10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One):
For the fiscal year ended December 31, 2024
OR
For the transition period from __________ to __________
Commission File Number: 001-35975
Gogo Inc.
(Exact name of registrant as specified in its charter)
105 Edgeview Dr.,Suite 300
Broomfield, CO80021
(Address of principal executive offices)
Telephone Number (303) 301-3271
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Trading Symbol Name of Each Exchange on Which Registered
Common stock, par value $0.0001 per share GOGO NASDAQ Global Select Market
Preferred Stock Purchase Rights GOGO NASDAQ Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☑ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of June 28, 2024, the last business day of the registrant's most recently completed second fiscal quarter, was $606,001,482 based upon the closing price reported for such date on the NASDAQ Global Select Market.
As of March 7, 2025,131,350,127shares of $0.0001 par value common stock were outstanding.
Documents Incorporated By Reference
Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders scheduled to be held June 3, 2025 are incorporated by reference into Part III of this Form 10-K. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2024.
GogoInc.
INDEX
Page
Part I.
Item 1. Business 5
Item 1A. Risk Factors 16
Item 1B. Unresolved Staff Comments 40
Item 1C. Cybersecurity 40
Item 2. Properties 41
Item 3. Legal Proceedings 41
Item 4. Mine Safety Disclosures 41
Part II.
Item 6. Reserved 43
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 58
Item 8. Financial Statements and Supplementary Data 60
Item 9A. Controls and Procedures 99
Item 9B. Other Information 100
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 101
Part III.
Item 10. Directors, Executive Officers and Corporate Governance 104
Item 11. Executive Compensation 104
Item 14. Principal Accounting Fees and Services 105
Part IV.
Item 15. Exhibits, Financial Statement Schedules 106
1
INTRODUCTORY NOTE
Unless the context otherwise indicates or requires, as used in this Annual Report on Form 10-K for the fiscal year ended December 31, 2024, references to: (i) “we,” “us,” “our,” “Gogo,” or the “Company” refer to Gogo Inc. and its directly and indirectly owned subsidiaries as a combined entity, except where otherwise stated or where it is clear that the term means only Gogo Inc. exclusive of its subsidiaries; and (ii) “fiscal,” when used in reference to any twelve-month period ended December 31, refers to our fiscal year ended December 31. Unless otherwise indicated, information contained in this Annual Report on Form 10-K is as of December 31, 2024. We have made rounding adjustments to reach some of the figures included in this Annual Report on Form 10-K and, unless otherwise indicated, percentages presented in this Annual Report on Form 10-K are approximate.
Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary
Certain statements in this Annual Report on Form 10-K may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding our industry, business strategy, acquisitions, plans, goals and expectations concerning our market position, international expansion, future technologies, future operations, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “future” and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this Annual Report on Form 10-K.
Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Factors that could cause actual events, results or outcomes to differ from those anticipated by these and other forward-looking statements include, among others, the items in the following list, which also summarizes some of our more principal risks:
Risks Related to Our Business
•
our ability to continue to generate revenue from the provision of our connectivity and other service offerings;
•
our development and fixed-price contracts;
•
our reliance on our key OEMs and dealers for equipment sales;
•
our dependence on single-source, third party satellite network providers;
•
the impact of competition;
•
our ability to maintain high-quality customer support;
•
our reliance on third parties for equipment components and services;
•
our participation in U.S. government contracts;
•
our participation in non-U.S. government contracts;
•
the finite useful life of satellites;
•
the impact of global supply chain and logistics issues, tariffs and inflationary trends;
•
the continued expansion of our business outside of the United States;
•
foreign currency risk;
•
the impact of our expansion geographically and otherwise on our corporate culture;
•
our ability to recruit, train and retain highly skilled employees, and the loss of any key personnel;
•
the impact of pandemics or other outbreaks of contagious diseases, and the measures implemented to combat them;
•
the impact of adverse economic conditions;
•
our ability to fully utilize portions of our deferred tax assets;
•
the impact of attention to climate change, conservation measures and other ESG matters; and
2
•
our ability to evaluate or pursue strategic opportunities.
Risks Related to the Satcom Direct Acquisition
•
our ability to integrate Satcom Direct’s business, and the potential failure to realize or delay in realizing all of the anticipated benefits of the acquisition; and
•
the changes in executive management that occurred as part of the acquisition.
Risks Related to Our Technology and Intellectual Property
•
our ability to develop and deploy Gogo 5G, Gogo Galileo or other next generation technologies;
•
our ability to maintain our rights to use our licensed 4MHz of ATG spectrum in the United States and obtain rights to additional spectrum if needed;
•
the impact of service interruptions or delays, cyberattacks, technology failures, equipment damage or system disruptions or failures;
•
the impact of assertions by third parties of infringement, misappropriation or other violations;
•
our ability to innovate and provide products and services;
•
our ability to protect our intellectual property rights;
•
risks associated with the use of artificial intelligence in our products and services;
•
the impact of our use of open-source software; and
•
the impact of equipment failure or material defects or errors in our software.
Risks Related to Litigation and Regulation
•
our ability to comply with applicable foreign ownership limitations;
•
the impact of government regulation of communication networks, and the internet;
•
our possession and use of personal information;
•
risks associated with participation in the Federal Communications Commission’s (“FCC”) Secure and Trusted Communications Networks Reimbursement Program;
•
our ability to comply with anti-bribery, anti-corruption, anti-money laundering and export control laws;
•
the extent of expenses, liabilities or business disruptions resulting from litigation;
•
the impact of global climate change and legal, regulatory or market responses to it;
•
the impact of the distribution of income among various jurisdictions in which we operate as well as changes in tax law or regulation on our U.S. and non-U.S. tax liabilities; and
•
the impact of changes in laws and regulations on U.S. government contractors.
Risks Related to Our Indebtedness
•
the impact of our substantial indebtedness;
•
our ability to obtain additional financing to refinance or repay our existing indebtedness;
•
the impact of restrictions and limitations in the agreements and instruments governing our debt;
•
the impact of increases in interest rates;
•
the impact of a substantial portion of our indebtedness being secured by substantially all of our assets; and
•
the impact of a downgrade, suspension or withdrawal of the rating assigned by a rating agency.
Risks Related to Our Common Stock
•
the volatility of our stock price;
•
our ability to fully utilize our tax losses;
3
•
the dilutive impact of future stock issuances;
•
the impact of our stockholder concentration and of our Executive Chair of the Board being a significant stockholder;
•
our ability to fulfill our obligations associated with being a public company;
•
the impact of identified material weaknesses in our internal control over financial reporting; and
•
the impact of anti-takeover provisions, ownership provisions and certain other provisions in our charter, our bylaws, Delaware law, and our existing and any future credit facilities.
Any one of these factors or a combination of these factors could materially affect our financial condition or future results of operations and could influence whether any forward-looking statements contained in this Annual Report on Form 10-K ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. All forward-looking statements speak only as of the date made and unless required by law we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
In addition, while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts, or opinions, such reports are not our responsibility.
4
Item 1. Business
Company Overview
Acquisition of Satcom Direct, LLC (the “Transaction”)
On December 3, 2024 (the “Closing”), we purchased all of the issued and outstanding equity interests of Satcom Direct, LLC, a Delaware limited liability company (f/k/a Satcom Direct, Inc., a Florida corporation) and certain of its affiliates and subsidiaries (collectively, “Satcom Direct”), in exchange for (i) an aggregate cash purchase price of approximately $375,000,000, subject to customary post-closing adjustments, (ii) 5,000,000 restricted shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) (valued at approximately $40,500,000 based on the Company’s closing stock price of $8.10 on December 2, 2024), and (iii) up to an additional $225,000,000 in potential earnout payments of cash and/or Common Stock tied to realizing certain financial performance milestones over four years following the Closing.
The acquisition has created the only in-flight connectivity provider able to satisfy the performance and cost needs of every segment of the global business aviation and military/government mobility markets. Founded in 1997, Satcom Direct primarily engages in providing business, military and government in-flight connectivity services as a reseller of satellite services. Satcom Direct operates worldwide with an international sales and service team based in nine countries. Satcom Direct sells services and equipment globally through their international sales force to OEMs, governments, military groups and private fleet companies, among other entities. Satcom Direct manages a network operating center and maintains its own data center in Melbourne, Florida with licensed data sites strategically placed around the world.
In connection with the Closing, the Company and Gogo Intermediate Holdings LLC (“GIH”), a direct wholly owned subsidiary of Gogo Inc., entered into a credit agreement with HPS Investment Partners, LLC, as the administrative agent, and the lenders party thereto, which provides for a term loan credit facility (the “HPS Term Loan Facility”) in an aggregate principal amount of $250 million. The HPS Term Loan Facility amortizes in quarterly installments equal to one percent of the aggregate initial principal amount thereof per annum, with the remaining balance payable upon final maturity of the HPS Term Loan Facility on April 30, 2028.
Concurrently with the closing of the HPS Term Loan Facility and the Closing, the Company and GIH, entered into a second amendment to that certain Credit Agreement, dated as of April 30, 2021 (the “Original 2021 Credit Agreement”, as it may be amended, supplemented or otherwise modified from time to time, the “2021 Credit Agreement”), with the guarantors party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent, and the lenders party thereto, to, among other purposes, (i) increase the aggregate principal amount of revolving commitments available under the 2021 Credit Agreement to $122,000,000 and (ii) extend the maturity date of the Revolving Facility (as defined below) to December 3, 2029 (subject to such maturity date springing to the date that is 90 days prior to the then-current maturity date of (a) the 2021 Term Loan Facility under the 2021 Credit Agreement and (b) the HPS Term Loan Facility under the HPS Credit Agreement under certain conditions).
Segments
As a result of the Company’s acquisition of Satcom Direct, the Company has two reportable segments as of December 31, 2024: the legacy pre-acquisition operations of the Company (“Gogo BA”) and the acquired entity, Satcom Direct. The Gogo BA segment provides in-flight connectivity for business aviation via air-to-ground (“ATG”) and satellite networks. The Satcom Direct segment primarily provides global satellite-based communication solutions for business, military and government aircraft. Satcom Direct is managed as a separate reportable segment, but in the future, after integrating the Satcom Direct business, we may determine to realign our reportable segments.
Our Strategy and our Solutions
The Company’s acquisition of Satcom Direct created a combined organization, which currently is the only multi-orbit, multi-band in-flight connectivity provider offering connectivity technology purpose-built for business and military/government aviation. The Company has a holistic approach of providing broadband connectivity services to its customers from small to large aircraft and heavy jets through the Company’s ATG technology and multiple satellite constellations, which aim to deliver consistent, global tip-to-tail connectivity with a suite of software, hardware, and advanced infrastructure supported by a 24/7/365 in-person customer support team.
The key strategic drivers of the Transaction included, among others, (i) access to Satcom Direct’s established global footprint, which includes a mature sales force and customers in over 100 countries; (ii) an established global military/government team and existing global military/government customers, with the ability to provide the Company entry into the large and fast-growing military/government mobility vertical for aircraft and land; (iii) additional products to provide to legacy customers of Gogo BA, including, among others, Satcom Direct’s well-known customer software solution, SD Pro®; (iv) a competitive cost structure achieved through cost synergies; and (v) integrated low earth orbit (“LEO”) and geostationary earth orbit (“GEO”) satellite solutions aimed at
5
providing greater reliability and redundancy for customers, enabling the Company to distinguish itself as a holistic satellite network integrator.
We believe the combined organization is well-positioned to accelerate growth in the evolving in-flight connectivity market, which is experiencing significant change due to several catalysts. The most significant advancement in technology driving change in our industry today is the introduction of LEO satellite technology, which provides, among other things, a global service offering, higher capacity and lower latency than available alternatives. Further, we believe that demand for in-flight connectivity will continue to increase because of changes in the demographics of our customer base, the proliferation of social applications and lifestyle changes that remain in a post-COVID world, such as videoconferencing and live streaming.
We view all these significant changes as opportunities to leverage our combined Company’s technological know-how and deep understanding of the in-flight connectivity market and to drive greater penetration of our solutions in our markets over the next decade.
