Exhibit 99.1
Press Release |
|
For Immediate Release |
|
Investor Relations Contact: |
Media Relations Contact: |
Will Davis |
Dave Mellin |
+1 917-519-6994 |
+1 303-301-3606 |
wdavis@gogoair.com |
dmellin@gogoair.com |
|
|
Gogo Announces First Quarter Results
Total Revenue of $104.3 million, up 6% Year-over-Year; Record First Quarter Service Revenue of $81.7 million, up 4% Year-over-Year
Q1 Net Income of $30.5 million; Adjusted EBITDA(1) of $43.3 million
Updates 2024 Adjusted EBITDA Guidance and Reiterates Long-Term Targets
BROOMFIELD, Colo. - May 7, 2024 – Gogo Inc. (NASDAQ: GOGO) (“Gogo” or the “Company”), the world’s largest provider of broadband connectivity services for the business aviation market, today announced its financial results for the quarter ended March 31, 2024.
Q1 2024 Highlights
1
"We’re excited about the upcoming launches of Gogo Galileo and Gogo 5G, which will substantially increase our global addressable market and provide our customers with a step-change improvement in speed and performance," said Oakleigh Thorne, Chairman and CEO. "Additionally, our accelerating conversion of customers from our old Classic products to the AVANCE platform will allow customers to benefit from better LTE performance and provides a simple and cost- effective upgrade path to Galileo and 5G."
"Strong first quarter results drove an increase in Gogo's 2024 Adjusted EBITDA guidance to the high end of the range and supported strong share repurchases," said Jessi Betjemann, Executive Vice President and CFO. "As our strategic investments roll-off and we benefit from the launch of Gogo Galileo and 5G, we expect to generate substantial Free Cash Flow in 2025 and beyond."
2024 Financial Guidance and Long-Term Financial Targets
The Company updates the following guidance for 2024 and reiterates long-term financial targets. The guidance and targets include the impact of the Federal Communications Commission's Secure and Trusted Communications Networks Reimbursement Program ("FCC Reimbursement Program"), except for 2025 Free Cash Flow. The guidance and targets do not reflect a potential delay in Gogo 5G beyond 2024.
The Company updates the following 2024 guidance:
2
The Company reiterates the following long-term financial targets:
Conference Call
The Company will host its first quarter conference call on May 7, 2024 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 investor website at https://ir.gogoair.com.
Participants can also join the call by dialing +1 844-543-0451 (within the United States and Canada). Please use the below link to retrieve your unique conference ID to use to access the earnings call.
https://register.vevent.com/register/BI94b9fc1e540f40e3a15f37414b934a81
Non-GAAP Financial Measures
We report certain non-GAAP financial measurements, including Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow in the discussion above. Management uses Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow for business planning purposes, including managing our business against internally projected results of operations and measuring our performance and liquidity. 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 used by other companies. Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow are not recognized measurements under accounting principles generally accepted in the United States, or GAAP. When analyzing our performance with Adjusted EBITDA or Adjusted EBITDA Margin or liquidity with Free Cash Flow, as applicable, investors should (i) evaluate each adjustment in our reconciliation to the corresponding GAAP measure, and the explanatory footnotes regarding those adjustments, (ii) use Adjusted EBITDA and Adjusted EBITDA Margin in addition to, and not as an alternative to, net income (loss) attributable to common stock as a measure of operating results, and (iii) use Free Cash Flow in addition to, and not as an alternative to, consolidated net cash provided by (used in) operating activities when evaluating our liquidity. No reconciliation of the forecasted amounts of Adjusted EBITDA for fiscal 2024, Adjusted EBITDA Margin for fiscal 2028 or Free Cash Flow for fiscal 2025 is included in this release because we are unable to quantify certain amounts that would be required to be included in the corresponding GAAP measure without unreasonable efforts, due to high variability and complexity with respect to estimating certain forward-looking amounts, and we believe such reconciliation would imply a degree of precision that would be confusing or misleading to investors.
