SEC Comment Letter for Gogo (GOGO) — Mar 30, 2012
Gogo Inc.
Date: March 30, 2012 · CIK: 0001537054 · Accession: 0000000000-12-016483
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-178727
Referenced dates: February 23, 2012
Letter
March 30, 2012 Via E-mail Marguerite M. Elias Senior Vice President and General Counsel Gogo Inc. 1250 N. Arlington Heights Road Suite 500 Itasca, IL 60143 Re: Gogo Inc. Amendment No. 2 to Registrati on Statement on Form S-1 Filed March 22, 2012 File No. 333-178727
Dear Ms. Elias:
We have reviewed your amended registra tion statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter by amending your registration statement and providing the requested information. If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response.
After reviewing any amendment to your re gistration statement and the information you provide in response to these comments, we may have additional comments. General
1. We received your request for confidential treatme nt for certain of your exhibits. We will provide you with our comments on such appl ication in separate correspondence. Prospectus Summary, page 1
2. We note disclosure on page 1 that you provi de Gogo Connectivity to passengers on nine of the ten North American airlines that provid e internet connectivity to their passengers. In order to provide context to your disclosure , please revise your disclosure here and throughout your prospectus to cl arify that three other major airlines (United, JetBlue and Southwest) have announced arra ngements with other providers. Also disclose that you
Marguerite M. Elias Gogo Inc. March 30, 2012 Page 2
have instituted litigation over Southwest’s no tice to you that AirTran will be deinstalling your equipment from its fleet in connection with the merger of AirTran and Southwest.
3. We note your response to comment 2 from our letter dated February 23, 2012 and your disclosure that passengers have used G ogo Connectivity over 18 m illion times from the inception of your service to December 31, 2011. Please provide more context so that the relevance of this data to the company and its operations is clear to investors. In this regard, explain what portion of the 18 million us es directly contributed to your revenues. Also explain whether this number of uses is the same as “sessions” under your key operating metric, average revenue per session. Furthermore, we note your disclosure on page 92 that certain passengers do not pay you directly for their use of Gogo Connectivity because such service is made available through a number of non-retail channels, including sponsored access and ente rprise sales. If the number of times passengers have used Gogo Connectivity does no t directly or fully tie to the company’s revenues, clearly state this and explain why the metric is significant for other reasons.
4. We note your response to comment 4 from our letter dated February 23, 2012. Please expand Note 7 to the table on page 11 to specify why management believes the items excluded from EBITDA and Adjusted EB ITDA have less bearing on your operating performance.
5. Please discuss that your ATG technology is li mited to flights over land because you are using a ground-based network. Discuss that this is one reason why you will be relying more on satellite technology in th e future to address both capacity constraints as well as expansion beyond flights over th e contiguous United States. Summary Historical Consolidated Financ ial and Other Operating Data, page 9
6. In light of the fact that you define “average revenue per passenger” using gross passenger opportunity rather than actual number of pa ssengers who paid for your services, please refer to this metric in a more descriptive manner, such as “average revenue per passenger opportunity.” In addition, please provide co mparable data metrics based upon actual passenger usage. See our related comment 9 below. Risk Factors, page 14
“If we are unable to successfully implement planned or future technology enhancements to increase our networ k capacity…,” page 15
7. We note your response to comment 5 from our letter dated February 23, 2012 and your belief that only a portion of the costs a ssociated with your technology roadmap and international expansion are likely to arise within 12 months from the date of this prospectus (i.e. March 2013). However, your disclosure on page 101 indicates that you
Marguerite M. Elias Gogo Inc. March 30, 2012 Page 3
will begin the roll-out of ATG-4 service dur ing the second half of 2012. In addition, we note that your technology roadmap includes the adoption and insta llation of your ATG-4 service, which, if not completed on “a timely” basis, will cause “significant capacity constraints by the second half of 2013 (as discussed on page 15). Please revise the disclosure in your risk factor s as well as on page 101 to provide more specificity with respect to the anticipated tim eline of your technology roadma p. Your revised disclosure should address the implications of this timeline on your capacity restraints.
8. We note your disclosure on page 15 that you will experience si gnificant capacity constraints by the second half of 2013 if you are unable to impl ement your technology roadmap on a timely basis. We also note your disclosure on page 16 that your network is currently experiencing capacity constraints on certain flights. Please provide a more detailed explanation of the portion of your commercial aircraft currently online that would need to upgrade to ATG-4 in order to avoid the referenced significant capacity constraints.