•
Gogo Galileo:We commercially launched the first global LEO broadband satellite service purpose-built for business aviation (“Gogo Galileo”) in the first quarter of 2025. Gogo Galileo will use an electronically steered antenna (“ESA”), specifically designed with Hughes Network Systems, LLC (“Hughes”) to address a broad range of business aviation and military/government aircraft, operating on a LEO satellite network operated by Network Access Associates, Ltd. (“Eutelsat OneWeb”). We believe that Gogo Galileo, in combination with or as an alternative to our ATG and GEO services, will allow us to increase our penetration of the North American market and provide an upgrade path and an additional product for our existing ATG and GEO customer base. In addition, we believe that Gogo Galileo will allow us to penetrate the business aviation and military/government market outside of North America, where there has been a lower adoption rate of in-flight connectivity. The launch of Gogo Galileo is also expected to augment our combined product and service offerings for ATG broadband, GEO broadband, and narrowband satellite services, as described below.
•
ATG Broadband Service:Gogo is the leading provider of in-flight connectivity in the ATG broadband market in North America. Gogo started in analogue ATG technology in the late 1990s, then, as analogue cellular backhaul disappeared, migrated to narrowband satellite connectivity in the early 2000s, and then back to ATG with our digital broadband networks beginning in 2010. We continue to augment our ATG broadband connectivity services through the addition of our fourth ATG broadband network (Gogo 5G), which we expect to deliver revenue in the fourth quarter of 2025. We are also actively working with a subset of our customers utilizing our AVANCE products and legacy Gogo Biz ATG airborne system to transition to an AVANCE system compatible with a new LTE network. We anticipate this subset of customers will see improved performance because of this network transition, which is expected to occur in 2026. The cost for the transition to the new LTE network is offset by our participation in the FCC Secure and Trusted Communications Networks Reimbursement Program (the “FCC Reimbursement Program”).
•
GEO Broadband Service: As a result of the Transaction, we now partner with industry satellite network operators to deliver GEO Ku- and Ka-band services. Our combined product offerings allow us to integrate and offer network agnostic solutions, providing customers with GEO satellite services utilizing networks provided by operators, including, among others, Intelsat Jackson Holdings S.A. (“Intelsat”) and Viasat, Inc. (“Viasat”).
•
Narrowband Satellite Services: Since our initial migration to narrowband satellite connectivity in the early 2000s, we continue to provide narrowband satellite services to customers in North America and internationally. We now provide this narrowband satellite service through reseller agreements with satellite providers, including Iridium Satellite LLC (“Iridium”) and Viasat.
As of December 31, 2024, we had approximately 1,249 activated GEO broadband business aviation customer aircraft and 7,059 line-replaceable units (“LRUs”) for our ATG broadband services, of which approximately 4,608 were equipped with AVANCE.
Our Products, Services and Customer Support
We accomplish our mission as the world’s only multi-orbit, multi-band in-flight connectivity provider, by delivering secure and reliable in-flight connectivity solutions for business and military/government aviation, and by offering a comprehensive portfolio of products and services consisting of our in-flight systems, in-flight services, aviation partner support, engineering, design and development services, and production operations functions.
In-Flight Systems. Across both of our business aviation and military/government customer bases, our customers have a broad range of equipment choices for their in-flight systems, which allows us to provide a solution based on geography, mission, size of aircraft and passenger preference. Customers can select a variety of different products such as our legacy AVANCE platforms and Gogo Galileo, products acquired with Satcom Direct, including Plane Simple®, Satcom Direct Router (“SDR”), SD PRO®, and FlightDeck Freedom, and other products to fit their needs.
In-Flight Services (Service Plans). Across both our business aviation and military/government customer bases, we provide a wide range of in-flight services for passengers, flight and cabin crews and our aviation partners. We offer a variety of connectivity services
6
tailored to our various networks and technologies that are generally priced on a per-aircraft per-month basis. We offer service plans ranging from unlimited data usage to an hourly monthly consumption plan, and offer alongside these data plans voice rates, inflight entertainment options, and other service features.
Infrastructure. The infrastructure supporting our in-flight connectivity services consists of our networks, towers, cybersecurity software, and data centers.
Customer Support. We strive to deliver a premium customer experience throughout our business. Our support and service organization leads these efforts and provides operational assistance and comprehensive analytics to our customers 24/7/365. The organization assists with installations, troubleshooting, system activations, and data analysis to evaluate our system and operational performance.
Product Development.Our engineering, design, and development (“ED&D”) operations augment our service and support teams. The in-house ED&D organization translates business requirements into products that comply with rigorous avionics certification requirements. Specialized capabilities within our ED&D operation include, among others, radiofrequency engineering, airborne platform development, network engineering, systems engineering, and application development and business systems.
Given our highly specialized technology and required production levels, we design, assemble and test our airborne LRUs, SDRs and Plane Simple® terminals in-house, while relying on third parties to manufacture specific components based on our design specifications. We also rely on third parties to manufacture our antennas and generally share antenna design responsibilities and intellectual property with these vendors. Our manufacturing and repair facilities located in the U.S. and in Canada are respectively certified by the Federal Aviation Administration (“FAA”)- and Transport Canada Civil Aviation.
Our Customers and Distribution Partners
Business Aviation Customers
We provide in-flight connectivity services to a variety of customers needing connectivity, but our end-users are primarily aircraft owners/operators. As of December 31, 2024, our market was comprised of approximately 27,000 business aircraft in North America, of which approximately 34% have broadband connectivity, and approximately 14,000 business aircraft in the rest of the world, of which approximately 14% have broadband connectivity. As of December 31, 2024, we had approximately 8,200 customers. Our top ten customers accounted for approximately 20% of our 2024 service revenue (excluding service revenue earned under a network sharing agreement with Intelsat, and no customer accounted for more than 10% of our revenue in 2024.
We also sell directly to every OEM of business aviation aircraft including Bombardier, Dassault Falcon, Embraer, Gulfstream, Pilatus and Textron Aviation. In the aftermarket, we sell through a global distribution network of approximately 140 independent dealers with approximately 220 locations who are certified by the FAA as Maintenance and Repair Organizations. Our independent dealers market, resell and obtain FAA-required supplemental type certificates (“STC”) for our equipment. Our customers also include fractional jet operators such as NetJets, charter operators, corporate flight departments and individuals owning aircraft.
Military and Civilian Government Customers
Following the Transaction, we have acquired a diversified customer base that now includes global military and civilian government customers supported through Satcom Direct’s military/government business. Similar to our provision of services for business aviation customers, the military/government operation offers a full range of satellite connectivity options for voice, data, and video applications on land, at sea, and in the air. The military/government operation services both U.S. and international customers with products and services that have defense, civil, and commercial applications, with our principal customers being agencies of the U.S. federal government and other members of the North American Treaty Organization.
Many of our military and civilian government contracts are subject to a competitive bid process and are awarded based on technical merit, personnel qualifications, experience and price. We also receive some contract awards involving special technical capabilities on a negotiated, noncompetitive basis due to our unique mix of communication products, satellite services, engineering capabilities and technical expertise in specialized areas.
Competitive Differentiators
We believe Gogo is uniquely positioned to thrive in this dynamic industry environment, due in part to the competitive differentiators described below:
Our Product Platform. Our product platform includes three components: networks, antennas, and airborne equipment and software. The comprehensiveness and flexibility in our product platform allow us to align our value proposition with our customers’ priorities and identify solutions based on geography, mission, size of aircraft and passenger preference. For example, the AVANCE or SDR
7
platforms are software-centric and designed to be fungible as it includes hardware built with common components that operate on a single operating system across multiple devices.
Our Distribution Relationships. We believe that our distribution network is unmatched in our industry. Our distribution partners include every OEM of business aviation aircraft and a global aftermarket network of approximately 140 dealers with approximately 220 locations, many of whom we have worked with for decades. We have established trusted relationships with our distribution partners and a proven track record of generating revenues and profits for them, and they have trust and confidence in our ability to continue to do so. This facilitates our sales and our speed to market as our distribution partners are willing to invest in marketing and certification efforts for our equipment. In addition, we are now further augmenting our distribution network by providing to the military/government aviation market globally.
Purpose-Built for Aviation. Our products are specifically designed to meet the unique demands of the business aviation industry, distinguishing them from off-the-shelf commercial alternatives. Unlike standardized solutions, our products are engineered with aviation-grade reliability, safety, and performance in mind, ensuring seamless integration with complex aircraft systems. This industry-specific focus allows us to provide customized, high-performance solutions that align with the operational and regulatory requirements of business aviation.
To support our specialized product offerings, we maintain a global sales force with deep expertise in the aviation industry. By combining purpose-built products with a knowledgeable and dedicated sales team, we differentiate ourselves in the market, ensuring that our solutions are well-suited to the precise needs of the business aviation industry.
Our Innovative Culture. We continuously innovate andhave a strong track record of innovation in our equipment and service offerings. As of March 1, 2025, we held approximately 571 U.S. and international patents, most of which relate to network technology. We pioneered and have led innovation in our industry for nearly 30 years, as evidenced by the advancements in our ATG network, AVANCE platform, SDR platform, Plane Simple® GEO broadband antennas, Galileo ESA Ku-broadband antennas, and ancillary software service offerings such as FlightDeck Freedom and SDPro®. We also have created a one-of-a-kind end to end secure connectivity system for the military/government market through our owned data center, user devices, and terminals.
Competition
With respect to the provisioning of our services to the business aviation and military and government markets, we compete against both equipment-providers and GEO- and LEO-satellite based telecommunications service providers, as well as resellers of the above, including but not limited to Honeywell Aerospace, Collins Aerospace, Intelsat, SES, SpaceX, and ViaSat. We also compete with government communications service providers and manufacturers of defense electronics products, systems or subsystems, including but not limited to BAE Systems, General Dynamics, Telesat, L3Harris, Echostar (Hughes Network Systems), Northrop Grumman and similar companies for certain contracts tendered in the military and government markets.
The markets in which we compete are dynamic and rapidly changing. Technologies are continuing to evolve to solutions offering higher capacity, speed, and other superior advantages. As a result, we maintain strategic relationships with our competitors, who are also our customers or partners, in some cases, to remain nimble and responsive to changing technology and market conditions.
We expect to face competition from other new and existing operators of LEO and/or GEO or other non-GEO satellite networks in the future. We differentiate ourselves in this highly competitive market through the following factors: technological capabilities, redundancy and reliability resulting from our multi-orbit and multi-band solutions, experienced network integration management, price, geographic coverage, customer service, ancillary service offerings for safety and cybersecurity services, product development, conformity to customer specifications, regulatory compliance, quality of support after the sale, and timeliness of delivery and installation.
Regulatory Matters
Our business is heavily regulated. Our global operations are subject to significant regulations and international treaties and conventions. We are required to comply with the laws and regulations of, and often obtain approvals from, national and local authorities in connection with the services that we provide. Further, we are subject to the laws and regulations of the jurisdictions where we sell equipment.
Federal Aviation Administration
The FAA prescribes standards and certification requirements for the manufacturing of aircraft and aircraft components, and certifies repair stations to perform aircraft maintenance, preventive maintenance and alterations, including the installation and maintenance of aircraft components. Each type of aircraft operated in the United States under an FAA-issued standard airworthiness certificate must possess an FAA Type Certificate, which constitutes approval of the design of the aircraft type based on applicable airworthiness standards. When a party other than the holder of the Type Certificate develops a major modification to an aircraft
8
already type-certificated, that party must obtain an FAA-issued STC approving the design of the modified aircraft type. The dealers and OEMs to which we sell our equipment are generally responsible for obtaining STCs for each aircraft type on which our equipment will be installed, and we support them in those efforts. Separate STCs typically are required for different configurations of the same aircraft type, such as when they are configured differently for different owners and operators.
After an STC is obtained, a manufacturer desiring to manufacture components to be used in the modification covered by the STC must apply to the FAA for a Parts Manufacturing Approval (“PMA”), which permits the holder to manufacture and sell components manufactured in conformity with the PMA and its approved design and data package. In general, each initial PMA is an approval of a manufacturing or modification facility’s production quality control system. PMA supplements are obtained to authorize the manufacture of a particular part in accordance with the requirements of the pertinent PMA, including its production quality control system. We routinely apply for and receive such PMAs and supplements.
Certain of our FCC licenses are conditioned upon our ability to obtain from the FAA a “No Hazard Determination” for our cell sites, which indicates that a proposed structure will not, if built as specified, create a hazard to air navigation. When building or altering certain cell sites, we may first be required to obtain such a determination.
Our business depends on our continuing access to, or use of, these FAA certifications, authorizations and other approvals, and our employment of, or access to, FAA-certified engineering and other professionals.
In accordance with these certifications, authorizations and other approvals, the FAA requires that we maintain, review and document our quality assurance processes. The FAA may visit our facilities at any time as part of our agreement for certification as a manufacturing facility and repair station to ensure that our facilities, procedures and quality control systems continue to meet FAA requirements. In addition, we are responsible for informing the FAA of significant changes to our organization and operations, product failures or defects, and any changes to our operational facilities or FAA-approved quality control systems. Other FAA requirements include training procedures and drug and alcohol screening for safety-sensitive employees working at our facilities or on aircraft.
