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Gogo Announces Fourth Quarter and Full Year 2013 Results

March 13, 2014

Record quarterly revenue up 46 percent to $92.6 million

ITASCA, Ill., March 13, 2014 /PRNewswire/ — Gogo Inc. (Nasdaq: GOGO), a leading provider of in-flight connectivity and a pioneer in wireless in-flight digital entertainment solutions, today announced its financial results for the fourth quarter and full year ended December 31, 2013.

Gogo reported revenue for Q4 2013 of $92.6 million, up 46% year-over-year. Adjusted EBITDA for Q4 2013 was negative $0.3 million, down from $0.5 million in Q4 2012, driven by increased investment in our international expansion. Net loss attributable to common stock for Q4 2013 was $22.1 million, or $0.26 per share, compared to net loss attributable to common stock of $36.0 million, or $5.29 per share, in Q4 2012.

Revenue for full year 2013 was $328.1 million, up 41% over 2012. Adjusted EBITDA for 2013 was $8.4 million, down from $9.3 million for 2012, also driven by increased investment in our international expansion. Net loss attributable to common stock for full year 2013 was $145.9 million, or $3.05 per share, compared to net loss attributable to common stock of $95.6 million, or $14.07 per share, for full year 2012.

“We are very pleased with the financial and operating performance we delivered in Q4 and full year 2013, as we continued to see strong demand for our connectivity products and services across business segments,” said Gogo’s President and CEO, Michael Small. “With more than 4,000 air-to-ground broadband aircraft and nearly 5,200 satellite aircraft online, Gogo has the industry-leading scale, technology offerings and operational expertise required to best serve airlines in North America and around the world,” added Mr. Small.

Q4 2013 Consolidated Financial Results

    --  Revenue increased to $92.6 million, up 46% from $63.5 million in Q4
        2012. Service revenue increased 44% to $69.7 million and equipment
        revenue increased 52% to $22.9 million year-over-year.
    --  Operating expenses increased to $107.0 million, up from $73.1 million in
        Q4 2012. We incurred higher cost of service expenses at CA-NA and BA as
        a result of increased service revenue, and increased cost of equipment
        expenses at BA as a result of increased equipment revenue.  In addition,
        other operating expenses in both CA-NA and BA rose to support these
        growing businesses. In CA-ROW, we also incurred increased operating
        expenses, primarily due to higher satellite transponder and teleport
        fees and expenses related to development and certification of our
        satellite connectivity systems.
    --  Adjusted EBITDA decreased to negative $0.3 million from $0.5 million in
        Q4 2012, driven by increased investment in our international expansion.
    --  Cash CAPEX, defined as capital expenditures net of airborne equipment
        proceeds received from the airlines, increased to $23.9 million, up
        102%, from $11.8 million in Q4 2012 driven primarily by a $9.7 million
        decrease in airborne equipment proceeds.
    --  As of December 31, 2013, Gogo had cash and cash equivalents and
        short-term investments of $266.3 million compared to $112.6 million as
        of December 31, 2012.

Q4 2013 Business Segment Financial Results

    --  Commercial Aviation - North America (CA-NA)
        --  We ended the quarter with 2,032 aircraft online, up 12% from 1,811
            at December 31, 2012.
        --  Average monthly service revenue per aircraft online, or ARPA,
            increased to $8,970, up 21% from $7,400 in Q4 2012, driven by a 21%
            increase in take rate to 6.9% in Q4 2013.
        --  Revenue increased to $55.4 million, up 41% from $39.2 million in Q4
            2012.
        --  Segment loss decreased to $2.0 million from $3.1 million in Q4 2012.
    --  Business Aviation (BA)
        --  We ended the quarter with 2,047 ATG systems online, up 41% from
            1,455 at December 31, 2012, and 5,175 satellite systems online, up
            3% from 5,030 at December 31, 2012.
        --  Service revenue increased to $15.0 million, up 50% from $10.0
            million in Q4 2012, driven by the increase in ATG systems online and
            higher average monthly service revenue per aircraft online for both
            ATG and satellite service.
        --  Equipment revenue increased to $22.1 million, up 54% from $14.4
            million in Q4 2012, driven by a 56% increase in ATG units shipped to
            248 for Q4 2013, up from 159 in Q4 2012, higher average revenue per
            ATG unit shipped, and strong sales of the recently introduced Gogo
            Text & Talk product.
        --  Total revenue increased to $37.1 million, up 52% from $24.4 million
            in Q4 2012.
        --  Segment profit increased to $16.1 million, up 91% from $8.5 million
            in Q4 2012, and segment profit as a percentage of segment revenue
            increased to 43% in Q4 2013 from 35% in Q4 2012.
    --  Commercial Aviation - Rest of World (CA-ROW)
        --  Segment loss increased to $14.4 million from $4.8 million in Q4
            2012, due primarily to increased satellite transponder and teleport
            fees needed to build our global satellite network and expenses
            associated with the development and certification of our aircraft
            satellite connectivity systems.

