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Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-02-28 · 429 added, 546 removed, 729 unchanged (57% of the section changed)

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Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

Consolidated Statements of Cash Flows

Consolidated Statements of Stockholders’

Equity (Deficit)

Consolidated Statements of Stockholders’ Equity (Deficit)

Notes to Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of Gogo Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’

equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with the accounting principles generally accepted in the United States of America.

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income Taxes —

Realizability of Deferred Tax Assets —

Refer to Notes 2 and 15 to the financial statements

Deferred Income Tax Assets — Realizability of certain deferred tax assets and the release of certain valuation allowances — Refer to Notes 1 and 13 to the financial statements

Critical Audit Matter Description

The Company recognizes deferred income tax assets and liabilities for tax attributes and are based on the differences between the financial statement and tax basis of assets and liabilities, applying enacted statutory tax rates in effect for the year in which the tax differences are expected to reverse.

The Company regularly assesses the need for a valuation allowance related to deferred income tax assets to determine, based on the weight of the available positive and negative evidence, whether it is more likely than not that some or all of such deferred assets will not be realized.

The Company’s assessment considers recent financial operating results, the scheduled expiration of its net operating losses, potential sources of taxable income, the reversal of existing taxable differences, taxable income in prior carryback years, if permitted under tax law, and tax planning strategies.

Management has determined that it is more likely than not that sufficient taxable income will be generated in the future to realize $162.7 million of its deferred income tax assets as of December 31, 2022.

We identified management’s determination that it is more likely than not that sufficient taxable income will be generated in the future to realize deferred income tax assets as a critical audit matter because of the significant judgments management makes related to taxable income.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates of taxable income.

The Company regularly assesses the need for a valuation allowance related to deferred income tax assets to determine, based on the weight of all available positive and negative evidence, whether it is more likely than not that some or all of such deferred assets will not be realized.

The Company’s assessment considers recent financial operating results, the scheduled expiration of its net operating losses, potential sources of future taxable income, the reversal of existing taxable differences, taxable income in prior carryback years, if permitted under tax law, and tax planning strategies.

Based on the Company’s assessment for the year ended December 31, 2023, the Company released valuation allowances related to its Section 163(j) interest limitation carryforward and certain state net operating losses (“NOLs”) and state credits.

We identified management’s determination that it is more likely than not that sufficient taxable income will be generated in the future to realize deferred income tax assets, excluding capital losses and foreign NOL deferred income tax assets, and the release of certain valuation allowances as a critical audit matter because of the significant judgments and estimates management makes related to projected future taxable income.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the determination that it is more likely than not that sufficient taxable income will be generated in the future to realize deferred income tax assets included the following, among others, which were performed with the assistance of our income tax specialists:

We tested the effectiveness of controls over deferred income tax assets, including management’s controls over the estimates of taxable income and the determination of whether it is more likely than not that the deferred income tax assets will be realized.

We evaluated the reasonableness of the methods, assumptions, and judgments used by management to determine whether it was more likely than not that certain tax attributes and deferred income tax assets could be realized.

We evaluated whether the sources of management’s estimated taxable income were of the appropriate character and sufficient to utilize the deferred income tax assets under the relevant tax law.

This included evaluating management’s assessment of the scheduling of the reversal of existing temporary taxable differences and carryforward lives of the deferred income tax assets, and the availability of tax planning strategies as a source of future taxable income.

We tested the reasonableness of management’s adjusted historical taxable income to project sources of future taxable income, and performed the following procedures related to historical taxable income:

Compared the historical taxable income to the amounts disclosed in the Company’s historical financial statements.

Evaluated the recurring permanent differences included in the historical taxable income for reasonableness.

Tested the adjustments made to historical taxable income for nonrecurring items to assess if they were objectively verifiable.

Compared the historical taxable income to internal budgets and information communicated internally, to the Board of Directors and in Company press releases related to fiscal year 2023 and forward.

We evaluated whether there was taxable income in prior carryback years that was of the appropriate character and available under the tax law.

Our audit procedures related to the determination that it is more likely than not that sufficient taxable income will be generated in the future to realize certain deferred income tax assets and the release of certain valuation allowances included the following, among others, which were performed with the assistance of our income tax specialists:

• We tested the effectiveness of controls over the valuation allowance for income taxes, including management’s controls over the estimates of future taxable income and the determination of whether it is more likely than not that the deferred tax assets will be realized.

• We compared the three-year historical taxable income to the amounts disclosed in the Company’s historical financial statements.

• We evaluated the reasonableness of the methods, assumptions, and judgments used by management to determine whether it was more likely than not that certain deferred income tax assets could be realized.

• We evaluated whether the sources of management’s projected future taxable income were of the appropriate character and sufficient to utilize certain deferred income tax assets under the relevant tax law.

This included evaluating management’s assessment of the scheduling of the reversal of existing temporary taxable differences and carryforward lives of certain deferred income tax assets, and the availability of tax planning strategies as a source of future taxable income.

• We evaluated management’s ability to accurately project future taxable income by comparing actual results to management’s historical estimates and evaluating whether there have been any changes that would affect management’s ability to continue accurately projecting future taxable income.

We tested the reasonableness of management’s projections of future taxable income by comparing the projections to:

▪ Internal budgets

▪ Historical pre-tax income

▪ Internal communications to management and the Board of Directors

▪ Forecasted information included in Company press releases as well as in analyst reports for the Company

• We evaluated whether the projections used to estimate future taxable income were consistent with evidence obtained in other areas of the audit.

/s/ Deloitte & Touche LLP

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February 28, 2024

We have served as the Company’s auditor since 2007.

and Subsidiaries

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Total non-current assets

Liabilities and stockholders’

Liabilities and stockholders’ equity (deficit)

Current liabilities:

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Commitments and contingencies (Note 15)

Stockholders’

Stockholders’ equity (deficit)

Common stock, par value $ 0.0001 per share;

500,000,000 shares authorized at December 31, 2022 and 2021;

136,531,362 and 117,407,468 shares issued at December 31, 2022 and 2021, respectively;

and 127,840,813 and 110,791,954 shares outstanding at December 31, 2022 and 2021, respectively

500,000,000 shares authorized at December 31, 2023 and December 31, 2022;

137,632,284 and 136,531,362 shares issued at December 31, 2023 and December 31, 2022, respectively;

and 128,462,343 and 127,840,813 shares outstanding at December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

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Accumulated deficit

Total stockholders’

Total liabilities and stockholders’

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ equity (deficit)

See the Notes to Consolidated Financial Statements

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Operating income

Other (income) expense:

Other expense (income):

Interest income

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Income (loss) from continuing operations before income taxes

Income tax provision (benefit)

Net income (loss) from continuing operations

Income tax (benefit) provision

Net income from continuing operations

Net loss from discontinued operations, net of tax

Net income (loss)

Net income (loss) attributable to common stock per share—basic:

Continuing operations

Discontinued operations

Net income (loss) attributable to common stock per share—basic

Net income (loss) attributable to common stock per share—diluted:

Net income attributable to common stock per share—basic

Net income attributable to common stock per share—diluted:

Continuing operations

Discontinued operations

Net income (loss) attributable to common stock per share—diluted

Net income attributable to common stock per share—diluted

Weighted average number of shares

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and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

(in thousands)

For the Years Ended December 31,

Net income (loss)

Other comprehensive income (loss), net of tax

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Cash flow hedges:

Amount recognized in other comprehensive income (loss)

Amount recognized in other comprehensive income

income (loss) realized and reclassified to earnings

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Other comprehensive income (loss), net of tax

Comprehensive income (loss)

Comprehensive income

See the Notes to Consolidated Financial Statements

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Operating activities from continuing operations:

Net income (loss)

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

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Accretion of debt discount

Gain on sale of equity investment

Loss on extinguishment of debt and settlement of convertible notes

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Purchases of property and equipment

Acquisition of intangible assets—capitalized software

Proceeds from FCC Reimbursement Program for property, equipment and intangibles

Proceeds from (purchase of) interest rate caps

Redemptions of short-term investments

Purchases of short-term investments

Net cash used in investing activities from continuing operations

Purchase of equity investment

Proceeds from sale of equity investment

Net cash provided by (used in) investing activities from continuing operations

Financing activities from continuing operations:

Proceeds from credit facility draw

Repayments of amounts drawn from credit facility

Repurchase of convertible notes

Proceeds from issuance of senior secured notes

Redemption of senior secured notes

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Stock-based compensation activity

Net cash provided by (used in) financing activities from continuing operations

Net cash used in financing activities from continuing operations

Cash flows from discontinued operations:

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash used in investing activities

Net cash used in financing activities

Net cash provided by (used in) discontinued operations

Net cash used in discontinued operations

Effect of foreign exchange rate changes on cash

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and Subsidiaries

Consolidated Statements of St ockholders’

Equity (Deficit)

Consolidated Statements of St ockholders’ Equity (Deficit)

(in thousands, except share data)

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Currency translation adjustments, net of tax

Fair value adjustments of cash flow hedge, net of tax

Stock-based compensation expense

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Issuance of common stock in connection with employee stock purchase plan

Settlement of convertible notes

Settlement of prepaid forward shares

Impact of the adoption of new accounting standards

Impact of the adoption of ASU 2020-06

Balance at December 31, 2021

Currency translation adjustments, net of tax

Fair value adjustments of cash flow hedge, net of tax

Fair value adjustments of cash flow hedges, net of tax

Stock-based compensation expense

Issuance of common stock upon exercise of stock options

Issuance of common stock upon vesting of restricted stock units and restricted stock awards

Issuance of common stock upon vesting of restricted stock units

Tax withholding related to vesting of restricted stock units

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Settlement of prepaid forward shares

Impact of the adoption of ASU 2020-06

Repurchase of common stock

Balance at December 31, 2022

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Issuance of common stock in connection with employee stock purchase plan

Settlement of convertible notes

Settlement of prepaid forward shares

Repurchase of common stock

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Notes to Consolidated Financial Statements

Gogo (“we”, “us,”

or “our”) is the world’s largest provider of broadband connectivity services for the business aviation market.

We have served this market for more than 25 years.

Our mission is to enrich the lives of passengers and the efficiency of operators with the world’s best business aviation in-flight connectivity and customer support.

We have always sought to provide the best connectivity for the business aviation market regardless of technology, and we have a successful history of doing so.

Until recently, we focused primarily on business aviation aircraft in North America, which comprise approximately 63% of the worldwide business aviation fleet, and we are the leading provider of in-flight connectivity in that market.

Gogo started in analogue air-to-ground (“ATG”) technology in the late 1990s, then, as analogue cellular backhaul disappeared, migrated to narrowband satellite connectivity in the early 2000s, then back to ATG with our digital broadband 3G and 4G networks beginning in 2010.

We expect to commercially launch our fourth ATG network –

Gogo 5G –

in the fourth quarter of 2023.

We also continue to provide narrowband satellite services to customers in North America and internationally through distribution agreements with satellite providers.

In May 2022, in order to further serve our existing customers and expand our target market, we announced plans to expand our broadband offerings beyond ATG by launching the first global broadband service designed for business aviation (“Global Broadband”).

The service will use an electronically steered antenna, specifically designed to address a broad range of business aviation aircraft, operating on a low earth orbit (“LEO”) satellite network.

The antenna will be designed with Hughes Network Systems, LLC (“Hughes”) and deployed on a LEO satellite network operated by Network Access Associates Limited (“OneWeb”).

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”).

At the closing of the Transaction, the parties entered into certain ancillary agreements, including a transition services agreement, an intellectual property license agreement and commercial agreements.

The transition services agreement has been terminated.

The commercial agreements include an ATG network sharing agreement with a 10-year term, pursuant to which we provide certain in-flight connectivity services on our current ATG network and, when available, our Gogo 5G network, subject to certain revenue sharing obligations.

Under the ATG network sharing agreement, Intelsat has exclusive access to the ATG network for commercial aviation in North America, subject to minimum revenue guarantees.