Foreign Aviation Regulation
According to the Convention on International Civil Aviation, the airworthiness of U.S.-registered and FAA type-certificated aircraft on which FAA-certified Gogo equipment is installed is recognized by civil aviation authorities (“CAAs”) worldwide that are signatories to that Convention. As a result, Gogo does not expect to require further airworthiness certification formalities in countries outside of the United States for U.S.-registered aircraft that already have an STC issued by the FAA covering Gogo equipment. For aircraft registered with a CAA of a country other than the United States, the installation of Gogo equipment requires airworthiness certification from an airworthiness certification body. Typically, the CAA of the country in which the aircraft is registered is responsible for ensuring the airworthiness of any aircraft modifications under its authority.
The FAA holds bilateral agreements with certification authorities around the globe. Bilateral agreements facilitate the reciprocal airworthiness certification of civil aeronautical products that are imported/exported between two signatory countries. A Bilateral Airworthiness Agreement (“BAA”) or Bilateral Aviation Safety Agreement (“BASA”) with Implementation Procedures for Airworthiness provides for airworthiness technical cooperation between the FAA and its counterpart CAA. Under a BAA or BASA, the CAA of the aircraft’s country of registration generally validates STCs issued by the FAA and then issues a Validation Supplemental Type Certificate. For countries with which the FAA does not have a BAA or BASA, Gogo must apply for certification approval with the CAA of the country in which the aircraft is registered. In order to obtain the necessary certification, Gogo will be required to comply with the airworthiness regulations of the country in which the aircraft is registered. Failure to address all foreign airworthiness and aviation regulatory requirements at the commencement of each aircraft operator’s service in any country in which it registers aircraft when there are no applicable bilateral agreements may lead to significant additional costs related to certification and could impact the timing of our ability to provide our service on such aircraft.
U.S. Department of Transportation
The U.S. Department of Transportation (“DOT”) established an Advisory Committee on Accessible Air Transportation to negotiate and develop a proposed rule concerning accommodations for passengers with disabilities in three basic areas, including in-flight entertainment (“IFE”) and closed captioning of IFE. The Committee issued a resolution in late 2016 that included its recommendations to the DOT for a rule on IFE. However, since a final rule on IFE has not yet been issued, it is unclear how, if at all, it may impact Gogo. According to the Agency Rule List – Fall 2024 posted by the Office of Information and Regulatory Affairs, Office of Management and Budget, the rulemaking about accessible IFE is a long-term action.
Federal Communications Commission
Under the Communications Act of 1934, as amended (the “Communications Act”), the FCC licenses the spectrum that we use and regulates the construction, operation, acquisition and sale of our wireless services. The Communications Act and FCC rules also require the FCC’s prior approval of the assignment or transfer of control of an FCC license, or the acquisition, directly or indirectly, of more than 25% of the equity or voting control of Gogo by non-U.S. individuals or entities.
9
Our various services are regulated differently by the FCC. For example, we provide some of our voice and data services (not including ATG) by reselling the services of satellite operators. Where we offer telecommunications services on a common carrier basis, we are subject to the provisions of Title II of the Communications Act, which require, among other things, that the charges and practices of common carriers be just, reasonable and non-discriminatory. In addition, where we provide an interconnected voice over Internet protocol (“VoIP”) service, the FCC applies many, but not all, of the same regulatory requirements to interconnected VoIP services as it does to common carrier telecommunications services.
We offer connectivity service in the United States to business aviation aircraft and, pursuant to an ATG network sharing agreement with Intelsat, to certain commercial aircraft operated by Intelsat’s airline customers, through our own facilities, using our ATG License, a nationwide commercial air-ground radiotelephone license in the 800 MHz band. We obtained and paid for this spectrum through an auction conducted by the FCC. See “—ATG License Terms and Conditions.”
In 2023, the FCC adopted regulations, including broadband labeling and digital discrimination rules, that apply to broadband Internet access service. In May 2024, the FCC classified broadband Internet access service as a common carrier “telecommunications service” and imposed network neutrality restrictions on blocking access to lawful content, applications, services or non-harmful devices; impairing or degrading lawful Internet traffic on the basis of content, applications, services or non-harmful devices; favoring some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind; or prioritizing the content and services of broadband providers’ affiliates. In January 2025, the U.S. Court of Appeals for the Sixth Circuit found that broadband Internet access service is a non-common carrier “information service” under the Communications Act, thereby overturning the FCC’s net neutrality rules. To the extent future legislation by Congress or state legislatures, further litigation in federal or state courts, or new regulations by the FCC further restrict reasonable network management, impose network neutrality rules, or determine that any of our services qualify as broadband Internet access service, our business may be affected.
Our Internet connectivity service is also subject to the FCC’s data roaming rules, which require commercial mobile data service (“CMDS”) providers like Gogo to negotiate roaming arrangements with any requesting facilities-based, technologically compatible providers of CMDS. The rules do not give other providers the right to install equipment on Gogo-equipped aircraft and do not require the Gogo service to be provided on a discounted basis, although the arrangement must be “commercially reasonable.” The rules allow us to take reasonable measures to safeguard the quality of our service against network congestion that may result from roaming traffic.
In addition, most of our services are subject to various rules that seek to ensure that the services are accessible to persons with disabilities, including requirements related to the pass-through of closed captioning for certain IP-delivered video content offered through our Gogo Vision.
In addition to the two ATG licenses, we hold microwave licenses that are used for backhaul in our terrestrial network and an authorization for the provision of voice and data services between the United States and foreign points.
ATG License Terms and Conditions
The FCC issued our 3 MHz ATG License on October 31, 2006, for a renewable 10-year term. We have satisfied our obligation under the license to provide “substantial service” to aircraft, and on January 25, 2017, we received confirmation from the FCC that the license has been renewed until October 31, 2026.
Our 1 MHz ATG license obtained in 2013 from LiveTV Airfone, LLC was also originally issued on October 31, 2006, for a renewable 10-year term, although there was no specific “substantial service” obligation attached to this license. Our application to renew this license was subsequently granted for an additional 10-year term. On August 3, 2017, the FCC released an order that, among other things, revised the wireless license renewal rules. As a result of this order, which applies to the industry generally, all licensees will need to make a showing (or certification) at renewal to demonstrate that the licensee provided and continues to provide service to the public. Because the 1 MHz ATG license has no construction or substantial service requirement, it is not currently clear what level and length of service the FCC will find adequate when considering the next renewal of the 1 MHz ATG license in 2026.
The service and technical rules that apply to our ATG licenses are mainly located in Part 22 of the FCC’s rules. In 2022, the FCC issued Gogo a waiver of the power measurement rule applicable to the ATG licenses, and the grant of that waiver included various conditions, including the filing of a petition for rulemaking proposing any suggested updates to the FCC rules applicable to our ATG licenses. Gogo filed that petition for rulemaking in 2022, including updating the ATG rules where Gogo had received previous waivers and other minor technical rule changes. The FCC sought comment on that petition through a public notice in 2024. The FCC can now move forward with addressing the petition and adopting a notice of proposed rulemaking that formally proposes our suggested rule changes. That notice of proposed rulemaking could also include other proposed rule changes that we did not propose.
Our two ATG licenses contain certain conditions that require us to comply with all applicable FCC and FAA rules as well as all bilateral agreements between the United States and Canada and the United States and Mexico regarding the frequencies that are allocated for ATG services. These agreements apply to our use of the spectrum in areas adjacent to the United States’ northern and southern borders and in and out of Canadian and Mexican airspace.
10
A bilateral ATG spectrum coordination agreement between the U.S. and Canada has been negotiated and approved and a bilateral agreement between the United States and Mexico is pending. In 2012, Industry Canada issued to our Canadian subsidiary a subordinate license that allows us to use Canadian ATG spectrum for which SkySurf Communications Inc. is the primary licensee, and in 2019 the primary license was renewed for an eight-year term expiring June 29, 2027. In 2012, we entered into a license agreement with SkySurf (the “License Agreement”), which commenced on August 14, 2012, and was recently renewed for a second ten-year term expiring July 24, 2032. Provided that the primary spectrum license issued by Industry Canada (now Innovation, Science and Economic Development Canada or “ISED”) to SkySurf remains in effect as of July 24, 2032, the License Agreement is renewable at our option for a further five-year term. The term of the License Agreement, including the second 10-year term and any renewals, is contingent on the effectiveness of the primary spectrum license.
Any future coordination agreement with Mexico and/or a future Mexican ATG licensee could affect our ability to provide our broadband Internet service in the border areas using our current cell sites at current operating power levels and could affect our ability to establish or maintain ATG service in the border areas as aircraft fly into and out of Mexican airspace.
Equipment Certification
We may not operate, lease, sell, market or distribute any radio transmission equipment used in the provision of our services unless such equipment is compliant with the FCC’s equipment authorization and relevant technical rules. We have the required FCC equipment authorizations for our services in the United States. We continue to obtain and assess certifications required for equipment currently used in the provisioning of our services outside of the United States. In particular, the Company has undertaken a comprehensive analysis of required equipment certifications in global markets in connection with the global launch of Gogo Galileo.
Government Contracts
As a government contractor, we must comply with laws and regulations relating to U.S. Government and other governments’ contracts, including foreign governments. We are also subject to a variety of acquisition regulations that regulate our ability to be reimbursed for costs under government contracts and foreign contracts. Other government contracting regulations require compliance with cybersecurity requirements, prohibit the use of certain telecommunications equipment from identified companies, require a written code of business ethics and conduct, and more. In addition, our government contracts may allow the government or prime contractors to terminate any of our government contracts and subcontracts either without cause or for default based on our performance.
Classified Contracts
We perform some classified work for the U.S. Government that cannot be specifically described. The operating results of classified contracts are included in our consolidated financial statements. The risks associated with performing classified contracts are not materially different from those of our other government contracts. Our internal controls addressing the financial reporting of classified contracts are consistent with our internal controls for our non-classified contracts.
Trade and Export Regulations
Trade and export policies and regulations, like the Export Administration Regulations (“EAR”), affect our business in and outside the U.S. Sanctions imposed by the U.S. or ally countries, either prohibiting or limiting business with certain entities and countries, may also impact our business. To maintain compliance and mitigate risks related to international sales and exports, we routinely assess our obligations under these regulations.
Privacy and Data Security-Related Regulations
We collect personal information, such as name, address, e-mail address and credit card information, directly from our users when they register to use our services, along with certain identifiers associated with devices using our services. We also may obtain information about our users from third parties or create records that may be personal information in connection with our services. We use the information that we collect and create to, for example, consummate their purchase transaction, customize and personalize content for our users and enhance the entertainment options when using our service. Our collection, protection, disclosure and use of such information are required in some circumstances to comply with our privacy policies, applicable law, and our contractual obligations to aviation partners and other third parties, as well as industry standards such as the Payment Card Industry Data Security Standard.
We must comply with certain Communications Act and FCC privacy and data security rules for our services, including certain provisions applicable to customer proprietary network information (“CPNI”). Effective March 2024, the FCC adopted additional CPNI and cybersecurity rules requiring disclosures of applicable data breaches to the FCC, federal law enforcement, and customers, which may affect our business. Additionally, as a U.S. Government contractor, we recognize our obligations under Executive Order 14028 regarding cybersecurity, which mandates federal contractors to implement heightened security measures to protect critical infrastructure. As a provider of communication services, we ensure that our cybersecurity practices align with federal guidelines, including those specified by the National Institute of Standards and Technology (“NIST”) and the Federal Information Security Modernization Act (“FISMA”), to protect sensitive government data from cyber threats.
11
We are also subject to other federal and state consumer privacy and data security requirements. For example, Section 5 of the Federal Trade Commission (“FTC”) Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” The FTC has been found to have authority to regulate the non-common carrier services offered by communications common carriers, meaning that the FTC may have jurisdiction over some of our services. The FTC has brought enforcement actions under the FTC Act against companies that among other things: (1) collect, use, share or retain personal information in a way that is inconsistent with the representations, commitments, and promises that they make in their privacy policies and other public statements; (2) have privacy policies that do not adequately inform consumers about the Company’s actual practices; and (3) fail to reasonably protect the security, privacy and confidentiality of nonpublic consumer information.