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,
3
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 press release. Forward-looking statements are based on 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: our ability to continue to generate revenue from the provision of our connectivity services; our reliance on our key OEMs and dealers for equipment sales; the impact of competition; our reliance on third parties for equipment components and services; the impact of global supply chain and logistics issues and inflationary trends; our ability to expand our business outside of the United States; our ability to recruit, train and retain highly skilled employees; 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 increased attention to climate change, ESG matters and conservation measures; our ability to evaluate or pursue strategic opportunities; our ongoing delay and the risk of future delays in deploying 5G, and 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 3Mhz of ATG spectrum in the United States and obtain rights to additional spectrum if needed; the impact of service interruptions or delays, 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; the impact of our use of open-source software; the impact of equipment failure or material defects or errors in our software; 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 FCC Reimbursement Program; our ability to comply with anti-bribery, anti-corruption and anti-money laundering 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 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; the impact of a downgrade, suspension or withdrawal of the rating assigned by a rating agency; the volatility of our stock price; our ability to fully utilize our tax losses; the dilutive impact of future stock issuances; the impact of our stockholder concentration and of our CEO and Chair of the Board being a significant stockholder; our ability to fulfill our obligations associated with being a public company; 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.
Additional information concerning these and other factors can be found under the caption “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission (“SEC”) on February 28, 2024 and in our subsequent quarterly reports on Form 10-Q as filed with the SEC.
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 report 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.
4
About Gogo
Gogo is the world’s largest provider of broadband connectivity services for the business aviation market. We offer a customizable suite of smart cabin systems for highly integrated connectivity, inflight entertainment and voice solutions. Gogo’s products and services are installed on thousands of business aircraft of all sizes and mission types from turboprops to the largest global jets, and are utilized by the largest fractional ownership operators, charter operators, corporate flight departments and individuals.
As of March 31, 2024, Gogo reported 7,136 business aircraft flying with its broadband ATG systems onboard, 4,110 of which are flying with a Gogo AVANCE L5 or L3 system; and 4,285 aircraft with narrowband satellite connectivity installed. Connect with us at www.gogoair.com.
Gogo Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
|
|
For the Three Months |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Revenue: |
|
|
|
|
|
|
||
Service revenue |
|
$ |
81,673 |
|