Full Year 2013 Consolidated Financial Results

    --  Revenue increased to $328.1 million, up 41% from $233.5 million in 2012.
        Service revenue increased 50% to $250.4 million and equipment revenue
        increased 17% to $77.7 million year-over-year.
        --  CA-NA revenue increased to $199.1 million, up 48% from $134.4
            million in 2012.
        --  BA revenue increased to $127.5 million, up 30% from $98.4 million in
            2012.
        --  CA-ROW revenue increased to $1.6 million from $0.7 million in 2012.
    --  Adjusted EBITDA decreased to $8.4 million, down $0.9 million from $9.3
        million in 2012, driven by increased investment in our international
        expansion.
    --  Cash CAPEX increased to $104.3 million, up 81% from $57.6 million in
        2012, as a result of increased airborne equipment purchases for CA-NA
        ATG-4 retrofits and CA-ROW satellite connectivity systems, continued
        investment in our ATG network, higher capitalized software spend and
        lower airborne equipment proceeds.

Recent Announcements

    --  We completed the first installation of our Ku-band satellite technology
        on Delta's international fleet.
    --  We received a Supplemental Type Certificate (STC) from the FAA and
        Certification from the Japanese Civil Aviation Bureau (JCAB) to install
        our Ku-band satellite technology on Japan Airlines' 777-200 aircraft.
    --  Japan Airlines, which previously agreed to provide our in-flight
        connectivity service on its entire domestic fleet of 77 aircraft,
        announced that it will also offer Gogo Vision service across the fleet.
    --  AeroMexico announced it selected Gogo to provide connectivity and Gogo
        Vision service on at least 75 aircraft.
    --  The first phase of our Canadian ATG network, which serves the Canadian
        routes most frequently used by our airline partners, went live in Q1
        2014, on schedule.

Business Outlook

For the full year ending December 31, 2014, we are providing the following guidance:

    --  Total revenue of $400 million to $422 million
        --  CA-NA revenue of $240 million to $250 million
        --  BA revenue of $157 million to $167 million
        --  CA-ROW revenue of $3 million to $5 million
    --  Adjusted EBITDA of $8 million to $18 million
    --  Cash CAPEX of $105 million to $125 million

“As we look to the year ahead, we are excited about our growth prospects. We expect our revenue per aircraft to increase at CA-NA, as take rates increase driven by a strong secular trend and passenger adoption of new services like Gogo Vision and Gogo Text Messaging grows. We expect to see a meaningful increase in network capacity during 2014, as we plan to roughly double the number of aircraft online equipped with ATG4 from 436 at the end of 2013 and introduce our new hybrid Ground-To-Orbit (GTO) technology. Our BA business is poised to deliver strong results driven by continued strong demand for ATG systems and adoption of recently announced new products and services. Finally, we are very excited about the commercial launch of our CA-ROW business in 2014 and expect to end the year with between 50 and 100 CA-ROW satellite aircraft online,” commented Mr. Small.

Conference Call

The fourth quarter and full year conference call will be held on March 13th, 2014 at 8:30 a.m. ET. A live webcast of the conference call, as well as a replay, will be available online on the Investor Relations section of the company’s website at http://ir.gogoair.com. Participants can also access the call by dialing (855) 500-1988 (within the United States and Canada) or (832) 412-1830 (international dialers) and entering conference ID number 88608003. A replay of the call will be available approximately two hours after the call has ended and will be available until April 13th, 2014. To access the replay, dial (855) 859-2056 (within the United States and Canada) or (404) 537-3406 (international dialers) and enter the conference ID number 88608003.

Non-GAAP Financial Measures

We report certain non-GAAP financial measurements, including Adjusted EBITDA, Adjusted Net Loss, Adjusted Net Loss Per Share and Cash CAPEX in the supplemental tables below. Management uses Adjusted EBITDA and Cash CAPEX for business planning purposes, including managing our business against internally projected results of operations and measuring our performance and liquidity. Management prepares Adjusted Net Loss and Adjusted Net Loss Per Share for investors, securities analysts and other users of our financial statements for use in evaluating our performance under our current capital structure. These supplemental performance measures also provide another basis for comparing period to period results by excluding potential differences caused by non-operational and unusual or non-recurring items. These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies. Adjusted EBITDA, Adjusted Net Loss, Adjusted Net Loss Per Share and Cash CAPEX are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance or liquidity, as applicable, investors should (i) evaluate each adjustment in our reconciliation of net loss attributable to common stock, and the explanatory footnotes regarding those adjustments, (ii) use Adjusted EBITDA, Adjusted Net Loss and Adjusted Net Loss Per Share in addition to, and not as an alternative to, net loss attributable to common stock as a measure of operating results, and (iii) use Cash CAPEX in addition to, and not as an alternative to, consolidated capital expenditures when evaluating our liquidity.

Cautionary Note Regarding Forward-Looking Statements

Certain disclosures in this press release and related comments by our management include 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 business outlook, industry, business strategy, plans, goals and expectations concerning our market position, international expansion, 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,” “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 press release.

Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: the loss of, or failure to realize benefits from, agreements with our airline partners; any inability to timely and efficiently roll out our technology roadmap for any reason, including regulatory delays, or the failure by our airline partners to roll out equipment upgrades or new services or adopt new technologies in order to support increased network capacity demands; the loss of relationships with original equipment manufacturers or dealers; our ability to develop network capacity sufficient to accommodate demand; unfavorable economic conditions in the airline industry and economy as a whole; our ability to expand our domestic or international operations, including our ability to grow our business with current and potential future airline partners; an inability to compete effectively; our reliance on third-party satellite service providers and equipment and other suppliers, including single source providers and suppliers; our ability to successfully develop and monetize new products and services, including those that were recently released, are currently being offered on a limited, or trial basis or are in various stages of development; our ability to deliver products and services, including newly developed products and services, on schedules consistent with our contractual commitments to customers; the effects, if any, on our business of the recent merger of American Airlines and U.S. Airways; a revocation of, or reduction in, our right to use licensed spectrum or grant of a license to use air-to-ground spectrum to a competitor; our use of open source software and licenses; the effects of service interruptions or delays, technology failures, material defects or errors in our software or damage to our equipment; the limited operating history of our CA-NA and CA-ROW segments; increases in our projected capital expenditures due to, among other things, unexpected costs incurred in connection with the roll-out of our technology roadmap or our international expansion; compliance with U.S. and foreign government regulations and standards, including those related to the installation and operation of satellite equipment and our ability to obtain and maintain all necessary regulatory approvals to install and operate our equipment in the U.S. and foreign jurisdictions; our, or our technology suppliers’, inability to effectively innovate; costs associated with defending pending or future intellectual property infringement and other litigation or claims; our ability to protect our intellectual property; any negative outcome or effects of pending or future litigation; limitations and restrictions in the agreements governing our indebtedness and our ability to service our indebtedness; our ability to obtain additional financing on acceptable terms or at all; fluctuation in our operating results; our ability to attract and retain customers and to capitalize on revenue from our platform; the demand for and market acceptance of our products and services; changes or developments in the regulations that apply to us, our business and our industry; the attraction and retention of qualified employees and key personnel; the effectiveness of our marketing and advertising and our ability to maintain and enhance our brands; our ability to manage our growth in a cost-effective manner and integrate and manage acquisitions; compliance with corruption laws and regulations in the jurisdictions in which we operate, including the Foreign Corrupt Practices Act and the (U.K.) Bribery Act 2010; restrictions on the ability of U.S. companies to do business in foreign countries, including, among others, restrictions imposed by the OFAC; and difficulties in collecting accounts receivable.

Additional information concerning these and other factors can be found under the caption “Risk Factors” in our final prospectus filed with the Securities and Exchange Commission on June 24, 2013 relating to the Company’s Initial Public Offering.

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 press release ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. All forward-looking statements speak only as of the date made and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

About Gogo

Gogo is the global leader of in-flight connectivity and wireless in-flight digital entertainment solutions. Using Gogo’s exclusive products and services, passengers with Wi-Fi enabled devices can get online on more than 2,000 Gogo equipped commercial aircraft. In-flight connectivity partners include AeroMexico, American Airlines, Air Canada, AirTran Airways, Alaska Airlines, Delta Air Lines, Frontier Airlines, Japan Airlines, United Airlines, US Airways and Virgin America. In-flight entertainment partners include AeroMexico, American Airlines, Delta Air Lines, Japan Airlines, Scoot and US Airways. In addition to its commercial airline business, Gogo provides its communications services to passengers on more than 6,300 business aircraft. Back on the ground, Gogo’s 700+ employees in Itasca, IL, Broomfield, CO and various locations overseas are working to continually redefine flying as a productive, socially connected, and all-around more satisfying experience. Connect with Gogo at www.gogoair.com, on Facebook at www.facebook.com/gogo and on Twitter at www.twitter.com/gogo.


    Investor Relations Contact:     Media Relations Contact:

    Varvara Alva                    Steve Nolan

    630-647-7460                    630-647-1074

    ir@gogoair.com                  pr@gogoair.com

Logo – http://photos.prnewswire.com/prnh/20110715/CG34837LOGO


                              Gogo Inc. and Subsidiaries

                         Consolidated Statements of Operations

                       (in thousands, except per share amounts)

                                For the Three
                                  Months                                   For the Years

                              Ended December                              Ended December
                                       31,                                             31,
                                 --------------                                ---------------

                              2013                        2012                2013                       2012
                              ----                        ----                ----                       ----

    Revenue:

    Service
     revenue               $69,656                     $48,469            $250,381                   $167,067

    Equipment
     revenue                22,898                      15,054              77,743                     66,448
                            ------                      ------              ------                     ------

    Total revenue           92,554                      63,523             328,124                    233,515

    Operating
     expenses:

    Cost of
     service
     revenue
     (exclusive of
     items shown
     below)                 39,963                      25,095             132,259                     83,235

    Cost of
     equipment
     revenue
     (exclusive of
     items shown
     below)                 10,348                       6,889              35,739                     29,905

    Engineering,
     design and
     development            13,747                      10,913              49,687                     35,354

    Sales and
     marketing               9,299                       6,910              30,597                     26,498

    General and
     administrative         19,313                      13,124              69,000                     49,053

    Depreciation
     and
     amortization           14,291                      10,214              55,509                     36,907
                            ------                      ------              ------                     ------