We may also be subject to state laws pertaining to privacy and data security, such as the “mini-FTC Acts,” which prohibit unfair or deceptive acts or practices, along with data security breach notification laws requiring entities holding certain personal data to provide notices in the event of a breach of the security of that data. A few states have also imposed specific data security obligations. These state mini-FTC Acts, data security breach notification laws, and data security obligations may not extend to all of our services and their applicability may be limited by various factors, such as whether an affected party is a resident of a particular state.
Certain states have also enacted specific comprehensive privacy laws to which we may be subject. For example, the California Consumer Privacy Act (“CCPA”), as amended by the California Privacy Rights Act (“CPRA”), provides broad privacy rights for California consumers, including, among others, the right to obtain copies of their personal information collected in the past 12 months, the ability to opt out from the sale of personal information and the right to demand the deletion of personal information. The CCPA also imposes compliance requirements on companies that do business in California and collect personal information from consumers, including, among others, notice, consent and service provider requirements. The CCPA also provides for civil penalties for violations as well as a private right of action for data breaches that may increase data breach litigation. New regulations under the CPRA are expected to take effect over the course of 2025.
Approximately a dozen state privacy laws have come into effect since 2020, and more are scheduled to come into effect over the course of 2025. These laws provide broad new privacy rights for consumers in these states, including the right to opt out of targeted advertising and certain profiling activities.
Congress and other state legislatures have also been considering additional legislation relating to privacy, artificial intelligence and data breaches. Should any additional laws be enacted, they could affect our business.
To the extent we collect personal information of residents of other countries, we may be subject to the data protection regulations of the relevant countries. The General Data Protection Regulation (“GDPR”) of the European Union (“EU”) has imposed more restrictive privacy-related requirements for entities outside the EU that process personal information about European data subjects. EU member states also have some flexibility to supplement the GDPR with their own laws and regulations and may apply stricter requirements for certain data processing activities. Additionally, in Canada, the Personal Information Protection and Electronic Documents Act of 2000 (“PIPEDA”) and substantially similar provincial laws may impose data privacy and security obligations on the processing of personal data. The regulation of data privacy and security in other jurisdictions continues to evolve.
In addition, certain countries have laws that restrict the transfer of personal information outside of such countries. For example, Switzerland, the United Kingdom and the member states of the EU impose restrictions on transferring such data to countries, including the U.S., that they do not deem to offer a similar standard of protection as they require. Certain mechanisms apply under Swiss, United Kingdom and EU member state laws that permit the cross-border transfer of personal information to countries that are not deemed adequate, such as the United States. Additionally, on July 16, 2020, the European Court of Justice (the highest EU court) ruled the EU-US privacy shield to be an invalid data transfer mechanism, confirmed that the Model Standard Contractual Clauses (“SCCs”) remain valid, and left unaddressed some issues regarding supplementary measures that may need to be taken to support transfers. On September 27, 2021, new versions of the SCCs went into effect. EU data protection authorities are developing their perspectives on the supplementary measures that may be needed when relying on the SCCs. Depending on the supplementary measures that may need to be taken to support transfers and implement the SCC, our ability to lawfully transfer personally identifiable information out of relevant jurisdictions to the United States or other jurisdictions may be impacted.
Other countries, such as Australia, Brazil, China, India and Russia have also implemented, amended or been considering legislation regarding data protection, data security, breach notification and data transfers/localization. China, in particular, has adopted new requirements for data transfers outside of China. Such laws may affect our business and, should any additional laws be enacted in countries in which we do business, those laws may also affect our business.
Truth in Billing and Consumer Protection
The FCC’s Truth in Billing rules require full and fair disclosure of all charges on customer bills for telecommunications services, except for broadband Internet access services. Thus, these rules apply to our satellite-based services. This disclosure must include brief, clear and non-misleading plain language descriptions of the services provided. States also have the right to regulate wireless carriers’ billing; however, we are not currently aware of any states that impose billing requirements on ATG services.
12
CALEA
The Communications Assistance for Law Enforcement Act, (“CALEA”), requires covered service providers to build certain law enforcement surveillance assistance capabilities into their communications networks or equipment and to maintain CALEA-related system security policies and procedures. Where applicable, we have implemented such policies and procedures and, based upon our periodic self-assessments, we believe that our network is compliant with CALEA.
FCC Reimbursement Program
In July 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 an initial 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. In December 2024, President Biden signed into law the Fiscal Year 2025 National Defense Authorization Act (“FY 2025 NDAA”), which authorizes the FCC to borrow funds from the U.S. Treasury sufficient to fully fund the FCC Reimbursement Program. On December 26, 2024, the FCC announced that it would expeditiously submit a request to the U.S. Treasury to borrow the funds and, following approval, will allocate funding to each approved applicant up to the full amount of their approved cost estimates.
Program participants are subject to a number of conditions and requirements under the FCC’s rules. The Company complied with the requirement to submit a reimbursement request prior to July 15, 2023 and received its first disbursement of funds on July 21, 2023, starting a one-year deadline to complete the removal, replacement and disposal of covered equipment, by July 21, 2024. The rules permit participants to petition the FCC for one or more six-month extensions of the completion deadline. Due to a number of factors, including supply chain disruptions, the insufficiency of FCC funding prior to the passage of the FY 2025 NDAA, and the operational and logistical complexity of replacing airborne equipment, the Company was unable to complete the project by the July 21, 2024 deadline, and has sought and been granted two extensions. The Company’s current FCC deadline for completing its transition is July 21, 2025, but the Company expects to require additional extensions past that date. As of March 1, 2025, the Company has filed approximately $47.0 million in claims and received approximately $45.8 million in reimbursements.
Intellectual Property
We rely on a combination of intellectual property rights, including trade secrets, patents, copyrights, trademarks and domain names, as well as contractual restrictions to protect intellectual property and proprietary technology owned or used by us.
We have patented certain of our technologies in the United States and certain countries outside of the United States. As of March 1, 2025, we held 167 U.S. patents expiring on dates ranging from June 2025 to March 2043 and 404 foreign patents expiring on dates ranging from September 2027 to October 2040. We do not believe that our business is dependent to any material extent on any single patent or group of patents that we own. We also have a number of patent applications pending both in and outside of the United States, and we will continue to seek patent protection in the United States and certain other countries to the extent we believe such protection is appropriate and cost-effective.
We consider our brands to be important to the success of our business and our competitive position. We rely on both trademark registrations and common law protection for trademarks. Our registered trademarks in the United States and certain other countries include, among others, “Gogo,” “Gogo 5G,” “Gogo Galileo,” “Gogo Biz” and “Gogo Vision,” along with trademarks acquired through the Transaction including, among others, “Satcom Direct,” “SD Pro,” “FlightDeck Freedom” and “Plane Simple,” although we have not yet obtained registrations for our most important marks in all markets in which we currently do business or intend to do business in the future. Generally, the protection afforded for trademarks is perpetual, if they are renewed on a timely basis, if registered, and continue to be used properly as trademarks.
We license or purchase from third parties technology, software and hardware that are critical to providing our products and services. Much of this technology, software and hardware is customized for our use and would be difficult or time-consuming to obtain from alternative vendors. We also license our proprietary technology and software to third parties to enable them to integrate such technology and software into the products they provide to us. Many of our agreements with such third parties are renewable for indefinite periods of time unless either party chooses to terminate, although some of our agreements expire after fixed periods and require renegotiation prior to expiration in order to extend the term. Among the most material of our technology-related agreements are those for modems, base stations and antennas. Our agreements for modems, base stations and antennas do not renew automatically and thus require periodic renegotiation. Such agreements, as well as certain licenses to commercially available software, are material to our business.
13
Under the terms of the sale of our commercial aviation (“CA”) business to Intelsat that closed in 2020, we retained ownership of the entire patent portfolio held by Gogo Inc. and its affiliates, including patents developed and obtained in connection with our former CA business. We have granted Intelsat a worldwide, perpetual, non-exclusive license to our patent portfolio for use in the commercial aviation and satellite mobility businesses (each as defined in the license agreement).
We have developed certain ideas, processes, and methods that contribute to our success and competitive position that we consider to be trade secrets. We protect our trade secrets by keeping them confidential through the use of internal and external controls, including contractual protections with employees, contractors, customers and vendors. Trade secrets can be protected for an indefinite period so long as their secrecy is maintained.
Human Capital
We believe that our success is the product of an integrated approach to talent management that touches every part of our business. Rather than focusing on individual processes, we manage our employee ecosystem holistically by encouraging behaviors, conversations, relationships, and activities that represent best practices for a high-performing culture. We are committed to fostering a highly engaged workforce and in turn driving satisfaction among partners and customers through initiatives that include the following:
•
Compensation: Our compensation program is designed to attract, retain, and reward the best performers. In addition to carefully calibrated salaries and bonuses, which are reviewed annually, our employees benefit from a generous benefit package, including an employee stock purchase and 401(k) program. We also grant additional equity awards on an annual basis to certain employees identified as high performers.
•
Training & Development: The continued development of our people is critical to our success. New hires participate in an onboarding and orientation program, which is intended to build knowledge and understanding of our business. We also invest in various professional development and leadership training initiatives and conduct periodicforums relevant to our business that provide unique learning and networking opportunities across all business functions.
•
Recognition: Our employees’ success is celebrated. Our recognition programs include service awards, peer-to-peer recognition awards (called Gogo Props), spot bonuses for significant contributions above and beyond daily work efforts and special equity awards for high performers nominated by their managers. We believe these programs promote a positive employee experience that champions performance while creating a sense of community.
•
Talent Review: We employ a comprehensive talent review program to assess the performance and capabilities of each individual. Annually, we set company-wide priorities that serve as the basis upon which clear individual objectives are set across the entire workforce. Feedback is provided regularly and our annual talent review process identifies and supports high performers in the form of additional development opportunities so that each employee has the opportunity to reach their full potential. By investing in our people and taking the opportunity to promote from within when appropriate, we believe we are best able to reinforce our core values and achieve our strategic objectives.
•
Culture and Engagement: We conduct employee engagement surveys to solicit feedback and help guide planning on all people-related efforts and initiatives that not only support our team members but propel our business forward. Our employees have the opportunity to learn more about our business strategy and ask questions of our leadership team during Town Hall meetings we host quarterly. In addition, we engage with our employees through wellness programs, community events, and hosted events at our offices. We are actively leveraging these efforts and initiatives to drive our integration of Satcom Direct’s business.
•
Inclusive Workplace: Gogo seeks to create an environment where each individual’s uniqueness is respected, and which allows for a sense of inclusion and belonging. We remain committed to having an inclusive workforce with a broad range of knowledge, skills, backgrounds and perspectives. To aid in this effort, our initiatives include building awareness of unconscious bias and investing in and seeking to expand our engagement with students at colleges and universities.
The efforts outlined above are supported by our dedicated human resources team and led by our Senior Vice President, People Experience, who is responsible for developing and executing our human capital strategy and regularly updates our Board of Directors and senior management on the operation and status of our human capital activities.
As of December 31, 2024, we employed approximately 790 individuals worldwide, with 81% of our workforce located in the United States, and no employee was covered by a collective bargaining agreement with a union.
Corporate Information
Gogo Inc. is a holding company that does business through its subsidiaries. Our principal operating subsidiaries are (i) Gogo Business Aviation LLC, which is a direct, wholly owned subsidiary of Gogo Intermediate Holdings LLC and (ii) Satcom Direct, LLC and Satcom Direct Government, LLC, which are directly, wholly owned subsidiaries of Gogo Direct Holdings LLC and indirect, wholly owned subsidiaries of Gogo Intermediate Holdings LLC.
14
Our principal executive office is located at 105 Edgeview Dr., Suite 300, Broomfield, CO 80021. Our telephone number is (303) 301-3271. Our website addresses are www.gogoair.com and www.satcomdirect.com.
Available Information
Our investor relations website is located at http://ir.gogoair.com. Our Proxy Statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge on the investor relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We also provide a link to the section of the SEC's website at www.sec.gov that has all of our public filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, our Proxy Statements, and other ownership related filings.
We may use our website as a distribution channel of material company information, and so investors should monitor it. We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website. Investors and others can receive notifications of new information posted on our investor relations website in real-time by signing up for email alerts and RSS feeds. The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
15
Item 1A. Risk Factors
You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. The risks described below are not the only ones facing us. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition and results of operations. This Annual Report on Form 10-K also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.
Risks Related to Our Business
We may be unable to continue to generate revenue from the provision of our connectivity and other service offerings, which could materially and adversely affect our business and profitability.
