Exhibit 99.2
Gogo Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
Overview and Basis of Presentation
On December 1, 2020, Gogo Inc. (“we,” “us,” “our,” or the “Company”) completed the previously announced sale of its Commercial Aviation, or “CA,” business to Intelsat Aviation AcquisitionCo LLC, a Delaware limited liability company and an indirect, wholly-owned subsidiary of Intelsat Jackson Holdings S.A. (“Intelsat” or the “Buyer”), pursuant to the purchase and sale agreement (the “Purchase Agreement”), dated August 31, 2020 with the Buyer, through the sale of all of the issued and outstanding units of our subsidiaries Gogo LLC, a Delaware limited liability company, and Gogo International Holdings LLC, a Delaware limited liability company, for a purchase price of $400 million in cash, subject to certain adjustments (the “Transaction”). The assets and liabilities of the CA business were presented as assets and liabilities held for sale in the Company’s Unaudited Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, and the results of operations of the CA business were presented as discontinued operations in the Company’s Unaudited Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2020 and 2019, in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2020, which was filed with the Securities and Exchange Commission (“SEC”) on November 9, 2020.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended September 30, 2020 and for the years ended December 31, 2019, 2018 and 2017 (collectively, the “Statements”) give effect to the Transaction as if the Transaction occurred on January 1, 2017. The Statements have been derived from, and should be read in conjunction with, the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and the unaudited condensed consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2020, which have been filed with the SEC. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2020 gives effect to the Transaction as if the Transaction occurred on September 30, 2020. The Unaudited Pro Forma Condensed Consolidated Balance Sheet has been derived from, and should be read in conjunction with, the unaudited condensed consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2020.
The following Unaudited Pro Forma Condensed Consolidated Financial Statements are provided for illustrative purposes only and do not purport to represent what the Company’s results of operations or financial position would have been had the Transaction been completed on the dates assumed and are not necessarily indicative of the Company’s future results of operations or financial position.
The Company believes that the adjustments included within the “Assets / Liabilities Held for Sale” column of the Unaudited Pro Forma Condensed Consolidated Balance Sheet and the adjustments included within the “Discontinued Operations” column of the Unaudited Pro Forma Condensed Consolidated Statements of Operations are consistent with the guidance for assets held for sale and discontinued operations under GAAP. The Unaudited Pro Forma Condensed Consolidated Financial Statements are based upon information and assumptions available at the time of the filing of this report on Form 8-K. Any of the factors underlying these estimates and assumptions may change or prove to be materially different and the estimates and assumptions may not be representative of facts that existed upon completion of the Transaction.
The Company’s historical consolidated financial statements have been adjusted in the Unaudited Pro Forma Condensed Consolidated Financial Statements to present events that are (i) directly attributable to the Transaction, (ii) factually supportable and (iii) with respect to the Statements, expected to have a continuing impact on the Company’s consolidated results following the Transaction.
Gogo Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(in thousands, except share data)
As of September 30, 2020 | ||||||||||||||||
Historical | Assets / Liabilities Held for Sale (A) | Pro Forma Adjustments | Pro Forma | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 117,483 | $ | — | $ | 375,729 | (C) | $ | 493,212 | |||||||
Accounts receivable, net of allowances of $1,539 | 32,497 | — | — | 32,497 | ||||||||||||
Inventories | 35,107 | — | — | 35,107 | ||||||||||||
Prepaid expenses and other current assets | 6,448 | — | — | 6,448 | ||||||||||||
Current assets held for sale | 627,499 | (627,499 | ) | — | — | |||||||||||
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Total current assets | 819,034 | (627,499 | ) | 375,729 | 567,264 | |||||||||||
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Non-current assets: | ||||||||||||||||
Property and equipment, net | 64,307 | — | — | 64,307 | ||||||||||||
Goodwill and intangible assets, net | 53,188 | — | — | 53,188 | ||||||||||||
Operating lease right-of-use assets | 32,564 | — | — | 32,564 | ||||||||||||
Other non-current assets, net of allowances of $320 | 15,362 | — | — | 15,362 | ||||||||||||
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Total non-current assets | 165,421 | — | — | 165,421 | ||||||||||||