    Total
     operating
     expenses              106,961                      73,145             372,791                    260,952
                           -------                      ------             -------                    -------

    Operating loss         (14,407)                     (9,622)            (44,667)                   (27,437)
                            ------                      ------             -------                     ------

    Other (income)
     expense:

    Interest
     income                    (17)                        (15)                (64)                       (77)

    Interest
     expense                 7,492                       4,108              29,272                      8,913

    Fair value
     derivative
     adjustment       -                           -              36,305                      (9,640)

    Write off of
     deferred
     equity
     financing
     costs            -                       5,023                   -                       5,023

    Other income                 4                           1                   2                         22
                               ---                         ---                 ---                        ---

    Total other
     (income)
     expense                 7,479                       9,117              65,515                      4,241
                             -----                       -----              ------                      -----

    Loss before
     incomes taxes         (21,886)                    (18,739)           (110,182)                   (31,678)

    Income tax
     provision                 219                         365               1,107                      1,036
                               ---                         ---               -----                      -----

    Net loss               (22,105)                    (19,104)           (111,289)                   (32,714)

    Class A and
     Class B
     senior
     convertible
     preferred
     stock return     -                     (14,194)            (29,277)                    (52,427)

    Accretion of
     preferred
     stock            -                      (2,663)             (5,285)                    (10,499)
                    ---                      ------              ------                      ------

    Net loss
     attributable
     to common
     stock                $(22,105)                   $(35,961)          $(145,851)                  $(95,640)

    Net loss
     attributable
     to common
     stock per
     share-
     basic and
     diluted                $(0.26)                     $(5.29)             $(3.05)                   $(14.07)
                            ======                      ======              ======                     ======

    Weighted
     average
     number of
     shares-basic
     and diluted            84,230                       6,798              47,832                      6,798
                            ======                       =====              ======                      =====

                            Gogo Inc. and Subsidiaries

                           Consolidated Balance Sheets

                 (in thousands, except share and per share data)

                                      December 31,               December 31,

                                                         2013                      2012
                                                         ----                      ----

    Assets

    Current assets:

    Cash and cash
     equivalents                                     $266,342                  $112,576

    Accounts
     receivable, net
     of allowances of
     $162 and $1,139,
     respectively                                      25,690                    24,253

    Inventories                                        13,646                    12,149

    Prepaid expenses
     and other current
     assets                                            16,287                     6,367
                                                       ------                     -----

    Total current
     assets                                           321,965                   155,345
                                                      -------                   -------

    Non-current
     assets:

    Property and
     equipment, net                                   265,634                   197,674

    Intangible assets,
     net                                               72,848                    58,147

    Goodwill                                              620                       620

    Long-term
     restricted cash                                    5,418                       640

    Debt issuance
     costs                                             12,969                     8,826

    Other non-current
     assets                                             9,546                    10,863
                                                        -----                    ------

    Total non-current
     assets                                           367,035                   276,770
                                                      -------                   -------

    Total assets                                     $689,000                  $432,115
                                                     ========                  ========

    Liabilities and
     Stockholders'
     equity (deficit)

    Current
     liabilities:

    Accounts payable                                  $22,251                   $16,691

    Accrued
     liabilities                                       49,146                    39,691

    Accrued airline
     revenue share                                      9,958                     6,261

    Deferred revenue                                   11,718                     6,663

    Deferred airborne
     lease incentives                                   9,005                     5,917

    Current portion of
     long-term debt
     and capital
     leases                                             7,887                     4,091
                                                        -----                     -----

    Total current
     liabilities                                      109,965                    79,314
                                                      -------                    ------

    Non-current
     liabilities:

    Long-term debt                                    235,627                   131,450

    Deferred airborne
     lease incentives                                  53,012                    40,043

    Deferred tax
     liabilities                                        5,770                     4,949

    Other non-current
     liabilities                                       14,436                     7,758
                                                       ------                     -----

    Total non-current
     liabilities                                      308,845                   184,200
                                                      -------                   -------

    Total liabilities                                 418,810                   263,514
                                                      -------                   -------

    Commitments and
     contingencies

    Redeemable
     preferred stock

    Class A senior
     convertible
     preferred stock                             -                    174,199

    Class B senior
     convertible
     preferred stock                             -                    285,035

    Junior convertible
     preferred stock                             -                    155,144
                                               ---                    -------

    Total preferred
     stock                                       -                    614,378
                                               ---                    -------

    Stockholders'
     equity (deficit)

    Common stock                                            8                         -

    Additional paid-
     in-capital                                       871,325                     9,110

    Accumulated other
     comprehensive
     loss                                                (425)                      (20)

    Accumulated
     deficit                                        (600,718)                 (454,867)
                                                     --------                  --------

    Total
     stockholders'
     equity (deficit)                                 270,190                 (445,777)
                                                      -------                  --------

    Total
     liabilities and
     stockholders'
     equity
     (deficit)                                       $689,000                  $432,115
                                                     ========                  ========

                           Gogo Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

                                 (in thousands)

                                                                For the Years
                                                                   Ended

                                                              December 31,
                                                              ------------

                                                                2013                  2012
                                                                ----                  ----

    Operating activities:

