)

Shares (Denominator)

Per Share Amount

Net income (loss) from continuing operations
$
22,196

$
(5,884
)

Less: participation rights on Forward Transactions allocated to continuing operations

113

0

Basic earnings (loss) per share from continuing operations

Undistributed income (loss) from continuing operations
$
22,083

111,414

$
0.20

$
(5,884
)

84,649

$
(0.07
)

Effect of dilutive securities from continuing operations

Stock-based compensation

0

5,550

0

0

2022 Convertible Notes

1,819

17,131

0

0

Diluted earnings (loss) per share from continuing operations

Undistributed income (loss) from continuing operations and assumed conversions
$
23,902

134,095

$
0.18

$
(5,884
)

84,649

$
(0.07
)

Net loss from discontinued operations
$
0

$
(1,801
)

Less: participation rights on Forward Transactions allocated to discontinued operations

0

0

Basic earnings (loss) per share from discontinued operations

Undistributed loss from discontinued operations
$
0

111,414

$
0

$
(1,801
)

84,649

$
(0.02
)

Effect of dilutive securities from discontinued operations

Stock-based compensation

0

5,550

0

0

2022 Convertible Notes

0

17,131

0

0

Diluted earnings (loss) per share from discontinued operations

Undistributed loss from discontinued operations and assumed conversions
$
0

134,095

$
0

$
(1,801
)

84,649

$
(0.02
)

Earnings (loss) per share - basic

$
0.20

$
(0.09
)
Earnings (loss) per share - diluted

$
0.18

$
(0.09
)

~~Composition of Certain Balance Sheet Accounts~~

~~Prepaid expenses and other current assets as of March 31, 2022 and December 31, 2021 were as follows (in thousands~~):

March 31,

December 31,

2022

2021

Contract assets

$
5,426

$
4,533

Prepaid inventories

2,549

2,525

Insurance receivable (1)

17,300

17,300

Tenant improvement allowance receivables

1,115

1,936

Interest rate caps

7,777

925

Other

5,487

5,076

Total prepaid expenses and other current assets

$
39,654

$
32,295

~~(1)~~

~~See Note 13, “Commitments and Contingencies,” for additional information.~~

~~Property and equipment as of March 31, 2022 and December 31, 2021 were as follows (in thousands~~):

March 31,

December 31,

2022

2021

Office equipment, furniture, fixtures and other

$
14,596

$
12,759

Leasehold improvements

14,524

13,545

Network equipment

149,684

142,601

178,804

168,905

Accumulated depreciation

(107,208
)

(105,233
)
Total property and equipment, net

$
71,596

$
63,672

~~Other non-current assets as of March 31, 2022 and December 31, 2021 were as follows (in thousands~~):

March 31,

December 31,

2022

2021

Contract assets, net of allowances of $515 and $455, respectively

$
14,671

$
13,217

Interest rate caps

25,872

11,359

Revolving credit facility deferred financing costs

1,772

1,879

Other

2,246

1,970

Total other non-current assets

$
44,561

$
28,425

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

Composition of Certain Balance Sheet Accounts

~~Accrued liabilities~~Prepaid expenses and other current assets as of ~~March 31,~~June 30, 2022 and December 31, 2021 were as follows (in thousands):

March 31,

December 31,

2022

2021

Accrued interest

$
7,580

$
6,231

Employee compensation and benefits

8,337

13,791

Litigation settlement accrual (1)

17,300

17,300

Operating leases

7,681

7,444

Warranty reserve

2,350

2,450

Taxes

1,725

1,997

Network equipment

3,282

3,179

Other

10,428

7,476

Total accrued liabilities

$
58,683

$
59,868


	June 30,		December 31,
	2022		2021
Contract assets	$	5,919	$	4,533
Prepaid inventories		3,232		2,525
Insurance receivable (1)		17,300		17,300
Tenant improvement allowance receivables		391		1,936
Interest rate caps		16,087		925
Other		5,966		5,076
Total prepaid expenses and other current assets	$	48,895	$	32,295

(1)

See the Securities Litigation section in Note ~~13,~~12, “Commitments and Contingencies,” for additional information.

Property and equipment as of June 30, 2022 and December 31, 2021 were as follows (in thousands):


	June 30,			December 31,
	2022			2021
Office equipment, furniture, fixtures and other	$	14,793		$	12,759
Leasehold improvements		14,740			13,545
Network equipment		163,939			142,601
		193,472			168,905
Accumulated depreciation		(108,886	)		(105,233	)
Total property and equipment, net	$	84,586		$	63,672

Other non-current ~~liabilities~~assets as of ~~March 31,~~June 30, 2022 and December 31, 2021 were as follows (in thousands):


	June 30,		December 31,
	2022		2021
Contract assets, net of allowances of $524 and $455, respectively	$	14,511	$	13,217
Interest rate caps		23,628		11,359
Revolving credit facility deferred financing costs		1,663		1,879
Other		2,178		1,970
Total other non-current assets	$	41,980	$	28,425

March 31,

December 31,

2022

2021

Asset retirement obligations

$
5,201

$
4,861

Other

2,125

2,375

Total other non-current liabilities

$
7,326

$
7,236

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

Accrued liabilities as of June 30, 2022 and December 31, 2021 were as follows (in thousands):


	June 30,		December 31,
	2022		2021
Accrued interest	$	6,067	$	6,231
Employee compensation and benefits		9,293		13,791
Litigation settlement accrual (1)		17,300		17,300
Operating leases		8,091		7,444
Warranty reserve		2,430		2,450
Taxes		1,715		1,997
Network equipment		7,730		3,179
Other		9,628		7,476
Total accrued liabilities	$	62,254	$	59,868

(1)

See the Securities Litigation section in Note 12, “Commitments and Contingencies,” for additional information.

Other non-current liabilities as of June 30, 2022 and December 31, 2021 were as follows (in thousands):


	June 30,		December 31,
	2022		2021
Asset retirement obligations	$	5,525	$	4,861
Other		1,768		2,375
Total other non-current liabilities	$	7,293	$	7,236

8.7.

Intangible Assets

Our intangible assets are comprised of both indefinite-lived and finite-lived intangible assets. Intangible assets with indefinite lives are not amortized; rather, they are reviewed for impairment at least annually or whenever events or circumstances indicate the carrying value of the asset may not be recoverable. We perform our annual impairment test of our indefinite-lived intangible assets during the fourth quarter of each fiscal year, and the results from the test performed in the fourth quarter of 2021 indicated no impairment. We also reevaluate the useful life of indefinite-lived intangible assets each reporting period to determine whether events and circumstances continue to support an indefinite useful life.

As of both ~~March 31,~~June 30, 2022 and December 31, 2021, our goodwill balance was $0.6 million.

Our intangible assets, other than goodwill, as of ~~March 31,~~June 30, 2022 and December 31, 2021 were as follows (in thousands, except for weighted average remaining useful life):


		As of March 31, 2022			As of December 31, 2021				As of June 30, 2022			As of December 31, 2021
	Weighted Average Remaining Useful Life (in years)	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Weighted Average Remaining Useful Life (in years)	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
Amortized intangible assets:
Software	3.5	$55,594	$(41,150)	$14,444	$54,128	$(39,289)	$14,839	5.3	$56,787	$(42,660)	$14,127	$54,128	$(39,289)	$14,839
Other intangible assets	8.3	1,812	—	1,812	1,812	—	1,812	8.0	1,812	—	1,812	1,812	—	1,812
Service customer relationships		8,081	(8,081)	—	8,081	(8,081)	—		8,081	(8,081)	—	8,081	(8,081)	—
OEM and dealer relationships		6,724	(6,724)	—	6,724	(6,724)	—		6,724	(6,724)	—	6,724	(6,724)	—
Total amortized intangible assets		72,211	(55,955)	16,256	70,745	(54,094)	16,651		73,404	(57,465)	15,939	70,745	(54,094)	16,651
Unamortized intangible assets:
FCC Licenses		32,283	—	32,283	32,283	—	32,283		32,283	—	32,283	32,283	—	32,283
Total intangible assets		$104,494	$(55,955)	$48,539	$103,028	$(54,094)	$48,934		$105,687	$(57,465)	$48,222	$103,028	$(54,094)	$48,934

Amortization expense was $1.5 million and $3.4 million, respectively, for the three- and six-month periods ended June 30, 2022 and $1.9 million and $3.8 million, respectively, for ~~both three-month periods ended March 31, 2022 and 2021.~~the prior-year periods.

1213

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

Amortization expense for the remainder of 2022, each of the next four years and thereafter is estimated to be as follows (in thousands):


	Amortization		Amortization
Years ending December 31,	Expense		Expense
2022 (period from April 1 to December 31)	$	3,198
2022 (period from July 1 to December 31)			$	1,653
2023	$	3,175	$	3,372
2024	$	1,802	$	1,999
2025	$	1,552	$	1,781
2026	$	1,455	$	1,621
Thereafter	$	5,074	$	5,513

Actual future amortization expense could differ from the estimated amount as a result of future investments and other factors.

9.8.

Long-Term Debt and Other Liabilities

Long-term debt as of ~~March 31,~~June 30, 2022 and December 31, 2021 was as follows (in thousands):


	March 31,			December 31,			June 30,			December 31,
	2022			2021			2022			2021
Term Loan Facility	$	716,359		$	718,057		$	714,663		$	718,057
2022 Convertible Notes		102,788			102,788			0			102,788
Total debt		819,147			820,845			714,663			820,845
Less: deferred financing costs		(15,633	)		(16,465	)		(14,931	)		(16,465	)
Less: current portion of long-term debt		(109,897	)		(109,620	)		(7,250	)		(109,620	)
Total long-term debt	$	693,617		$	694,760		$	692,482		$	694,760

2021 Credit Agreement

On April 30, 2021, Gogo and Gogo Intermediate Holdings LLC (“GIH”) (a wholly owned subsidiary of Gogo) entered into a credit agreement (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. 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 0 amortization payments under the Revolving Facility, and all borrowings under the Revolving Facility mature on April 30, 2026.