As a result of the Transaction, the CA business is reported in discontinued operations and financial statements for the years ended December 31, 2021 and 2020 have been conformed to present the CA business as a discontinued operation.

There was no discontinued operations activity for the CA business after December 31, 2021.

We report the financial results of discontinued operations separately from continuing operations to distinguish the financial impact of disposal transactions from ongoing operations.

Discontinued operations reporting occurs only when the disposal of a component or a group of components (i) meets the held-for-sale classification criteria or is disposed of by sale or other than by sale, and (ii) represents a strategic shift that will have a major effect on our operations and financial results.

Unless otherwise noted, discussion in these Notes to Consolidated Financial Statements refers to our continuing operations.

Refer to Note 20, “Discontinued Operations,”

for further information.

Summary of Significant Accounting Policies

Principles of Consolidation –

The consolidated financial statements include our wholly owned subsidiaries.

Principles of Consolidation - The consolidated financial statements include our wholly owned subsidiaries.

All intercompany transactions and account balances have been eliminated.

Prior to the closing of the Transaction, we historically reported our results of operations in three segments:

Commercial Aviation-North America (“CA-NA”), Commercial Aviation-Rest of World (“CA-ROW”) and Business Aviation.

We managed and reported these businesses separately, as they generally did not share the same customer base, had different products, pricing and expense structures, and measured operating performance and allocated resources on different bases.

As a result of the Transaction, we operate in a single distinct business segment, Business Aviation, for which operating performance is measured and resources are allocated on a consolidated basis, consistent with the financial information regularly reviewed by the chief operating decision maker, our CEO.

Therefore, we now report one business segment, comprised of our continuing operations.

Unless otherwise noted, discussion in these Notes to Consolidated Financial Statements refers to our continuing operations.

Refer to Note 19, “Discontinued Operations,” for further information.

We operate in a single distinct business segment, Business Aviation, for which operating performance is measured and resources are allocated on a consolidated basis, consistent with the financial information regularly reviewed by the chief operating decision maker, our CEO.

Therefore, we report one business segment, comprised of our continuing operations.

As we do not have multiple segments, we do not present segment information in this Annual Report on Form 10-K.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis, management evaluates the significant estimates and bases

such estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances.

On an ongoing basis, management evaluates the significant estimates and bases such estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances.

However, actual results could differ materially from those estimates.

As a result of our determination to participate in the FCC Reimbursement Program (as defined below), we reassessed and shortened the estimated useful lives of affected network equipment to be consistent with our estimated date to complete the program.

This change in accounting estimate was effective beginning the second quarter of 2023 and resulted in increased depreciation expense of $ 5.7 million for the year ended December 31, 2023.

Net income per basic and diluted share decreased by $ 0.04 for the year ended December 31, 2023.

See Note 6, “Composition of Certain Reserves and Allowances,” for further details.

Significant Risks and Uncertainties - Our operations are subject to certain risks and uncertainties, including without limitation those associated with fluctuations in operating results, implementation of our technology roadmap, strategic alliances, relationships with customers, suppliers and dealers, supply chain disruptions, funding of our growth, financing terms that may restrict operations, regulatory issues, competition, the economy, te chnology trends, evolving industry standards and other events that may impact the demand for air travel.

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We consider short-term investments to be investments with maturities of twelve months or less (but greater than three months).

Allowance for Credit Losses - We regularly evaluate our accounts receivable and contract assets for expected credit losses.

Our expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of each customer’s trade accounts receivables.

Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on the aging of the accounts receivable balances and the financial condition of customers.

Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.

Our monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of each customer’s financial condition and macroeconomic conditions.

Balances are written off when determined to be uncollectible.

We apply a similar methodology to our current and non-current contract asset balances.

However, due to the inherent additional risk associated with a long-term receivable, an additional provision for credit loss is applied to contract asset balances that will diminish over time as the contract nears its expiration date.

Estimates are used to determine the expected loss allowances.

Such allowances are based on management’s assessment of anticipated payment, taking into account available historical and current information as well as management’s assessment of potential future developments.

We are continuously monitoring our assumptions used to determine our expected credit losses which could cause us to record additional material credit losses in future periods.

Restricted Cash - Certain cash amounts are restricted as to use and are classified outside of cash and cash equivalents.

Cash amounts with restrictions of twelve months or less are included in Prepaid expenses and other current assets and amounts restricted for greater than twelve months are included in Other non-current assets in our consolidated balance sheets.

Our restricted cash balances were $ 0.3 million and $ 0.4 million , respectively, as of December 31, 2022 and 2021 , and consisted primarily of a letter of credit issued for the benefit of the landlord of our office location in Chicago, IL.

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Our restricted cash balances were $ 0.3 million as of both December 31, 2023 and 2022 , and consisted primarily of a letter of credit issued for the benefit of the landlord of our office location in Chicago, IL.

Concentrations of Credit Risk - Financial instruments that potentially subject us to a concentration of credit risk consist principally of cash and cash equivalents.

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We also consider the existence of any uncertain tax positions and, as necessary, provide a reserve for any uncertain tax positions at each reporting date.

See Note 15, “Income Tax,”

for further details.

See Note 13, “Income Tax,” for further details.

Inventories - Inventories consist primarily of telecommunications systems and parts and are recorded at the lower of average cost or net realizable value.

We evaluate the need for write-downs associated with obsolete, slow-moving and nonsalable inventory by reviewing net realizable inventory values on a periodic basis.

See Note 5, “Inventories,”

for further details.

See Note 5, “Composition of Certain Balance Sheet Accounts,” for further details.

Property and Equipment and Depreciation - Property and equipment, including leasehold improvements, are stated at historical cost, less accumulated depreciation.

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Network equipment consists of switching equipment, antennas, base transceiver stations, site preparation costs, and other related equipment used in the operation of our network.

Depreciation expense totaled $ 7.9 million for each of the years ended December 31, 2022, 2021 and 2020.

Depreciation expense totaled $ 14.7 million for the year ended December 31, 2023 and $ 7.9 million for both of the years ended December 31, 2022 and 2021.

Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives for owned assets, which are as follows:

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Network equipment

See Note 6, “Composition of Certain Balance Sheet Accounts,”

for further details.

See Note 5, “Composition of Certain Balance Sheet Accounts,” for further details.

Improvements to leased property are depreciated over the shorter of the useful life of the improvement or the term of the related lease.

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With respect to software sold as part of our equipment sales, we capitalize software development costs once technological feasibility has been established.

Such capitalized software costs are amortized on a product-by-product basis over the remaining estimated economic life of the product, based on the greater of the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or the straight-line method.

Such capitalized software costs are included in Intangible assets, net, in our consolidated balance sheets and amortized on a product-by-product basis over the remaining estimated economic life of the product, based on the greater of the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or the straight-line method.

Intangible Assets - Intangible assets with indefinite lives are not amortized but are reviewed for impairment at least annually or whenever events or circumstances indicate the carrying value of the asset may not be recoverable.

Our FCC Licenses, as defined in Note 8, “Intangible Assets,”

are our only material indefinite-lived intangible assets.

Our FCC Licenses, as defined in Note 7, “Intangible Assets,” are our only material indefinite-lived intangible assets.

We perform our annual impairment test of our FCC Licenses during the fourth quarter of each fiscal year.

We assess qualitative factors to determine the likelihood of impairment.

Our qualitative analysis includes, but is not limited to, assessing the changes in macroeconomic conditions, regulatory environment, industry and market conditions, financial performance versus budget and any other events or circumstances specific to the FCC Licenses.

Our qualitative analysis includes, but is not limited to, assessing the changes in macroeconomic conditions, regulatory environment,

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

industry and market conditions, financial performance versus budget and any other events or circumstances specific to the FCC Licenses.

If it is more likely than not that the fair value of the FCC Licenses is greater than the carrying value, no further testing is required.

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When performing this quantitative impairment testing, we estimate the value of our FCC spectrum licenses by calculating the present value of the cash flows of a hypothetical new market participant whose only assets are such licenses to determine the fair value of the FCC licenses.

The estimate takes into account all costs and expenses necessary to build the Company’s infrastructure during the start-up period, projected revenue, and cash flows once the infrastructure is completed.

Since there is limited corroborating data available in the marketplace that would demonstrate a market participant’s experience in establishing an “air-to-ground”

business, we utilize our historic results and future projections as the underlying basis for the application of the Greenfield method.

We follow the traditional discounted cash flow method, calculating the present value of a new market participant’s estimated debt free cash flows, based on our historical weighted average cost of capital, adjusted to reflect the cost of capital for a new market participant.

Since there is limited corroborating data available in the marketplace that would demonstrate a market participant’s experience in establishing an “air-to-ground” business, we utilize our historic results and future projections as the underlying basis for the application of the Greenfield method.

Although we believe our projected future operating results and cash flows and related estimates regarding fair values are based on reasonable assumptions, projected operating results and cash flows may not always be achieved.

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Other intangible assets

See Note 8, “Intangible Assets,”

for further details .

See Note 7, “Intangible Assets,” for further details .

Long-Lived Assets - We review our long-lived assets to determine potential impairment whenever events indicate that the carrying amount of such assets may not be recoverable.

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Revenue Recognition - Our revenue is primarily earned from providing connectivity and entertainment services and through sales of equipment.

We account for revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”).

We determine revenue recognition through the following steps:

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For these contracts, we account for each distinct good or service as a separate performance obligation.

We allocate the contract’s transaction price to each performance obligation using the relative standalone selling price, which is based on the actual selling price for any good or service sold separately to a similar class of customer.

See Note 4, “Revenue Recognition,”

for further information.

See Note 3, “Revenue Recognition,” for further information.

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Government Assistance - In July 2023, the Company elected to participate in the Federal Communications Commission (“FCC”) Secure and Trusted Communications Networks Reimbursement Program (the “FCC Reimbursement Program”).

There is no applicable authoritative guidance under GAAP to account for this government grant.

Therefore, we have elected to apply International Accounting Standard (“IAS”) 20 Accounting for Government Grants and Disclosure of Government Assistance by analogy.

Under IAS 20, government grants related to assets are presented as either deferred income that is recognized on a systematic basis over the useful life of the asset or by deducting the grant from the carrying value of the asset.

The Company has elected to deduct the grant from the carrying value of the asset.

For grants related to income, the Company has elected to recognize these grants as a deduction from the related expense.

Grant receivables from the FCC are recorded by the Company once there is reasonable assurance that the Company will comply with the conditions of the grant and the grant will be received.

See Note 4, “Government Assistance,” for additional information.

Research and Development Costs - Expenditures for research and development are charged to expense as incurred and totaled $ 36.7 million , $ 29.6 million and $ 24.9 million for the years ended December 31, 2023, 2022 and 2021 , respectively.

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The warranty reserves are determined based on known product failures, historical experience and other available evidence, and are included in accrued liabilities in our consolidated balance sheets.

See Note 7, “Composition of Certain Reserves and Allowances,”

for the details of the changes in our warranty reserve.

See Note 6, “Composition of Certain Reserves and Allowances,” for the details of the changes in our warranty reserve.

Asset Retirement Obligations - We have certain asset retirement obligations related to contractual commitments to remove our network equipment and other assets from leased cell sites upon termination of the site leases.

The asset retirement obligations are classified as a noncurrent liability in our consolidated balance sheets.

See Note 6, “Composition of Certain Balance Sheet Accounts,”

for the details of the changes in our asset retirement obligations.

See Note 5, “Composition of Certain Balance Sheet Accounts,” for the details of the changes in our asset retirement obligations.

Fair Value of Financial Instruments - We group financial assets and financial liabilities measured at fair value into three levels of hierarchy based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

See Note 13, “Fair Value of Financial Assets and Liabilities,”

for further information.

See Note 11, “Fair Value of Financial Assets and Liabilities,” for further information.

Derivatives - We are exposed to interest rate risk on our variable rate borrowings.

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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.

See Note 10, “Derivative Instruments and Hedging Activities,”

for further information.