    Net income (loss)                                      $(111,289)             $(32,714)

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

    Depreciation and amortization                             55,509                36,907

    Fair value derivative
     adjustment                                               36,305                (9,640)

    Write off of deferred equity
     financing costs                                   -                    5,023

    Loss on asset disposals/
     abandonments                                              1,058                 1,592

    Deferred income taxes                                        821                   803

    Stock compensation expense                                 5,621                 3,545

    Amortization of deferred
     financing costs                                           2,832                   804

    Changes in operating assets and
     liabilities:

    Accounts receivable                                       (1,015)               (3,288)

    Inventories                                               (1,497)               (3,026)

    Prepaid expenses and other
     current assets                                           (1,378)               (1,032)

    Canadian ATG license payments                                126                (3,236)

    Deposits on satellite services                            (4,774)                    -

    Accounts payable                                           2,281                 2,561

    Accrued liabilities                                       10,911                 5,943

    Accrued airline revenue share                              3,697                 3,416

    Deferred airborne lease
     incentives                                               10,217                18,165

    Deferred revenue                                           6,685                 3,212

    Other non-current assets and
     liabilities                                               1,680                 1,017
                                                               -----                 -----

    Net cash provided by operating
     activities                                               17,790                30,052
                                                              ------                ------

    Investing activities:

    Proceeds from the sale of
     property and equipment                                      226                   860

    Purchases of property and
     equipment                                              (105,228)              (67,449)

    Acquisition of intangible
     assets                                                  (16,141)              (12,007)

    Acquisition of Airfone,
     includes $1.0 million in
     restricted cash at December
     31, 2013                                                 (9,344)                    -

    (Increase) decrease in
     investing restricted cash                                (4,565)                 (257)

    Net cash used in investing
     activities                                             (135,052)              (78,853)
                                                             -------                ------

    Financing activities:

    Proceeds from initial public
     offering, net of underwriter
     commissions                                             173,910                     -

    Proceeds from credit facilities                          113,000               135,000

    Proceeds from issuance of
     preferred stock                                   -                        -

    Payment of debt, including
     capital leases                                           (6,326)               (2,339)

    Payment of additional offering
     costs                                                    (3,858)               (4,255)

    Payment of debt issuance costs                            (6,975)               (9,630)

    Stock option exercises                                     1,305                     -

    Other                                              -                        -
                                                     ---                      ---

    Net cash provided by financing
     activities                                              271,056               118,776
                                                             -------               -------

    Effect of exchange rate changes
     on cash                                                     (28)                   10
                                                                 ---                   ---

    Increase in cash and cash
     equivalents                                             153,766                69,985

    Cash and cash equivalents at
     beginning of period                                     112,576                42,591
                                                             -------                ------

    Cash and cash equivalents at
     end of period                                          $266,342              $112,576
                                                            ========                ======

                             Gogo Inc. and Subsidiaries

                  Supplemental Information - Key Operating Metrics

                          Commercial Aviation North America

                                      For the
                                      Three
                                      Months                       For the Years

                                      Ended                            Ended
                                     December                       December 31,
                                           31,
                                       ---------                      -------------

                                    2013              2012               2013          2012
                                    ----              ----               ----          ----

     Aircraft
     online                        2,032             1,811              2,032         1,811

     Average
     monthly
     service
     revenue
     per
     aircraft
     online
     (ARPA)                       $8,970            $7,400             $8,375        $6,981

    Gross
     passenger
     opportunity
     (GPO)
     (in
     thousands)                   73,519            61,431            294,709       250,354

    Total
     average
     revenue
     per
     passenger
     opportunity
     (ARPP)                        $0.74             $0.63              $0.67         $0.53

    Total
     average
     revenue
     per
     session
     (ARPS)                       $10.29            $10.67             $10.40         $9.74

     Connectivity
     take
     rate                            6.9%              5.7%               6.2%          5.3%
     ------------                    ---               ---                ---           ---

       Aircraft online. We define aircraft online as
        the total number of commercial aircraft on
        which our ATG network equipment is installed
        and Gogo service has been made commercially
        available as of the last day of each period
        presented.

       Average monthly service revenue per aircraft
        online ("ARPA").  We define ARPA as the
        aggregate service revenue for the period divided
        by the number of months in the period, divided
        by the number of aircraft online during the
        period (expressed as an average of the month end
        figures for each month in such period).

       Gross passenger opportunity ("GPO"). We define
        GPO as the estimated aggregate number of
        passengers who board commercial aircraft on
        which Gogo service has been available during
        the period presented. We calculate passenger
        estimates by taking the maximum capacity of
        flights with Gogo service, which is calculated
        by multiplying the number of flights flown by
        Gogo-equipped aircraft, as published by Air
        Radio Inc. (ARINC), by the number of seats on
        those aircraft, and adjusting the product by a
        passenger load factor for each airline, which
        represents the percentage of seats on aircraft
        that are occupied by passengers. Load factors
        are provided to us by our airline partners and
        are based on historical data.

       Total average revenue per passenger opportunity
        ("ARPP"). We define ARPP as revenue from Gogo
        Connectivity, Gogo Vision, Gogo Signature
        Services and other service revenue for the
        period, divided by GPO for the period.