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 London inter-bank offered 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 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. 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.

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.

Subject to certain exceptions and de minimis thresholds, the Term Loan Facility is subject to mandatory prepayments in an amount equal to:

•

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;

•

100% of the net cash proceeds of certain debt offerings; and

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

•

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.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

The 2021 Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants include restrictions on, among other things: incurrence of indebtedness or issuance of disqualified equity interests; incurrence or existence of liens; consolidations or mergers; activities of Gogo and any subsidiary holding a license issued by the Federal Communications Commission; investments, loans, advances, guarantees or acquisitions; asset sales; dividends or other distributions on equity; purchase, redemption or retirement of capital stock; payment or redemption of certain junior indebtedness; entry into other agreements that restrict the ability to incur liens securing the Facilities; and amendment of organizational documents; in each case subject to customary exceptions.

The Revolving Facility includes a financial covenant set at a maximum senior secured first lien net leverage ratio of 7.50:1.00, which will apply if the outstanding amount of loans and unreimbursed letter of credit drawings thereunder at the end of any fiscal quarter exceeds 35% of the aggregate of all commitments thereunder.

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.

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 (as defined below) together with accrued and unpaid interest and redemption premiums and to pay fees associated with the termination of the ABL Credit Agreement (as defined below and, 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 Revolving Facility is available for working capital and general corporate purposes of GIH and its subsidiaries and was undrawn as of ~~March 31,~~June 30, 2022 and December 31, 2021.

As of ~~March 31,~~June 30, 2022 and December 31, 2021, the outstanding principal amount of the Term Loan Facility was $~~719.6~~717.8 million and $721.4 million, respectively, the unaccreted debt discount was $~~3.2~~3.1 million and $3.3 million, respectively, and the net carrying amount was $~~716.4~~714.7 million and $718.1 million, respectively.

We paid approximately $19.7 million of loan origination and financing costs related to the Facilities which are being accounted for as deferred financing costs on our Unaudited Condensed Consolidated Balance Sheets and are amortized over the terms of the Facilities. Total amortization expense was $0.7 million and $1.3 million, respectively, for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022 and $0.4 million for both prior-year periods and is included in interest expense in our Unaudited Condensed Consolidated Statements of Operations. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the balance of unamortized deferred financing costs related to the Facilities was $~~17.3~~16.6 million and $17.9 million, respectively.

On April 30, 2021, Gogo, GIH, and each direct and indirect wholly-owned U.S. restricted subsidiary of GIH (Gogo and such subsidiaries collectively, the “Guarantors”) entered into a guarantee agreement (the “Guarantee Agreement”) in favor of Morgan Stanley Senior Funding, Inc., as collateral agent (the “Collateral Agent”), whereby GIH and the Guarantors guarantee the obligations under the Facilities and certain other secured obligations as set forth in the Guarantee Agreement, and GIH and the Guarantors entered into a collateral agreement (the “Collateral Agreement”), in favor of the Collateral Agent, whereby GIH and the Guarantors grant a security interest in substantially all of their respective tangible and intangible assets (including the equity interests in each direct material wholly-owned U.S. restricted subsidiary owned by GIH or any Guarantor, and 65% of the equity interests in any non-U.S. subsidiary held directly by GIH or any Guarantor), subject to certain exceptions, to secure the obligations under the Facilities and certain other secured obligations as set forth in the Collateral Agreement.

2022 Convertible Notes

On November 21, 2018, we issued $215.0 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. We granted an option to the initial purchasers to purchase up to an additional $32.3 million aggregate principal amount of 2022 Convertible Notes to cover over-allotments, of which $22.8 million was subsequently exercised during December 2018, resulting in a total issuance of $237.8 million aggregate principal amount of 2022 Convertible Notes.The 2022 Convertible Notes mature on May 15, 2022, unless earlier converted into shares of our common stock. We pay interest on the 2022 Convertible Notes semi-annually in arrears on May 15 and November 15 of each year, beginning on May 15, 2019.

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 the 2022 Convertible Notes. Pursuant to the March 2021 Exchange Agreements, such holders exchanged a total of $28,235,000 aggregate principal amount of 2022 Convertible Notes for 5,121,811 shares of our common stock on

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

March 24, 2021. The negotiated exchange rate under the March 2021 Exchange Agreements was 181.40 shares of common stock per $1,000 principal amount of the 2022 Convertible Notes, which resulted in a loss on settlement of $4.4 million, which is included in

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

Loss on extinguishment of debt and settlement of convertible notes in our Unaudited Condensed Consolidated Statements of Operations for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2021.

On April 1, 2021, Gogo entered into a privately negotiated exchange agreement (the “GTCR Exchange Agreement”) with an affiliate of funds managed by GTCR LLC (“GTCR”). Pursuant to the GTCR Exchange Agreement, GTCR exchanged $105,726,000 aggregate principal amount of 2022 Convertible Notes for 19,064,529 shares of our common stock on April 9, 2021. The negotiated exchange rate under the GTCR Exchange Agreement was 180.32 shares of common stock per $1,000 principal amount of 2022 Convertible Notes, which resulted in a loss on settlement of $14.6 million, which is included in Other (income) expense in our Unaudited Condensed Consolidated Statements of Operations for the three- and six-month periods ended June 30, 2021.

As of ~~both March 31, 2022 and~~ December 31, 2021, the outstanding principal amount of the 2022 Convertible Notes was $102.8 million and was classified as Current portion of long-term debt in the Unaudited Condensed Consolidated Balance Sheets.

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 June 30, 2022, there were 0 outstanding 2022 Convertible Notes.

We incurred approximately $8.1 million of issuance costs related to the 2022 Convertible Notes that ~~are being~~were amortized over the term of the 2022 Convertible Notes using the effective interest method. Total amortization expense was $~~0.3~~0.1 million and $~~0.6~~0.4 million, respectively, for the ~~three-month~~three- and six-month periods ended ~~March 31,~~June 30, 2022 and ~~2021~~$0.2 million and $0.8 million, respectively, for the prior-year periods and is included in Interest expense in the Unaudited Condensed Consolidated Statements of Operations. As of ~~March 31, 2022 and~~ December 31, 2021, the balance of unamortized deferred financing costs related to the 2022 Convertible Notes was $~~0.1~~0.4 million and $~~0.4~~ ~~million, respectively, and is~~was included as a reduction to the carrying amount of the debt in our Unaudited Condensed Consolidated Balance Sheets. See Note ~~11,~~10, “Interest Costs,” for additional information.

The 2022 Convertible Notes had an initial conversion rate of 166.6667 common shares per $1,000 principal amount of 2022 Convertible Notes, which iswas equivalent to an initial conversion price of approximately $6.00 per share of our common stock. I~~n November 2021, we informed~~Prior to conversion, the ~~trustee under the indenture governing the 2022 Convertible Notes that we intend to settle any conversions of the 2022 Convertible Notes occurring after November 15, 2021 in shares of our common stock~~. ~~The~~ shares of common stock subject to conversion ~~are~~were considered in the diluted earnings per share calculations under the if-converted method if their impact iswas dilutive.

~~A holder may convert its 2022 Convertible Notes, in multiples of $1,000~~ ~~principal amount, at any time on or after January 15, 2022 until the second scheduled trading day immediately preceding May 15, 2022.~~

In addition, if we undergo a fundamental change (as defined in the indenture governing the 2022 Convertible Notes), holders may, subject to certain conditions, require us to repurchase their 2022 Convertible Notes for cash at a price equal to ~~100~~% of the principal amount of the 2022 Convertible Notes to be purchased, plus any accrued and unpaid interest. In addition, following a make-whole fundamental change, we will increase the conversion rate in certain circumstances for a holder who elects to convert its 2022 Convertible Notes in connection with such make-whole fundamental change.

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.

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. In the future, we may request that the 2022 Forward Counterparty modify the settlement terms of the Amended and Restated Forward Transaction to provide that, in lieu of the delivery of the applicable number of shares of our common stock to us to settle a portion of the Amended and Restated Forward Transaction in accordance with its terms, the 2022 Forward Counterparty would pay to us the net proceeds from the sale by the 2022 Forward Counterparty (or its affiliate) of a corresponding number of shares of our common stock in a registered offering (which may include block sales, sales on the NASDAQ Global Select Market, sales in the over-the-counter market, sales pursuant to negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices). Any such sales could potentially decrease (or reduce the size of any increase in) the market price of our common stock. The 2022 Forward Counterparty is not required to effect any such settlement in cash in lieu of delivery of shares of our common stock and, if we request that the 2022 Forward Counterparty effect any such settlement, it will be entered into in the discretion of the 2022 Forward Counterparty on such terms as may be mutually agreed upon at the time. As a result of the Forward Transactions, total shareholders’ equity within our consolidated balance sheets was reduced by approximately $140.0 million. In March 2020, approximately 5.1 million shares of common stock were delivered to us in connection with the Forward Transactions. In April 2021, approximately 1.5 million shares of common stock were delivered to us in connection with the Amended and Restated Forward Transaction. ~~The~~In May 2022, the approximately 0.6 million shares ~~of common stock~~that were remaining under the Amended and Restated Forward ~~Transactions~~Transaction were delivered to us and there are ~~treated as retired shares for basic and diluted EPS purposes although they remain legally~~no additional prepaid forward stock repurchase transactions outstanding.