Our business is dependent on our ability to continuously attract and retain users of our connectivity and other service offerings, and we cannot be certain that we will be successful in these efforts or that customer retention levels will not materially decline. For the fiscal years ended December 31, 2024, 2023 and 2022, the service we provided (which excludes service provided on commercial aircraft under an ATG network sharing agreement with Intelsat) generated approximately 80%, 78% and 71% of our revenue from operations, respectively. A significant portion of such service revenue is generated through individual subscription agreements with our customers that cover a single or small number of aircraft, with the remainder generated through subscription agreements with certain fractional or charter operators covering larger fleets of aircraft. These agreements are generally between one and three years in duration but can be longer. As such, we have no assurance that any of such customers will renew their existing agreements with us upon expiration on comparable terms or at all, including as a result of a lack of demand or dissatisfaction with our services or the availability of superior or less expensive alternatives in the market. To the extent that our subscribers terminate or fail to renew their contracts with us for any reason, our business prospects, financial condition and results of operations may be materially adversely affected.
We have in the past, and may in the future, experience periods of reduced usage of our services by our customers, which could adversely impact our results of operations and profitability.
Our development contracts may be difficult for us to comply with and may expose us to third-party claims for damages, and we may experience losses from fixed-price contracts.
As a result of the Satcom Direct acquisition, within our military/government operation, we are party to certain government contracts involving the development of new products. These contracts typically contain strict performance obligations and project milestones. We cannot assure you we will comply with these performance obligations or meet these project milestones in the future. If we are unable to comply with these performance obligations or meet these milestones, our customers may terminate these contracts and, under some circumstances, recover damages or other penalties from us. We cannot assure you that the other parties to any such contract will not terminate the contract or seek damages from us. If other parties elect to terminate their contracts or seek damages from us, it could materially harm our business.
A substantial majority of revenue in our military/government operation is expected to be derived from contracts with fixed prices. These contracts carry the risk of potential cost overruns because we assume all of the cost burden. We assume greater financial risk on fixed-price contracts than on other types of contracts because if we do not anticipate technical problems, estimate costs accurately or control costs during performance of a fixed-price contract, it may significantly reduce our net profit or cause a loss on the contract. Because many of these contracts involve new technologies and applications and can last for years, unforeseen events, such as technological difficulties, fluctuations in the price of raw materials, a significant increase in or a sustained period of increased inflation, problems with our suppliers, and cost overruns, can result in the contractual price becoming less favorable or even unprofitable to us over time (which, especially in the case of sharp increases in or significant sustained inflation, could happen quickly and have long-lasting impacts). Furthermore, if we do not meet contract deadlines or specifications, we may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages or suffer major losses if the customer exercises its right to terminate. Although we attempt to accurately estimate costs for fixed-price contracts, we cannot assure you our estimates will be adequate or that substantial losses on fixed-price contracts will not occur in the future. If we are unable to address any of the risks described above, it could materially harm our business, financial condition and results of operations.
We are reliant on our key OEMs and dealers for equipment sales.
Revenue from equipment sales accounted for approximately 18%, 20% and 27% of our revenue for the fiscal years ended December 31, 2024, 2023 and 2022, respectively. More than 90% of our equipment revenue in each such fiscal year was generated from contracts with OEMs and after-market dealers. Almost all of our contracts with OEMs and dealers are terminable at will by either party on short notice. If one or more key OEMs or dealers terminates its relationship with us for any reason or our contract
16
expires and is not renewed, our business and results of operations may be materially and adversely affected. In addition, pursuant to many of our contracts with our OEM distribution partners, we have agreed to deliver equipment and/or services, including equipment and services not yet in production, for a fixed price and, accordingly, take the risk of any cost overruns or delays in the completion of the design and manufacturing of the product. Certain of our contracts with our OEMs also include provisions that, under specified circumstances, entitle them to the benefit of certain more favorable provisions than included in other equipment contracts, including with respect to pricing. These provisions, some of which have retroactive effect, may limit the benefits we realize from contracts containing such provisions. Our inability to identify and offer improved terms to a distribution partner or customer in accordance with such a provision could negatively affect our relationship with that distribution partner or customer or give rise to a claim that we are in breach of such contract.
Many of our distribution partners have also not committed to purchase any minimum quantity of our equipment. In certain cases, we must anticipate the future volume of orders based upon non-binding production schedules provided by OEMs, historical purchasing patterns and informal discussions with customers and dealers as to their anticipated future requirements. Cancellations, reductions or delays by OEMs and dealers may have a material adverse effect on our business, financial condition and results of operations.
Some of our dealers are experiencing continuing issues with labor shortages, which has impacted their ability to install our equipment, leading to a longer period of time between shipment and activation of our equipment. If our dealers are unable to eliminate or mitigate these labor shortages, our business, financial condition and results of operations may be materially adversely affected.
Our distribution partners may be materially adversely impacted by economic downturns and market disruptions. See “—Adverse economic conditions, including economic slowdowns, may have a material adverse effect on our business.” In anticipation of changing economic conditions, OEMs in particular may be more conservative in their production, which may reduce our market opportunities. Further, unfavorable market conditions could cause one or more of our OEMs or dealers to file for bankruptcy, which may have a material adverse effect on our business, financial condition and results of operations.
We depend upon third party satellite networks providers, which are single-source providers, for our satellite services.
Our satellite services business relies on the satellites of third parties. For example, we launched Gogo Galileo using Eutelsat OneWeb as our sole LEO satellite network provider. These satellites utilize highly complex technology, operate in the harsh environment of space and are subject to significant operational risks while in orbit. Risks include malfunctions (commonly referred to as anomalies), such as malfunctions in the deployment of subsystems and/or components, interference from electrostatic storms, and collisions with meteoroids, decommissioned spacecraft or other space debris. Anomalies can occur due to various factors, including satellite manufacturer error, problems with the power or control sub-system of a satellite or general failures caused by the harsh space environment. The satellites provided by third parties that we use to provide satellite services have experienced various anomalies in the past and will likely experience anomalies in the future. While some anomalies are covered by insurance policies, others may not be covered or may be subject to large deductibles. In addition, any contractual remedies may be insufficient to cover any related losses. Failures by, or degradations of the satellite performance of, our satellite network providers could affect our business, financial condition and results of operations.
Competition could result in price reduction, reduced revenue and loss of market position and could harm our results of operations.
Our equipment and services are sold in competitive markets. We compete against both equipment providers and GEO- and LEO-satellite based telecommunications service providers, as well as resellers of the above, to the business aviation market and military/government market. See “Item 1. Business—Company Overview and Strategy—Competition.” Some of our current or potential future competitors are, or could potentially be, larger, more diversified corporations and have greater financial, marketing, production and research and development resources, stronger customer relationships, more experience with regulatory compliance, and with militaries and governments, and/or access to technologies not available to us. As a result, they may be better able to withstand pricing pressures and the effects of periodic economic downturns. Some of our current or future competitors may offer a broader product line to customers. In addition, some of our current or future competitors have developed or may develop satellite direct-to-user capabilities. Our business and results of operations may be materially adversely affected if our competitors develop equipment or services that are superior to our equipment and services, develop equipment or services that are priced more competitively than our equipment and services, develop methods of more efficiently and effectively providing equipment and services, or adapt more quickly than we do to new technologies or evolving customer requirements.
In addition, because the markets in which we operate are constantly evolving and characterized by rapid technological change, it is difficult for us to predict whether, when and by whom new competing technologies, products or services may be introduced into our markets. Maintaining and improving our competitive position will require continued investment in technology, manufacturing, engineering, quality standards, marketing and customer service and support. If we do not maintain sufficient resources to make these investments or are not successful in maintaining our competitive position, our operations and financial performance will suffer.
17
The increasing availability of satellite capacity and capacity from other forms of communications technology has historically created an excess supply of telecommunications capacity in certain regions from time to time. We believe such an imbalance could occur again in certain regions, particularly as we and other service providers introduce new technology on our fleets.
Any failure to deliver and maintain high-quality customer support may adversely affect our relationships with our customers and prospective customers and could adversely affect our reputation, business, results of operations and financial condition.
Many of our customers depend on our customer support team to assist them in deploying or using our services effectively, to help them resolve post-deployment issues quickly and to provide ongoing support. If we do not devote sufficient resources or are otherwise unsuccessful in assisting our customers effectively, it could adversely affect our ability to retain existing customers and could prevent prospective customers from adopting our services. We may be unable to respond quickly enough to accommodate short-term increases in demand for customer support. We also may be unable to modify the nature, scope and delivery of our customer support to compete with changes in the support services provided by our competitors. Increased demand for customer support, without corresponding revenue, could increase costs and adversely affect our business, results of operations and financial condition. Our sales are highly dependent on our business reputation and on positive recommendations from existing customers. Any failure to deliver and maintain high-quality customer support, or a market perception that we do not maintain high-quality customer support, could adversely affect our reputation, business, results of operations and financial condition.
We depend upon third parties, many of which are single-source providers, to manufacture equipment components, provide services for our network, and install and maintain our equipment.
We rely on third-party suppliers for equipment components and services that we use to provide our services. Our suppliers range in size and scale from large to small and may have differing levels of access to capital and going concern profiles. Many suppliers of critical components of our equipment are single-source providers. Components for which we rely on single-source suppliers include, among others, the antennas and modems for all systems, the equipment used at our ATG cell site base stations and the HDX Terminal for our Gogo Galileo network. If we are required for any reason (including expiration of the contract, termination by one party for material breach or other termination events) to find one or more alternative suppliers, we estimate that the replacement process could take up to two years depending upon the component or service, and we may not be able to contract with such alternative suppliers on a timely basis, on commercially reasonable terms, or at all. Finding and contracting with suppliers of some components may be delayed or made more difficult by current suppliers’ ownership of key intellectual property that requires alternative suppliers to either obtain rights to such intellectual property or develop new designs that do not infringe on such intellectual property. In addition, many of our components, such as the equipment used in our base stations, are highly integrated with other system components, which may further lengthen the time required for an alternative supplier to deliver a component or service that meets our system requirements. We also rely on third parties to provide the links between our data centers and our ground network. If we are not able to continue to engage suppliers with the capabilities or capacities required by our business, or if such suppliers fail to deliver quality products, parts, equipment and services in sufficient quantities or on a timely basis consistent with our inventory needs and production schedule, our business, financial condition and results of operations may be materially adversely affected.
The supply of third-party components and services could be interrupted or halted by a termination of our relationships, a failure of quality control or other operational problems at such suppliers or a significant decline in their financial condition. If we are not able to continue to engage suppliers with the capabilities or capacities required by our business, or if such suppliers fail to deliver quality products, parts, equipment and services on a timely basis consistent with our schedule, our business, financial condition and results of operations may be materially adversely affected.
Our participation in U.S. government contracts exposes us to significant commercial and other business risks.
Our revenues from military/government customers are expected to represent a reasonably significant percentage of our total revenues, and are expected to be derived primarily from U.S. government applications. Therefore, any significant disruption or deterioration of our relationship with the U.S. government would significantly reduce our revenues. U.S. government business exposes us to various risks, including:
•
unpredictable order placements, reductions or cancellations;
•
reductions or delays in government funds available for our projects due to government policy changes, budget cuts or delays, changes in available funding, reductions in defense expenditures and contract adjustments;
•
the ability of competitors to protest contractual awards;
•
penalties arising from post-award contract audits;
•
the reduction in the value of our contracts as a result of the routine audit and investigation of our costs by U.S. government agencies;
•
higher-than-expected final costs for work performed under contracts where we commit to specified services for a fixed price;
18
•
unpredictable cash collections of unbilled receivables that may be subject to acceptance of deliverables by the customer and contract close-out procedures, including government approval of final indirect rates;
•
competition with programs managed by other government contractors for limited resources and for uncertain levels of funding;
•
significant changes in contract scheduling or program structure, which generally result in delays or reductions in services; and
•
intense competition for available U.S. government business necessitating increases in time and investment for design and development.
U.S. government contracts are also subject to termination by the government, either for the convenience of the government or for our failure to perform consistent with the terms of the applicable contract. If we are unable to address any of the risks described above, or if we were to lose all or a substantial portion of our sales to the U.S. government, it could materially harm our business and impair the value of our common stock.