|
$ |
78,499 |
|
Equipment revenue |
|
|
22,649 |
|
|
|
20,098 |
|
Total revenue |
|
|
104,322 |
|
|
|
98,597 |
|
Operating expenses: |
|
|
|
|
|
|
||
Cost of service revenue (exclusive of amounts shown below) |
|
|
17,871 |
|
|
|
16,797 |
|
Cost of equipment revenue (exclusive of amounts shown below) |
|
|
15,786 |
|
|
|
18,126 |
|
Engineering, design and development |
|
|
9,216 |
|
|
|
7,879 |
|
Sales and marketing |
|
|
8,283 |
|
|
|
6,877 |
|
General and administrative |
|
|
14,651 |
|
|
|
14,199 |
|
Depreciation and amortization |
|
|
3,841 |
|
|
|
2,791 |
|
Total operating expenses |
|
|
69,648 |
|
|
|
66,669 |
|
Operating income |
|
|
34,674 |
|
|
|
31,928 |
|
Other expense (income): |
|
|
|
|
|
|
||
Interest income |
|
|
(2,048 |
) |
|
|
(1,916 |
) |
Interest expense |
|
|
8,410 |
|
|
|
8,976 |
|
Other (income) expense, net |
|
|
(13,099 |
) |
|
|
31 |
|
Total other (income) expense |
|
|
(6,737 |
) |
|
|
7,091 |
|
Income before income taxes |
|
|
41,411 |
|
|
|
24,837 |
|
Income tax provision |
|
|
10,921 |
|
|
|
4,388 |
|
Net income |
|
$ |
30,490 |
|
|
$ |
20,449 |
|
|
|
|
|
|
|
|
||
Net income attributable to common stock per share: |
|
|
|
|
|
|
||
Basic |
|
$ |
0.24 |
|
|
$ |
0.16 |
|
Diluted |
|
$ |
0.23 |
|
|
$ |
0.15 |
|
Weighted average number of shares: |
|
|
|
|
|
|
||
Basic |
|
|
129,272 |
|
|
|
129,136 |
|
Diluted |
|
|
132,441 |
|
|
|
133,602 |
|
5
Gogo Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
152,820 |
|
|
$ |
139,036 |
|
Accounts receivable, net of allowances of $1,855 and $2,091, respectively |
|
|
49,405 |
|
|
|
48,233 |
|
Inventories |
|
|
69,298 |
|
|
|
63,187 |
|
Prepaid expenses and other current assets |
|
|
63,782 |
|
|
|
64,138 |
|
Total current assets |
|
|
335,305 |
|
|
|
314,594 |
|
Non-current assets: |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
96,042 |
|
|
|
98,129 |
|
Intangible assets, net |
|
|
57,870 |
|
|
|
55,647 |
|
Operating lease right-of-use assets |
|
|
69,804 |
|
|
|
70,552 |
|
Investment in convertible note |
|
|
18,132 |
|
|
|
— |
|
Other non-current assets, net of allowances of $614 and $591, respectively |
|
|
25,577 |
|
|
|
25,979 |
|
Deferred income taxes |
|
|
206,223 |
|
|
|
216,638 |
|
Total non-current assets |
|
|
473,648 |
|
|
|
466,945 |
|
Total assets |
|
$ |
808,953 |
|
|
$ |
781,539 |
|
Liabilities and stockholders’ equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
22,823 |
|
|
$ |
16,094 |
|
Accrued liabilities |
|
|
47,643 |
|
|
|
47,649 |
|
Deferred revenue |
|
|
2,150 |
|
|
|
1,003 |
|
Current portion of long-term debt |
|
|
7,250 |
|
|
|
7,250 |
|
Total current liabilities |
|
|
79,866 |
|
|
|
71,996 |
|
Non-current liabilities: |
|
|
|
|
|
|
||
Long-term debt |
|
|
586,274 |
|
|
|
587,501 |
|
Non-current operating lease liabilities |
|
|
71,784 |
|
|
|
73,047 |
|
Other non-current liabilities |
|
|
8,590 |
|
|
|
8,270 |
|
Total non-current liabilities |
|
|
666,648 |
|
|
|
668,818 |
|
Total liabilities |
|
|
746,514 |
|
|
|
740,814 |
|
Stockholders’ equity |
|
|
|
|
|
|
||
Common stock |
|
|
14 |
|
|
|
14 |
|
Additional paid-in capital |
|
|
1,404,217 |
|
|
|
1,402,003 |
|
Accumulated other comprehensive income |
|
|
14,966 |
|
|
|
15,796 |
|
Treasury stock, at cost |
|
|
(173,357 |
) |
|
|
(163,197 |
) |
Accumulated deficit |
|
|
(1,183,401 |
) |
|
|
(1,213,891 |
) |
Total stockholders’ equity |
|
|
62,439 |
|
|
|
40,725 |
|
Total liabilities and stockholders’ equity |
|
$ |