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

2024 Senior Secured Notes

On April 25, 2019, GIH and Gogo Finance Co. Inc. (a wholly owned subsidiary of GIH) (“Gogo Finance” and, together with GIH, the “Issuers”) issued $905.0 million aggregate principal amount of 9.875% senior secured notes due 2024 (the “2024 Senior Secured Notes”), at a price equal to 99.512% of their face value, under an indenture, dated as of April 25, 2019, among the Issuers, Gogo, the subsidiary guarantors party thereto and U.S. 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 2024 Senior Secured Notes were guaranteed on a senior secured basis by Gogo and all of GIH’s existing and future restricted subsidiaries (other than Gogo Finance), subject to certain exceptions. The 2024 Senior Secured Notes and the related guarantees were secured by certain liens on the Company’s collateral, which were released upon the closing of the Transaction.

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

We paid approximately $22.6 million of origination fees and financing costs related to the issuance of the 2024 Senior Secured Notes, which were accounted for as deferred financing costs on our Unaudited Condensed Consolidated Balance Sheets and were being amortized over the contractual term of the 2024 Senior Secured Notes using the effective interest method. Total amortization expense was ~~$1.0~~$0.4 million and $1.4 million, respectively, for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2021 and is included in Interest expense in the Unaudited Condensed Consolidated Statements of Operations. The remaining unamortized deferred financing fees were written off as of May 1, 2021.

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. 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 Unaudited Condensed Consolidated Statements of Operations for the three- and six-month periods ended June 30, 2021.

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 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 included letter of credit and swingline sub-facilities. 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. 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 Unaudited Condensed Consolidated Statements of Operations for the three- and six-month periods ended June 30, 2021.

~~10.~~9.

Derivative Instruments and Hedging Activities

We are exposed to interest rate risk on our variable rate borrowings. We currently use interest rate caps to manage our exposure to interest rate changes, and have designated these interest rate caps as cash flow hedges for accounting purposes. Accordingly, the earnings impact of the derivatives designated as cash flow hedges is recorded upon the recognition of the variable interest payments related to the hedged debt.

In May 2021, we purchased interest rate caps with an aggregate notional amount of $650.0 million for $8.6 million. The cost of the interest rate caps will be amortized to interest expense using the caplet method, from the effective date through termination date. We receive payments in the amount calculated pursuant to the caps for any period in which the three-month USD LIBOR rate increases beyond the applicable strike rate. The notional amounts of the interest rate caps periodically decrease over the life of the caps.

The notional amounts, strike rates and end dates of the cap agreements are as follows (notional amounts in thousands):


Start Date	End Date	Notional Amounts		Strike Rate
7/31/2021	7/31/2023	$	650,000		0.75	%
7/31/2023	7/31/2024		525,000		0.75	%
7/31/2024	7/31/2025		350,000		1.25	%
7/31/2025	7/31/2026		250,000		2.25	%
7/31/2026	7/31/2027		200,000		2.75	%

We record the effective portion of changes in the fair value of our cash flow hedges to other comprehensive income (loss), net of tax, and subsequently reclassify these amounts into earnings in the period during which the hedged transaction is recognized. The amounts included in accumulated other comprehensive income will be reclassified to interest expense in the event the hedges are no longer considered effective, in accordance with ASC 815, Derivatives and Hedging. NaN gains or losses of our cash flow hedges were

~~Gogo Inc. and Subsidiaries~~

~~Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)~~

considered to be ineffective and reclassified from other comprehensive income (loss) to earnings for the ~~three-month period~~three- and six-month periods ended ~~March 31, 2022.~~June 30, 2022 and 2021. We estimate that approximately $~~0.3~~0.5 million currently recorded in accumulated other comprehensive income (loss) will be recognized in earnings over the next 12 months. We assess the effectiveness of the hedges on an ongoing basis. Cash flows from interest rate caps are classified in the Unaudited Condensed Consolidated Statement of Cash Flows as investing activities from continuing operations.

For the three-month period ended ~~March 31,~~June 30, 2022, we recorded an unrealized gain on the interest rate caps of $~~16.1~~4.6 million, net of tax of $~~5.3~~1.5 million, and for the six-month period ended June 30, 2022, we recorded an unrealized gain on the interest rate caps of

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

$20.6 million, net of tax of $6.8 million. For the three- and six-month periods ended June 30, 2021, we recorded an unrealized loss on the interest rate caps of $0.4 million, net of tax of $0.1 million.

When derivatives are used, we are exposed to credit loss in the event of non-performance by the counterparties; however, non-performance is not anticipated. ASC 815, Derivatives and Hedging, requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. The fair values of the interest rate derivatives are based on quoted market prices for similar instruments from commercial banks (based on significant observable inputs - Level 2 inputs).

The following table presents the fair value of our interest rate derivatives included in the Unaudited Condensed Consolidated Balance Sheets for the periods presented (in thousands):

March 31,

December 31,

Derivatives designated as hedging instruments

Balance sheet location

2022

2021

Current portion of interest rate caps

Prepaid expenses and other current assets

$
7,777

$
925

Non-current portion of interest rate caps

Other non-current assets

$
25,872

$
11,359


		June 30,		December 31,
Derivatives designated as hedging instruments	Balance sheet location	2022		2021
Current portion of interest rate caps	Prepaid expenses and other current assets	$	16,087	$	925
Non-current portion of interest rate caps	Other non-current assets	$	23,628	$	11,359

Fair Value Measurement

Our derivative assets and liabilities consist principally of interest rate caps, which are carried at fair value based on significant observable inputs (Level 2 inputs). Derivatives entered into by us are typically executed over-the-counter and are valued using discounted cash flows along with fair value models that primarily use market observable inputs. These models take into account a variety of factors including, where applicable, maturity, interest rate yield curves, and counterparty credit risks.

~~12.~~11.

Leases

Operating and Financing Leases — We determine whether a contract contains a lease at contract inception. For leases subsequent to adoption of ASC 842, lease liabilities are calculated using a discount rate based on our incremental borrowing rate at lease commencement. We have operating lease agreements primarily related to cell sites and office space. Certain cell site and office space leases have renewal option terms that have been deemed reasonably certain to be exercised. These renewal options extend a lease by up to 15 years. We recognize operating lease expense on a straight-line basis over the lease term. AsOperating lease liabilities recorded in the Unaudited Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2022 ~~there were no significant~~exclude $2.4 million of undiscounted minimum lease payments over 10 years pursuant to leases ~~which had~~signed but not ~~commenced.~~yet commenced for new and modified rights to use tower space.

The following is a summary of our lease expense included in the Unaudited Condensed Consolidated Statements of Operations (in thousands):


					For the Three Months Ended June 30,				For the Six Months Ended June 30,
	For the Three Months Ended March 31, 2022		For the Three Months Ended March 31, 2021		2022		2021		2022		2021
Operating lease cost	$	3,546	$	3,078	$	3,618	$	3,086	$	7,164	$	6,164
Financing lease cost:
Amortization of leased assets		38		3		39		2		77		5
Interest on lease liabilities		13		15		11		13		24		28
Total lease cost	$	3,597	$	3,096	$	3,668	$	3,101	$	7,265	$	6,197

Other information regarding our leases is as follows (in thousands, except lease terms and discount rates):


							For the Six Months Ended June 30,
	For the Three Months Ended March 31, 2022			For the Three Months Ended March 31, 2021			2022			2021
Supplemental cash flow information
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows used in operating leases	$	3,496		$	3,382		$	7,117		$	6,785
Operating cash flows used in financing leases	$	13		$	15		$	24		$	28
Financing cash flows used in financing leases	$	43		$	124		$	103		$	154
Non-cash items:
Operating leases obtained	$	2,269		$	618		$	5,688		$	1,016
Financing leases obtained	$	0		$	0		$	11		$	0
Weighted average remaining lease term
Operating leases	9 years			7 years			8 years			7 years
Financing leases	1 year			2 years			1 year			2 years
Weighted average discount rate
Operating leases		6.9	%		10.5	%		6.8	%		10.5	%
Financing leases		17.9	%		16.5	%		17.4	%		16.5	%

Annual future minimum lease payments as of ~~March 31,~~June 30, 2022 (in thousands):


Years ending December 31,	Operating Leases			Financing Leases
2022 (period from July 1 to December 31)	$	6,344		$	83
2023		14,083			155
2024		13,315			4
2025		12,422			2
2026		12,298			—
Thereafter		54,143			—
Total future minimum lease payments		112,605			244
Less: Amount representing interest		(26,770	)		(25	)
Present value of net minimum lease payments	$	85,835		$	219
Reported as of June 30, 2022
Accrued liabilities	$	8,091		$	170
Non-current operating lease liabilities		77,744			0
Other non-current liabilities		0			49
Total lease liabilities	$	85,835		$	219

Years ending December 31,

Operating
Leases

Financing
Leases

2022 (period from April 1 to December 31)

$
9,683

$
154

2023

13,175

150

2024

12,524

—

2025

11,706

—

2026

11,623

—

Thereafter

53,849

—

Total future minimum lease payments

112,560

304

Less: Amount representing interest

(27,805
)

(35
)
Present value of net minimum lease payments

$
84,755

$
269

Reported as of March 31, 2022

Accrued liabilities

$
7,681

$
176

Non-current operating lease liabilities

77,074

0

Other non-current liabilities

0

93

Total lease liabilities

$
84,755

$
269

1819

Gogo Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements – (Continued)

18.

Discontinued Operations

As discussed in Note 1, “Basis of Presentation,” on December 1, 2020 we completed the sale of our CA business to Intelsat. As a result of the Transaction, the CA business is reported for all periods as discontinued operations.