The funding of U.S. government programs is subject to congressional appropriations. If appropriations for one of our programs become unavailable, or are reduced or delayed, our contract or subcontract under such program may be terminated or adjusted by the government, which could have a negative impact on our future sales and results of operations. Budget cuts to defense spending can exacerbate these problems. From time to time, when a formal appropriation bill has not been signed into law before the end of the U.S. government’s fiscal year, Congress may pass a continuing resolution that authorizes agencies of the U.S. government to continue to operate, generally at the same funding levels from the prior year, but does not authorize new spending initiatives, during a certain period. During such period (or until the regular appropriation bills are passed), delays can occur in procurement of products and services due to lack of funding, and such delays can affect our results of operations during the period of delay.
The military/government industry has experienced, and we expect it will continue to experience, significant changes to business practices globally, in part due to changes in the global security and threat environment and an increased focus on affordability, efficiencies, business systems, recovery of costs and a reprioritization of available defense funds. We have experienced and may continue to experience an increased number of audits and challenges to our claims and our business systems for current and past years, as well as longer periods to close audits, broader requests for information and an increased risk of withholdings of payments. The U.S. government has been pursuing and may continue to pursue policies that could negatively impact our profitability, including those that shift additional responsibility and performance risks to the contractor. Changes in procurement practices, including those favoring incentive-based fee arrangements, fixed price development or long-term production programs, different award criteria, non-traditional contract provisions, and contract negotiation offers that indicate what our costs should be, have affected and may in the future affect our profitability and predictability.
Finally, we are subject to the risk of changes in governmental procurement legislation and regulations and other policies, which may reflect military and political developments. For more information, see “—As a U.S. government contractor in our military/government operation, we could be adversely affected by changes in various procurement and other laws and regulations applicable to our industry or any negative findings by the U.S. government as to our compliance with them, as well as by changes in our customers’ business practices globally.”
Our participation in non-U.S. government contracts exposes us to significant risks.
Our non-U.S. government customers expose us to various risks, including changes in administration policy. Furthermore, foreign government customer contracts are subject to specific procurement regulations and a variety of other complex requirements, which affect how we transact business with our foreign government customers and can impose additional costs on our business operations. Numerous laws and regulations affect our contracts with foreign government customers. Foreign government customers routinely audit government contractors to review contract performance, cost structure and compliance with applicable laws, regulations, and standards, as well as the adequacy of and compliance with internal control systems and policies. Any inadequacies in our systems and policies, or the perception or allegations of such inadequacies, could result in payments being withheld, penalties and reduced future business. Improper or illegal activities, or the perception or allegation of such activities, could subject us to civil or criminal penalties or administrative sanctions, including contract termination, fines, forfeiture of fees, suspension of payment and suspension or debarment from doing business with government agencies, any of which could materially adversely affect our reputation, business, financial condition and results of operations. We may also be subject to the same risks with respect to U.S. government contracts, highlighted in the risk factor above, relating to the shift in focus on affordability, efficiencies, business systems, recovery of costs and a reprioritization of available defense funds.
Satellites have a finite useful life, and their actual operational life may be shorter than their mission life.
Our ability to earn revenues from our satellite services depends on the continued operation of the satellite networks by our third-party vendors. Each satellite has a limited useful life, referred to as its mission life. There can be no assurance as to the actual operational life of a satellite, which may be shorter than its mission life. A number of factors affect the useful lives of the satellites,
19
including the quality of design and construction, durability of component parts and back-up units, the ability to continue to maintain proper orbit and control over the satellite’s functions, the efficiency of the launch vehicle used, consumption of on-board fuel, degradation and durability of solar panels, the actual space environment experienced and the occurrence of anomalies or other in-orbit risks affecting the satellite. In addition, continued improvements in satellite technology may make satellites obsolete prior to the end of their operational life.
Global supply chain challenges and logistics issues as well as increasing inflation have had, and may continue to have, an adverse effect on our business, financial condition and results of operations.
Inflation, changes in trade policies, the imposition of duties and tariffs (including the recently announced tariffs on imports from Canada, Mexico, and China), potential retaliatory countermeasures, public health crises and geopolitical conflicts continue to adversely impact the availability and price of electronic components. As a result, we have experienced longer lead times and encountered delays in obtaining electronic components, and we expect longer lead times and delays to continue. In addition, global logistics issues such as shipping logjams, workforce shortages and carrier capacity constraints, have affected and may continue to negatively affect our ability to obtain electronic and other components on a timely basis. Challenges stemming from these global supply chain issues could lead our suppliers and OEMs to claim that they are not obligated to perform their commitments to us due to force majeure provisions in such agreements. We cannot predict how long the component shortages or logistics issues will continue, and a prolonged impact on our supply chain could adversely impact our business in a material way.
We are exposed to a variety of risks associated with international operations that could adversely affect our business.
Our operations and business are located across 9 countries worldwide, including the United States, Canada, the United Kingdom, the United Arab Emirates, Switzerland, Brazil, Hong Kong, Australia and Singapore. In addition, a component of our growth strategy involves the continued expansion of our operations and customer base internationally. As a result, we are subject to risks related to conducting operations outside the United States, including, but not limited to:
•
difficulties in penetrating new markets due to established and entrenched competitors;
•
difficulties in developing products and services that are tailored to the needs of local customers;
•
the need to adapt and localize our products and services for specific countries;
•
lack of local acceptance or knowledge of our products and services;
•
changes in a specific country’s or region’s political or economic conditions;
•
difficulties in obtaining required regulatory or other governmental approvals;
•
greater difficulty in enforcing contracts and managing collections in countries where our recourse may be more limited, as well as longer collection periods;
•
multiple and possibly overlapping tax structures;
•
unexpected changes in laws and regulatory requirements, including with respect to taxes and trade laws;
•
more stringent regulations relating to communications; artificial intelligence; privacy and data security and the unauthorized use of, or access to, commercial and personal data; and aerospace and liability standards;
•
challenges inherent in efficiently managing employees over large geographic distances, including compliance with differing labor laws and the need to implement appropriate systems, policies and hiring, benefits and compliance programs;
•
difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems and regulatory systems;
•
increased costs associated with international operations, including travel, real estate, infrastructure and legal compliance costs;
•
currency exchange rate fluctuations and the resulting effect on our revenue and expenses and the cost and risk of entering into hedging transactions if we chose to do so in the future;
•
the effect of other economic factors, including inflation, pricing and currency devaluation;
•
limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;
•
laws and business practices favoring local competitors or general preferences for local vendors or imposing local domestic ownership restrictions;
20
•
operating in new, developing or other markets in which there are significant uncertainties regarding the interpretation, application and enforceability of laws and regulations, including relating to contract and intellectual property rights;
•
limited or insufficient intellectual property protection or difficulties enforcing our intellectual property;
•
political instability, social unrest, terrorist activities, acts of civil or international hostility, such as the ongoing conflict between Russia and Ukraine, the ongoing conflict in the wider Middle East and tensions in the South China Sea, natural disasters and regional or global outbreaks of contagious diseases;
•
restrictions on the ability of U.S. companies to do business in foreign countries; and
•
exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.K. Bribery Act (the “Bribery Act”) and similar laws and regulations in other jurisdictions.
These and other factors could affect our ability to compete successfully and continue to expand internationally and, consequently, our business, financial condition and results of operations may be materially adversely affected.
Our business is subject to foreign currency risk.
Almost all of our customers pay for our services in U.S. dollars, although we are exposed to some risk related to customers who do not pay in U.S. dollars. Fluctuations in the value of non-U.S. currencies may make payment in U.S. dollars more expensive for our non-U.S. customers, and in certain circumstances, cause us to renegotiate prices or other terms in contracts in order to retain such customers. In addition, our non-U.S. customers may have difficulty obtaining U.S. currency and/or remitting payment due to currency exchange controls.
As we expand geographically and otherwise, we may experience difficulties in maintaining our corporate culture, and our business, results of operations and financial condition could be adversely affected.
We believe that our corporate culture has been a critical component of our success, and have invested substantial time and resources in building this culture. As we further expand our business and grow internationally, we may find it difficult to maintain our corporate culture. For instance, we recently acquired Satcom Direct’s business and employees and we will be required to make certain changes to create a unified culture for the combined organization. Any failure to manage organizational changes from our expansion, including in our management or employee base, in a manner that preserves the key aspects of our culture could be detrimental to our future success, including by limiting our ability to recruit and retain personnel and to effectively pursue our corporate objectives. For example, we are dedicated to having every employee feel like they have a home at our Company, and our expansion may hinder these efforts. This, in turn, could adversely affect our business, results of operations and financial condition.
In addition, expansion could lead to our organizational structure becoming more complex, and could strain our ability to maintain reliable service levels for our customers (both existing customers of the Company and new customers acquired as a result of Satcom Direct’s business). If we fail to achieve the necessary level of efficiency in our organization as we grow, then our business, results of operations and financial condition could be adversely affected. See “—We are exposed to a variety of risks associated with international operations that could adversely affect our business.”
We may fail to recruit, train and retain the highly skilled employees that are necessary to remain competitive and execute our growth strategy. The loss of one or more of our key personnel could harm our business.
Competition for key technical personnel in high-technology industries such as ours is intense. We believe that our future success depends in large part on our continued ability to hire, train, retain and leverage the skills of qualified engineers and other highly skilled personnel needed to maintain and grow our ATG networks and related technology and develop and successfully deploy Gogo 5G, Gogo Galileo and other elements of our technology roadmap and new wireless telecommunications products and technology. We may not be as successful as our competitors at recruiting, training, retaining and utilizing these highly skilled personnel. Any failure to recruit, train and retain highly skilled employees may have a material adverse effect on our business.
We depend on the continued service and performance of our key personnel. Such individuals have acquired specialized knowledge and skills with respect to Gogo and its operations. As a result, if any of our key personnel were to leave Gogo, we could face substantial difficulty in hiring qualified successors and could experience a loss of productivity while any such successor obtains the necessary training and expertise. We do not maintain key man insurance on any of our officers or key employees. In addition, much of our key technology and systems is custom-made for our business by our personnel. The loss of key personnel, including key members of our management team, could disrupt our operations and may have a material adverse effect on our business. See “—The changes in executive management that occurred as part of the acquisition of Satcom Direct could disrupt our operations and may have a material adverse effect on our business.”
21
Pandemics or other outbreaks of contagious diseases and the measures implemented to combat them have had, and may continue to have, a material adverse effect on our business.
We face various risks related to public health issues, including epidemics, pandemics and other outbreak of infectious disease. Pandemics and other outbreaks of contagious diseases could result in significant business and operational disruptions, including business closures, supply chain disruptions, travel restrictions, stay-at-home orders and limitations on the availability of workforces.
Whether and to what extent future pandemics and other outbreaks of contagious diseases may impact our financial and operational performance will depend on developments that include the duration, spread and severity of the outbreak, the timetable for administering and efficacy of vaccines, the duration and geographic scope of related travel advisories and restrictions and the extent of the impact of the pandemic or outbreak on overall demand for commercial and business aviation travel, and other factors beyond our control, all of which are highly uncertain and cannot be predicted.
In addition to directly impacting demand for air travel, future pandemics and other outbreaks of contagious diseases and any resultant restrictions may have a material and adverse impact on other aspects of our business, including:
•
delays and difficulties in completing installations on certain aircraft; and
•
limitations on our ability to market and grow our business and to promote technological innovation.
In addition, pandemics and other outbreaks of contagious diseases may also exacerbate other risks disclosed in this Annual Report on Form 10-K. See, for example, “—Global supply chain challenges and logistics issues as well as increasing inflation have had, and may continue to have, an adverse effect on our business, financial condition and results of operations.”
Adverse economic conditions, including economic slowdowns, may have a material adverse effect on our business.
We cannot predict the nature, extent, timing or likelihood of any economic slowdown or the strength or sustainability of any economic recovery, worldwide, in the United States or in the aviation industry. Negative conditions in the general economy both in the United States and globally, including conditions resulting from changes in gross domestic product growth, declines in consumer confidence, labor shortages, inflationary pressures, rising interest rates, changes in government and election results in the United States and other jurisdictions in which we operate and financial and credit market fluctuations could cause a decrease in business investments, including spending on air travel and otherwise, and could materially and adversely affect the growth of our business. The U.S. economy has experienced a significant inflationary effect during the last several years from, among other things, supply chain disruptions and governmental stimulus or fiscal policies adopted in response to the COVID-19 pandemic and the war in Ukraine. While we cannot predict any future trends in the rate of inflation, there is currently significant uncertainty in the near-term economic outlook. Continued inflation would further raise our costs for labor, materials and services, which could negatively impact our profitability and cash flows. Additionally, we may be unable to raise our prices for our equipment and services in amounts equal to the rate of inflation, which may negatively impact our operating results and business.