Management’s Discussion and Analysis of Fi nancial Condition and Results of Operations
Key Business Metrics, page 52
9. We note your response to comment 7 from our letter dated February 23, 2012. We continue to believe that a mo re detailed explanation of the sources of your revenues, including the actual number of passengers who purchased yo ur services during each period or the average revenues per passenger who has used your services, are relevant to investors and would allow them to better understand the company’s financial condition and operating performance, as well as its pros pects for future periods. Therefore, please disclose this information. Alternatively, tell us why disclosure of these or other key monetization performance indicators are not material to investors. For guidance, refer to Section III.B of SEC Release No. 33-8350.
Cost of Service Revenue Commercial Aviation, page 55
10. Please expand your disclosure to clarify whet her the revenue share percentage under your connectivity agreements is the same for each of your services (Gogo Vision, Gogo Signature Services and Gogo Connectivity Se rvices), or whether you typically pay a different revenue share percentage for each type of service. Business, page 84
Airline Partners and Contracts, page 96
11. We note your disclosure on page 81 that tw o airline contracts a llow the airline to terminate the contract should the percentage of passengers using the Gogo Service not
Marguerite M. Elias Gogo Inc. March 30, 2012 Page 4
meet certain thresholds. If either of these contracts is with Delta Air Lines or American Airlines, please revise your disclosure in this section to address this fact. Our Technology Roadmap, page 101
12. Please disclose whether any of your airline pa rtners other than Un ited have agreed to upgrade to ATG-4. Back cover page of prospectus
13. Please revise the graphic on the back cover page of your prospectus to explain the significance of each metric to the company a nd investors. Provide us with support for each statement.
You may contact Christine Adams, Staff A ccountant at (202) 551- 3363 or Terry French, Accountant Branch Chief, at (202) 551-3828 if you have questions regarding comments on the financial statements and related matters. Plea se contact Jessica Plowgi an, Attorney-Adviser at (202) 551-3367 or Kathleen Krebs, Special Couns el at (202) 551-3350 with any other questions.
Sincerely,
/s/ Kathleen Krebs, for Larry Spirgel
Assistant Director
cc: Via E-mail
Matthew E. Kaplan, Esq.
Debevoise & Plimpton LLP
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March 30, 2012 Via E-mail Marguerite M. Elias Senior Vice President and General Counsel Gogo Inc. 1250 N. Arlington Heights Road Suite 500 Itasca, IL 60143 Re: Gogo Inc. Amendment No. 2 to Registrati on Statement on Form S-1 Filed March 22, 2012 File No. 333-178727 Dear Ms. Elias: We have reviewed your amended registra tion statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter by amending your registration statement and providing the requested information. If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response. After reviewing any amendment to your re gistration statement and the information you provide in response to these comments, we may have additional comments. General 1. We received your request for confidential treatme nt for certain of your exhibits. We will provide you with our comments on such appl ication in separate correspondence. Prospectus Summary, page 1 2. We note disclosure on page 1 that you provi de Gogo Connectivity to passengers on nine of the ten North American airlines that provid e internet connectivity to their passengers. In order to provide context to your disclosure , please revise your disclosure here and throughout your prospectus to cl arify that three other major airlines (United, JetBlue and Southwest) have announced arra ngements with other providers. Also disclose that you Marguerite M. Elias Gogo Inc. March 30, 2012 Page 2 have instituted litigation over Southwest’s no tice to you that AirTran will be deinstalling your equipment from its fleet in connection with the merger of AirTran and Southwest. 3. We note your response to comment 2 from our letter dated February 23, 2012 and your disclosure that passengers have used G ogo Connectivity over 18 m illion times from the inception of your service to December 31, 2011. Please provide more context so that the relevance of this data to the company and its operations is clear to investors. In this regard, explain what portion of the 18 million us es directly contributed to your revenues. Also explain whether this number of uses is the same as “sessions” under your key operating metric, average revenue per session. Furthermore, we note your disclosure on page 92 that certain passengers do not pay you directly for their use of Gogo Connectivity because such service is made available through a number of non-retail channels, including sponsored access and ente rprise sales. If the number of times passengers have used Gogo Connectivity does no t directly or fully tie to the company’s revenues, clearly state this and explain why the metric is significant for other reasons. 