808,953 |
|
|
$ |
781,539 |
|
6
Gogo Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
|
|
For the Three Months |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
30,490 |
|
|
$ |
20,449 |
|
Adjustments to reconcile net income to cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
3,841 |
|
|
|
2,791 |
|
Loss on asset disposals, abandonments and write-downs |
|
|
15 |
|
|
|
107 |
|
Provision for expected credit losses |
|
|
(132 |
) |
|
|
93 |
|
Deferred income taxes |
|
|
10,641 |
|
|
|
4,273 |
|
Stock-based compensation expense |
|
|
4,840 |
|
|
|
5,041 |
|
Amortization of deferred financing costs and interest rate caps |
|
|
1,375 |
|
|
|
764 |
|
Accretion of debt discount |
|
|
100 |
|
|
|
108 |
|
Change in fair value of convertible note investment |
|
|
(13,132 |
) |
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
(1,017 |
) |
|
|
7,405 |
|
Inventories |
|
|
(6,111 |
) |
|
|
(5,003 |
) |
Prepaid expenses and other current assets |
|
|
(5,904 |
) |
|
|
(8,632 |
) |
Contract assets |
|
|
6 |
|
|
|
557 |
|
Accounts payable |
|
|
4,809 |
|
|
|
1,191 |
|
Accrued liabilities |
|
|
(1,442 |
) |
|
|
(9,620 |
) |
Deferred revenue |
|
|
1,146 |
|
|
|
(1,054 |
) |
Accrued interest |
|
|
(2 |
) |
|
|
130 |
|
Other non-current assets and liabilities |
|
|
134 |
|
|
|
(86 |
) |
Net cash provided by operating activities |
|
|
29,657 |
|
|
|
18,514 |
|
Investing activities: |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
(1,451 |
) |
|
|
(3,112 |
) |
Acquisition of intangible assets—capitalized software |
|
|
(2,720 |
) |
|
|
(1,484 |
) |
Proceeds from FCC Reimbursement Program for property, equipment and intangibles |
|
|
28 |
|
|
|
— |
|
Proceeds from interest rate caps |
|
|
6,539 |
|
|
|
6,087 |
|
Redemptions of short-term investments |
|
|
— |
|
|
|
24,796 |
|
Purchases of short-term investments |
|
|
— |
|
|
|
(24,728 |
) |
Purchase of convertible note investment |
|
|
(5,000 |
) |
|
|
— |
|
Net cash (used in) provided by investing activities |
|
|
(2,604 |
) |
|
|
1,559 |
|
Financing activities: |
|
|
|
|
|
|
||
Payments on term loan |
|
|
(1,813 |
) |
|
|
(1,813 |
) |
Repurchases of common stock |
|
|
(10,137 |
) |
|
|
— |
|
Payments on financing leases |
|
|
(3 |
) |
|
|
(57 |
) |
Stock-based compensation activity |
|
|
(1,343 |
) |
|
|
(5,575 |
) |
Net cash used in financing activities |
|
|
(13,296 |
) |
|
|
(7,445 |
) |
Effect of exchange rate changes on cash |
|
|
27 |
|
|
|
88 |
|
Increase in cash, cash equivalents and restricted cash |
|
|
13,784 |
|
|
|
12,716 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
139,366 |
|
|
|
150,880 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
153,150 |
|
|
$ |
163,596 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
153,150 |
|
|
$ |
163,596 |
|
Less: non-current restricted cash |
|
|
330 |
|
|
|
330 |
|
Cash and cash equivalents at end of period |
|
$ |
152,820 |
|
|
$ |
163,266 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
14,207 |
|
|
$ |
15,014 |
|
Cash paid for taxes |
|
|
11 |
|
|
|
12 |
|
Non-cash investing activities: |
|
|
|
|
|
|
||
Purchases of property and equipment in current liabilities |
|
$ |
6,520 |
|
|
$ |
9,973 |
|
7
Gogo Inc. and Subsidiaries
Supplemental Information – Key Operating Metrics
|
|
For the Three Months |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Aircraft online (at period end) |
|
|
|
|
|
|
||
ATG AVANCE |
|
|
4,110 |
|
|
|
3,447 |
|
Gogo Biz |
|
|