       Total average revenue per session ("ARPS"). We
        define ARPS as revenue from Gogo Connectivity
        divided by the total number of sessions during
        the period. A session, or a "use" of Gogo
        Connectivity, is defined as the use by a unique
        passenger of Gogo Connectivity on a flight
        segment. Multiple logins or purchases under the
        same user name during one flight segment count
        as only one session.

       Connectivity take rate. We define connectivity
        take rate as the number of sessions during the
        period expressed as a percentage of GPO.
        Included in our connectivity take-rate
        calculation are sessions for which we did not
        receive revenue, including those provided
        pursuant to free promotional campaigns and, to
        a lesser extent, as a result of complimentary
        passes distributed by our customer service
        representatives or unforeseen technical issues.
        For the periods listed above, the number of
        sessions for which we did not receive revenue
        was less than 3% of the total number of
        sessions.

                          Gogo Inc. and Subsidiaries

               Supplemental Information - Key Operating Metrics

                              Business Aviation

                                  For the                       For the
                                   Three                          Years
                                   Months

                                   Ended                         Ended
                                  December                       December
                                       31,                               31,
                                    ---------                        ---------

                                2013             2012             2013          2012
                                ----             ----             ----          ----

    Aircraft
     online (1)

    Satellite                  5,175            5,030            5,175         5,030

    ATG                        2,047            1,455            2,047         1,455

    Average
     monthly
     service
     revenue per
     aircraft
     online (1)

    Satellite                   $162             $132             $155          $133

    ATG                        1,985            1,887            1,941         1,857

    Units Shipped

    Satellite                    167              165              659           711

    ATG                          248              159              880           687

    Average
     equipment
     revenue per
     unit shipped
     (in
     thousands)

    Satellite                    $40              $37              $40           $41

    ATG                           61               52               55            51
    ---                          ---              ---              ---           ---

      (1) Aircraft online and average monthly
       service revenue per aircraft online
       exclude the aircraft covered by contracts
       acquired from Airfone and the related
       revenue for the year ended December 31,
       2013. With the exception of one customer
       whose Airfone service will continue
       through March 10, 2014, we terminated the
       Airfone service effective December 31,
       2013.

       Satellite aircraft online. We define
        satellite aircraft online as the total
        number of business aircraft for which we
        provide satellite service as of the last
        day of each period presented.

       ATG aircraft online. We define ATG aircraft
        online as the total number of business
        aircraft for which we provide ATG service
        as of the last day of each period
        presented.

       Average monthly service revenue per
        satellite aircraft online. We define
        average monthly service revenue per
        satellite aircraft online as the aggregate
        satellite service revenue for the period
        divided by the number of months in the
        period, divided by the number of satellite
        aircraft online during the period
        (expressed as an average of the month end
        figures for each month in such period).

       Average monthly service revenue per ATG
        aircraft online. We define average monthly
        service revenue per ATG aircraft online as
        the aggregate ATG service revenue for the
        period divided by the number of months in
        the period, divided by the number of ATG
        aircraft online during the period
        (expressed as an average of the month end
        figures for each month in such period).

       Units shipped. We define units shipped as
        the number of satellite or ATG network
        equipment units, respectively, shipped
        during the period.

       Average equipment revenue per satellite
        unit shipped. We define average equipment
        revenue per satellite unit shipped as the
        aggregate equipment revenue earned from
        all satellite shipments during the period,
        divided by the number of satellite units
        shipped.

       Average equipment revenue per ATG unit
        shipped. We define average equipment
        revenue per ATG unit shipped as the
        aggregate equipment revenue from all ATG
        shipments during the period, divided by
        the number of ATG units shipped.

                                   Gogo Inc. and Subsidiaries
                  Supplemental Information - Segment Revenue and Segment Profit
                                    (in thousands, Unaudited)

               For the Three Months Ended
                   December 31, 2013

                    CA-NA                      CA-ROW                        BA       Total
                    -----                      ------                       ---       -----

     Service
     revenue           $54,536                         $72                    $15,048    $69,656

     Equipment
     revenue               836                           -                     22,062     22,898

     Total
     revenue           $55,372                         $72                    $37,110    $92,554
                       =======                         ===                    =======    =======

     Segment
     profit
     (loss)            $(2,018)                   $(14,408)                   $16,133      $(293)
                        ======                      ======                    =======      =====

               For the Three Months Ended
                  December 31, 2012

                    CA-NA                      CA-ROW                        BA       Total
                    -----                      ------                       ---       -----

     Service
     revenue           $38,455         $                 -                    $10,014    $48,469

     Equipment
     revenue               699                           -                     14,355     15,054

     Total
     revenue           $39,154         $                 -                    $24,369    $63,523
                       =======        ==               ===                    =======    =======

     Segment
     profit
     (loss)            $(3,116)                    $(4,832)                    $8,455       $507
                        ======                      ======                     ======       ====

               For the Year Ended December
                       31, 2013

                    CA-NA                      CA-ROW                        BA       Total
                    -----                      ------                       ---       -----

     Service
     revenue          $196,732                      $1,392                    $52,257   $250,381

     Equipment
     revenue             2,336                         168                     75,239     77,743