Earnings (Loss) Per Share - We calculate basic earnings (loss) per share using the weighted-average number of common shares outstanding during the period.

We calculate diluted earnings (loss) per share using the weighted-average number of common shares outstanding and all dilutive potential common shares outstanding.

See Note 3, “Earnings (Loss) Per Share,”

for further information.

See Note 9, “Derivative Instruments and Hedging Activities,” for further information.

Earnings Per Share - We calculate basic earnings per share using the weighted-average number of common shares outstanding during the period.

We calculate diluted earnings per share using the weighted-average number of common shares outstanding and all dilutive potential common shares outstanding.

See Note 2, “Earnings Per Share,” for further information.

Stock-Based Compensation Expense - Compensation cost is measured and recognized at fair value for all stock-based payments, including stock options.

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Forfeitures are recognized when they occur.

Restricted stock units (“RSUs”) and restricted stock are measured based on the fair market value of the underlying stock on the date of grant.

For awards with a market condition (which we have used on a limited basis), we estimate fair value using the Monte Carlo Simulation model, which requires assumptions, such as volatility, risk-free interest rate, expected life and dividends.

Restricted stock units (“RSUs”) and restricted stock are measured based on the fair market value of the underlying stock on the date of grant.

Our stock-based compensation expense is recognized over the applicable vesting period and is included in the same operating expense line items in the consolidated statements of operations as the base cash compensation paid to the underlying employees .

See Note 14, “Stock-Based Compensation and 401(k) Plan,”

for further information.

Leases –

We account for leases in accordance with Accounting Standards Codification Topic 842, Leases (“ASC 842”).

We have operating lease agreements for which w e have recorded lease liabilities and right-of-use assets for leases primarily related to cell sites and office buildings.

See Note 12, “Stock-Based Compensation and 401(k) Plan,” for further information.

Leases – We have operating lease agreements for which w e have recorded lease liabilities and right-of-use assets for leases primarily related to cell sites and office buildings.

We determine whether a contract contains a lease at contract inception and calculate the lease liability and right-of-use asset using our incremental borrowing rate.

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Our building leases have original terms of ten years , with renewal options for an additional five years .

We recognize operating lease expense on a straight-line basis over the lease term.

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

recogni ze operating lease expense on a straight-line basis over the lease term.

We have finance leases for computer and office equipment.

Covenants within the Term Loan Facility contain certain restrictions on our ability to enter into new finance lease arrangements.

See Note 16, “Leases,”

for further information.

See Note 14, “Leases,” for further information.

Advertising Costs - Costs for advertising are expensed as incurred.

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Deferred financing costs associated with future debt issuances are written off in the period during which we determine that the debt will no longer be issued.

See Note 9, “Long-Term Debt and Other Liabilities,”

for further information.

Comprehensive Income (Loss) - Comprehensive income for the years ended December 31, 2022 and 2021 is net income plus or minus unrealized gains and losses on foreign currency translation adjustments and the changes in fair value of cash flow hedges.

Comprehensive loss for the year ended December 31, 2020 is net loss plus unrealized gains on foreign currency translation adjustments.

See Note 8, “Long-Term Debt and Other Liabilities,” for further information.

Comprehensive Income - Comprehensive income for the years ended December 31, 2023, 2022 and 2021 is net income plus or minus unrealized gains and losses on foreign currency translation adjustments and the changes in fair value of cash flow hedges.

Recently Issued Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB).

ASUs not listed below were assessed and determined to be either not applicable or expected to have minimal impact on our consolidated financial statements.

Accounting standards adopted:

On January 1, 2022, we adopted ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance to increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting model by analogy.

ASU 2021-10 requires an entity to disclose information about the nature of the transactions, including the significant terms and conditions, accounting policy used to account for the transactions, and the effect of the transactions on the financial statements.

Adoption of this standard did not have a material impact on our consolidated financial statements.

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, “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 shares of common stock and participating securities on a one-to-one basis.

In periods of a net loss, the shares associated with the Forward Transactions will not receive an allocation of losses, as the counterparties to the Forward Transactions are not required to fund losses.

Additionally, the calculation of weighted average shares outstanding as of December 31, 2021 and 2020 excludes approximately 0.6 million and 2.1 million shares, respectively, associated with the Forward Transactions.

ASUs not listed below were assessed and determined to be either not applicable or expected to have minimal impact on our consolidated financial statements and related notes.

Accounting standards not yet adopted:

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This guidance is effective retrospectively for fiscal years beginning after December 15, 2023 and interim periods after December 15, 2024.

Early adoption is permitted.

We are currently evaluating the impact that this guidance will have upon our consolidated financial statements and related notes.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures, most notably in the tax rate reconciliation and income taxes paid.

This guidance is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted and the amendments should be applied on a prospective basis, however, retrospective application is permitted.

We are currently evaluating the impact that this guidance will have upon our consolidated financial statements and related notes.

Earnings Per Share

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

Diluted earnings per share was computed using the treasury stock method for stock-based compensation and the if-converted method for the 2022 Convertible Notes.

The shares of common stock effectively repurchased in connection with the Forward Transactions (as defined and described in Note 8, “Long-Term Debt and Other Liabilities”) were considered participating securities requiring the two-class method to calculate basic and diluted earnings per share.

Net earnings were allocated between shares of common stock and participating securities on a one-to-one basis.

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 the years ended December 31, 2022 and 2021, the weighted average number of shares excluded from the computation was 0.5 million and 5.7 million shares, respectively.

As a result of the net loss for the year ended December 31, 2020, 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.

During September 2022, we repurchased 1.5 million shares of common stock in a private transaction for an aggregate purchase price of $ 18,345,000 , or $ 12.23 per share (the “Repurchase”).

The Repurchase decreased the weighted average shares outstanding for the year ended December 31, 2022.

The following tables sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2022, 2021 and 2020;

For the years ended December 31, 2023, 2022 and 2021, the weighted average number of shares excluded from the computation was 1.8 million , 0.5 million and 5.7 million shares, respectively.

The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2023, 2022 and 2021;

however, for the reasons described above, the shares associated with the Forward Transactions are excluded from the computation of basic earnings per share ( in thousands, except per share amounts ):

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

For the Years Ended December 31,

Income (Numerator)

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Per Share Amount

Income (Numerator)

Shares (Denominator)

Per Share Amount

Net income from continuing operations

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Earnings per share - diluted

For the Year Ended December 31,

Net loss from continuing operations

Net loss from discontinued operations

Participation rights of the Forward Transactions

Undistributed losses

Weighted-average common shares outstanding-basic and diluted

Net loss attributable to common stock per share-basic and diluted:

Net loss from continuing operations

Net loss from discontinued operations

Revenue Recognition

Remaining Performance Obligations

As of December 31, 2022, the aggregate amount of the transaction price in our customer contracts allocated to unsatisfied performance obligations was approximately $ 102 million .

We have excluded from this amount consideration from contracts that have an original duration of one year or less.

Approximately $ 80 million primarily represents connectivity and entertainment service revenues which are recognized as services are provided, which is expected to occur through the remaining term of the contract.

The remaining $ 22 million of such amount represents future equipment revenue that is expected to be recognized primarily within the next two years .

As of December 31, 2023, the aggregate amount of the transaction price in our contracts allocated to the remaining unsatisfied performance obligations (“RPO”) was approximately $ 253 million and excludes consideration from contracts that have an original duration of one year or less.

Approximately $ 234 million of the RPO primarily represents connectivity and entertainment service revenues which are recognized as services are provided which is expected to occur through the remaining term of the contracts.

Our contracts vary in length and generally have terms of two to ten years .

The remaining $ 19 million of the RPO represents future equipment revenue that is expected to be recognized primarily within the next three years.

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Disaggregation of revenue

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Equipment revenue

Narrowband satellite

Total equipment revenue

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Our current and non-current contract asset balances totaled $ 16.6 million and $ 19.9 million as of December 31, 2023 and 2022, respectively.

Contract assets represent the aggregate amount of revenue recognized in excess of billings primarily for certain sales programs.

Contract assets represent the aggregate amount of revenue recognized in excess of billings and recoverable contract costs primarily for certain sales programs.

Our current and non-current deferred revenue balances totaled $ 1.0 million and $ 3.4 million as of December 31, 2023 and 2022, respectively.

Deferred revenue includes, among other things, fees paid for equipment and subscription connectivity products.

Deferred revenue includes, among other things, prepayments for equipment and subscription connectivity products.

Major Customers

No customer accounted for more than 10 % of total revenue for the years ended December 31, 2023, 2022 and 2021 and no customer accounted for more than 10 % of accounts receivable as of December 31, 2023 or 2022 .

Inventories consist primarily of telecommunications systems and parts and are recorded at the lower of average cost or net realizable value.

We evaluate the need for write-downs associated with obsolete, slow-moving and nonsalable inventory by reviewing net realizable inventory values on a periodic basis.

Government Assistance

FCC Reimbursement Program

On July 15, 2022, the Company was notified that it was approved for participation in the FCC Reimbursement Program, designed to reimburse providers of advanced communications services for reasonable costs incurred in the required removal, replacement, and disposal of covered communications equipment or services, that have been deemed to pose a national security risk, from their networks.

Pursuant to the FCC Reimbursement Program, the FCC approved up to approximately $ 334 million in reimbursements to the Company to cover documented and approved costs to (i) remove and securely destroy all ZTE communications equipment and services in the Company’s terrestrial U.S.

networks and replace such equipment and (ii) remove and replace certain equipment installed on aircraft operated by the Company’s ATG customers that is not compatible with the terrestrial equipment that will replace ZTE equipment.

Due to a shortfall in the amount appropriated by Congress to fund the FCC Reimbursement Program, approximately $ 132 million of the approved amount is currently allocated to the Company under the program.

If Congress appropriates additional funds for this purpose, the allocations of the Company and other approved applicants will be increased pro rata .

Program participants are subject to a number of conditions and requirements under the FCC’s rules including a requirement that they submit their first reimbursement request by July 17, 2023 and certify that they have developed a plan to permanently remove, replace and dispose of covered equipment or services within one year following the first reimbursement request.

The rules permit participants to petition the FCC for one or more six-month extensions of the completion deadline.

The Company, with the assistance of an advisor we engaged to help administer the program, submitted and received its first reimbursement claim in July 2023.

The Company’s one year term to complete the program is set for July 21, 2024, however, based on discussions with our vendors supporting the program regarding lead times for network equipment, we plan to petition the FCC for multiple extensions, as outlined in our application for the FCC Reimbursement Program.

As of December 31, 2023, we have recorded a $ 18.3 million receivable from the FCC, which is included in Prepaid expenses and other current assets in our Consolidated Balance Sheets.

See Note 1, “Summary of Significant Accounting Policies,” for additional information on our accounting policy for government grants.

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

The following are the deductions to the carrying value of asset balances in our Consolidated Balance Sheets as of December 31, 2023 (in thousands):

As of December 31,

Prepaid expenses and other current assets

Property and equipment, net

Intangible assets, net

Other non-current assets

The following are the increases to Net income in our Consolidated Statements of Operations for the year ended December 31, 2023 (in thousands) :

For the year ended December 31,

Service revenue

Operating expenses:

Cost of service revenue

Cost of equipment revenue

General and administrative

Composition of Certain Balance Sheet Accounts

Inventories as of December 31, 2023 and 2022 were as follows ( in thousands ):

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Total inventory (1)

Composition of Certain Balance Sheet Accounts

(1) See Note 4, “Government Assistance,” for additional information.

As a result of our determination to participate in the FCC Reimbursement Program (as defined and described in Note 1, “Summary of Significant Accounting Policies” ), the Company wrote down the net realizable value of certain inventory by approximately $ 1.3 million for the year ended December 31, 2023.

The write-off charge is included in Cost of equipment revenue in our Consolidated Statements of Operations.