4. We note your response to comment 4 from our letter dated February 23, 2012. Please expand Note 7 to the table on page 11 to specify why management believes the items excluded from EBITDA and Adjusted EB ITDA have less bearing on your operating performance. 5. Please discuss that your ATG technology is li mited to flights over land because you are using a ground-based network. Discuss that this is one reason why you will be relying more on satellite technology in th e future to address both capacity constraints as well as expansion beyond flights over th e contiguous United States. Summary Historical Consolidated Financ ial and Other Operating Data, page 9 6. In light of the fact that you define “average revenue per passenger” using gross passenger opportunity rather than actual number of pa ssengers who paid for your services, please refer to this metric in a more descriptive manner, such as “average revenue per passenger opportunity.” In addition, please provide co mparable data metrics based upon actual passenger usage. See our related comment 9 below. Risk Factors, page 14 “If we are unable to successfully implement planned or future technology enhancements to increase our networ k capacity…,” page 15 7. We note your response to comment 5 from our letter dated February 23, 2012 and your belief that only a portion of the costs a ssociated with your technology roadmap and international expansion are likely to arise within 12 months from the date of this prospectus (i.e. March 2013). However, your disclosure on page 101 indicates that you Marguerite M. Elias Gogo Inc. March 30, 2012 Page 3 will begin the roll-out of ATG-4 service dur ing the second half of 2012. In addition, we note that your technology roadmap includes the adoption and insta llation of your ATG-4 service, which, if not completed on “a timely” basis, will cause “significant capacity constraints by the second half of 2013 (as discussed on page 15). Please revise the disclosure in your risk factor s as well as on page 101 to provide more specificity with respect to the anticipated tim eline of your technology roadma p. Your revised disclosure should address the implications of this timeline on your capacity restraints. 8. We note your disclosure on page 15 that you will experience si gnificant capacity constraints by the second half of 2013 if you are unable to impl ement your technology roadmap on a timely basis. We also note your disclosure on page 16 that your network is currently experiencing capacity constraints on certain flights. Please provide a more detailed explanation of the portion of your commercial aircraft currently online that would need to upgrade to ATG-4 in order to avoid the referenced significant capacity constraints. Management’s Discussion and Analysis of Fi nancial Condition and Results of Operations Key Business Metrics, page 52 9. We note your response to comment 7 from our letter dated February 23, 2012. We continue to believe that a mo re detailed explanation of the sources of your revenues, including the actual number of passengers who purchased yo ur services during each period or the average revenues per passenger who has used your services, are relevant to investors and would allow them to better understand the company’s financial condition and operating performance, as well as its pros pects for future periods. Therefore, please disclose this information. Alternatively, tell us why disclosure of these or other key monetization performance indicators are not material to investors. For guidance, refer to Section III.B of SEC Release No. 33-8350. Cost of Service Revenue Commercial Aviation, page 55 10. Please expand your disclosure to clarify whet her the revenue share percentage under your connectivity agreements is the same for each of your services (Gogo Vision, Gogo Signature Services and Gogo Connectivity Se rvices), or whether you typically pay a different revenue share percentage for each type of service. Business, page 84 Airline Partners and Contracts, page 96 11. We note your disclosure on page 81 that tw o airline contracts a llow the airline to terminate the contract should the percentage of passengers using the Gogo Service not Marguerite M. Elias Gogo Inc. March 30, 2012 Page 4 meet certain thresholds. If either of these contracts is with Delta Air Lines or American Airlines, please revise your disclosure in this section to address this fact. Our Technology Roadmap, page 101 12. Please disclose whether any of your airline pa rtners other than Un ited have agreed to upgrade to ATG-4. Back cover page of prospectus 13. Please revise the graphic on the back cover page of your prospectus to explain the significance of each metric to the company a nd investors. Provide us with support for each statement. You may contact Christine Adams, Staff A ccountant at (202) 551- 3363 or Terry French, Accountant Branch Chief, at (202) 551-3828 if you have questions regarding comments on the financial statements and related matters. Plea se contact Jessica Plowgi an, Attorney-Adviser at (202) 551-3367 or Kathleen Krebs, Special Couns el at (202) 551-3350 with any other questions. Sincerely, /s/ Kathleen Krebs, for Larry Spirgel Assistant Director cc: Via E-mail Matthew E. Kaplan, Esq. Debevoise & Plimpton LLP