The following table summarizes the results of discontinued operations which are presented as Net loss from discontinued operations, net of tax, in our Unaudited Condensed Consolidated Statements of Operations (in thousands):


	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2022		2021			2022		2021
Revenue:
Service revenue	$	0	$	0		$	0	$	0
Equipment revenue		0		0			0		0
Total revenue		0		0			0		0

Operating expenses:
Cost of service revenue (exclusive of amounts shown below)		0		0			0		0
Cost of equipment revenue (exclusive of amounts shown below)		0		0			0		0
Engineering, design and development		0		0			0		0
Sales and marketing		0		0			0		0
General and administrative		0		2,754			—		4,555
Depreciation and amortization		0		0			0		0
Total operating expenses		0		2,754			—		4,555
Operating loss		0		(2,754	)		—		(4,555	)

Total other (income) expense		0		0			0		0

Loss before income taxes		0		(2,754	)		—		(4,555	)
Income tax provision		0		100			—		100
Net loss from discontinued operations, net of tax	$	0	$	(2,854	)	$	—	$	(4,655	)

Stock-based compensation – In August 2020 the Compensation Committee of our Board of Directors (the “Compensation Committee”) approved modifications to the vesting conditions and exercise periods of outstanding equity compensation awards held by certain of our then-current employees who became employees of Intelsat in the Transaction. Certain of these awards vested based on conditions that were not classified as a service, market or performance condition, and as a result such awards were classified as a liability. As of December 31, 2021, there were no remaining liability-classified awards.

The following is a summary of our stock-based compensation expense contained within the results of discontinued operations by operating expense line (in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Cost of service revenue	$	0	$	0	$	0	$	0
Engineering, design and development		0		0		0		0
Sales and marketing		0		0		0		0
General and administrative		0		2,802		—		3,855
Total stock-based compensation expense	$	0	$	2,802	$	0	$	3,855

See Note 15, “Stock-Based Compensation and 401(k) Plan,” for additional information on our stock-based compensation plans.

Other Costs Classified to Discontinued Operations – During the three- and six-month periods ended June 30, 2021, we incurred $0.1 million and $0.8 million, respectively, of additional costs (exclusive of the stock-based compensation expense noted above) primarily due to employer-paid taxes arising from the exercise of stock options by former employees then employed by Intelsat.

Certain statements in this report may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding our industry, business strategy, plans, goals and expectations concerning our market position, international expansion, future technologies, future operations, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “future” and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this Quarterly Report on Form 10-Q.

Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following:

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

In addition, while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts, or opinions, such reports are not our responsibility.

ITEM 2. 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 report, 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.

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”). As a result, all periods presented in our Unaudited Condensed Consolidated Financial Statements and other portions of this Quarterly Report on Form 10-Q 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 and the 2022 Q1 10-Q and in Item 1A ~~of this report~~ and in “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 December 31 and, unless otherwise noted, references to “years” or “fiscal” are for fiscal years ended December 31. See “— Results of Operations.”

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.

The COVID-19 pandemic caused a significant decline in international and domestic business aviation travel, which materially and adversely affected our business in 2020. Beginning in March 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 in the 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.

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:

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.

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.

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 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.

See Note 3,2, “Recent Accounting Pronouncements,” to our Unaudited Condensed Consolidated Financial Statements for additional information.

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

Revenue and percent change for the ~~three-month~~three- and six-month periods ended ~~March 31,~~June 30, 2022 and 2021 were as follows (in thousands, except for percent change):

Revenue increased to ~~$92.8~~$97.8 million and $190.6 million, respectively, for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022, as compared with ~~$73.9~~$82.4 million and $156.2 million, respectively, for the prior-year ~~period,~~periods, due to increases in both service and equipment revenue.

Service revenue increased to ~~$70.7~~$73.1 million and $143.7 million, respectively, for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022, as compared with ~~$59.4~~$64.8 million and $124.1 million, respectively, for the prior-year ~~period,~~periods, primarily due to increases in ATG aircraft online and average monthly service revenue per aircraft online.

Equipment revenue increased to ~~$22.1~~$24.8 million and $46.9 million, respectively, for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022, as compared with ~~$14.5~~$17.6 million and $32.1 million, respectively, for the prior-year ~~period,~~periods, primarily due to increases in the number of ATG units sold, with ~~246~~310 units and 556 units, respectively, sold during the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022 as compared with ~~135~~182 units and 317 units, respectively, sold during the prior-year ~~period.~~periods.

We expect service revenue to increase in the future as additional ATG aircraft come online and average monthly connectivity service revenue per ATG aircraft online increases. We expect equipment revenue to increase in the future as additional ATG units are sold. In addition, we expect further revenue growth as we launch Global Broadband.

Cost of revenue and percent change for the ~~three-month~~three- and six-month periods ended ~~March 31,~~June 30, 2022 and 2021 were as follows (in thousands, except for percent change):

Cost of service revenue increased to ~~$14.6~~$15.8 million and $30.4 million, respectively, for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022, as compared with ~~$14.1~~$15.2 million and $29.3 million, respectively, for the prior-year ~~period,~~periods, primarily due to an increase in personnel costs.

We expect cost of service revenue to increase over time, primarily due to service revenue growth and increasing ATG network costs associated with Gogo 5G. In addition, we expect cost of service revenue to increase as we launch Global Broadband.

Cost of equipment revenue increased to ~~$14.3~~$16.9 million and $31.1 million, respectively, for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022, as compared with ~~$8.3~~$10.9 million and $19.2 million, respectively, for the prior-year ~~period,~~periods, primarily due to an increase in ATG units sold.

We expect that our cost of equipment revenue will increase with growth in ATG units ~~sold.~~sold and Global Broadband units sold following the launch of that service.

Engineering, design and development expenses ~~decreased~~increased to ~~$5.4~~$8.0 million and $13.4 million, respectively, for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022, as compared with ~~$5.5~~$6.5 million and $12.0 million, respectively, for the prior-year ~~period,~~periods, primarily due to ~~a decrease in 5G~~the commencement of Global Broadband development and personnel costs.

We expect engineering, design and development expenses as a percentage of service revenue to increase in the near term, driven by ~~Gogo 5G~~Global Broadband development costs, and decrease over the long term as the level of investment decreases and revenue increases.

Sales and marketing expenses increased to ~~$6.2~~$6.1 million and $12.3 million, respectively, for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022, as compared with ~~$3.7~~$4.8 million and $8.6 million, respectively, for the prior-year ~~period,~~periods, primarily due to an increase in personnel, ~~and~~ promotional and advertising and travel expenses.

We expect sales and marketing expenses as a percentage of service revenue to remain relatively flat in the future.

General and administrative expenses increased to ~~$13.5~~$15.4 million and $28.8 million, respectively, for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022 as compared with ~~$10.4~~$11.7 million and $22.1 million, respectively, for the prior-year ~~period,~~periods, primarily due to ~~an increase~~increases in stock-based compensation, legal fees and ~~outside services.~~personnel costs.

We expect general and administrative expenses as a percentage of service revenue to decrease over time as the business grows given the relatively fixed cost nature of this operating expense category.

Depreciation and amortization expense ~~decreased to $3.8~~was $3.5 million for both three-month periods and $7.3 million and $7.7 million, respectively, for the ~~three-month~~six-month periods ended June 30, 2022 and 2021. The decrease for the six-month period ended ~~March 31,~~June 30, 2022 ~~as compared with $4.1 million for the prior-year period,~~was primarily due to ~~the depreciation of network assets.~~decreased amortization expense for capitalized software.

We expect that our depreciation and amortization expense will increase in the future as we launch our Gogo 5G network.

Other (income) expense and percent change for the ~~three-month~~three- and six-month periods ended ~~March 31,~~June 30, 2022 and 2021 were as follows (in thousands, except for percent change):

Total other expense decreased to ~~$10.8~~$9.6 million and $20.4 million, respectively, for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022, as compared with ~~$33.6~~$95.7 million and $129.4 million, respectively, for the prior-year ~~period,~~periods, primarily due to the prior-year periods including the loss on extinguishment of debt and settlement of convertible notes as well as lower interest expense in the current year as a result of the ~~Refinancing as well as the prior-year period including the loss on settlement of convertible notes.~~Refinancing.

We expect our interest expense to ~~decrease~~fluctuate with changes in the ~~future following~~variable rates associated with the ~~maturity of the remaining 2022 Convertible Notes.~~Facilities. See Note 9,8, “Long-Term Debt and Other Liabilities,” to our Unaudited Condensed Consolidated Financial Statements for additional information.

The effective income tax rates for the ~~three-month~~three- and six-month periods ended ~~March 31,~~June 30, 2022 were 3.1% and ~~2021 were 8.0% and (0.6)%~~5.6%, ~~respectively.~~respectively, compared to (0.4)% for both prior-year periods. For the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2022, our income tax expense was ~~$1.9~~$0.7 million and $2.6 million, respectively, primarily due to pre-tax income, partially offset by the ~~tax benefits for stock-based compensation and a~~ partial release of the valuation allowance onagainst our deferred income tax ~~assets.~~assets and the tax benefits for stock-based compensation. For the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2021, our income tax expense was not significant primarily due to the full valuation allowance against our net deferred tax assets. See Note ~~15,~~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 generate positive pre-tax income, which may be at least partially offset by reversals of our valuation allowance within the next twelve to eighteen months.

In our discussion below, we discuss Adjusted EBITDA and Free Cash Flow, as defined below, which are non-GAAP financial measures. 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. 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. 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.