Prepaid expenses and other current assets as of December 31, 2023 and 2022 were as follows ( in thousands ):

Interest rate caps and receivable

FCC reimbursement receivable (1)

Contract assets (1)

Prepaid inventories

Insurance receivable (1)

Tenant improvement allowance receivables

Total prepaid expenses and other current assets

(1) See Note 17, “Commitments and Contingencies,”

for additional information.

(1) See Note 4, “Government Assistance,” for additional information.

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Property and equipment as of December 31, 2023 and 2022 were as follows ( in thousands ):

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Property and equipment, net

(1) See Note 4, “Government Assistance,” for additional information.

Other non-current assets as of December 31, 2023 and 2022 were as follows ( in thousands ):

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Total other non-current assets

(1) See Note 4, “Government Assistance,” for additional information.

Accrued liabilities as of December 31, 2023 and 2022 were as follows ( in thousands ):

Employee compensation and benefits

Accrued interest

Operating leases

Customer credit reserve

Network equipment

Warranty reserve

Litigation settlement accrual (1)

Accrued interest

Total accrued liabilities

(1) See Note 17, “Commitments and Contingencies,”

for additional information.

Other non-current liabilities as of December 31, 2022 and 2021 consist of the following ( in thousands ):

Asset retirement obligations

Total other non-current liabilities

Changes in our non-current asset retirement obligations for the years ended December 31, 2022 and 2021 consist of the following ( in thousands ):

Balance –

January 1, 2021

Asset retirement obligations are included in Other non-current liabilities in our consolidated balance sheets and changes for the years ended December 31, 2023 and 2022 consist of the following ( in thousands ):

Balance – January 1, 2022

Liabilities incurred

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Foreign exchange rate adjustments

Balance –

December 31, 2021

Balance – December 31, 2022

Liabilities incurred

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Foreign exchange rate adjustments

Balance –

December 31, 2022

Balance – December 31, 2023

Composition of Certain Reserves and Allowances

Credit Losses —

We regularly evaluate our accounts receivable and contract assets for expected credit losses.

Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.

Our monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of each customer’s financial condition and macroeconomic conditions.

Balances are written off when determined to be uncollectible.

We apply a similar methodology to our current and non-current contract asset balances.

Estimates are used to determine the expected loss allowances.

We are continuously monitoring our assumptions used to determine our expected credit losses, including the impact of COVID-19, which could cause us to record additional material credit losses in future periods.

Changes in our allowances for credit losses for the years ended December 31, 2022 and 2021 were as follows ( in thousands ):

Credit Losses — Changes in our allowances for credit losses for the years ended December 31, 2023 and 2022 were as follows ( in thousands ):

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Balance at January 1, 2022

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Balance at December 31, 2023

Warranties —

We provide warranties on parts and labor related to our products.

Our warranty terms range from two to five years .

Warranty reserves are established for costs that are estimated to be incurred after the sale, delivery and installation of the products under warranty.

The warranty reserves are determined based on known product failures, historical experience and other available evidence, and are included in accrued liabilities in our consolidated balance sheets.

Changes in our warranty reserve for the years ended December 31, 2022 and 2021 were as follows ( in thousands ):

Balance –

January 1, 2021

Warranties — Changes in our warranty reserve for the years ended December 31, 2023 and 2022 were as follows ( in thousands ):

Balance – January 1, 2022

Accruals for warranties issued

Settlements and adjustments to warranties

Balance –

December 31, 2021

Balance – December 31, 2022

Accruals for warranties issued

Settlements and adjustments to warranties

Balance –

December 31, 2022

Balance – December 31, 2023

Intangible Assets

Our intangible assets are comprised of indefinite- and finite-lived intangible assets and goodwill.

We own the rights to 3 MHz of ATG spectrum in the nationwide 800 MHz Commercial Air-Ground Radiotelephone band (the “3 MHz FCC License”), which is used in the operation of our ATG network, and the license for 1 MHz of ATG spectrum in the nationwide 800MHz Commercial Air-Ground Radiotelephone band (the “1 MHz FCC License”) acquired as part of our acquisition of LiveTV Airfone, LLC.

Together we refer to the 3 MHz FCC License and the 1 MHz FCC License as the “FCC Licenses.”

The FCC Licenses were originally issued with 10-year terms and we have renewed both licenses for subsequent 10-year terms.

Together we refer to the 3 MHz FCC License and the 1 MHz FCC License as the “FCC Licenses.” The FCC Licenses were originally issued with 10-year terms and we have renewed both licenses for subsequent 10-year terms.

Such licenses are subject to further renewal by the FCC, and renewals of licenses held by others have occurred routinely and at nominal cost.

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Total intangible assets

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Amortization expense for the years ended December 31, 2023, 2022 and 2021 was $ 2.0 million , $ 4.7 million and $ 7.5 million , respectively.

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Term Loan Facility

2022 Convertible Notes

deferred financing costs

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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 “Original 2021 Credit Agreement,”

and, as it may be amended, supplemented or otherwise modified from time to time , 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.

On February 2, 2023, Gogo and GIH entered into an amendment to the Original 2021 Credit Agreement with Morgan Stanley Senior Funding, Inc., as administrative agent, which replaced all references in the Original 2021 Credit Agreement to LIBOR in respect of the applicable interest rates for the Facilities with an adjusted term secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”), plus a credit spread adjustment based on the Alternative Reference Rates Committee recommended spread adjustment.

On April 30, 2021, Gogo and Gogo Intermediate Holdings LLC (“GIH”) (a wholly owned subsidiary of Gogo) entered into a credit agreement (the “Original 2021 Credit Agreement,” and, as it may be amended, supplemented or otherwise modified from time to time , 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.

On February 2, 2023, Gogo and GIH entered into an amendment to the Original 2021 Credit Agreement with Morgan Stanley Senior Funding, Inc., as administrative agent, which replaced all references in the Original 2021 Credit Agreement to LIBOR in respect of the applicable interest rates for the Facilities with an adjusted term secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”), plus a credit spread adjustment recommended by the Alternative Reference Rates Committee.

We elected to apply the optional expedient within ASC 848, Facilitation of the Effects of Reference Rate Reform on Financial Reporting , to conclude that this modification was not substantial and did not have a material impact to our consolidated financial statements.

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 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 term SOFR rate (subject to a floor of 0.75 %) plus an applicable margin of 3.75 % and a credit spread adjustment based on the Alternative Reference Rates Committee recommended spread adjustments 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 term SOFR 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 and a credit spread adjustment based on the Alternative Reference Rates Committee recommended spread adjustments 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.

The Term Loan Facility bears annual interest at a floating rate measured by reference to, at GIH’s option, either (i) an adjusted term SOFR rate (subject to a floor of 0.75 %) plus an applicable margin of 3.75 % and a credit spread adjustment recommended by the Alternative Reference Rates Committee of 0.11%, 0.26% or 0.43% per annum based on 1-month, 3-month or 6-month term SOFR, respectively 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 term SOFR 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 and a credit spread adjustment recommended by the Alternative Reference Rates Committee of 0.11 %, 0.26 % or 0.43 % per annum based on 1-month, 3-month or 6-month term SOFR, respectively 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.

As of December 31, 2023 , the fee for the unused commitments under the Revolving Facility was 0.25 % and the applicable margin was 3.25 %.

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

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.

On May 3, 2023, the Company prepaid $ 100 million of the outstanding principal amount of the Term Loan Facility.

As a result, we wrote off $ 2.2 million of the deferred financing costs and unaccreted debt discount, which are included in Loss on extinguishment of debt and settlement of convertible notes in our Consolidated Statements of Operations for the year ended December 31, 2023.

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

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consolidations or mergers;

activities of Gogo and any subsidiary holding a license issued by the Federal Communications Commission;

activities of Gogo and any subsidiary holding a license issued by the FCC;

investments, loans, advances, guarantees or acquisitions;

other distributions on equity;

dividends or other distributions on equity;

purchase, redemption or retirement of capital stock;

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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 December 31, 2022 and 2021.

As of December 31, 2023 and 2022, the outstanding principal amount of the Term Loan Facility was $ 606.9 million and $ 714.1 million, respectively, the unaccreted debt discount was $ 2.1 million and $ 2.8 million, respectively, and the net carrying amount was $ 604.8 million and $ 711.3 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 consolidated balance sheets and are amortized over the terms of the Facilities.

Total amortization expense was $ 2.6 million and $ 1.8 million, respectively, for the years ended December 31, 2022 and 2021 and is included in Interest expense in our consolidated statements of operations.

Total amortization expense was $ 2.4 million , $ 2.6 million and $ 1.8 million, respectively, for the years ended December 31, 2023, 2022 and 2021 and is included in Interest expense in our consolidated statements of operations.

As of December 31, 2023 and 2022, the balance of unamortized deferred financing costs related to the Facilities was $ 11.1 million and $ 15.3 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.

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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.

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 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 Loss on extinguishment of debt and settlement of convertible notes in our consolidated statements of operations for the year ended December 31, 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 Loss on extinguishment of debt and settlement of convertible notes in our consolidated statements of operations for the year ended December 31, 2021.

As of 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 consolidated balance sheets.

In 2018, we issued $ 237.8 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.

In 2021, $ 135.0 million aggregate principal amount of 2022 Convertible Notes was converted by holders and settled through the issuance of 24,353,006 shares of common stock.

In May 2022, the remaining $ 102.8 aggregate principal amount of 2022 Convertible Notes was converted by holders into 17,131,332 shares of common stock.

Thorndale Farm Private Equity Fund 2, LLC, an entity affiliated with our Chairman and Chief Executive Officer, held $ 8,000,000 aggregate principal amount of 2022 Convertible Notes that was converted into 1,333,333 shares of common stock.

As of December 31, 2022, there were no outstanding 2022 Convertible Notes.

Thorndale Farm Private Equity Fund 2, LLC, an entity affiliated with our Chair of the Board and

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Chief Executive Officer, held $ 8.0 aggregate principal amount of 2022 Convertible Notes that was converted into 1,333,333 shares of common stock.

We incurred approximately $ 8.1 million of issuance costs related to the issuance of the 2022 Convertible Notes that were amortized over the term of the 2022 Convertible Notes using the effective interest method.

Total amortization expense was $ 0.4 million, $ 1.4 million and $ 1.8 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

Amortization expense is included in Interest expense in the consolidated statements of operations.

As of December 31, 2021, the balance of unamortized deferred financing costs related to the 2022 Convertible Notes was $ 0.4 million and was included as a reduction to the carrying amount of the debt in our consolidated balance sheets.

See Note 11, “Interest Costs,”

for additional information.

The 2022 Convertible Notes had an initial conversion rate of 166.6667 shares of common stock per $ 1,000 principal amount of 2022 Convertible Notes, which was equivalent to an initial conversion price of approximately $ 6.00 per share of our common stock.

Total amortization expense was $ 0.4 million and, $ 1.4 million , respectively, for the years ended December 31, 2022 and 2021 and is included in Interest expense in the consolidated statements of operations.

See Note 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 was equivalent to an initial conversion price of approximately $ 6.00 per share of our common stock.

Prior to conversion, the shares of common stock subject to conversion were considered in the diluted earnings per share calculations under the if-converted method if their impact was dilutive.

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.

As a result of the Forward Transactions, total shareholders’

equity within our consolidated balance sheets was reduced by approximately $ 140.0 million.

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.

In May 2022, the approximately 0.6 million shares that were remaining under the Amended and Restated Forward Transactions were delivered to us.

As of December 31, 2022, there were no prepaid forward stock repurchase transactions outstanding.

In May 2022, the approximately 0.6 million shares that were remaining under the Amended and Restated Forward Transaction were delivered to us.

There are no longer any additional prepaid forward stock repurchase transactions outstanding.

2024 Senior Secured Notes

On April 25, 2019, GIH and Gogo Finance Co.

(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.

(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.

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 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 $ 1.4 million and $ 3.7 million, respectively, for the years ended December 31, 2021 and 2020.

Total amortization expense was $ 1.4 million for the year ended December 31, 2021.

Amortization expense is included in Interest expense in the consolidated statements of operations.

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.

