Prospectus Summary
PROSPECTUS SUMMARY The following summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our common stock. You should read this entire prospectus, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes to those statements, before making an investment decision. Unless the context otherwise indicates or requires, the terms “we,” “our,” “us,” “Gogo,” and the “Company,” as used in this prospectus, 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 mean only Gogo Inc. exclusive of its subsidiaries.Mission
Our mission is to make Gogo everyone’s favorite part of flying.
We transform the in-cabin experience for airline passengers by delivering ground-breaking and branded in-flight internet connectivity and an array of digital entertainment solutions. We enable our commercial airline partners to differentiate their service offerings, increase customer satisfaction and unlock new revenue streams. We provide our media partners with access to an attractive and undistracted audience. We provide our business aviation customers with a full suite of in-flight internet connectivity and other voice and data communications products and services, allowing discerning private jet passengers the ability to stay connected in flight. Our goal is to enable the connected lifestyle of today’s business and leisure travelers in the air.
Who We Are
Gogo is the world’s leading provider of in-flight connectivity and a pioneer in wireless in-cabin digital entertainment solutions. Through our proprietary platform and dedicated air-to-ground, or ATG, network, and a variety of in-cabin offerings, we provide turnkey solutions that make it easy and convenient for passengers to extend their connected lifestyles to the aircraft cabin. We operate our business through two operating segments: commercial aviation, or CA, and business aviation, or BA. Our CA business provides in-flight connectivity and digital entertainment solutions to commercial airline passengers through their personal Wi-Fi enabled devices. Through our Gogo platform, passengers can access an array of services including:
We provide Gogo Connectivity to passengers on nine of the ten North American airlines that provide internet connectivity to their passengers. We provide Gogo Connectivity to passengers on Delta Air Lines, American Airlines, Virgin America, Alaska Airlines, US Airways, Frontier Airlines and Air Tran Airways pursuant to long-term agreements with these airlines. We also provide Gogo Connectivity to passengers on a small number of aircraft operated by United Airlines and Air Canada pursuant to trial agreements. As of September 30, 2011, we had equipped 1,177 commercial aircraft, representing approximately 85% of internet-enabled North American commercial aircraft at such date, which were operated on more than 4,200 daily flights. Since September 30, 2011 we have installed 146 additional aircraft as of the date of this prospectus. From the inception of our service in August 2008 to September 30, 2011, we provided more than 15 million Gogo sessions to more than 4.4 million registered unique users. As of September 30, 2011, we have signed contracts with airlines to install Gogo on an additional approximately 525 aircraft, and we currently expect to complete a significant portion of those installations by the end of 2012. Gogo-equipped planes representing approximately 42% of our consolidated revenue for the nine months ended September 30, 2011 are contracted under ten-year agreements, the earliest of which expires in 2018.
Our BA business sells equipment and provides services for in-flight internet connectivity and other voice and data communications under our Gogo Biz and Aircell branded products and services. BA’s customers include original equipment manufacturers of private jet aircraft such as Gulfstream, Cessna, Hawker Beechcraft, Bombardier, Dassault, and Embraer, leading aftermarket dealers and all of the largest fractional jet operators including NetJets, Flexjets, Flight Options and CitationAir. We sell equipment for three of the primary connectivity network options in the business aviation market: Gogo Biz, through which we deliver broadband internet connectivity over our ATG network, and the Iridium and Inmarsat SwiftBroadband satellite networks. As of September 30, 2011, we had more than 700 Gogo Biz systems in operation and more than 4,600 aircraft with Iridium satellite communications systems in operation, and we have sold more than 100 Inmarsat SwiftBroadband systems. We are the only provider of ATG broadband connectivity in the business aviation market through our Gogo Biz service, and we are the largest reseller of Iridium satellite services to the business aviation market.
We provide in-flight broadband connectivity across the contiguous United States and portions of Alaska via 3 MHz of Federal Communications Commission, or FCC, licensed ATG spectrum and our proprietary network of cell sites. We believe the reliability of Gogo’s in-flight connectivity is unmatched. Our customized airborne network allows us to actively manage data traffic in order to maintain the speed and quality of the Gogo service through sophisticated bandwidth management. We are implementing a technology roadmap that will allow us to significantly increase our network capacity by utilizing a combination of the best available and developing technology, including the next generation of ATG, or ATG-4, and Ka-band and other satellite-based solutions.