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Total assets | $ | 984,455 | $ | (627,499 | ) | $ | 375,729 | $ | 732,685 | |||||||
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Liabilities and Stockholders’ deficit | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 6,060 | $ | — | $ | 23,587 | (D) | $ | 29,647 | |||||||
Accrued liabilities | 77,901 | — | 5,490 | (D) | 83,391 | |||||||||||
Deferred revenue | 2,492 | — | — | 2,492 | ||||||||||||
Current liabilities held for sale | 369,436 | (369,436 | ) | — | — | |||||||||||
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Total current liabilities | 455,889 | (369,436 | ) | 29,077 | 115,530 | |||||||||||
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Non-current liabilities: | ||||||||||||||||
Long-term debt | 1,126,634 | — | — | 1,126,634 | ||||||||||||
Non-current operating lease liabilities | 38,223 | — | — | 38,223 | ||||||||||||
Other non-current liabilities | 10,903 | — | — | 10,903 | ||||||||||||
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Total non-current liabilities | 1,175,760 | — | — | 1,175,760 | ||||||||||||
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Total liabilities | 1,631,649 | (369,436 | ) | 29,077 | 1,291,290 | |||||||||||
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Commitments and contingencies | — | — | — | — | ||||||||||||
Stockholders’ deficit | ||||||||||||||||
Common stock, par value $0.0001 per share; 500,000,000 shares authorized at September 30, 2020; 85,255,574 shares issued at September 30, 2020; and 85,237,282 shares outstanding at September 30, 2020 | 9 | — | — | 9 | ||||||||||||
Additional paid-in-capital | 1,086,665 | — | — | 1,086,665 | ||||||||||||
Accumulated other comprehensive loss | (4,323 | ) | — | — | (4,323 | ) | ||||||||||
Treasury stock, at cost | (98,857 | ) | — | — | (98,857 | ) | ||||||||||
Accumulated deficit | (1,630,688 | ) | (258,063 | ) | 346,652 | (1,542,099 | ) | |||||||||
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Total stockholders’ deficit | (647,194 | ) | (258,063 | ) | 346,652 | (558,605 | ) | |||||||||
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Total liabilities and stockholders’ deficit | $ | 984,455 | $ | (627,499 | ) | $ | 375,729 | $ | 732,685 | |||||||
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See the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Gogo Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
For the Nine Months Ended September 30, 2020 | ||||||||||||
Historical | Discontinued Operations (B) | Pro Forma | ||||||||||
Revenue: | ||||||||||||
Service revenue | $ | 155,083 | $ | — | $ | 155,083 | ||||||
Equipment revenue | 37,001 | — | 37,001 | |||||||||
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Total revenue | 192,084 | — | 192,084 | |||||||||
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Operating expenses: | ||||||||||||
Cost of service revenue (exclusive of items shown below) | 32,809 | — | 32,809 | |||||||||
Cost of equipment revenue (exclusive of items shown below) | 24,036 | — | 24,036 | |||||||||
Engineering, design and development | 17,365 | — | 17,365 | |||||||||
Sales and marketing | 10,724 | — | 10,724 | |||||||||
General and administrative | 36,378 | — | 36,378 | |||||||||
Depreciation and amortization | 10,117 | — | 10,117 | |||||||||
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Total operating expenses | 131,429 | — | 131,429 | |||||||||
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Operating income | 60,655 | — | 60,655 | |||||||||
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Other (income) expense: | ||||||||||||
Interest income | (689 | ) | — | (689 | ) | |||||||
Interest expense | 93,595 | — | 93,595 | |||||||||
Other expense | 12 | — | 12 | |||||||||
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Total other expense | 92,918 | — | 92,918 | |||||||||
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Loss from continuing operations before income taxes | (32,263 | ) | — | (32,263 | ) | |||||||
Income tax provision | 216 | — | 216 | |||||||||
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Net loss from continuing operations | (32,479 | ) | — | (32,479 | ) | |||||||
Net loss from discontinued operations, net of tax | (218,402 | ) | 218,402 | — | ||||||||
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Net loss | $ | (250,881 | ) | $ | 218,402 | $ | (32,479 | ) | ||||
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Net loss attributable to common stock per share – basic and diluted: | ||||||||||||
Net loss from continuing operations | $ | (0.40 | ) | $ | (0.40 | ) | ||||||
Net loss from discontinued operations | (2.67 | ) | — | |||||||||
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Net loss | $ | (3.07 | ) | $ | (0.40 | ) | ||||||
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Weighted average number of shares - basic and diluted | 81,892 | 81,892 | ||||||||||
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See the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Gogo Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