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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 party 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 includes letter of credit and swingline sub-facilities.

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

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 includes 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 collateral of the Company.

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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 consolidated statements of operations for the year ended December 31, 2021.

2020 Convertible Notes

In March 2015, we issued $ 361.9 million aggregate principal amount of 3.75 % Convertible Senior Notes due 2020 (the “2020 Convertible Notes”) in a private offering to qualified institutional buyers, pursuant to Rule 144A under the Securities Act.

In 2018 and 2019, we repurchased a total of $ 359.4 million aggregate principal amount of the 2020 Convertible Notes, and on March 1, 2020, the remaining $ 2.5 million aggregate principal amount of the 2020 Convertible Notes matured.

Derivative Instruments and Hedging Activities

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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 .

We receive payments in the amount calculated pursuant to the caps for any period in which the daily compounded SOFR rate plus a credit spread adjustment recommended by the Alternative Reference Rate Committee of 0.26% increases beyond the applicable strike rate .

The notional amounts of the interest rate caps periodically decrease over the life of the caps.

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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 .

No gains or losses of our cash flow hedges were considered to be ineffective and reclassified from other comprehensive income (loss) to earnings for the years ended December 31, 2022 and 2021 .

During the year ended December 31, 2023, fully offsetting unrealized gains and losses were incurred from our cash flow hedges that were considered ineffective as a result of a voluntary partial de-designation of the hedge relationship related to a prepayment of our existing variable-rate debt discussed in Note 8, “Long-Term Debt and Other Liabilities.” No gains or losses of our cash flow hedges were considered to be ineffective and reclassified from other comprehensive income (loss) to earnings for the years ended December 31, 2022 and 2021 .

We estimate that approximately $ 2.6 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 hedge on an ongoing basis.

Cash flows from interest rate caps are classified in the consolidated statement of cash flows as investing activities from continuing operations.

For the year ended December 31, 2022, we recorded an unrealized gain on the interest rate caps of $ 28.4 million, net of tax of $ 9.3 million.

For the year ended December 31, 2021, we recorded an unrealized gain on the interest rate caps of $ 2.7 million, net of tax of $ 0.9 million.

Unrealized gains and losses on interest rate caps exclude amortization of the purchase price paid for the interest rate caps.

We assess the effectiveness of the hedges on an ongoing basis, and the remaining outstanding caps are still considered to be highly effective, and remain designated as a cash flow hedge.

Cash flows from interest rate caps are classified in the consolidated statements of cash flows as investing activities from continuing operations.

For the year ended December 31, 2023, we recorded a decrease in fair value on the interest rate caps of $ 16.1 million, net of tax of $ 4.8 million.

For the year ended December 31, 2022, we recorded an increase in fair value on the interest rate caps of $ 28.4 million, net of tax of $ 9.3 million.

Increases and decreases in fair value on interest rate caps above exclude amortization of the purchase price paid for the interest rate caps.

When derivatives are used, we are exposed to credit loss in the event of non-performance by the counterparties;

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Fair Value Measurement

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

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).

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These models take into account a variety of factors including, where applicable, maturity, interest rate yield curves, and counterparty credit risks.

Reference Rate Reform

In March 2020, the FASB issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

ASU 2020-04, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

The amendments in ASU 2021-01 provide optional expedients to the current guidance on contract modification and hedge accounting from the expected market transition from LIBOR and other interbank offered rates to alternative reference rates.

The guidance generally can be applied to applicable contract modifications through December 31, 2024.

The Company evaluated the impact of ASU 2020-04 and 2021-01, both of which were previously adopted by the Company, and has made necessary changes to its affected contracts in order to capture the market transition from LIBOR to SOFR.

On February 2, 2023 the Company modified its 2021 Credit Agreement to use the Secured Overnight Financing Rate (“SOFR”) as a reference rate rather than LIBOR (see Note 8, “Long-Term Debt and Other Liabilities”).

In conjunction with the amendment of the debt, the Company’s derivative positions automatically transitioned to SOFR, the designated fallback as determined by the International Swaps and Derivatives Association on July 31, 2023.

Concurrently, the Company updated its hedge documentation to reflect the changing of the benchmark index, which changed solely as a result of reference rate reform.

Under ASC 848, Reference Rate Reform, hedge accounting may continue without de-designation if certain criteria are met.

For cash flow hedges in which the designated hedged risk is LIBOR (or another rate that is expected to be discontinued), the guidance allows an entity to assert that it remains probable that the hedged forecasted transaction will occur.

The Company has assessed the effectiveness of the amended hedge relationship and concluded that the hedge relationship remains highly effective.

The Company applied the optional expedient within ASC 848 to conclude the updates to the hedge relationship due to reference rate reform did not have a material impact on the Company's consolidated financial statements .

Interest Costs

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Total interest costs

Common Stock and Preferred Stock

Common Stock –

We have one class of common stock outstanding as of December 31, 2022 and 2021.

Our common stock is junior to our preferred stock, if and when issued.

Our Third Amended and Restated Certificate of Incorporation authorizes a total of 500,000,000 shares of common stock with a par value of $ 0.0001 per share.

Preferred Stock –

Our Third Amended and Restated Certificate of Incorporation authorizes 100,000,000 shares of new preferred stock with a par value of $ 0.01 per share.

No shares of this new preferred stock have been issued.

The preferred stock may be issued, from time to time, in one or more series as authorized by the Board of Directors, which has the authority to designate the terms of any series of preferred stock issued, including, without limitation, the number of shares to be included in such series of preferred stock, any dividend, redemption, conversion rights or voting powers and the designations, preferences and relative participating, optional or other special rights.

Shareholder Rights Plan –

On September 23, 2020, our Board of Directors adopted a Section 382 Rights Agreement (as amended, the “Rights Agreement”), between the Company and Computershare Trust Company, N.A., as rights agent (the “Rights Agent”), and declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock of the Company, outstanding on the record date of October 2, 2020, to the stockholders of record on that date.

Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $ 0.01 per share, of the Company (the “Preferred Shares”) at a price of $ 38.40 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment.

In December 2022, the Company entered into Amendment No.

1 to the Rights Agreement with the Rights Agent, which, among other things, changed the Distribution Date (as defined below) from the close of business on the tenth to the thirtieth day after the Stock Acquisition Date (as defined in the Rights Agreement), with certain exceptions.

The purpose of the Rights Agreement is to facilitate the Company’s ability to preserve its net operating losses (“NOLs”) and certain other tax attributes in order to be able to offset potential future income taxes for federal income tax purposes.

The Company’s ability to use its NOLs and other tax attributes would be substantially limited if it experiences an “ownership change,”

as such term is defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).

A company generally experiences an ownership change if the percentage of the value of its stock owned by certain “5-percent shareholders,”

as such term is defined in Section 382 of the Code, increases by more than 50 percentage points over a rolling three-year period.

The Rights Agreement is intended to reduce the likelihood of an ownership change under Section 382 of the Code by deterring any person or group from acquiring beneficial ownership of 4.9% or more of the shares of the Company’s common stock then-outstanding.

The Rights are attached to all shares of the Company’s common stock, and until the Distribution Date (as defined below), the Rights will be transferred with and only with the common stock.

As long as the Rights are attached to the common stock, the Company will issue one Right with each new share of common stock so that all such shares of common stock will have Rights attached (subject to certain limited exceptions).

The Rights will separate and begin trading separately from the common stock, and Right certificates will be caused to evidence the Rights, on the earlier to occur of (i) the close of business on the thirtieth day following public disclosure of facts indicating that a person or group has acquired beneficial ownership of 4.9% or more of the outstanding common stock (an “Acquiring Person”) (or, in the event the Board of Directors determines to effect an exchange in accordance with Section 24 of the Rights Agreement and the Board of Directors determines that a later date is advisable, then such later date) and (ii) the close of business on the tenth business day (or such later date as may be determined by action of the Board of Directors prior to such time as any person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 4.9% or more of the outstanding common stock (the earlier of such dates, the “Distribution Date”).

The Rights are not exercisable until the Distribution Date.

The Rights will expire on the earlier to occur of (i) the date on which the Board of Directors determines in its sole discretion that (x) the Rights Agreement is no longer necessary for the preservation of material valuable NOLs or tax attributes or (y) the NOLs and tax attributes have been fully utilized and may no longer be carried forward and (ii) the close of business on September 23, 2023.

The Rights Agreement was approved by the Company's stockholders at the Company's 2021 annual meeting of stockholders.

On September 15, 2022, pursuant to the Rights Agreement and following approval by the Board of Directors, the Company requested that BlackRock, Inc.

(together with its subsidiaries and funds under management, “BlackRock”), as promptly as practicable, divest sufficient shares of the Company’s common stock to take BlackRock’s beneficial ownership below 4.9% so as to not be deemed an “Acquiring Person”

under the Rights Agreement.

On September 28, 2022, following confirmation that it had divested sufficient shares of the Company’s common stock so as to not be deemed an “Acquiring Person”

under the Rights Agreement, the Board of Directors granted a request by BlackRock that it be deemed an “Exempt Person”

under the Rights Agreement, subject to BlackRock satisfying certain ownership conditions, including that neither BlackRock, Inc.

nor any subsidiary or individual fund will have an economic interest of 4.9% or more of the Company’s common stock.

Additionally, on December 29, 2022, the Board of Directors determined another shareholder not to be deemed an “Acquiring Person”

under the Rights Agreement and granted a request from the shareholder that it be deemed an “Exempt Person”

under the Rights Agreement, subject to such shareholder satisfying certain ownership conditions.

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Fair Value of Financial Assets and Liabilities

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• Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Refer to Note 10, “Derivative Instruments and Hedging Activities,”

for fair value information relating to our interest rate caps.

Refer to Note 9, “Derivative Instruments and Hedging Activities,” for fair value information relating to our interest rate caps.

Long-Term Debt:

As of December 31, 2022 and 2021, our financial assets and liabilities that are disclosed but not measured at fair value include the Term Loan Facility, and solely as of December 31, 2021, the 2022 Convertible Notes, which are reflected on the consolidated balance sheets at cost.

The fair value measurements are classified as Level 2 within the fair value hierarchy since they are based on quoted market prices of our instruments in markets that are not active.

We estimated the fair value of the Term Loan Facility, and

solely as of December 31, 2021, the 2022 Convertible Notes, by calculating the upfront cash payment a market participant would require to assume these obligations.

The upfront cash payments used in the calculations of fair value on our consolidated balance sheets, excluding any issuance costs, are the amount that a market participant would be willing to lend at such date to an entity with a credit rating similar to ours and that would allow such an entity to achieve sufficient cash inflows to cover the scheduled cash outflows under the Term Loan Facility, and solely as of December 31, 2021, the 2022 Convertible Notes.

As of December 31, 2023 and 2022, our only financial asset and liability disclosed but not measured at fair value is the Term Loan Facility, which is reflected on the consolidated balance sheets at cost.

The fair value measurement is classified as Level 2 within the fair value hierarchy since it is based on quoted market prices of our instrument in markets that are not active.

We estimated the fair value of the Term Loan Facility by calculating the upfront cash payment a market participant would require to assume this obligation.

The upfront cash payment used in the calculation of fair value on our consolidated balance sheets, excluding any issuance costs, is the amount that a market participant would be willing to lend at such date to an entity with a credit rating similar to ours and that would allow such an entity to achieve sufficient cash inflows to cover the scheduled cash outflows under the Term Loan Facility.

The fair value and carrying value of long-term debt as of December 31, 2023 and 2022 was as follows (in thousands) :

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Term Loan Facility

2022 Convertible Notes

(1) Fair value amounts are rounded to the nearest million.

(2) Carrying value of the Term Loan Facility reflects the unaccreted debt discount of $ 2.1 million and $ 2.8 million, respectively, as of December 31, 2023 and 2022.

See Note 9, “Long-Term Debt and Other Liabilities,”

for further information.

See Note 8, “Long-Term Debt and Other Liabilities,” for further information.