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

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, (iii) loss on extinguishment of debt and settlement of convertible notes and (iv) separation costs related to the sale of CA. 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 is appropriate given the significant variation in expense that can result from using the Black-Scholes model to determine the fair value of such compensation. The fair value of our stock options is determined using the Black-Scholes model and varies based on fluctuations in the assumptions used in this model, including inputs that are not necessarily directly related to the performance of our business, such as the expected volatility, the risk-free interest rate and the expected life of the options. Therefore, we believe 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. While we believe that investors should have information about any dilutive effect of outstanding options and the cost of that compensation, we also believe that stockholders should have the ability to consider our performance using a non-GAAP financial measure that excludes these costs and that management uses to evaluate our business.

We believe it is useful for an understanding of our operating performance to exclude the results of our discontinued operations from Adjusted EBITDA because they are not part of our ongoing operations.

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 separation costs related to the sale of CA from Adjusted EBITDA for the ~~three-month period~~three- and six-month periods ended ~~March 31,~~June 30, 2021 because of the non-recurring nature of this activity.

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 Flow represents net cash provided by operating activities, less purchases of property and equipment, ~~and~~ the acquisition of intangible ~~assets.~~assets and the cash flows associated with our interest rate caps. We believe that Free Cash Flow provides meaningful information regarding our liquidity.

31To conform to current year presentation, we included the cash paid for our interest rate caps in Free Cash Flow for the three- and six-month periods ended June 30, 2021. We 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.


	For the Three Months Ended March 31,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2022			2021			2022			2021			2022			2021
Adjusted EBITDA:
Net income (loss) attributable to common stock (GAAP)	$	22,196		$	(7,685	)	$	22,017		$	(69,248	)	$	44,213		$	(76,933	)
Interest expense		10,889			29,294			9,772			16,340			20,661			45,634
Interest income		(47	)		(57	)		(194	)		(54	)		(241	)		(111	)
Income tax provision		1,937			35			702			277			2,639			312
Depreciation and amortization		3,791			4,117			3,499			3,547			7,290			7,664
EBITDA		38,766			25,704			35,796			(49,138	)		74,562			(23,434	)
Stock-based compensation expense		4,007			1,849			5,404			2,892			9,411			4,741
Loss from discontinued operations		—			1,801			—			2,854			—			4,655
Loss on settlement of convertible notes		—			4,397
Loss on extinguishment of debt and settlement of convertible notes								—			79,564			—			83,961
Separation costs related to CA sale		—			145			—			575			—			720
Adjusted EBITDA	$	42,773		$	33,896		$	41,200		$	36,747		$	83,973		$	70,643

Free Cash Flow:
Net cash provided by operating activities (GAAP)	$	17,866		$	24,574
Net cash provided by (used in) operating activities (GAAP)							$	26,374		$	(14,973	)	$	44,240		$	9,601
Consolidated capital expenditures		(9,055	)		(702	)		(10,895	)		(1,124	)		(19,950	)		(1,826	)
Payments for interest rate caps								—			(8,629	)		—			(8,629	)
Free cash flow	$	8,811		$	23,872		$	15,479		$	(24,726	)	$	24,290		$	(854	)

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.

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, non-convertible debt, senior convertible preferred stock, convertible debt, credit facilities 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. We actively 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.

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 and debt maturities, for at least the next twelve months and thereafter for the foreseeable future.

As detailed in Note 9,8, “Long-Term Debt and Other Liabilities,” to our Unaudited Condensed Consolidated Financial Statements, 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. 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 bears annual interest at a floating rate measured by reference to, at GIH’s option, either (i) an adjusted London inter-bank offered rate (subject to a floor of 0.75%) plus an applicable margin of 3.75% or (ii) an alternate base rate plus an applicable margin of 2.75%. 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 London inter-bank offered 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 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. 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. For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2022, the fee for unused commitments under the Revolving Facility was 0.25%.

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. 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 2021 Credit Agreement 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.

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 GIH and its subsidiaries and was undrawn as of ~~March 31,~~June 30, 2022 and December 31, 2021.

~~The~~In May 2022, ~~Convertible Notes mature on May 15, 2022, unless earlier converted to shares of our common stock. In November 2021, we informed~~ the ~~trustee under the indenture governing the 2022 Convertible Notes that we intend to settle any conversions~~remaining $102.8 million aggregate principal amount of the 2022 Convertible Notes ~~occurring after November 15, 2021 in~~was converted by holders into 17,131,332 shares of ~~our~~ common stock. ~~To the extent any 2022 Convertible Notes remain outstanding at maturity, we currently expect to pay such principal amount through cash on hand.~~

For additional information on the 2021 Credit Agreement and 2022 Convertibles Notes, see Note 9,8, “Long-Term Debt and Other Liabilities,” to our Unaudited Condensed Consolidated Financial Statements.

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. The notional amounts of the interest rate caps periodically decrease over the life of the caps. 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,~~9, “Derivative Instruments and Hedging Activities,” to our Unaudited Condensed Consolidated Financial Statements.

Consistent with our capital allocation strategy, and given our cash position and the upcoming maturity of the 2022 Convertible Notes, we are evaluating the return of capital to our stockholders, which may take the form of stock repurchases. The implementation of any capital allocation policy, including any declaration of stock repurchases or other distributions, will be at the discretion of, and subject to the approval by, our Board of Directors and will depend on our financial condition, earnings, liquidity and capital requirements, level of indebtedness, contractual restrictions, restrictions imposed by Delaware law, general business conditions and any other factors that our Board of Directors deems relevant in making any such determination. Therefore, there can be no assurance that we will make any stock repurchases or make other distributions or returns on our common stock, or as to the amount of any such stock repurchases, distributions or returns of capital.

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

For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2022, net cash provided by operating activities was ~~$17.9~~$44.2 million as compared with net cash provided by operating activities of ~~$24.6~~$9.6 million in the prior-year period. The principal contributors to the year-over-year change in operating cash flows were:

For the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2022, our Free Cash Flow ~~decreased~~improved to ~~$8.8~~$24.3 million as compared ~~to $23.9~~with negative $0.9 million for the prior-year period.

Cash used in investing activities is primarily for capital expenditures related to cell site construction, software development, and data center upgrades, see “— Capital Expenditures” below. Additionally, cash used in investing activities includes the purchase of the interest rate caps during the six-month period ended June 30, 2021.

Cash used in financing activities for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2022 was ~~$1.9~~$6.2 million primarily due to principal payments on the Term Loan Facility.

Cash used in financing activities for the ~~three-month~~six-month period ended ~~March 31,~~June 30, 2021 was ~~$3.3~~$324.9 million primarily due to ~~stock-based compensation activity.~~the redemption of all of our outstanding 2024 Senior Secured Notes (including the make-whole premium payable under the indenture governing the 2024 Senior Secured Notes) for a redemption price totaling $1,023.1 million and the payment of $20.3 million of deferred financing fees associated with the issuance of the Facilities, offset in part by $721.4 million of gross proceeds from the Term Loan Facility.

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

Capital expenditures for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2022 and 2021 were ~~$9.1~~$20.0 million and ~~$0.7~~$1.8 million, respectively. The increase in capital expenditures was primarily due to the build out of Gogo 5G.

We expect that our capital expenditures will increase in the near-term as we build out Gogo 5G and further invest in capitalized software ~~and~~but then decrease substantially after the Gogo 5G build out is completed.

~~Other~~Contractual Commitments: In June 2022, we and Hughes entered into a supply and product support agreement (the “SPSA”), providing for our purchase from Hughes of airborne antennas for use on a LEO satellite network, and the performance by Hughes of services related thereto. Under the SPSA, we commit to purchase, over a seven-year period that will begin on completion of a project milestone currently expected to occur at the end of 2024, antennas with an estimated aggregate purchase price of approximately $170 million. During that seven-year period, Hughes may not sell substantially similar equipment to other purchasers in our primary target market.

Leases and Cell Site Contracts: We have lease agreements relating to certain facilities and equipment, which are considered operating leases. See Note ~~12,~~11, “Leases,” to our Unaudited Condensed Consolidated Financial Statements for additional information.

Indemnifications and Guarantees: In accordance with Delaware law, we indemnify our officers and directors for certain events or occurrences while the officer or director is, or was, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under this indemnification is uncertain and may be unlimited, depending upon circumstances. 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. Based on historical experience, we believe that the risk of sustaining any material loss related to such guarantees is remote.

We have entered into a number of agreements pursuant to which we indemnify the other party for losses and expenses suffered or incurred in connection with any patent, copyright, or trademark infringement or misappropriation claim asserted by a third party with respect to our equipment or services. 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.

Our exposure to market risk is currently confined to our cash and cash equivalents, short-term investments and debt. We have not used derivative financial instruments for speculation or trading purposes. The primary objectives of our investment activities are to preserve our capital for the purpose of funding operations while maximizing the income we receive from our investments without significantly increasing risk. To achieve these objectives, our investment policy allows us to maintain a portfolio of cash equivalents and short-term investments through a variety of securities, including U.S. Treasury securities, U.S. government agency securities, and money market funds. Our cash and cash equivalents as of both ~~March 31,~~June 30, 2022 and December 31, 2021 included amounts in bank deposit accounts and money market funds, and we did not have any short-term investments as of either such date. We believe that a change in average interest rates would not affect our interest income and results of operations by a material amount.