For the Year Ended December 31, 2019 | ||||||||||||
Historical | Discontinued Operations (B) | Pro Forma | ||||||||||
Revenue: | ||||||||||||
Service revenue | $ | 664,353 | $ | (442,431 | ) | $ | 221,922 | |||||
Equipment revenue | 171,373 | (84,310 | ) | 87,063 | ||||||||
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Total revenue | 835,726 | (526,741 | ) | 308,985 | ||||||||
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Operating expenses: | ||||||||||||
Cost of service revenue (exclusive of items shown below) | 297,848 | (255,706 | ) | 42,142 | ||||||||
Cost of equipment revenue (exclusive of items shown below) | 134,728 | (82,984 | ) | 51,744 | ||||||||
Engineering, design and development | 108,610 | (82,597 | ) | 26,013 | ||||||||
Sales and marketing | 49,156 | (27,920 | ) | 21,236 | ||||||||
General and administrative | 89,843 | (35,215 | ) | 54,628 | ||||||||
Depreciation and amortization | 118,817 | (102,127 | ) | 16,690 | ||||||||
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Total operating expenses | 799,002 | (586,549 | ) | 212,453 | ||||||||
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Operating income | 36,724 | 59,808 | 96,532 | |||||||||
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Other (income) expense: | ||||||||||||
Interest income | (4,210 | ) | 210 | (4,000 | ) | |||||||
Interest expense | 130,572 | (99 | ) | 130,473 | ||||||||
Loss on extinguishment of debt | 57,962 | — | 57,962 | |||||||||
Other (income) expense | (2,602 | ) | 2,633 | 31 | ||||||||
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Total other expense | 181,722 | 2,744 | 184,466 | |||||||||
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Loss before income taxes | (144,998 | ) | 57,064 | (87,934 | ) | |||||||
Income tax provision | 1,006 | (443 | ) | 563 | ||||||||
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Net loss | $ | (146,004 | ) | $ | 57,507 | $ | (88,497 | ) | ||||
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Net loss attributable to common stock per share – basic and diluted | $ | (1.81 | ) | $ | (1.10 | ) | ||||||
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Weighted average number of shares—basic and diluted | 80,766 | 80,766 | ||||||||||
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See the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Gogo Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
For the Year Ended December 31, 2018 | ||||||||||||
Historical | Discontinued Operations (B) | Pro Forma | ||||||||||
Revenue: | ||||||||||||
Service revenue | $ | 630,147 | $ | (433,770 | ) | $ | 196,377 | |||||
Equipment revenue | 263,617 | (169,841 | ) | 93,776 | ||||||||
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Total revenue | 893,764 | (603,611 | ) | 290,153 | ||||||||
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Operating expenses: | ||||||||||||
Cost of service revenue (exclusive of items shown below) | 291,642 | (254,503 | ) | 37,139 | ||||||||
Cost of equipment revenue (exclusive of items shown below) | 222,244 | (166,828 | ) | 55,416 | ||||||||
Engineering, design and development | 120,090 | (101,571 | ) | 18,519 | ||||||||
Sales and marketing | 58,823 | (34,427 | ) | 24,396 | ||||||||
General and administrative | 94,269 | (36,366 | ) | 57,903 | ||||||||
Depreciation and amortization | 133,617 | (119,254 | ) | 14,363 | ||||||||
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Total operating expenses | 920,685 | (712,949 | ) | 207,736 | ||||||||
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Operating income (expense) | (26,921 | ) | 109,338 | 82,417 | ||||||||
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Other (income) expense: | ||||||||||||
Interest income | (4,292 | ) | 170 | (4,122 | ) | |||||||
Interest expense | 122,809 | (189 | ) | 122,620 | ||||||||
Loss on extinguishment of debt | 19,653 | — | 19,653 | |||||||||
Other (income) expense | 233 | (153 | ) | 80 | ||||||||
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Total other expense | 138,403 | (172 | ) | 138,231 | ||||||||
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Loss before income taxes | (165,324 | ) | 109,510 | (55,814 | ) | |||||||
Income tax benefit | (3,293 | ) | (61 | ) | (3,354 | ) | ||||||
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Net loss | $ | (162,031 | ) | $ | 109,571 | $ | (52,460 | ) | ||||
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Net loss attributable to common stock per share – basic and diluted | $ | (2.02 | ) | $ | (0.66 | ) | ||||||
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Weighted average number of shares - basic and diluted | 80,038 | 80,038 | ||||||||||
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See the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Gogo Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
For the Year Ended December 31, 2017 | ||||||||||||
Historical | Discontinued Operations (B) | Pro Forma | ||||||||||
Revenue: | ||||||||||||
Service revenue | $ | 617,906 | $ | (447,026 | ) | $ | 170,880 | |||||
Equipment revenue | 81,184 | (11,452 | ) | 69,732 | ||||||||