Stock-Based Compensation and 401(k) Plan

As of December 31, 2022 , we maintained three stock-based incentive compensation plans:

the Second Amended and Restated Gogo Inc.

2016 Omnibus Incentive Plan (the “2016 Omnibus Plan”), the Gogo Inc.

2013 Omnibus Incentive Plan (the “2013 Omnibus Plan”), and The Aircell Holdings Inc.

Stock Option Plan, collectively referred to as the “Stock Plans,”

as well as an Employee Stock Purchase Plan (“ESPP”), as discussed below.

Our Stock Plans provide for the grant of both equity and cash awards, including non-qualified stock options, incentive stock options, stock appreciation rights, performance awards (shares and units), restricted stock, RSUs, deferred share units (“DSUs”) and other stock-based awards and dividend equivalents to eligible employees, directors and consultants, as determined by the Compensation Committee of our Board of Directors (the “Compensation Committee”).

Under the Stock Plans, 33,234,128 shares of common stock were reserved for issuance.

As of December 31, 2022 , 6,941,586 shares remained available for grant under our Stock Plans.

As of December 31, 2023, we maintained the Second Amended and Restated Gogo Inc.

2016 Omnibus Incentive Plan (the “2016 Omnibus Plan”).

The 2016 Omnibus Plan provides for the grant of both equity and cash awards, including non-qualified stock options, incentive stock options, stock appreciation rights, performance awards (shares and units), restricted stock, RSUs, deferred share units (“DSUs”) and other stock-based awards and dividend equivalents to eligible employees, directors and consultants, as determined by the Compensation Committee of our Board of Directors (the “Compensation Committee”).

The Gogo Inc.

2013 Omnibus Incentive Plan (the “2013 Omnibus Plan”), The Aircell Holdings Inc.

Stock Option Plan, and the Employee Stock Purchase Plan (“ESPP”) have all expired.

Under the 2016 Omnibus Plan, 33,234,128 shares of common stock were reserved for issuance.

As of December 31, 2023 , 4,432,317 shares remained available for grant under the 2016 Omnibus Plan.

The contractual life of granted options is 10 years .

Except as otherwise approved by the Compensation Committee, all options that are unvested as of the date on which a recipient’s employment terminates, as well as vested options that are not exercised within a prescribed period following termination, are forfeited and become available for future grants.

Options granted beginning in 2010 but prior to the Option Exchange (as defined below) include options that (a) vest in specified increments over a four-year period, (b) vest on the date of grant for certain options granted to non-employee members of our Board of Directors or (c) vest on the first anniversary of the date of grant for certain options granted to non-employee members of our Board of Directors.

In June 2020, we consummated an option exchange program that was approved by our stockholders at the annual meeting held on April 29, 2020 in which previously outstanding eligible options (which excluded options granted for service by non-executive members of our Board of Directors) to purchase 6,664,773 shares of common stock were surrendered and cancelled and we granted replacement options (the “Replacement Options”) in exchange for the tendered options.

Of the 4,168,455 options we granted in 2020, 2,896,383 w ere Replacement Options.

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Beginning in 2013, we granted RSUs, which generally vest in equal annual increments over a four-year period.

Vested RSUs will be settled, at the discretion of the Compensation Committee, in shares of our common stock or in cash equal to the value of the applicable number of shares of our common stock on the vesting date.

Vested RSUs will be settled, at the discretion of the Compensation Committee, in shares of our common stock or in cash equal to the value of the

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

applicable number of shares of our common stock on the vesting date.

We also granted DSUs to directors, some of which vest on the grant date and others on the first anniversary of the grant date.

DSUs will be settled in shares of our common stock 90 days after the director ceases to serve as a director.

DSUs will be settled in shares of our common stock after the director ceases to serve as a director.

We intend to settle RSU and DSU awards in stock and we have the shares available to do so.

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(in thousands)

Options outstanding –

January 1, 2022

Options outstanding –

December 31, 2022

Options exercisable –

December 31, 2022

As of December 31, 2022, total unrecognized compensation costs related to unvested stock options were approximately $ 0.4 million which is expected to be recognized over a weighted average period of approximately 1 year.

Options outstanding – January 1, 2023

Options outstanding – December 31, 2023

Options exercisable – December 31, 2023

As of December 31, 2023, total unrecognized compensation costs related to unvested stock options were immaterial.

The total grant date fair value of stock options vested in 2023, 2022 and 2021 was approximately $ 0.3 million , $ 18 million and $ 10 million, respectively.

We estimate the fair value of stock options using the Black-Scholes option-pricing model.

No stock options were granted during the year ended December 31, 2022.

Weighted average assumptions used and weighted average grant date fair value of stock options granted for the years ended December 31, 2021 and 2020 were as follows:

No stock options were granted during the years ended December 31, 2023 and 2022.

Weighted average assumptions used and weighted average grant date fair value of stock options granted for the years ended December 31, 2021 were as follows:

For the Years Ended December 31,

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Beginning in 2020, we calculated volatility based exclusively on our common stock.

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

The following table summarizes the activities for our unvested RSUs and DSUs for the year ended December 31, 2023:

Unvested –

January 1, 2022

Unvested – January 1, 2023

Forfeited/canceled

Unvested –

December 31, 2022

Unvested – December 31, 2023

As of December 31, 2023, there was approximately $ 37 million of unrecognized compensation cost related to unvested employee RSUs.

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The total grant date fair value of RSUs and DSUs vested in 2023 was approximately $ 17 million .

ESPP - In June 2013, the Board of Directors and stockholders approved the ESPP, which became effective on June 26, 2013, and in 2017 and 2020, the ESPP was amended to increase the number of shares reserved thereunder.

The ESPP allows eligible employees to purchase a limited number of shares of common stock during pre-specified offering periods at a discount established by the Compensation Committee which may not exceed 15 % of the fair market value of the common stock at the beginning or end of the offering period (whichever is lower).

ESPP - We had an ESPP which expired during 2023.

The ESPP allowed eligible employees to purchase a limited number of shares of common stock during pre-specified offering periods at a discount established by the Compensation Committee which could not exceed 15 % of the fair market value of the common stock at the beginning or end of the offering period (whichever was lower).

Under the ESPP, 2,200,000 shares were reserved for issuance and 29,257 shares of common stock were issued during the year ended December 31, 2023.

As of December 31, 2022 , 714,091 shares remained available for purchase under the ESPP.

401(k) Plan - Under our 401(k) plan, all employees who are eligible to participate are entitled to make tax-deferred contributions, subject to Internal Revenue Service limitations.

We match 100 % of the employee’s first 4 % of contributions made, subject to annual

We match 100 % of the employee’s first 4 % of contributions made, subject to annual limitations.

Our matching contributions were $ 2.3 million , $ 2.1 million, and $ 1.8 million for the years ended December 31, 2023, 2022 and 2021 , respectively.

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For the Years Ended December 31,

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

The provision (benefit) for income taxes from continuing operations differs from income taxes computed at the federal statutory tax rates for the years ended December 31, 2023, 2022, and 2021 as a result of the following items:

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State income taxes-net of federal tax benefit

Nondeductible officer's compensation

Excess tax benefits on stock-based compensation

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Deferred income tax assets:

Compensation accruals

Stock options

Warranty reserves

Deferred revenue

Federal net operating loss (NOL)

Interest carryforward

UNICAP adjustment

Finite-lived intangible assets

Operating lease liability

Section 174 costs

Total deferred income tax assets

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Net deferred income tax asset

We regularly assess the need for a valuation allowance related to our deferred income tax assets to determine, based on the weight of the available positive and negative evidence, whether it is more likely than not that some or all of such deferred assets will not be realized.

In our assessments, the Company considers recent financial operating results, the scheduled expiration of our net operating losses, potential sources of taxable income, the reversal of existing taxable differences, taxable income in prior carryback years, if permitted under tax law, and tax planning strategies.

Based on our most recent assessment, for the year ended December 31, 2022, we released $ 11.4 million of the valuation allowance for the portion of our deferred income tax assets that we are more likely than not going to utilize.

As of December 31, 2022, we can demonstrate an estimate of objectively verifiable future income based on the prior three years of pre-tax income from continuing operations, adjusted for the change in interest expense resulting from the Refinancing and the settlement of the 2022 Convertible Notes.

This estimate of future income, along with our assessment of the other positive and negative evidence considered, supports the release of a portion of the valuation allowance.

The remaining valuation allowance is still required for deferred tax assets related to certain state and foreign NOLs, capital losses, and the Section 163(j) interest limitation carryforward as it was more likely than not as of December 31, 2022 that these deferred tax assets will not be realized.

If we continue to sustain our current operating performance, additional reversals of our valuation allowance could occur within the next twelve months.

As of December 31, 2022, the federal net operating loss (“NOL”) carryforward amount was approximately $ 562 million, the state NOL carryforward amount was approximately $ 448 million and the Section 163(j) interest limitation carryforward amount was $292 million.

The federal NOLs will begin to expire in 2032.

The state NOLs expire in various tax years beginning in 2023.

The interest carryforward does not expire.

As of December 31, 2022 , the Canadian NOL carryforward amount was approximately $ 54 million, and it will begin to expire in 2032.

Utilization of our NOL, interest and tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions.

Such annual limitations could result in the expiration of the NOL and tax credit carryforwards before their utilization.

We regularly assess the need for a valuation allowance related to our deferred income tax assets to determine, based on the weight of all available positive and negative evidence, whether it is more likely than not that some or all of such deferred assets will not be realized.

In our assessments, the Company considers recent financial operating results, the scheduled expiration of our net operating losses, future taxable income, the reversal of existing taxable differences, and tax planning strategies.

Based on our most recent assessment, for the year ended December 31, 2023, we released $ 72.8 million of the valuation allowance for the portion of our deferred income tax assets that we expect will ultimately be more likely than not to be realized.

As of December 31, 2023, we can demonstrate an estimate of objectively verifiable future income based on the prior three years of pre-tax income from continuing operations.

This estimate of future income, along with our assessment of the other available positive and negative evidence considered, supports the release of a portion of the valuation allowance.

The remaining valuation allowance is still required for deferred tax assets related to certain state credits, foreign NOLs and capital loss carryforwards as it is more likely than not as of December 31, 2023 that these deferred tax assets will not be realized.

As of December 31, 2023, the federal net operating loss (“NOL”) carryforward, state NOL carryforward and Canadian NOL carryforward were approximately $ 446 million , $ 377 million , and $ 54 million , respectively.

We have recorded a deferred tax asset of $ 93.6 million , $ 22.2 million , and $ 14.2 million for federal NOLs, state NOLs, and Canadian NOLs, respectively, reflecting the benefit of these loss carryforwards.

Certain of the federal and state NOLs begin to expire in 2034 and 2024, respectively.

The Canadian NOL carryforward begins to expire in 2033.

The interest carryforward arises from the Tax Cuts and Jobs Act and generally limits the interest expense deduction to 30 % of income (loss) attributable to common stock before interest expense, interest income, income taxes and depreciation and amortization for tax years 2018 to 2021 and 30 % of income (loss) attributable to common stock before interest expense, interest income and income taxes for 2022 and subsequent years.

The interest carryforward will not expire as it may be carried forward indefinitely.

Uncertain Tax Positions - As of December 31, 2022, the total amount of gross unrecognized tax benefits was $ 0.8 million, which, if recognized, would impact the Company's effective tax rate.

As of December 31, 2021 , we did no t have any gross unrecognized tax benefits.

The aggregate change in the balance of gross unrecognized tax benefits, which excludes interest and penalties for the year ended December 31, 2022 is as follows (in thousands) :

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Uncertain Tax Positions - As of December 31, 2023, the total amount of gross unrecognized tax benefits was $ 1.9 million.

As of December 31, 2022 , the total amount of gross unrecognized tax benefits was $ 0.8 million.

The aggregate change in the balance of gross unrecognized tax benefits, which excludes interest and penalties for the years ended December 31, 2023 and 2022 is as follows (in thousands) :

For the Year Ended December 31,

Beginning balances

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federal, state, local or foreign examinations by tax authorities for years before 2020.