In addition, geopolitical risks, including those arising from political turmoil, trade tension and/or the imposition of trade tariffs, terrorist activity and acts of civil or international hostility, are increasing. For instance, the ongoing military conflict between Russia and Ukraine has had negative impacts on the global economy, including by contributing to rapidly rising costs of living (driven largely by higher energy prices) in Europe and created uncertainty in the global capital markets and is expected to have further global economic consequences, including disruptions of energy markets. Further, other events outside of our control, including natural disasters, climate change-related events and regional or global outbreaks of contagious diseases may arise from time to time and be accompanied by governmental actions that may increase international tension. Any such events and responses, including regulatory developments, may cause significant volatility and declines in the global markets, disproportionate impacts to certain industries or sectors, disruptions to commerce (including to economic activity, travel and supply chains), loss of life and property damage, and may materially and adversely affect the global economy or capital markets, as well as our business and results of operations. If conditions of the general economy or markets in which we operate worsen from present levels, it could lead to a decrease in air travel, cause owners and operators of business aircraft to cut costs by reducing their purchases or use of business aircraft or their use of in-flight connectivity on such aircraft. Should an economic slowdown occur in the U.S. or globally, our business and results of operations may be materially adversely affected.
We may not be able to fully utilize portions of our deferred tax assets, which would negatively impact our earnings and other comprehensive income.
Our determination that we are more likely than not to realize a portion of our deferred tax assets represents our best estimate and considers both positive and negative factors. It is possible that there will be changes in our business, our performance, our industry or otherwise that cause actual results to differ materially from this estimate. If those changes result in significant and sustained reductions in our pre-tax income or utilization of existing tax carryforwards in future periods, additional valuation allowances may have to be recorded, which could have a material adverse impact on earnings and/or other comprehensive income.
22
Attention to climate change, conservation measures, and other ESG matters may adversely impact our business.
Concern over climate change, including the impact of global warming, has in recent years led to significant U.S. and international legislative and regulatory efforts to limit greenhouse gas (“GHG”) emissions. See “—We may be affected by global climate change or by legal and regulatory responses to such change.” Increased awareness and any adverse publicity in the global marketplace about the GHGs emitted by companies in the airline and transportation industries could harm our reputation and reduce customer demand for our services. Environmental activists and organizations have recently promoted the idea of “flight shaming,” or advocating that consumers reduce their use of private jets and commercial air travel in favor of more environmentally sustainable modes of transportation such as boats, trains and buses. To the extent that our customers reduce their use of air travel in response to new environmental regulation or changes in public perception about the impact of air travel on climate change, our customers may reduce their usage of our services and, as a result, our business prospects, financial condition and results of operations may be materially adversely affected.
In addition, other stakeholders, including shareholders, customers, employees, regulators and suppliers, have also been focused on ESG matters. In addition to the changing rules and regulations related to ESG matters imposed by governmental and self-regulatory organizations, especially in European jurisdictions, a variety of third-party organizations, institutional investors and customers evaluate the performance of companies on ESG topics, and the results of these assessments are widely publicized. These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. Reduced access to or increased cost of capital may occur as financial institutions and investors increase expectations related to ESG matters. Companies that do not adapt to or comply with investor or other stakeholder expectations and standards, or that are perceived to have not responded appropriately to concerns regarding ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and other adverse consequences.
In addition, in recent years, specifically in the United States, “anti-ESG” sentiment has gained momentum, with several states and Congress having proposed or enacted “anti-ESG” policies, legislation, or initiatives or issued related legal opinions, and the new U.S. presidential administration having recently issued an executive order opposing diversity equity and inclusion (“DEI”) initiatives in the private sector and executive orders to pursue deregulation in environmental and climate-change-related topics. Such anti-ESG and anti-DEI-related policies, legislation, initiatives, litigation, legal opinions, and scrutiny could result in the Company facing additional compliance obligations, becoming the subject of investigations and enforcement actions, or sustaining reputational harm.As a result, the regulatory landscape—and the resulting focus of various stakeholders on sustainability and other ESG matters—remains unclear.
We may be unsuccessful at evaluating or pursuing strategic opportunities, which could adversely affect our revenue, financial condition and results of operation.
Our Board and management continuously assess whether shareholder value would be increased by engaging in strategic and/or financial relationships, transactions or other opportunities, including those that are suggested to us by third parties. There can be no assurance that we will pursue any strategic or financial relationship, transaction or other opportunity, the outcome of which is inherently uncertain. Further, the process of evaluating and pursuing any such relationship, transaction or other opportunity will involve the dedication of significant resources and the incurrence of significant costs and expenses. If we are unable to mitigate these or other potential risks relating to assessing and undertaking strategic opportunities, it may disrupt our business or adversely impact our revenue, financial condition and results of operation. There can also be no assurance that we will be able to negotiate any acquisition successfully, and once negotiated, receive the required approvals for any acquisition or otherwise conclude any acquisition successfully, or that any acquisition will achieve the anticipated synergies or other positive results.
In addition, to the extent we consummate acquisitions or other related transactions, these completed acquisitions may entail further risks, including: unanticipated costs and liabilities of the acquired businesses, including environmental liabilities, that could materially adversely affect our results of operations; increased regulatory compliance relating to the acquired business; difficulties in assimilating acquired businesses, their personnel and their financial reporting systems, which would prevent the expected benefits from the transaction from being realized within the anticipated timeframe; negative effects on existing business relationships with suppliers and customers; and loss of key employees of the acquired businesses or our business. In addition, any future acquisitions could result in the incurrence of additional debt and related interest expense, contingent liabilities and amortization expense related to intangible assets, which could have a material adverse effect on our business, financial condition, operating results and cash flows, or the issuance of additional equity, which could dilute our shareholders’ interests.
Overall, if our acquisition strategy is not successful or if acquisitions are not well integrated into our existing operations, the Company’s profitability, business and financial condition could be negatively affected. See “—Risks Related to the Satcom Direct Acquisition”.
23
Risks Related to the Satcom Direct Acquisition
We may fail to realize all of the anticipated benefits of the Satcom Direct acquisition, or those benefits may take longer to realize than expected. We may also encounter significant difficulties in integration Satcom Direct’s business.
Our ability to realize the anticipated benefits of the Satcom Direct transaction will depend, to a large extent, on our ability to integrate Satcom Direct’s business. We cannot provide any assurance that we will successfully integrate or achieve the anticipated synergies of Satcom Direct’s technology, personnel, geographical reach, financial condition or business generally. The combination of two independent businesses is a complex, costly and time-consuming process. As a result, we will be required to devote significant management attention and resources to integrate the business practices and operations of Gogo and Satcom Direct’s businesses. The integration process may disrupt the business and, if implemented ineffectively, would restrict the realization of the full expected benefits. The failure to meet the challenges involved in integrating the two businesses and to realize the anticipated benefits of the transaction could cause an interruption of, or a loss of momentum in, the activities of the combined businesses, and could adversely affect the results of operations of the combined businesses.
In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customers and other business relationships, and diversion of management’s attention. The difficulties of combining the operations of the companies include, among others:
•
the diversion of management’s attention to integration matters;
•
difficulties in achieving anticipated cost savings, business opportunities and growth prospects from the combination;
•
difficulties in the integration of operations and systems, products and services, and management of facilities;
•
challenges in conforming standards, controls, procedures and accounting and other policies, business cultures, engineering, design and development processes, and compensation structures between the two companies;
•
difficulties in the assimilation of employees;
•
difficulties in managing the expanded operations of a large and complex company;
•
challenges in keeping existing customers and obtaining new customers; and
•
challenges in attracting and retaining key personnel.
Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially impact the business, financial condition and results of operations of the combined company. In addition, even if Satcom Direct’s business operations are integrated successfully, the full benefits of the transaction may not be realized, including the cost savings or sales or growth opportunities that are expected. These benefits may not be achieved within the anticipated time frame, or at all. Further, additional unanticipated costs may be incurred in the integration of the businesses. Additionally, we cannot reasonably predict the impact that Satcom Direct’s key operating results or business, or investors’ perception of its future value, would have on the market’s perception of our Company’s overall value. As a result, it cannot be assured that the transaction will result in the realization of the full benefits anticipated from such transaction.
The changes in executive management that occurred as part of the acquisition of Satcom Direct could disrupt our operations and may have a material adverse effect on our business.
As part of the acquisition of Satcom Direct, we appointed a new Chief Executive Officer, a new Chief Financial Officer, and other key personnel from Satcom Direct. We may encounter challenges with the integration of these new members of our management team. See “—Fulfilling our obligations associated with being a public company is expensive and time-consuming, and any delays or difficulties in satisfying these obligations may have a material adverse effect on our results of operations and our stock price.” These key personnel may require significant time to learn our pre-existing business and become familiar with various aspects of our operations, including as a public company. These factors could have an adverse impact on the Company’s operations.
Risks Related to Our Technology and Intellectual Property
We are currently delayed in deploying Gogo 5G, and may be unsuccessful or delayed in developing and deploying this or other next generation technologies.
We are currently developing a next generation ATG network using 5G technology, unlicensed spectrum, and licensed spectrum. Gogo 5G will be capable of working with different spectrum and supporting different next generation technologies. As previously disclosed, we are delayed in our commercial, nationwide launch of Gogo 5G due to a design error in a non-5G component of our chip,
24
which was designed by a third-party subcontractor of our 5G solution provider. We currently expect to deliver revenue from Gogo 5G in the fourth quarter of 2025, and are working with our vendors to finalize the schedule.
There can be no assurance that, during the current delay of our 5G launch, our customers will not seek alternative technologies of competitors. The launch of Gogo 5G likely will, depending on the impact of delays, launch shortly after the launch of our Gogo Galileo service, which could impede our marketing and sales efforts with respect to either offering, due to possible customer confusion among the offerings or lack of sufficient customer focus on either one during launch. Additionally, while we expect to deliver revenue from Gogo 5G in the fourth quarter of 2025, we cannot assure you that the 5G launch or our launch of other next generation technologies will in fact occur in sufficient time to meet growing user expectations regarding the in-flight connectivity experience and to effectively compete in the business aviation market. The current delay and any future delays could also decrease customer confidence, including from current or prospective customers, in our offerings, and negatively impact our financial position.
If Gogo 5G or any other next generation technology fails to perform as expected, our ability to meet users’ expectations regarding our systems' performance and to effectively compete in our market may be impaired and our business, financial condition and results of operations may be materially adversely affected. Factors heightening the risk of future delays in our 5G network or other next generation technologies, or a failure of such technologies to perform once commercialized, include: (i) our failure to design and develop a technology that provides the features and performance we require; (ii) integrating the solution with our existing network services; (iii) the availability of adequate spectrum; (iv) the failure of spectrum to perform as expected; (v) the failure of equipment and software to perform as expected; (vi) problems arising in the manufacturing process; (vii) our ability to negotiate contracts with suppliers on acceptable commercial and other terms; (viii) our reliance on single-source suppliers and their ability to continue as a going concern with adequate access to capital for the development and manufacturing of the core elements of the network and on other suppliers to provide certain components and services; and (ix) delays in obtaining or failures to obtain the required regulatory approvals for installation and operation of such equipment and the provision of service to passengers.
We may be unsuccessful in deploying our Gogo Galileo service.
There can be no assurance that Gogo Galileo will effectively compete in the global business aviation market due to, among other things, risks associated with: (i) the failure of our equipment and software to perform as expected; (ii) the failure of the Eutelsat OneWeb network to perform as expected; (iii) difficulties in integrating our hardware and software with the Eutelsat OneWeb network; (iv) problems arising in the manufacturing process; (v) our inability to negotiate contracts with suppliers on acceptable commercial and other terms; (vi) our reliance on single-source suppliers for the development and manufacturing of the antenna and access to a LEO network; and (vii) delays in obtaining or failures to obtain the required regulatory approvals for installation and operation of such equipment and the provision of service to passengers. If Gogo Galileo fails to perform as expected, our ability to meet customers’ or end users’ expectations regarding our systems’ performance and to effectively compete in our market may be impaired and our business, financial condition and results of operations may be materially adversely affected. See “—Competition could result in price reduction, reduced revenue and loss of market position and could harm our results of operations.” Furthermore, under our agreement with Hughes we have committed to purchase, over a seven-year period, half duplex and full duplex antennas with an aggregate purchase price of approximately $170 million and $102 million, respectively, and we may make additional financial commitments in connection with Gogo Galileo. If we are not successful in deploying Gogo Galileo, we may nonetheless, depending on the circumstances, be required to honor these commitments. Likewise, under Satcom Direct’s agreement with Gilat Satellite Networks Ltd., Satcom Direct’s supplier for an antenna similar to our full duplex antenna which could be used on a LEO satellite network like Gogo Galileo, we have committed to purchase, over a two-year period, a full duplex antenna and a modem with an aggregate purchase price of approximately $21 million.