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. 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). We assess our market risks based on changes in interest rates utilizing a sensitivity analysis that measures the potential impact on earnings and cash flows based on a hypothetical one percentage point change in interest rates. As of ~~March 31,~~June 30, 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. 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. 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 ~~March 31,~~June 30, 2022 was $650.0 million. Based on our ~~March 31,~~June 30, 2022 outstanding variable rate debt balance, a hypothetical one percentage point ~~increase~~change in the three-month LIBOR interest rate would impact our annual interest expense by approximately $0.7 million for the next twelve-month period, which includes the impact of our interest rate caps at a strike rate of 0.75%. Excluding the impact of our interest rate caps, a hypothetical one percentage point ~~increase~~change in the three-month LIBOR interest rate would impact our annual interest expense by approximately $7.2 ~~million. A hypothetical one percentage point decrease in~~million for the ~~three-month LIBOR interest rate would impact our annual interest expense by an immaterial amount due to the LIBOR floor of 0.75% in our Term Loan Facility.~~next twelve-month period.

Our earnings are affected by changes in interest rates due to the impact those changes have on interest income generated from our cash and cash equivalents. Our cash and cash equivalents as of both ~~March 31,~~June 30, 2022 and December 31, 2021 included amounts in bank deposit accounts and money market funds. We believe we have minimal interest rate risk related to our cash and cash equivalents, as a 10% decrease in the average interest rate on our portfolio would have reduced interest income for the ~~three-month~~three- and six-month periods ended ~~March 31,~~June 30, 2022 and 2021 by immaterial amounts.

Inflation: We do not believe that inflation has had a material effect on our results of operations. However, there can be no assurance that our business will not be affected by inflation in the future.

Management, with the participation of our Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of ~~March 31,~~June 30, 2022. Based upon this evaluation, our Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~March 31,~~June 30, 2022.

There have been no changes to our internal control over financial reporting in connection with the evaluation required by Rules 13a-15(f) and 15d-15(f) under the Exchange Act during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are subject to a number of lawsuits arising out of the conduct of our business. See Note ~~13,~~12, “Commitments and Contingencies,” to our Unaudited Condensed 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. We cannot predict with certainty the outcome of any litigation or the potential for future litigation. Regardless of the outcome of any particular litigation and the merits of any particular claim, litigation can have a material adverse impact on our company due to, among other reasons, any injunctive relief granted, which could inhibit our ability to operate our business, amounts paid as damages or in settlement of any such matter, diversion of management resources and defense costs.

“Item 1A. Risk Factors” of our ~~Form~~2021 10-K includes a discussion of our risk factors. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in our 2021 10-K. Except as set forth below and in Item 1A of the 2022 Q1 10-Q, there have been no material changes to the risk factors previously disclosed in our 2021 10-K.

Competition could result in price reduction, reduced revenue and loss of market position and could harm our results of operations.

Our equipment and services are sold in competitive markets. Some of our current or potential future competitors are or could potentially be, larger, more diversified corporations and have greater financial, marketing, production and research and development resources. As a result, they may be better able to withstand pricing pressures and the effects of periodic economic downturns. Some of our current or future competitors may offer a broader product line or broader geographic coverage to customers. Our business and results of operations may be materially adversely affected if our competitors:

We believe that the principal points of competition in our business are technological capabilities, geographic coverage, price, customer service, product development, conformity to customer specifications, compliance with regulatory certification requirements, quality of support after the sale and timeliness of delivery and installation. Maintaining and improving our competitive position will require continued investment in technology, manufacturing, engineering, quality standards, marketing and customer service and support. If we do not maintain sufficient resources to make these investments or are not successful in maintaining our competitive position, our operations and financial performance will suffer. In addition, competition may subject us to downward pricing pressures. Pricing at too high a level could adversely affect our ability to gain new customers and retain current customers, while increased competition could force us to lower our prices or lose market position, which could adversely affect growth prospects and profitability. We may not have the financial resources, technical expertise or support capabilities to continue to compete successfully. A competitor 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. Another in-flight connectivity provider has launched service on commercial aircraft in Europe using a hybrid ATG/satellite network.~~2021 10-K~~

While we have recently announced our plans to launch the first Global Broadband service in business aviation, we do not currently offer satellite-based broadband service, and could face competition from owners of LEO and other new non-geosynchronous satellite constellations should they decide to enter our market. Starlink, a division of Space Exploration Technologies Corp., has recently been awarded an ESIM (Earth Stations in Motion) license by the Federal Communications Commission that would cover aircraft and other moving vehicles. Starlink recently announced that it has signed contracts to provide in-flight connectivity services on transpacific jets operated by a commercial airline and a semi-private regional jet operator’s fleet. We believe that Starlink intends to enter the business aviation market but cannot predict the timing of such entry. A failure to successfully anticipate and respond to Starlink and other established and new competitors may have a material adverse impact on our business and results of operations.

The COVID-19 pandemic and the measures implemented to combat it have had, and may continue to have, a material adverse effect on our business.

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 in the U.S. and internationally.

Whether and to what extent COVID-19 impacts our future financial and operational performance will depend on developments that include the duration, spread and severity of the outbreak, the timetable for administering and efficacy of vaccines, the duration and geographic scope of related travel advisories and restrictions and the extent of the impact of COVID-19 on overall demand for commercial and business aviation travel, all of which are highly uncertain and cannot be predicted.

In addition to directly impacting demand for air travel, COVID-19 and related restrictions may have a material and adverse impact on other aspects of our business, including:

In addition, COVID-19 has had, and may in the future continue to have, an adverse effect on our supply chain. 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.”

At this time, we are also not able to predict whether the COVID-19 pandemic will result in long-term changes to business practices and consumer behavior, with such changes including but not limited to a long-term reduction in travel as a result of increased usage of “virtual” and “teleconferencing” products. The full extent of the ongoing impact of COVID-19 on our longer-term operational and financial performance will depend on future developments, many of which are outside of our control.

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.

In early 2020, many manufacturers of electronic components reduced their capacity in response to the reduced demand that accompanied the COVID-19 pandemic. While manufacturers have begun to increase manufacturing capacity as demand recovers from the impact of COVID-19, demand has exceeded supply in certain areas, and global shortages of electronic components have occurred. In particular, inflation, changes in trade policies, the imposition of duties and tariffs, potential retaliatory countermeasures, public health crises (such as the COVID-19 pandemic), Russia's invasion of Ukraine and geopolitical conflicts continue to adversely impact the availability and price of electronic components. We have experienced longer lead times and encountered delays in obtaining electronic components, and we expect longer lead times and delays to continue. 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. We have prepaid the suppliers of certain components to help ensure adequate supply and expect to continue to do so, and we may face price increases for certain components due to the shortages. In addition, the effects of the pandemic include global logistics issues such as shipping logjams, workforce shortages and carrier capacity constraints, all of which may negatively affect our ability to obtain electronic and other components on a timely basis. We cannot predict how long the component shortages or logistics issues will continue. Furthermore, 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. While we cannot predict any future trends in the rate of inflation, there is currently significant uncertainty to the near-term economic outlook. A significant increase in inflation would raise our costs for labor, materials and services, which could negatively impact our profitability and cash flows. Additionally, we may be unable to raise our prices for our equipment and services equal to the rate of inflation, and if our constrained supply chain continues, our operating profit and balance sheet may be negatively impacted. All of these factors could have a material adverse effect on our profitability and cash flows, business, financial condition and results of operations.

We may be unsuccessful or delayed in developing and deploying Gogo 5G or other next generation technologies.

We are currently developing a next generation ATG network using 5G technology and unlicensed ~~spectrum, which we intend to launch on a commercial, nationwide basis in the second half of 2022.~~spectrum. Gogo 5G will be capable of working with different spectrum and supporting different next generation technologies. There 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. As disclosed in ~~the 2021 10-K~~this Item 1A under the caption ~~“Risk Factors~~—~~Risks Related to Our Business~~—~~The COVID-19 pandemic~~“Global supply chain challenges and ~~the measures implemented to combat it~~logistics issues as well as increasing inflation have had, and may continue to have, ~~a material~~an adverse effect on our business, financial condition and results of operations,” we have experienced longer lead times and encountered delays in obtaining

certain electronic components used in our business. For instance, manufacturing issues with respect to a component necessitated ~~manufacturing~~ process revisions and additional testing, which have repeatedly delayed the delivery date for this component, and the supplier of the component ~~has~~recently informed us ~~that the component is taking longer than expected to manufacture,~~of additional manufacturing issues which will further delay delivery. In addition, our principal 5G supplier subcontracts with contract manufacturers located in China for the manufacture of certain components, and COVID-19- related restrictions recently imposed by the Chinese government are causing delays in the delivery of such components. We currently believe that ~~we can accommodate these~~this combination of delays ~~without affecting~~will likely shift the commercial launch of Gogo 5G service from our ~~service launch, but the repeated compression~~previously announced target of ~~our schedule resulting from such delays could limit our ability to preserve the current schedule should other significant issues arise.~~fourth quarter 2022 into 2023. 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.

~~Assertions by third parties of infringement, misappropriation~~We may be unsuccessful or ~~other violations by us of their intellectual property rights could result~~delayed in ~~significant costs~~developing and ~~materially adversely affect our business and results of operations.~~deploying Global Broadband service.