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Total revenue | 699,090 | (458,478 | ) | 240,612 | ||||||||
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Operating expenses: | ||||||||||||
Cost of service revenue (exclusive of items shown below) | 268,334 | (238,278 | ) | 30,056 | ||||||||
Cost of equipment revenue (exclusive of items shown below) | 58,554 | (11,922 | ) | 46,632 | ||||||||
Engineering, design and development | 133,286 | (111,761 | ) | 21,525 | ||||||||
Sales and marketing | 64,017 | (39,829 | ) | 24,188 | ||||||||
General and administrative | 93,671 | (37,070 | ) | 56,601 | ||||||||
Depreciation and amortization | 145,490 | (134,187 | ) | 11,303 | ||||||||
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Total operating expenses | 763,352 | (573,047 | ) | 190,305 | ||||||||
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Operating income (expense) | (64,262 | ) | 114,569 | 50,307 | ||||||||
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Other (income) expense: | ||||||||||||
Interest income | (2,964 | ) | 38 | (2,926 | ) | |||||||
Interest expense | 111,944 | (406 | ) | 111,538 | ||||||||
Other (income) expense | 750 | (544 | ) | 206 | ||||||||
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Total other expense | 109,730 | (912 | ) | 108,818 | ||||||||
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Loss before income taxes | (173,992 | ) | 115,481 | (58,511 | ) | |||||||
Income tax benefit | (1,997 | ) | (48 | ) | (2,045 | ) | ||||||
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Net loss | $ | (171,995 | ) | $ | 115,529 | $ | (56,466 | ) | ||||
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Net loss attributable to common stock per share – basic and diluted | $ | (2.17 | ) | $ | (0.71 | ) | ||||||
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Weighted average number of shares—basic and diluted | 79,407 | 79,407 | ||||||||||
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See the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(unaudited)
1. | Pro Forma Adjustments |
The following are the explanations for the adjustments reflected in the Unaudited Pro Forma Condensed Consolidated Financial Statements based on preliminary estimates, which may change as additional information is obtained:
(A) | Adjustments reflect the elimination of the CA assets and liabilities that were determined to be assets or liabilities held for sale as of September 30, 2020, as reported in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2020, and resulting net impact on stockholders’ equity. |
(B) | Adjustments reflect the reclassification to discontinued operations of historical CA revenues and expenses. Interest expense and corporate expenses that were not specifically related to CA have been excluded as such general corporate expenses do not meet the requirements to be presented as discontinued operations. |
(C) | Represents the cash proceeds received at closing in connection with the Transaction, computed pursuant to the Purchase Agreement as (i) the $400.0 million purchase price, (ii) plus security deposits of $5.0 million acquired by the Buyer, (iii) less debt-like items and transaction expenses, as defined in the Purchase Agreement, of $9.3 million assumed by the Buyer, and (iv) less the estimated net working capital adjustment, as defined in the Purchase Agreement, of $20.0 million, which is subject to finalization within 90 days following the closing date of the Transaction. Additional cash transferred to and separately paid by the Buyer in the Transaction is not included in this adjustment. |
(D) | Represents estimated transaction costs related primarily to investment banking fees, legal expenses, other professional fees and accelerated payments attributable to the Transaction under commercial agreements specifically related to CA totaling $23.6 million and Transaction bonuses totaling $5.5 million that were unpaid as of September 30, 2020. |
The Unaudited Pro Forma Condensed Consolidated Financial Statements do not include adjustments to reflect the non-recurring gain on the Transaction or the related income tax effect. The gain will be included in the Company’s results of operations for the three-month period ending December 31, 2020, and the Company does not anticipate any income tax effect as it plans to utilize its net operating loss carryforwards to offset the gain on the Transaction.
2. | Transition Services Agreement and Sublease |
In connection with the Transaction, the Company and the Buyer entered into a transition services agreement whereby the Company and the Buyer will provide certain post-closing services to each other on a transitional basis. The Company and the Buyer also entered into a sublease agreement whereby the Company will sublease a portion of its Chicago office space to the Buyer for a period of no longer than one year. No pro forma adjustments have been made in respect of these agreements as the post-closing services will not have a continuing impact on the Company’s future results and the sublease expense is immaterial.