     Total
     revenue          $199,068                      $1,560                   $127,496   $328,124
                        ======                      ======                     ======     ======

     Segment
     profit
     (loss)            $(1,328)                   $(41,004)                   $50,721     $8,389
                        ======                      ======                    =======     ======

               For the Year Ended December
                       31, 2012

                    CA-NA                      CA-ROW                        BA       Total
                    -----                      ------                       ---       -----

     Service
     revenue          $132,607         $                 -                    $34,460   $167,067

     Equipment
     revenue             1,833                         670                     63,945     66,448

     Total
     revenue          $134,440                        $670                    $98,405   $233,515
                        ======                        ====                    =======     ======

     Segment
     profit
     (loss)           $(12,211)                   $(14,261)                   $35,816     $9,344
                        ======                      ======                    =======     ======


       Gogo Inc. and Subsidiaries
    Supplemental Information - Segment Cost of
            Service Revenue(1)
        (in thousands, Unaudited)

                         For the
                          Three
                          Months

                          Ended
                        December
                              31,
                          ---------

                        2013               2012
                        ----               ----

    CA-NA            $28,421            $22,301

    BA                 4,452              2,279

    CA-ROW             7,090                515

    Total            $39,963            $25,095
                     =======              =====

                         For the
                          Years

                          Ended
                        December
                              31,
                          ---------

                        2013               2012
                        ----               ----

    CA-NA           $100,442            $74,555

    BA                14,888              7,744

    CA-ROW            16,929                936

    Total           $132,259            $83,235
                      ======              =====

    (1)       Excludes depreciation
              and amortization
              expense.



       Gogo Inc. and Subsidiaries
    Supplemental Information - Segment Cost of
          Equipment Revenue(1)
       (in thousands, Unaudited)

                           For the
                          Three
                         Months

                         Ended
                        December
                              31,
                          ---------

                       2013               2012
                       ----               ----

    CA-NA            $1,628               $382

    BA                8,720              6,479

    CA-ROW       -                 28

    Total           $10,348             $6,889
                      =====             ======

                        For the
                         Years

                         Ended
                        December
                              31,
                          ---------

                       2013               2012
                       ----               ----

    CA-NA            $2,550             $1,043

    BA               33,096             28,478

    CA-ROW               93                384

    Total           $35,739            $29,905
                      =====              =====

    (1)       Excludes depreciation
              and amortization
              expense.

                           Gogo Inc. and Subsidiaries

                  Reconciliation of GAAP to Non-GAAP Measures

                    (in thousands, except per share amounts)

                                  (unaudited)

                            For the Three                            For the Twelve
                               Months                                     Months

                            Ended December                           Ended December
                                    31,                                           31,
                              --------------                              ---------------

                             2013                     2012                2013                      2012
                             ----                     ----                ----                      ----

    Adjusted
     EBITDA:

    Net loss
     attributable
     to common
     stock
     (GAAP)              $(22,105)                $(35,961)          $(145,851)                 $(95,640)

    Interest
     expense                7,492                    4,108              29,272                     8,913

    Interest
     income                   (17)                     (15)                (64)                      (77)

    Income tax
     provision                219                      365               1,107                     1,036

    Depreciation
     and
     amortization          14,291                   10,214              55,509                    36,907
                           ------                   ------              ------                    ------

    EBITDA                   (120)                 (21,289)            (60,027)                  (48,861)

    Fair value
     derivative
     adjustments     -                        -               36,305                    (9,640)

    Class A and
     Class B
     senior
     convertible
     preferred
     stock return    -                   14,194               29,277                    52,427

    Accretion of
     preferred
     stock           -                    2,663                5,285                    10,499

    Stock-based
     compensation
     expense                2,453                      959               5,621                     3,545

    Amortization
     of deferred
     airborne
     lease
     incentives            (2,630)                  (1,044)             (8,074)                   (3,671)

    Write off of
     deferred
     equity
     financing
     costs           -                    5,023                    -                     5,023

    Adjusted
     EBITDA                 $(297)                    $506              $8,387                    $9,322
                            =====                     ====              ======                    ======

    Adjusted Net
     Loss and
     Adjusted Net
     Loss  Per
     Share:

    Net loss
     attributable
     to common
     stock
     (GAAP)              $(22,105)                $(35,961)          $(145,851)                 $(95,640)

    Fair value
     derivate
     adjustments     -                        -               36,305                    (9,640)

    Class A and
     Class B
     senior
     convertible
     preferred
     stock return    -                   14,194               29,277                    52,427

    Accretion of
     preferred
     stock           -                    2,663                5,285                    10,499
                   ---                    -----                -----                    ------

    Adjusted
     Net Loss            $(22,105)                $(19,104)           $(74,984)                 $(42,354)
                           ======                   ======             =======                    ======

    Basic and
     diluted
     weighted
     average
     shares
     outstanding
     (GAAP)                84,230                    6,798              47,832                     6,798

    Adjustment of
     shares to
     our current
     capital
     structure                746                   78,178              37,144                    78,178

    Adjusted
     shares
     outstanding           84,976                   84,976              84,976                    84,976
                           ======                   ======              ======                    ======