In ~~recent years, there has been significant litigation involving intellectual property rights~~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. There can be no assurance that we will launch Global Broadband in ~~many technology-based industries, including~~sufficient time to effectively compete in the ~~wireless communications industry. Many companies, including our competitors, are devoting significant resources~~global business aviation market, if at all, due to, ~~obtaining patents that could potentially cover many aspects~~among other things, risks associated with: (i) OneWeb’s failure to launch or delay in launching its LEO network; (ii) the failure of our ~~business. While we have reviewed~~equipment and software to perform as expected; (iii) the ~~patent portfolios~~failure of ~~certain competitors~~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 ~~third parties, we~~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. As disclosed in this Item 1A under the caption “Global supply chain challenges and logistics issues as well as increasing inflation have ~~not exhaustively searched all patents relevant to our technologies and business and therefore it is possible that we may be unknowingly infringing the patents of others. We are currently facing,~~had, and may ~~in the future face, claims that we or a supplier~~continue to have violated patent, trademark or other intellectual property rights of third parties. A competitor recently filed a patent infringement suit against us and is seeking a preliminary injunction, which, if granted, would prevent us from proceeding with Gogo 5G until the infringement suit is resolved. Adverse results in this 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. These actions, if required, may be costly or unavailable on terms acceptable to us. Even if we are successful in defending these claims, ~~such litigation may be time-consuming and costly, divert management resources and could adversely affect our business relating to such disputed technology during its pendency.~~ Any infringement, misappropriation or related claims, whether or not meritorious and whether or not they result in litigation, are time-consuming, divert technical and management personnel and are costly to resolve.

Pursuant to our contracts with certain customers, we have agreed to indemnify such customers against such claims, and our indemnification obligations generally include defending or paying for the defense of the action and paying any judgments or other costs assessed against the customer in the event of an adverse outcome. In most cases, our contracts do not cap our indemnification obligations. In addition, certain of our suppliers do not indemnify us for third-party infringement or misappropriation claims arising from our use of supplier technology, and we may be liable in the event of such claims. Our inability to meet our indemnification obligations and our customers terminating or failing to renew their contracts may have a material adverse effect on our business, financial condition and results of operations,” we have experienced longer lead times and encountered delays in obtaining certain electronic components used in our business, and such issues could affect the development of Global Broadband. 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.~~condition and results of operations may be materially adversely affected. See “—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. If we are not successful in launching Global Broadband, we may nonetheless, depending on the circumstances, be required to honor these commitments.

In addition, expanding our business to include international markets involves various risks including without limitation (i) the need to invest significant resources in unfamiliar markets; (ii) legal and regulatory restrictions including different communications, privacy, aerospace and liability standards; (iii) intellectual property laws and enforcement practices; (iv) changes in tariffs; (v) restrictions on the ability of U.S. companies to do business in foreign countries; and (vi) compliance with anti-corruption laws and regulations in the jurisdictions in which we do business.

* This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Title of Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, par value $0.0001 per share	GOGO	NASDAQ Global Select Market
Preferred Stock Purchase Rights	GOGO	NASDAQ Global Select Market


		Page
Part I.	Financial Information
Item 1.	Financial Statements	2
	Unaudited Condensed Consolidated Balance Sheets	2
	Unaudited Condensed Consolidated Statements of Operations	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Unaudited Condensed Consolidated Statements of Cash Flows	5
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	6
	Notes to Unaudited Condensed Consolidated Financial Statements	78
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2527
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3739
Item 4.	Controls and Procedures	3739

Part II.	Other Information
Item 1.	Legal Proceedings	3840
Item 1A.	Risk Factors	3840
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4043
Item 3.	Defaults Upon Senior Securities	4043
Item 4.	Mine Safety Disclosures	4043
Item 5.	Other Information	4043
Item 6.	Exhibits	4144
Signatures		4245


	For the Three Months Ended March 31,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2022			2021			2022			2021			2022			2021
Net income (loss)	$	22,196		$	(7,685	)	$	22,017		$	(69,248	)	$	44,213		$	(76,933	)
Other comprehensive income, net of tax
Currency translation adjustments	$	111		$	101		$	(120	)	$	37		$	(9	)	$	138
Cash flow hedges:
Net unrealized gain		16,053			0			5,106			(430	)		21,159			(430	)
Less: income (loss) realized and reclassified to earnings		(8	)		0
Less: income realized and reclassified to earnings								527			0			519			0
Changes in fair value of cash flow hedges		16,061			0			4,579			(430	)		20,640			(430	)
Other comprehensive income, net of tax		16,172			101			4,459			(393	)		20,631			(292	)
Comprehensive income (loss)	$	38,368		$	(7,584	)	$	26,476		$	(69,641	)	$	64,844		$	(77,225	)


	March 31, 2022			December 31, 2021
	Fair Value (1)	Carrying Value		Fair Value (1)	Carrying Value		June 30, 2022					December 31, 2021
							Fair Value (1)		Carrying Value			Fair Value (1)		Carrying Value
Term Loan Facility	$715,000	$716,359	(2)	$723,000	$718,057	(2)	$	680,000	$	714,663	(2)	$	723,000	$	718,057	(2)
2022 Convertible Notes	$328,000	$102,788		$230,000	$102,788		$	0	$	0		$	230,000	$	102,788


				Change in
	Currency			Fair Value of
	Translation			Cash Flow
	Adjustment			Hedges			Total
Balance at January 1, 2022	$	(960	)	$	2,749		$	1,789
Other comprehensive income (loss) before reclassifications		111			16,053			16,164
Less: income (loss) realized and reclassified to earnings		0			(8	)		(8	)
Net current period comprehensive income		111			16,061			16,172
Balance at March 31, 2022	$	(849	)	$	18,810		$	17,961


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	For the quarterly period ended ~~March 31,~~June 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	For the transition period from __________ to __________


Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


	For the Three Months Ended June 30, 2022
									Accumulated
						Additional			Other
	Common Stock					Paid-In			Comprehensive			Accumulated			Treasury Stock
	Shares			Par Value		Capital			Income			Deficit			Shares		Amount			Total
Balance at March 31, 2022		111,784,217		$	11	$	1,259,223		$	17,961		$	(1,429,432	)		6,615,449	$	(128,803	)	$	(281,040	)
Net income		—			—		—			—			22,017			—		—			22,017
Currency translation adjustments, net of tax		—			—		—			(120	)		—			—		—			(120	)
Fair value adjustments of cash flow hedges, net of tax		—			—		—			4,579			—			—		—			4,579
Stock-based compensation expense		—			—		5,404			—			—			—		—			5,404
Issuance of common stock upon exercise of stock options		303,840			—		838			—			—			—		—			838
Issuance of common stock upon vesting of restricted stock units		29,803			—		—			—			—			—		—			—
Tax withholding related to vesting of restricted stock units		—			—		(262	)		—			—			—		—			(262	)
Issuance of common stock in connection with employee stock purchase plan		14,280			—		170			—			—			—		—			170
Settlement of convertible notes		17,131,332			2		102,786			—			—			—		—			102,788
Settlement of prepaid forward shares		(575,100	)		—		11,197			—			—			575,100		(11,197	)		—
Balance at June 30, 2022		128,688,372		$	13	$	1,379,356		$	22,420		$	(1,407,415	)		7,190,549	$	(140,000	)	$	(145,626	)


	For the Three Months Ended June 30, 2021
									Accumulated
						Additional			Other
	Common Stock					Paid-In			Comprehensive			Accumulated			Treasury Stock
	Shares			Par Value		Capital			Loss			Deficit			Shares		Amount			Total
Balance at March 31, 2021		92,071,085		$	9	$	1,080,305		$	(912	)	$	(1,612,048	)		5,077,400	$	(98,857	)	$	(631,503	)
Net loss		—			—		—			—			(69,248	)		—		—			(69,248	)
Currency translation adjustments, net of tax		—			—		—			37			—			—		—			37
Fair value adjustments of cash flow hedge, net of tax		—			—		—			(430	)		—			—		—			(430	)
Stock-based compensation expense		—			—		3,385			—			—			—		—			3,385
Issuance of common stock upon exercise of stock options		34,751			—		86			—			—			—		—			86
Issuance of common stock upon vesting of restricted stock units and restricted stock awards		51,246			—		—			—			—			—		—			—
Tax withholding related to vesting of restricted stock units		—			—		(324	)		—			—			—		—			(324	)
Issuance of common stock in connection with employee stock purchase plan		12,032			—		131			—			—			—		—			131
Settlement of convertible notes		19,064,529			2		120,582			—			—			—		—			120,584
Settlement of prepaid forward shares		(1,538,049	)		—		29,946			—			—			1,538,049		(29,946	)		—
Balance at June 30, 2021		109,695,594		$	11	$	1,234,111		$	(1,305	)	$	(1,681,296	)		6,615,449	$	(128,803	)	$	(577,282	)


	For the Six Months Ended June 30, 2022
									Accumulated
						Additional			Other
	Common Stock					Paid-In			Comprehensive			Accumulated			Treasury Stock
	Shares			Par Value		Capital			Loss			Deficit			Shares		Amount			Total
Balance at January 1, 2022		110,791,954		$	11	$	1,258,477		$	1,789		$	(1,451,628	)		6,615,449	$	(128,803	)	$	(320,154	)
Net income		—			—		—			—			44,213			—		—			44,213
Currency translation adjustments, net of tax		—			—		—			(9	)		—			—		—			(9	)
Fair value adjustments of cash flow hedges, net of tax		—			—		—			20,640			—			—		—			20,640
Stock-based compensation expense		—			—		9,411			—			—			—		—			9,411
Issuance of common stock upon exercise of stock options		727,423			—		1,944			—			—			—		—			1,944
Issuance of common stock upon vesting of restricted stock units		585,037			—		—			—			—			—		—			—
Tax withholding related to vesting of restricted stock units		—			—		(4,778	)		—			—			—		—			(4,778	)
Issuance of common stock in connection with employee stock purchase plan		27,726			—		319			—			—			—		—			319
Settlement of convertible notes		17,131,332			2		102,786			—			—			—		—			102,788
Settlement of prepaid forward shares		(575,100	)		—		11,197			—			—			575,100		(11,197	)		—
Balance at June 30, 2022		128,688,372		$	13	$	1,379,356		$	22,420		$	(1,407,415	)		7,190,549	$	(140,000	)	$	(145,626	)