Our CA business generates revenue primarily from fees paid for Gogo Connectivity and from products and services available through Gogo Vision and Gogo Signature Services. We generate Gogo Connectivity related revenue from purchases by airline passengers of individual sessions, monthly renewable subscriptions and multiple session packages as well as from fees paid by third parties who sponsor free or discounted access to Gogo Connectivity to passengers in exchange for a promotional presence on our in-air website. We generate Gogo Vision related revenue from fees paid by passengers for access to content on Gogo Vision, a service that we recently commenced on aircraft operated by Delta Air Lines and American Airlines. We generate Gogo Signature Services related revenue from advertising fees and e-commerce revenue share arrangements. Our BA business generates revenue from the sale of satellite and ATG equipment and from subscriptions for in-flight internet connectivity and other voice and data communications products and services.
We have grown significantly since the launch of Gogo Connectivity in August 2008. We increased the number of Gogo equipped commercial aircraft from 30 to 1,177 between December 31, 2008 and September 30, 2011, and the aggregate number of passengers on flights with Gogo Connectivity, or our gross passenger opportunity, increased from approximately 624,000 in 2008 to approximately 152,744,000 in 2010. Since 2006, our BA business has sold approximately 6,000 ATG and satellite-based communications systems for private aircraft and signed agreements with all of the largest fractional jet operators. We grew our consolidated revenue from $36.8 million in 2009 to $94.7 million in 2010, an increase of 157%, and over the same period we grew consolidated Adjusted EBITDA from ($88.6) million to ($44.9) million and we reduced consolidated net loss attributable to common stock from $(142.3) million to $(140.1) million. For the nine months ended September 30, 2011 as compared with the nine months ended September 30, 2010, consolidated revenue increased to $113.8 million from $60.1 million, an increase of 89.3%, consolidated Adjusted EBITDA increased to $(1.8) million from $(42.7) million and consolidated net loss attributable to common stock improved from $(137.0) million to $(25.8) million. See Note 7 to the table in the section “Summary Historical Condensed Consolidated Financial and Other Operating Data” for the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss attributable to common stock.
We Are Enabling the Connected Lifestyle In-Cabin
Passengers on commercial and business aircraft are increasingly seeking to remain connected in flight. Airlines are under pressure to remain competitive and must attract passengers by improving services while simultaneously reducing costs. We believe the intersection of these trends creates a meaningful opportunity for Gogo.
The Gogo Advantage
We believe the following strengths provide us competitive advantages in realizing the potential of our opportunity:
survey. Gogo is continually redefining and transforming the category and, in doing so, becoming associated with in-flight connectivity in our customers’ minds. According to a Gogo-commissioned survey, 27% of leisure travelers and 54% of business travelers are aware of Gogo, and more than 80% of Gogo users have indicated that their travel experience was made more satisfying because of Gogo. This survey also indicates that Gogo has 18 times the top of mind unaided awareness as our nearest competitor. Within the realm of social media, a recent analysis of Facebook by aggregator Fan Page List ranked Gogo as first for having the most engaged fans.
In our BA business, we have nearly two decades of experience, and we sell equipment for three of the primary network options, Gogo Biz, Iridium and Inmarsat SwiftBroadband, to all of the largest OEMs of business aircraft, leading aftermarket dealers and all of the largest fractional jet operators. We sell Gogo Biz and Iridium services to owners and operators of private aircraft, we are the only provider of ATG broadband internet connectivity, via Gogo Biz, in the business aviation market, and we are the largest reseller of Iridium satellite services to the business aviation market. As of December 31, 2010, we had over 4,700 aircraft with Iridium satellite communications systems and Gogo Biz systems in operation, including over 3,500 North American aircraft, which represented approximately 31% of business aircraft in North America, and had an additional 395 aircraft with Iridium satellite communications systems and Gogo Biz systems in operation by September 30, 2011.
quality of the Gogo service. Our technology approach and architecture provide us with the flexibility to utilize the best available technologies to serve our customers now and going forward, and we believe that our lightweight and compact equipment make us the only internet connectivity provider capable of equipping an airline’s entire North American fleet, including regional jets, with in-flight broadband internet connectivity on a cost-effective basis. Going forward, our technology approach and architecture will facilitate our transition to the next-generation ATG-4 and Ka-band and other satellite-based solutions, which will expand our network capacity in the United States and facilitate planned future international expansion.