    Adjusted
     Net Loss
     Per Share
     - basic
     and
     diluted               $(0.26)                  $(0.22)             $(0.88)                   $(0.50)
                           ======                   ======              ======                    ======

    Cash CAPEX:

     Consolidated
     capital
     expenditures
     (GAAP) (1)          $(27,354)                $(24,987)          $(121,369)                 $(79,456)

    Deferred
     airborne
     lease
     incentives
     (2)                      872                   12,154               8,990                    18,165

    Amortization
     of deferred
     airborne
     lease
     incentives             2,630                    1,044               8,074                     3,671

    Cash CAPEX           $(23,852)                $(11,789)          $(104,305)                 $(57,620)
                           ======                   ======             =======                    ======

    (1)       See consolidated statements
              of cash flows

    (2)       Excludes deferred airborne
              lease incentives
              associated with STCs for
              the year ended December
              31, 2013 as STC costs are
              expensed as incurred as
              part of Engineering,
              Design and Development.

Definition of Non-GAAP Measures

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

Adjusted EBITDA represents EBITDA adjusted for (i) fair value derivative adjustments, (ii) preferred stock dividends, (iii) accretion of preferred stock, (iv) stock-based compensation expense, (v) amortization of deferred airborne lease incentives and (vi) write off of deferred equity financing costs. Our management believes that the use of Adjusted EBITDA eliminates items that, management believes, have less bearing on our operating performance, thereby highlighting trends in our core business which may not otherwise be apparent. It also provides an assessment of controllable expenses, which are indicators management uses to determine whether current spending decisions need to be adjusted in order to meet financial goals and achieve optimal financial performance.

More specifically, we believe the exclusion of fair value derivative adjustments, Class A and Class B senior convertible preferred stock return and accretion of preferred stock from Adjusted EBITDA is appropriate because we do not believe such items are indicative of ongoing operating performance due to their non-recurring nature as a result of the conversion of all shares of preferred stock into shares of common stock upon consummation of our IPO in June 2013.

Additionally, we believe the exclusion of stock-based compensation expense from Adjusted EBITDA is appropriate given the significant variation in expense that can result from using the Black-Scholes model to determine the fair value of such compensation. The fair value of our stock options as determined using the Black-Scholes model varies based on fluctuations in the assumptions used in this model, including inputs that are not necessarily directly related to the performance of our business, such as the expected volatility, the risk-free interest rate, the expected life of the options and future dividends to be paid by the Company. Therefore, we believe the exclusion of this cost provides a clearer view of the operating performance of our business. Further, non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time. While we believe that investors should have information about any dilutive effect of outstanding options and the cost of that compensation, we also believe that stockholders should have the ability to consider our performance using a non-GAAP financial measure that excludes these costs and that management uses to evaluate our business.

We believe the exclusion of the amortization of deferred airborne lease incentives from Adjusted EBITDA is useful as it allows an investor to view operating performance across time periods in a manner consistent with how management measures segment profit and loss. Management evaluates segment profit and loss in this manner (for a description of segment profit (loss), see Note 11 “Business Segments and Major Customers” of the Annual Report on Form 10-K to be filed with the SEC), excluding the amortization of deferred airborne lease incentives, because such presentation reflects operating decisions and activities from the current period, without regard to the prior period decision or form of connectivity agreements. See “–Key Components of Consolidated Statements of Operations–Cost of Service Revenue–Commercial Aviation North America” of the Annual Report on Form 10-K to be filed with the SEC for a discussion of the accounting treatment of deferred airborne lease incentives.

We believe it is useful to an understanding of our operating performance to exclude write off of deferred equity financing costs from Adjusted EBITDA because of the non-recurring nature of this charge.

We also present Adjusted EBITDA as a supplemental performance measure because we believe that this measure provides investors, securities analysts and other users of our financial statements with important supplemental information with which to evaluate our performance and to enable them to assess our performance on the same basis as management.

Adjusted Net Loss represents net loss attributable to common stock before fair value derivative adjustments, Class A and Class B senior convertible preferred stock return and accretion of preferred stock. We present Adjusted Net Loss to eliminate the impact of such items because we do not consider those indicative of ongoing operating performance due to their non-recurring nature as a result of the conversion of all shares of preferred stock into shares of common stock in connection with our IPO in June 2013.

Adjusted Net Loss Per Share represents net loss attributable to common stock per share–basic and diluted, adjusted to reflect the number of shares of common stock outstanding as of December 31, 2013 under our current capital structure, after giving effect to the initial public offering and the corresponding conversion of shares of preferred stock outstanding. We present Adjusted Net Loss Per Share to provide investors, securities analysts and other users of our financial statements with important supplemental information with which to evaluate our performance considering our current capital structure and the shares outstanding following our IPO on a consistent basis.

Cash CAPEX represents capital expenditures net of airborne equipment proceeds received from the airlines. We believe Cash CAPEX provides a more representative indication of our liquidity requirements with respect to capital expenditures, as under certain agreements with our airline partners we are reimbursed for all, or a substantial portion of, the cost of our airborne equipment, thereby reducing our cash capital requirements.

SOURCE Gogo


Source: PR Newswire



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