	For the Six Months Ended June 30,2021
									Accumulated
						Additional			Other
	Common Stock					Paid-In			Comprehensive			Accumulated			Treasury Stock
	Shares			Par Value		Capital			Loss			Deficit			Shares		Amount			Total
Balance at January 1, 2021		85,990,499		$	9	$	1,088,590		$	(1,013	)	$	(1,629,843	)		5,077,400	$	(98,857	)	$	(641,114	)
Net loss		—			—		—			—			(76,933	)		—		—			(76,933	)
Currency translation adjustments, net of tax		—			—		—			138			—			—		—			138
Fair value adjustments of cash flow hedge, net of tax		—			—		—			(430	)		—			—		—			(430	)
Stock-based compensation expense		—			—		11,312			—			—			—		—			11,312
Issuance of common stock upon exercise of stock options		212,397			—		544			—			—			—		—			544
Issuance of common stock upon vesting of restricted stock units and restricted stock awards		654,072			—		—			—			—			—		—			—
Tax withholding related to vesting of restricted stock units		—			—		(3,544	)		—			—			—		—			(3,544	)
Issuance of common stock in connection with employee stock purchase plan		23,669			—		247			—			—			—		—			247
Settlement of convertible notes		24,353,006			2		154,439			—			—			—		—			154,441
Settlement of prepaid forward shares		(1,538,049	)		—		29,946			—			—			1,538,049		(29,946	)		—
Impact of the adoption of ASU 2016-13		—			—		(47,423	)		—			25,480			—		—			(21,943	)
Balance at June 30, 2021		109,695,594		$	11	$	1,234,111		$	(1,305	)	$	(1,681,296	)		6,615,449	$	(128,803	)	$	(577,282	)


	For the Three Months Ended March 31,
	2022						2021
	Income (Numerator)		Shares (Denominator)		Per Share Amount		Income (Numerator)			Shares (Denominator)		Per Share Amount
Net income (loss) from continuing operations	$	22,196					$	(5,884	)
Less: participation rights on Forward Transactions allocated to continuing operations		113						0

Basic earnings (loss) per share from continuing operations
Undistributed income (loss) from continuing operations	$	22,083		111,414	$	0.20	$	(5,884	)		84,649	$	(0.07	)

Effect of dilutive securities from continuing operations
Stock-based compensation		0		5,550				0			0
2022 Convertible Notes		1,819		17,131				0			0

Diluted earnings (loss) per share from continuing operations
Undistributed income (loss) from continuing operations and assumed conversions	$	23,902		134,095	$	0.18	$	(5,884	)		84,649	$	(0.07	)

Net loss from discontinued operations	$	0					$	(1,801	)
Less: participation rights on Forward Transactions allocated to discontinued operations		0						0

Basic earnings (loss) per share from discontinued operations
Undistributed loss from discontinued operations	$	0		111,414	$	0	$	(1,801	)		84,649	$	(0.02	)

Effect of dilutive securities from discontinued operations
Stock-based compensation		0		5,550				0			0
2022 Convertible Notes		0		17,131				0			0

Diluted earnings (loss) per share from discontinued operations
Undistributed loss from discontinued operations and assumed conversions	$	0		134,095	$	0	$	(1,801	)		84,649	$	(0.02	)

Earnings (loss) per share - basic					$	0.20						$	(0.09	)
Earnings (loss) per share - diluted					$	0.18						$	(0.09	)


	For the Three Months Ended June 30,
	2022						2021
	Income (Numerator)		Shares (Denominator)		Per Share Amount		Income (Numerator)			Shares (Denominator)		Per Share Amount
Net income (loss) from continuing operations	$	22,017					$	(66,394	)
Less: participation rights on Forward Transactions allocated to continuing operations		64						0

Basic earnings (loss) per share from continuing operations
Undistributed income (loss) from continuing operations	$	21,953		123,252	$	0.18	$	(66,394	)		109,060	$	(0.61	)

Effect of dilutive securities from continuing operations
Stock-based compensation		0		5,061				0			0
2022 Convertible Notes		951		6,405				0			0

Diluted earnings (loss) per share from continuing operations
Undistributed income (loss) from continuing operations and assumed conversions	$	22,904		134,718	$	0.17	$	(66,394	)		109,060	$	(0.61	)

Net loss from discontinued operations	$	0					$	(2,854	)
Less: participation rights on Forward Transactions allocated to discontinued operations		0						0

Basic earnings (loss) per share from discontinued operations
Undistributed loss from discontinued operations	$	0		123,252	$	0	$	(2,854	)		109,060	$	(0.02	)

Effect of dilutive securities from discontinued operations
Stock-based compensation		0		5,061				0			0
2022 Convertible Notes		0		6,405				0			0

Diluted earnings (loss) per share from discontinued operations
Undistributed loss from discontinued operations and assumed conversions	$	0		134,718	$	0	$	(2,854	)		109,060	$	(0.02	)

Earnings (loss) per share - basic					$	0.18						$	(0.63	)
Earnings (loss) per share - diluted					$	0.17						$	(0.63	)


	For the Six Months Ended June 30,
	2022						2021
	Income (Numerator)		Shares (Denominator)		Per Share Amount		Income (Numerator)			Shares (Denominator)		Per Share Amount
Net income (loss) from continuing operations	$	44,213					$	(72,278	)
Less: participation rights on Forward Transactions allocated to continuing operations		173						0

Basic earnings (loss) per share from continuing operations
Undistributed income (loss) from continuing operations	$	44,040		117,375	$	0.38	$	(72,278	)		96,884	$	(0.74	)

Effect of dilutive securities from continuing operations
Stock-based compensation		0		5,455				0			0
2022 Convertible Notes		2,770		11,644				0			0

Diluted earnings (loss) per share from continuing operations
Undistributed income (loss) from continuing operations and assumed conversions	$	46,810		134,474	$	0.35	$	(72,278	)		96,884	$	(0.74	)

Net income (loss) from discontinued operations	$	0					$	(4,655	)
Less: participation rights on Forward Transactions allocated to discontinued operations		0						0

Basic earnings (loss) per share from discontinued operations
Undistributed loss from discontinued operations	$	0		117,375	$	0	$	(4,655	)		96,884	$	(0.05	)

Effect of dilutive securities from discontinued operations
Stock-based compensation		0		5,455				0			0
2022 Convertible Notes		0		11,644				0			0

Diluted earnings (loss) per share from discontinued operations
Undistributed loss from discontinued operations and assumed conversions	$	0		134,474	$	0	$	(4,655	)		96,884	$	(0.05	)

Loss per share - basic					$	0.38						$	(0.79	)
Loss per share - diluted					$	0.35						$	(0.79	)


	For the Three Months Ended March 31,				% Change			For the Three Months Ended June 30,				% Change			For The Six Months Ended June 30,				% Change
	2022		2021		2022 over 2021			2022		2021		2022 over 2021			2022		2021		2022 over 2021
Service revenue	$	70,667	$	59,355		19.1	%	$	73,064	$	64,767		12.8	%	$	143,731	$	124,122		15.8	%
Equipment revenue		22,083		14,514		52.1	%		24,772		17,608		40.7	%		46,855		32,122		45.9	%
Total revenue	$	92,750	$	73,869		25.6	%	$	97,836	$	82,375		18.8	%	$	190,586	$	156,244		22.0	%


Exhibit Number		Description of Exhibits

~~4.10~~10.1		~~Amendment No. 2 to the Registration Rights~~Master Services Agreement, dated as of ~~March 2,~~May 21, 2022, by and ~~among~~between Gogo ~~Inc.,~~ ~~Silver (XII) Holdings,~~Business Aviation LLC and ~~Silver (Equity) Holdings LP~~HughesNetwork Systems, LLC (incorporated by reference to Exhibit ~~4.10~~10.1 to Form ~~10-~~8-K filed on May 26, 2022 (File No.001-35975))

10.2		Supply and Product Support Agreement, dated as of June 6, 2022, by and between Gogo Business Aviation LLC K and Hughes Network Systems, LLC (incorporated by reference to Exhibit 10.1 to Form 8-K filed on ~~March 3,~~June 14, 2022 ~~(File~~(File No. 001-35975))

~~10.2.1#~~10.4.1#		~~Amendment No. 1, dated March 25, 2022, to the Employment Agreement between~~Second Amended and Restated Gogo ~~Business Aviation LLC, as assignee of Gogo LLC (f/k/a Aircell LLC), and Oakleigh Thorne~~Inc. 2016 Omnibus Incentive Plan

~~10.2.2#~~		~~Amendment No. 1, dated March 25, 2022, to the Employment Agreement between Gogo Business Aviation LLC, as assignee of Gogo LLC (f/k/a Aircell LLC), and Barry Rowan~~

~~10.2.3#~~		~~Amendment No. 1, dated March 25, 2022, to the Employment Agreement between Gogo Business Aviation LLC and Sergio Aguirre~~

~~10.2.4#~~		~~Amendment No. 3, dated March 25, 2022, to the Employment Agreement between Gogo Business Aviation LLC, as assignee of Gogo LLC (f/k/a Aircell LLC), and Marguerite Elias~~

~~10.2.5#~~		~~Amendment No. 1, dated March 25, 2022, to the Employment Agreement between Gogo Business Aviation LLC, as assignee of Gogo LLC (f/k/a Aircell LLC), and Karen Jackson~~

31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 *		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 *		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


		Gogo Inc.
Date: ~~May~~August 5, 2022
		/s/ Oakleigh Thorne
		Oakleigh Thorne
		Chief Executive Officer
		(Principal Executive Officer)

		/s/ Barry Rowan
		Barry Rowan
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)