Growth Strategy
Our mission is to make Gogo everyone’s favorite part of flying, and we intend to execute the following strategies:
Organizational Structure and History
Gogo Inc. is a holding company that does business through its two operating subsidiaries, Gogo LLC and Aircell Business Aviation Services LLC, and holds its FCC license through a third subsidiary, AC BidCo LLC.
Air-cell, Inc. was incorporated in Texas on June 11, 1991 to develop and market airborne telecommunication systems for the business aviation market, and on December 10, 1996 merged with Aircell, Inc., a Delaware corporation. AC HoldCo LLC and its subsidiary AC BidCo LLC, were formed as Delaware limited liability companies on March 20, 2006. During 2006, Aircell, Inc. and AC HoldCo LLC entered into a series of agreements to pursue the FCC license governing our ATG spectrum and to provide capital to develop and operate our ATG network. In June 2006, AC BidCo LLC won the spectrum auction, and the FCC license was issued on October 21, 2006. On January 31, 2007, Aircell, Inc. converted to a limited liability company (Aircell LLC) and was acquired by AC HoldCo LLC. On June 3, 2008, Aircell Business Aviation Services LLC was formed as a separate operating subsidiary. Aircell Holdings Inc. was formed on December 31, 2009 via a two-step merger resulting in a conversion of AC HoldCo LLC into Aircell Holdings Inc., a Delaware corporation. The underlying corporate structure of the company did not change and included the same limited liability company subsidiaries that existed under AC HoldCo LLC as of the date of the two-step merger. On June 15, 2011, Aircell Holdings Inc. changed its name to Gogo Inc. and Aircell LLC changed its name to Gogo LLC.
Principal Stockholders
As of November 30, 2011, AC Acquisition I LLC and AC Acquisition II LLC, or Ripplewood, owned approximately 38% of our outstanding common stock, on an as converted basis, and Oakleigh Thorne, including the entities affiliated with Mr. Thorne as described under “Principal and Selling Stockholders”, or the Thorne Entities, owned approximately 34% of our outstanding common stock, on an as converted basis. Following the completion of this offering and assuming that the underwriters do not exercise their option to purchase additional shares, Ripplewood and the Thorne Entities will own approximately % and % of our outstanding common stock, respectively.
Ripplewood Holdings L.L.C.
Since its founding in 1995, Ripplewood Holdings L.L.C. has managed several institutional private equity funds. To date, the firm has invested in transactions valued at over $15 billion in the U.S., Asia, Europe and the Middle East. AC Acquisition I LLC and AC Acquisition II LLC are special purpose entities formed by Ripplewood Holdings L.L.C. (which includes Ripplewood Partners II, LP, Ripplewood Partners II Parallel Fund, LP, and Ripplewood Partners II Offshore Parallel Fund, LP) for the purposes of Ripplewood Holdings L.L.C.’s investment in Gogo.
Oakleigh Thorne
Oakleigh Thorne, together with certain family members and affiliated entities were among the original investors in Gogo. The Thorne Entities hold investments in several other companies, including Shoppertrak Corporation, MachineryLink, Inc. and Datamark Inc., and companies in which they previously invested include eCollege.com, Performics, Inc. and Zave Networks, Inc.
Our Corporate Information
We are incorporated in Delaware and our corporate offices are located at 1250 North Arlington Heights Rd., Suite 500, Itasca, IL 60143. Our telephone number is (630) 647-1400. As of September 30, 2011, we had 428 full-time, non-union employees. Our website addresses are www.gogoair.com and www.aircell.com. None of the information contained on, or that may be accessed through, our websites or any other website identified herein is part of, or incorporated into, this prospectus. All website addresses in this prospectus are intended to be inactive textual references only.
Gogo®, Aircell®, Aircell Axxess®, the Gogo and Aircell logos, and other trademarks or service marks of Gogo Inc. and its subsidiaries appearing in this prospectus, are the property of Gogo Inc. or one of its subsidiaries. Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply relationships with, or endorsements of us by, these other companies.