Our business is dependent on the availability of spectrum.
In June 2006, we purchased at FCC auction an exclusive ten-year, 3 MHz license for ATG spectrum, and in April 2013, as part of our acquisition of LiveTV Airfone, LLC, we acquired an additional 1 MHz ATG spectrum license. In 2017, our applications to renew our licenses were granted for additional ten-year terms without further payment. Any breach of the terms of our FCC licenses, FCC waiver conditions or FCC regulations, including foreign ownership restrictions, permitted uses of the spectrum and compliance with FAA regulations could result in the revocation, suspension, cancellation or reduction in the term of our licenses or a refusal by the FCC to renew the licenses upon expiration. Further, in connection with an application to renew our licenses upon expiration, a competitor could file a petition opposing such renewal on anti-competitive or other grounds. On August 3, 2017, the FCC released an order that, among other things, revised the wireless license renewal rules. As a result of this order, which applies to the industry generally, all licensees will need to make a showing (or certification) at renewal to demonstrate that the licensee provided and continues to provide service to the public. Because the 1 MHz ATG license has no specific construction or substantial service requirement, it is currently not clear what level and length of service the FCC will find adequate when considering the next renewal of the 1 MHz ATG license in 2026. We plan to incorporate this 1 MHz ATG license into our network. An ambiguous renewal requirement could impair our flexibility to use or otherwise realize the value of such spectrum beyond 2026.
Our ability to offer in-flight broadband connectivity through our ATG service currently depends on our ability to maintain rights to use the 3 MHz ATG spectrum in the U.S., and our failure to do so may have a material adverse effect on our business, financial
25
condition and results of operations. In addition, our ability to meet increasing performance demands and expand our service offerings in the United States will depend in part upon our ability to successfully roll-out our plans to employ unlicensed spectrum in the 2.4 GHz band for concurrent use with the licensed 3 MHz spectrum to launch Gogo 5G, and may require that we obtain additional licensed or unlicensed spectrum suitable for our use. Such spectrum may not be available to us on commercially reasonable terms or at all. Our failure to obtain adequate spectrum could have a material adverse effect on our business, financial condition and results of operations.
Additional ATG spectrum, whether licensed or unlicensed, is or may become available in the future.
While we have exclusive rights to the only broadband spectrum licensed by the FCC for ATG use, the FCC may in the future decide to auction additional spectrum for ATG use that is not currently designated for that purpose, or a competitor could develop technology or a business plan that allows it to cost effectively use spectrum not specifically reserved for ATG, but on which ATG use is not prohibited, to provide broadband connectivity.
The availability of additional spectrum in the marketplace that is available for ATG use may increase the possibility that we may face competition from one or more other ATG service providers in the future.
We periodically are and could in the future be adversely affected if we or our third party suppliers or service providers suffer service interruptions or delays, technology failures, damage to equipment or system disruptions or failures arising from, among other things, force majeure events, cyberattacks or other malicious activities.
We rely heavily on communications, information systems (both internal and provided by third parties), and the internet to conduct our business. Our brand, reputation and ability to attract, retain and serve our customers depend upon the reliable performance of our ground network, in-flight systems and third-party satellite networks. We have experienced and may in the future experience service interruptions, service delays or technology or systems failures, which may be due to factors beyond our control, including cyberattacks or other malicious activities, natural catastrophes, epidemics, pandemics, industrial accidents, blackouts, acts of war or terrorism or other similar events. If we experience frequent or severe system or network failures, our reputation, brand and customer retention could be harmed. In addition, in the event that a significant number of our or our vendors’ managers were unavailable following a disaster, our ability to effectively conduct business could be severely compromised. Unanticipated problems with, or failures of, our disaster recovery systems and business continuity plans could have a material impact on our ability to conduct business and on our results of operations and financial condition. The failure of our disaster recovery systems and business continuity plans could adversely impact our profitability and our business or result in delays in reporting our financial results.
We and our vendors, like other commercial entities, have been, and will likely continue to be, subject to various forms of cyberattacks from a wide variety of sources/malicious actors, with the objective of gaining unauthorized access to our systems and data or disrupting our operations. These include, but are not limited to, cyberattacks, phishing attacks, account takeover attempts, the introduction of computer viruses or malicious code (commonly referred to as “malware”), ransomware or other extortion tactics, denial of service attacks, credential stuffing, and other computer-related penetrations. To date, none of these cyberattacks has, individually or in the aggregate, resulted in a cybersecurity incident with a material effect on our operations or our financial condition, results of operations, liquidity, or cash flows, but they could have a material impact in the future. Hardware, software or applications developed by us or received from third parties may contain exploitable vulnerabilities, bugs, or defects in design, maintenance or manufacture or other issues that could compromise information and cybersecurity. In addition, nation state attacks against U.S. businesses, including in the telecommunications industry, are prevalent. In light of the Ukraine war and other geopolitical events and dynamics, including ongoing tensions with North Korea, Iran and other states, state-sponsored parties or their supporters may launch cyberattacks, and may attempt to cause supply chain disruptions, or carry out other geopolitically motivated actions that may adversely disrupt or degrade our operations and may result in data compromise. Cybersecurity incidents may also arise as a result of employee error, and our continuous technological evaluations and enhancements, including changes designed to update our protective measures, may increase our risk of a significant cybersecurity incident. There is no assurance that administrative, physical, and technical controls and other preventive actions taken to reduce the risk of cyberattacks and protect our information technology will prevent physical and electronic break-ins, cyberattacks or other cybersecurity incidents to such systems or our data. In some cases, such physical and electronic break-ins, cyberattacks or other cybersecurity incidents may not be immediately detected. If we or our vendors fail to prevent, detect, address and mitigate such incidents, this may impede or interrupt our business operations and could adversely affect our business, financial condition and results of operations.
In addition, system failures or cybersecurity incidents could subject us to regulatory enforcement actions (including penalties, fines, and investigations), and result in claims of material breaches of our customer contracts resulting in termination rights, penalties or claims for damages. Regulators’ or others’ scrutiny of cybersecurity, including new laws, regulations, or industry standards, could increase our compliance costs and operational burdens, especially as regulatory and legislative focus on cybersecurity matters intensifies. Regulators, customers, or others may scrutinize us for any system disruptions or cybersecurity incidents. We may incur higher costs to comply with laws related to, or regulators’ scrutiny of, our use, collection, management, or transfer of data and other privacy practices.
26
Assertions by third parties of infringement, misappropriation or other violations by us of their intellectual property rights could result in significant costs and materially adversely affect our business and results of operations.
In recent years, there has been significant litigation involving intellectual property rights in many technology-based industries, including the wireless communications industry. We are currently facing, and may in the future face, claims that we or a supplier have violated patent, trademark or other intellectual property rights of third parties. Many companies, including our competitors, are devoting significant resources to obtaining patents that could potentially cover many aspects of our business. While we have reviewed the patent portfolios of certain competitors and other third parties, we have not exhaustively searched all patents relevant to our technologies and business and therefore it is possible that we may be unknowingly infringing the patents of others. Any infringement, misappropriation or related claims, whether or not meritorious and whether or not they result in litigation, are time-consuming, divert technical and management personnel and are costly to resolve. Asa result of any such dispute, we may have to develop non-infringing technology, pay damages, enter into royalty or licensing agreements, cease providing certain products or services, adjust our merchandizing or marketing and advertising activities or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us.
In February 2022, a competitor filed a patent infringement suit against us. A trial date has been scheduled for November 17, 2025. Claim construction proceedings, fact discovery and expert discovery are completed. Dispositive motions were filed on October 25, 2024 and await resolution. For more information, see Note 15, “Commitments and Contingencies—SmartSky Litigation,” to our consolidated financial statements. Adverse results in the underlying infringement suit or other infringement suits could require us to develop non-infringing technology, pay damages, enter into royalty or licensing agreements, cease providing certain products or services, adjust our sales, marketing and advertising activities or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us. Even if we are successful in defending these claims, such litigation may be time-consuming and costly, divert management resources and could adversely affect our business relating to such disputed technology during its pendency.
Pursuant to our contracts with certain customers, we have agreed to indemnify such customers against such claims, and our indemnification obligations generally include defending or paying for the defense of the action and paying any judgments or other costs assessed against the customer in the event of an adverse outcome. In most cases, our contracts do not cap our indemnification obligations. In addition, certain of our suppliers do not indemnify us for third-party infringement or misappropriation claims arising from our use of supplier technology, and we may be liable in the event of such claims. Our inability to meet our indemnification obligations and our customers terminating or failing to renew their contracts may have a material adverse effect on our business and financial condition.
We or our technology suppliers may be unable to continue to innovate and provide products and services that are useful to customers and passengers.
The market for our services is characterized by evolving technology, changes in customer and passenger needs and performance expectations, and frequent new service and product introductions. Our success will depend, in part, on our and our suppliers’ ability to continue to enhance existing technology and services or develop new technology and services on a timely and cost-effective basis. If we or our suppliers fail to adapt quickly enough to changing technology, customer requirements and/or regulatory requirements, our business and results of operations may be materially adversely affected. We expect to have to invest significant capital to keep pace with innovation and changing technology, and if the amount of such investment exceeds our plans or the amount of investment permitted under the Credit Agreements (as defined below), it may have a material adverse effect on our results of operations.
As is common in industries like ours, changing technology may result in obsolescence as we implement new technologies and products and retire old technologies and products. As we encounter such obsolescence, we need to ensure that we have a sufficient supply of parts, products and equipment compatible with our existing technology, as well as access to maintenance, repair and other critical support services, until the transition is completed. Certain suppliers may determine to stop manufacturing and supplying end-of-life parts, products and equipment, or may stop providing related services, prior to completion of our transition. In the event that we are unable to obtain sufficient inventory from existing suppliers we would be required to engage new suppliers who have access to the intellectual property required to manufacture and support components that meet our specifications, and we may be unable to contract with such suppliers on commercially reasonable terms, or at all. We have implemented policies and procedures intended to ensure that we timely anticipate technology and product transitions and have access to sufficient inventory and services, but if such policies prove ineffective and we are unable to continue to engage suppliers with the capabilities or capacities required by our business to effect a transition, or if such suppliers fail to deliver quality products, parts, equipment and services in sufficient quantities or on a timely basis consistent with our schedule, our business, financial condition and results of operations may be materially adversely affected. In addition, following our retirement of end-of-life technologies and products, we may find that we have either obsolete or excess inventory on hand and might have to write off unusable inventory, which could have a material adverse effect on our results of operations.
27
We may be unable to protect our intellectual property rights.
We regard our trademarks, service marks, copyrights, patents, trade secrets, proprietary technologies, domain names and similar intellectual property as important to our success. We rely on trademark, copyright and patent law, trade secret protection, and confidentiality agreements with our employees, vendors, customers and others to protect our proprietary rights. We have sought and obtained patent protection for certain of our technologies in the United States and certain other countries. Many of the trademarks that we use (including marks we have applied to register) contain words or terms having a somewhat common usage, such as “Gogo” and “Gogo Vision” and, as a result, we may have difficulty registering them in certain jurisdictions. We do not own, for example, the domain www.gogo.com and we have not yet obtained registrations for our most important marks in all markets in which we do business or may do business in the future. If other companies have registered or have been using in commerce similar trademarks for services similar to ours in foreign jurisdictions, we may have difficulty in registering, or enforcing an exclusive right to use, our marks in those foreign jurisdictions.
There can be no assurance that the efforts we have taken to protect our proprietary rights will be effective, that any patent and trademark applications will lead to issued patents and registered trademarks in all instances, that others will not obtain intellectual property rights to similar or superior technologies, products or services, or that our intellectual property will not be challenged, invalidated, misappropriated or infringed by others. Furthermore, the intellectual property laws and enforcement practices of other countries in which our service is or may in the future be offered may not protect our intellectual property rights to the same extent as the laws of the United States. We may need to expend additional resources to defend our intellectual property in these countries and our inability to do so could impair our business or adversely affect our international expansion. If we are unable to protect our intellectual property from unauthorized use, our ability to exploit our proprietary technology or our brand image may be harmed, which may materially adversely affect our business and results of operations.
The use of new and evolving technologies, such as artificial intelligence (“AI”), in our products and services may result in reputational harm, competitive harm or legal liability.