The total amount of unrecognized tax benefits that, if recognized, would reduce the Company’s effective tax rate is $ 1.2 million and $ 0.8 million as of December 31, 2023 and 2022 , respectively.

We record penalties and interest relating to uncertain tax positions in the income tax provision line item in the consolidated statement of operations.

No penalties or interest related to uncertain tax positions were recorded for the years ended December 31, 2023, 2022 or 2021.

As of December 31, 2022 and 2021 , we did no t have a liability recorded for interest or potential penalties.

We do no t expect a change in the unrecognized tax benefits within the next 12 months.

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Finance leases

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Annual future minimum lease payments as of December 31, 2023 (in thousands) :

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Commitments and Contingencies

Contractual Commitments –

We have agreements with various vendors under which we have remaining commitments to purchase hardware components and development services.

Contractual Commitments – We have agreements with various vendors under which we have remaining commitments to purchase hardware components and development services.

Such commitments will become payable as we receive the hardware components or as development services are provided.

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.

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 the 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.

Securities Litigation –

On June 27, 2018 , a purported stockholder of the Company filed a putative class action lawsuit in the United States District Court for the Northern District of Illinois, Eastern Division (the “Court”) styled Pierrelouis v.

Gogo Inc., naming the Company, its former Chief Executive Officer and Chief Financial Officer, its current Chief Financial Officer and its then-current President, Commercial Aviation, as defendants purportedly on behalf of all purchasers of our securities from February 27, 2017 through May 4, 2018.

The complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, alleging misrepresentations or omissions by us purporting to relate to the reliability of and installation and remediation costs associated with CA’s 2Ku antenna.

The plaintiffs sought to recover from us and the individual defendants an unspecified amount of damages.

In December 2018, the plaintiffs filed an amended complaint and in February 2019, we filed a motion to dismiss such amended complaint.

In October 2019, the judge granted the motion to dismiss on two independent grounds, finding that the plaintiffs failed to plausibly allege that the defendants made materially false or misleading statements and that the plaintiffs failed to plead with particularity that the defendants acted with scienter.

The amended complaint was dismissed without prejudice, and in December 2019, the defendants filed a second amended complaint.

In July 2020, the plaintiffs filed a motion requesting leave to file a proposed third amended complaint, which was granted by the Court.

The plaintiffs proceeded to file the third amended complaint in July 2020 and we filed a motion to dismiss in September 2020.

In April 2021, the Court denied our motion to dismiss, and the defendants filed their answer and affirmative defenses to the third amended complaint in June 2021.

The parties engaged in mediation and reached a tentative resolution that included a cash payment of $ 17.3 million (funded by our Directors’

and Officers’

(“D&O”) insurance policy) in exchange for a dismissal with prejudice of the class claims and full releases.

As a result of this development, the Company accrued a $ 17.3 million liability within Accrued liabilities and a corresponding insurance receivable in Prepaid expenses and other current assets in the consolidated balance sheets as of December 31, 2021.

On April 12, 2022, the parties entered into a Stipulation and Agreement of Settlement memorializing these terms (the “Class Action Settlement”).

On May 3, 2022, the Court signed an order (i) preliminarily approving the Class Action Settlement;

(ii) certifying the settlement class;

(iii) approving the notice to be sent to members of the settlement class;

and (iv) scheduling a final hearing for August 30, 2022, and the insurance carriers subsequently deposited the settlement amount into escrow.

On August 31, 2022, the Court issued a final judgment approving the Class Action Settlement and dismissing all claims against the defendants with prejudice.

The Company released the $ 17.3 million liability and corresponding insurance receivable after the Court approved the Class Action Settlement.

Derivative Litigation –

On September 25, 2018 and September 26, 2018 , two purported stockholders of the Company filed substantively identical derivative lawsuits in the Court, styled Nanduri v.

In June 2022, we entered into a supply and product support agreement (the “SPSA”) with Hughes Network Systems, LLC (“Hughes”), providing for our purchase from Hughes of airborne half duplex (“HDX”) 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 in the second half of 2024, HDX antennas with an estimated aggregate purchase price of approximately $ 170 million.

During the contractual seven-year period, Hughes may not sell substantially similar equipment to other purchasers in our primary target market.

In March 2023, we amended the SPSA, pursuant to which, we committed to purchase, over a seven-year period that will begin on completion of a project milestone currently expected to occur in mid-2025, full duplex (“FDX”) antennas with an estimated aggregate purchase price of approximately $ 102 million.

On February 26, 2024, Gogo invested $ 5 million in a convertible note offering issued by one of our suppliers.

Derivative Litigation – On September 25, 2018 and September 26, 2018 , two purported stockholders of the Company filed substantively identical derivative lawsuits in the Court, styled Nanduri v.

and Hutsenpiller v.

Gogo Inc., respectively.

Both lawsuits were purportedly brought derivatively on behalf of us and name us as a nominal defendant and name as defendants each then-current member of the Company’s Board of Directors, its former Chief Executive Officer and Chief Financial Officer, its then-current President, Commercial Aviation, and its current Chief Executive Officer and Chief Financial Officer.

The complaints assert claims under Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duty, unjust enrichment, and waste of corporate assets, and allege misrepresentations or omissions by us purporting to relate to the 2Ku antenna’s reliability and installation and remediation costs, as well as allegedly excessive bonuses, stock options, and other compensation paid to current officers and directors and excessive severance paid to former officers.

The plaintiffs seek to recover, on our behalf, an unspecified amount of damages from the individual defendants.

The two lawsuits were consolidated and were stayed pending a final disposition of the motion to dismiss in the class action suit and remain stayed.

In addition, a purported stockholder has sent a letter to the Company’s Board of Directors, dated June 21, 2021, demanding based on substantially the same allegations, that the Company sue certain current and former Officers for, inter alia , breach of fiduciary duty.

The two derivative lawsuits and the litigation demand letter are collectively referred to herein as the “Derivative Matters”

and the plaintiffs in the two derivative lawsuits and the purported stockholder who sent the litigation demand letter are collectively referred to herein as the “Stockholders.”

On January 5, 2023, following mediation, the defendants and the Stockholders entered into Stipulation and Agreement of Settlement (the “Derivative Settlement”) under which the Company, in consideration of dismissal of the two derivative lawsuits with prejudice and a release of all claims asserted against the Company and the individual defendants in the Derivative Matters, will implement certain corporate governance initiatives and cause its D&O insurance carrier to pay the Stockholders’

attorneys’

Under the terms of the Derivative Settlement, the defendants will not be required to pay any damages.

We have accrued a liability for attorneys’

fees within Accrued liabilities and a corresponding receivable in Prepaid expenses and other current assets in the consolidated balance sheets.

On February 1, 2023, the Court granted preliminary approval of the proposed Derivative Settlement, approved various notices to be disseminated to the Company’s stockholders and the schedule for dissemination, and scheduled a final hearing for April 11, 2023.

The Derivative Settlement is conditioned on final Court approval.

We believe that the claims are without merit and will continue to defend them vigorously should the Derivative Settlement for any reason not become final.

SmartSky Litigation –

On February 28, 2022 , SmartSky Networks, LLC brought suit against Gogo Inc.

On January 5, 2023, following mediation, the Company entered into a Stipulation and Agreement of Settlement (the “Derivative Settlement”) with the plaintiffs named in the foregoing derivative lawsuits and a stockholder that made substantially the same allegations via a letter sent to the Company’s then-Board of Directors, dated June 21, 2021 (collectively, the “Stockholders”).

Pursuant to the terms of the Derivative Settlement, the Company implemented certain corporate governance initiatives (the “Governance Initiatives”) and caused its D&O insurance carrier to pay the attorneys’ fees for the Stockholders in consideration of dismissal of the two derivative lawsuits with prejudice and a release of all claims asserted against the Company and the individual defendants named in the derivative lawsuits.

Under the terms of the Derivative Settlement, the defendants were not required to pay any damages.

We had accrued a liability for attorneys’ fees within Accrued liabilities and a corresponding receivable in Prepaid expenses and other current assets in the consolidated balance sheets as of December 21, 2022.

On April 11, 2023, the Court issued final judgment approving the Derivative Settlement.

The Company released the accrued liability and corresponding receivable for attorneys’ fees as of March 31, 2023 and pursuant to the terms of the Derivative Settlement, has implemented the Governance Initiatives.

SmartSky Litigation – On February 28, 2022 , SmartSky Networks, LLC brought suit against Gogo Inc.

and its subsidiary Gogo Business Aviation LLC in the U.S.

District Court for the District of Delaware alleging that Gogo 5G infringes four patents owned by the plaintiff.

District Court for the District of Delaware (the “Court”) alleging that Gogo 5G infringes four patents owned by the plaintiff.

On February 21, 2023, the plaintiff amended its complaint to allege that Gogo 5G infringes two additional patents recently issued to the plaintiff.

The suit seeks an unspecified amount of compensatory damages as well as treble damages for alleged willful infringement and reimbursement of plaintiff's costs, disbursements and attorneys' fees.

Under a schedule agreed upon by the parties, fact discovery and claim construction proceedings will be substantially completed by the end of 2023 or early 2024, and expert discovery by early-to-mid 2024, with dispositive motions to follow.

The suit seeks an unspecified amount of compensatory damages as well as treble

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

damages for alleged willful infringement and reimbursement of plaintiff's costs, disbursements and attorneys' fees.

Under a schedule agreed upon by the parties, fact discovery and claim construction proceedings will be substantially completed by early 2024, and expert discovery by early-to-mid 2024, with dispositive motions to follow.

A trial date has been scheduled for April 14, 2025.

Also on February 28, 2022, the plaintiff filed a motion (the “PI Motion”) requesting that the Court preliminarily enjoin the Company from making, using, offering to sell or selling the Gogo 5G system.

On September 26, 2022, the Court issued an order denying the PI Motion.

The plaintiff has appealed the denial to the U.S.

The plaintiff appealed the denial to the U.S.

Court of Appeals for the Federal Circuit.

We expect that briefing for the appeal will be completed by early March of 2023, after which the appellate court will schedule oral argument.

We believe that the plaintiff’s claims are without merit and intend to continue to vigorously defend our position in the infringement suit and defend against the appeal.

Briefing for the appeal is complete and the appellate court heard oral arguments on June 5, 2023.

On January 31, 2024, the U.S.

Court of Appeals for the Federal Circuit affirmed the decision of the Court to deny the PI Motion.

We intend to continue to vigorously defend our position in the infringement suit and defend against the appeal.

The outcomes of the appeal and the underlying litigation are inherently uncertain.

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Other comprehensive income before reclassifications

income (loss) realized and reclassified to earnings

Net current period comprehensive income

Balance at December 31, 2020

Other comprehensive income before reclassifications

loss realized and reclassified to earnings

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income realized and reclassified to earnings

Net current period comprehensive income

Balance at December 31, 2022

Other comprehensive income before reclassifications

income realized and reclassified to earnings

Net current period comprehensive income (loss)

Balance at December 31, 2023

Common Stock and Preferred Stock

Common Stock – We have one class of common stock outstanding as of December 31, 2023 and 2022.

Our common stock is junior to our preferred stock, if and when issued.

Our Third Amended and Restated Certificate of Incorporation authorizes a total of 500,000,000 shares of common stock with a par value of $ 0.0001 per share.

Preferred Stock – Our Third Amended and Restated Certificate of Incorporation authorizes 100,000,000 shares of new preferred stock with a par value of $ 0.01 per share.

No shares of this new preferred stock have been issued.

Share Repurchases – On September 5, 2023, we announced a share repurchase program that grants the Company authority to repurchase up to $ 50 million of shares of the Company’s common stock.

Repurchases may be made at management's discretion from time to time on the open market, through privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act, as amended, in accordance with applicable securities laws and other restrictions.

The repurchase program has no time limit and may be suspended for periods or discontinued at any time and does not obligate us to purchase any shares of our common stock.

The timing and total amount of stock repurchases will depend upon business, economic and market conditions, corporate and regulatory requirements, prevailing stock prices, and other

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

considerations.

We do not expect to incur debt to fund the share repurchase program.

During the year ended December 31, 2023 , we repurchased an aggregate 0.5 million shares of our common stock for $ 4.8 million.

During September 2022, we repurchased 1.5 million shares of common stock in a private transaction for an aggregate purchase price of $ 18.3 million.

Shareholder Rights Plan – On September 23, 2020, our Board of Directors adopted a Section 382 Rights Agreement (as amended, the “Rights Agreement”), between the Company and Computershare Trust Company, N.A., as rights agent.

The Rights Agreement was intended to reduce the likelihood of an ownership change under Section 382 of the Internal Revenue Code of 1986, as amended, by deterring any person or group from acquiring beneficial ownership of 4.9% or more of the shares of the Company’s common stock then-outstanding .

The Rights Agreement expired on September 23, 2023 and the Board of Directors voted not to renew the agreement.

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Condensed Financial Information of Registrant

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Deferred income taxes

Liabilities and stockholders’

Liabilities and stockholders’ deficit:

Other current liabilities

Current portion of long-term debt

Investments and payables with subsidiaries

Total liabilities

Total stockholders’

Total liabilities and stockholders’

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ deficit

Condensed Statements of Operations and Comprehensive Income (Loss)

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Interest expense

Loss on extinguishment of debt

Loss on extinguishment of debt and settlement of convertible notes

Total other expense

Loss before income taxes

Income tax provision (benefit)

Income (loss) before income taxes

Income tax (benefit) provision

Equity (gains) losses of subsidiaries

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Comprehensive income (loss)

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

Condensed Statements of Cash Flows

1 unchanged sentence

For the Years Ended December 31,

Net income (loss)

Accretion of debt discount

Operating activities:

Amortization of deferred financing costs

Loss on extinguishment of debt

Settlement of convertible notes

Subsidiary equity (gains) losses

Deferred income taxes

Gain on sale of equity investment

Other operating activities

Net cash used in operating activities

Net cash provided by (used in) operating activities

Investing activities:

Investments and advances with subsidiaries

Purchase of equity investment

Proceeds from sale of equity investment

Net cash provided by (used in) investing activities

Financing activities:

Repurchase of convertible notes

Repurchase of common stock

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Discontinued Operations

As discussed in Note 1, “Background,”

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.

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”).

The transition services agreement has been terminated.

Under the ATG network sharing agreement, Intelsat has exclusive access to the ATG network for commercial aviation in North America, subject to minimum revenue guarantees.

As a result of the Transaction, financial results related to the CA business were reported as discontinued operations for the year ended December 31, 2021.

There was no discontinued operations activity for the CA business after December 31, 2021.

We report the financial results of discontinued operations separately from continuing operations to distinguish the financial impact of disposal transactions from ongoing operations.

The following table summarizes the results of discontinued operations which are presented as Net loss from discontinued operations, net of tax, in our consolidated statements of operations (in thousands) :

For the Years Ended December 31,

Service revenue

Equipment revenue

Total revenue

and Subsidiaries

Notes to Consolidated Financial Statements – (Continued)

For the Year Ended December 31,

Operating expenses:

Cost of service revenue (exclusive of items shown below)

Cost of equipment revenue (exclusive of items shown below)

Engineering, design and development

Sales and marketing

General and administrative

Impairment of long-lived assets

Depreciation and amortization

Total operating expenses

Operating loss

Other (income) expense:

Other income:

Gain on sale of CA business

Other (income) expense

Total other (income) expense:

Total other income:

Loss before income taxes

Income tax provision (benefit)

Income tax benefit

Net loss from discontinued operations, net of tax

The following discussion relates entirely to discontinued operations.

Gain on Sale –

Upon the closing of the Transaction on December 1, 2020, we received initial gross proceeds of $ 386.3 million, which reflects the $ 400.0 million purchase price, adjusted for cash, debt, transaction expenses and working capital.

Gain on Sale – Upon the closing of the Transaction on December 1, 2020, we received initial gross proceeds of $ 386.3 million, which reflects the $ 400.0 million purchase price, adjusted for cash, debt, transaction expenses and working capital.

The final purchase price was subject to change due to customary post-closing purchase price adjustment procedures set forth in the purchase and sale agreement between Gogo and Intelsat, that were not yet complete.

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In the fourth quarter of 2021, Gogo paid Intelsat the $ 7.8 million and recognized an additional Gain on sale of CA business of $ 1.6 million.

Stock-Based Compensation –

In August 2020, 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.

Stock-Based Compensation – In August 2020, 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.

These modifications became effective upon the consummation of the Transaction.

Pursuant to such modifications, the options and restricted stock units (“RSUs”) held by Intelsat employees generally vested on the earlier of (i) the original vesting date and (ii) December 1, 2021;

provided that the employee did not voluntarily resign from and was not terminated for cause by Intelsat prior to such date.

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Total stock-based compensation expense

See Note 14, “Stock-Based Compensation and 401(k) Plan,”

for additional information on our stock-based compensation plans.

Other Costs Classified to Discontinued Operations –

During the year ended December 31, 2021, we incurred $ 1.5 million of additional costs (exclusive of the gain on sale, stock-based compensation expense noted above and income tax benefit) primarily due to employer-paid taxes arising from the exercise of stock options by former employees then employed by Intelsat.

Change in Estimates –

During the second quarter of 2020, our agreement with Delta Air Lines, Inc.

(“Delta”) to provide 2Ku service on certain Delta aircraft was amended to change the contract expiration date from February 2027 with respect to all aircraft to a staggered, fleet by fleet expiration schedule under which expiration dates will occur between November 2020 and July 2022 (the “Delta amendment”).

As a result, the useful lives of the equipment installed on these fleets were shortened to align with the expiration dates in the amended agreement.

The change in estimated useful lives resulted in approximately $ 41.0 million of accelerated depreciation during the year ended December 31, 2020.

We ceased depreciating these assets and other depreciable assets included as part of discontinued operations when the CA business was classified as held for sale.

Additionally, the amortization periods for the remaining deferred airborne lease incentives associated with the equipment installed on the 2Ku fleets were shortened to align with the new expiration dates, which resulted in approximately $ 42.0 million of accelerated amortization during the year ended December 31, 2020.

Amortization of deferred airborne lease incentives is a reduction to cost of service revenue.

Credit Losses –

During the year ended December 31, 2020, we recorded $ 10.7 million of provisions for expected credit losses, primarily related to one international airline partner entering bankruptcy administration, while we had recoveries of approximately $ 0.6 million.

Arrangements with Commercial Airlines –

For our divested CA business, pursuant to contractual agreements with our airline partners, we placed our equipment on commercial aircraft operated by the airlines in order to deliver our service to passengers on the aircraft.

We had two types of commercial airline arrangements:

turnkey and airline-directed.

Under the airline-directed model, we transferred control of the equipment to the airline and therefore the airline was our customer in these transactions.

Under the turnkey model, we had not transferred control of our equipment to our airline partner and, as a result, the airline passenger was deemed to be our customer.

Transactions with our airline partners under the turnkey model were accounted for as an operating lease of space on an aircraft.

We recognized $ 71.2 million for the year ended December 31, 2020 as a reduction to our cost of service revenue from the amortization of deferred airborne lease incentives.

Under the turnkey model, the revenue share paid to our airline partners represented operating lease payments.

These payments were deemed to be contingent rental payments as the payments due to each airline were based on a percentage of our CA service revenue generated from that airline’s passengers, which was unknown until realized.

Therefore, we estimated the lease payments due to an airline at the commencement of our contract with such airline.

This rental expense is included in cost of service revenue and is partially offset by the amortization of the deferred airborne lease incentives discussed above.

Due to the accelerated amortization resulting from the Delta amendment and a significant reduction in revenue share as a result of COVID-19, the amortization of deferred airborne lease incentives exceeded our revenue share expense by $ 49.1 million for the year ended December 31, 2020.

Asset Impairment –

We reviewed our long-lived assets, including property and equipment, right-of-use assets, and other non-current assets, for potential impairment whenever events indicated that the carrying amount of such assets might not be recoverable.

We performed this review by comparing the carrying value of the long-lived assets to the estimated future undiscounted cash flows expected to result from the use of the assets.

We grouped certain long-lived assets by airline contract and by technology.

If we determined that an impairment existed, the amount of the impairment was computed as the difference between the asset group’s carrying value and its estimated fair value, following which the assets were written down to their estimated fair values.

In light of the COVID-19 pandemic and its impact on air travel, including decreased flights, decreased gross passenger opportunity and our airline partners’

temporary parking of a significant number of their aircraft, we conducted a review as of March 31, 2020 and determined that the carrying values for the asset groups related to three of our airline agreements for the CA business exceeded their estimated undiscounted cash flows, which triggered the need to estimate the fair value of these assets.

Fair value reflects our best estimate of the discounted cash flows of the impaired assets.

For the airborne assets and right-of-use assets associated with the three airline agreements (the “impaired assets”), we recorded an impairment charge of $ 46.4 million for the three-month period ended March 31, 2020, reflecting the difference between the carrying value and the estimated fair value of the impaired assets.

We conducted another review as of June 30, 2020 due to the continuation of the COVID-19 pandemic as well as the signing of the Delta amendment and determined that $ 1.0 million of deferred STC costs was impaired due to the bankruptcy of three airline partners.

As such, we recorded a $ 1.0 million charge for impairment of long-lived assets for the three-month period ended June 30, 2020.

For the year ended December 31, 2020, charges recorded for impairments of long-lived assets totaled $ 47.4 million.

Revenue Recognition

We account for revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”).

CA’s airline-directed contracts contain multiple performance obligations, which primarily include the sale of equipment, installation services, connectivity services and entertainment services.

For these contracts, we accounted for each distinct good or

service as a separate performance obligation.

We allocated the contract’s transaction price to each performance obligation using the relative standalone selling price, which was based on the actual selling price for any good or service sold separately to a similar class of customer, if available.

To the extent a good or service was not sold separately, we used our best estimate of the standalone selling price and maximized the use of observable inputs.

The primary method we used to estimate the standalone selling price was the expected cost-plus margin approach.

The contractual consideration used for allocation purposes includes connectivity and entertainment services, which may be based on a fixed monthly fee per aircraft or a variable fee based on the volume of connectivity activity, or a combination of both.

Examples of variable consideration within CA’s airline contracts include megabyte overages and pay-per-use sessions.

We constrained our estimates to reduce the probability of a significant revenue reversal in future periods, allocated variable consideration to the identified performance obligations and recognized revenue in the period the services were provided.

Our estimates were based on historical experience, anticipated future performance, market conditions and our best judgment at the time.

For 2020, our estimates included management’s best assumptions for the continued impact of COVID-19, which included decreased flights and gross passenger opportunity (“GPO”).

A significant change in one or more of these estimates could have affected estimated contract value.

For example, estimates of variable revenue within certain contracts required estimation of the number of sessions or megabytes that would be purchased over the contract term and the average revenue per connectivity session, which varies based on the connectivity options available to passengers on each airline.

Estimated revenue under these contracts anticipated increases in take rates over time and assumed an average revenue per session consistent with our historical experience.

We regularly reviewed and updated our estimates, especially in light of COVID-19, and recognized adjustments under the cumulative catch-up method.

Any adjustments under this method were recorded as a cumulative adjustment in the period identified and revenue for future periods was recognized using the new adjusted estimate.

See Note 12, “Stock-Based Compensation and 401(k) Plan,” for additional information on our stock-based compensation plans.

Other Costs Classified to Discontinued Operations – During the year ended December 31, 2021, we incurred $ 1.5 million of additional costs (exclusive of the gain on sale, stock-based compensation expense noted above and income tax benefit) primarily due to employer-paid taxes arising from the exercise of stock options by former employees then employed by Intelsat.

Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data