3,026 |
|
|
|
3,599 |
|
Total ATG |
|
|
7,136 |
|
|
|
7,046 |
|
Narrowband satellite |
|
|
4,285 |
|
|
|
4,458 |
|
Average monthly connectivity service revenue per aircraft online |
|
|
|
|
|
|
||
ATG |
|
$ |
3,458 |
|
|
$ |
3,389 |
|
Narrowband satellite |
|
|
292 |
|
|
|
304 |
|
Units sold |
|
|
|
|
|
|
||
ATG |
|
|
258 |
|
|
|
223 |
|
Narrowband satellite |
|
|
41 |
|
|
|
49 |
|
Average equipment revenue per unit sold (in thousands) |
|
|
|
|
|
|
||
ATG |
|
$ |
75 |
|
|
$ |
70 |
|
Narrowband satellite |
|
|
41 |
|
|
|
54 |
|
8
Gogo Inc. and Subsidiaries
Supplemental Information – Revenue and Cost of Revenue
(in thousands, unaudited)
|
|
For the Three Months |
|
|
% Change |
|
||||||
|
|
2024 |
|
|
2023 |
|
|
2024 over 2023 |
|
|||
Service revenue |
|
$ |
81,673 |
|
|
$ |
78,499 |
|
|
|
4.0 |
% |
Equipment revenue |
|
|
22,649 |
|
|
|
20,098 |
|
|
|
12.7 |
% |
Total revenue |
|
$ |
104,322 |
|
|
$ |
98,597 |
|
|
|
5.8 |
% |
|
|
|
|
|
|
|
|
|
|
|||
|
|
For the Three Months |
|
|
% Change |
|
||||||
|
|
2024 |
|
|
2023 |
|
|
2024 over 2023 |
|
|||
Cost of service revenue (1) |
|
$ |
17,871 |
|
|
$ |
16,797 |
|
|
|
6.4 |
% |
Cost of equipment revenue (1) |
|
$ |
15,786 |
|
|
$ |
18,126 |
|
|
|
(12.9 |
)% |
Gogo Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, unaudited)
|
|
For the Three Months |
|
|
For the Three Months Ended December 31, |
|
||||||
|
|
2024 |
|
|
2023 |
|
|
2023 |
|
|||
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|||
Net income attributable to common stock (GAAP) |
|
$ |
30,490 |
|
|
$ |
20,449 |
|
|
$ |
14,467 |
|
Interest expense |
|
|
8,410 |
|
|
|
8,976 |
|
|
|
8,249 |
|
Interest income |
|
|
(2,048 |
) |
|
|
(1,916 |
) |
|
|
(1,894 |
) |
Income tax provision |
|
|
10,921 |
|
|
|
4,388 |
|
|
|
4,636 |
|
Depreciation and amortization |
|
|
3,841 |
|
|
|
2,791 |
|
|
|
4,679 |
|
EBITDA |
|
|
51,614 |
|
|
|
34,688 |
|
|
|
30,137 |
|
Stock-based compensation expense |
|
|
4,840 |
|
|
|
5,041 |
|
|
|
5,559 |
|
Change in fair value of convertible note investment |
|
|
(13,132 |
) |
|
|
— |
|
|
|
— |
|
Gain on sale of equity investment |
|
|
— |
|
|
|
— |
|
|
|
(570 |
) |
Adjusted EBITDA |
|
$ |
43,322 |
|
|
$ |
39,729 |
|
|
$ |
35,126 |
|
|
|
|
|
|
|
|
|
|
|
|||
Free Cash Flow: |
|
|
|
|
|
|
|
|
|
|||
Net cash provided by operating activities (GAAP) (1) |
|
$ |
29,657 |
|
|
$ |
18,514 |
|
|
$ |
26,152 |
|
Consolidated capital expenditures (1) |
|
|
(4,171 |
) |
|
|
(4,596 |
) |
|
|
(5,371 |
) |
Proceeds from FCC Reimbursement Program for property, equipment and intangibles (1) |
|
|
28 |
|
|
|
— |
|
|
|
1,127 |
|
Proceeds from interest rate caps (1) |
|
|
6,539 |
|
|
|
6,087 |
|
|
|
6,510 |
|
Free cash flow |
|
$ |
32,053 |
|
|
$ |
20,005 |
|
|
$ |
28,418 |
|
9
Gogo Inc. and Subsidiaries
Reconciliation of Estimated Full-Year GAAP Net Cash
Provided by Operating Activities to Non-GAAP Measures
(in millions, unaudited)
|
FY 2024 Range |
|
|||||
|
Low |
|
|
High |
|
||
Free Cash Flow: |
|
|
|
|
|
||
Net cash provided by operating activities (GAAP) |
$ |
37 |
|
|
$ |
57 |
|
Consolidated capital expenditures |
|
(45 |
) |
|
|
(45 |
) |
Proceeds from FCC Reimbursement Program for property, equipment and intangibles |
|
8 |
|
|
|
8 |
|
Proceeds from interest rate caps |
|
20 |
|
|
|
20 |
|
Free cash flow |
$ |
20 |
|
|
$ |
40 |
|
Definition of Non-GAAP Measures
EBITDA represents net income attributable to common stock before interest expense, interest income, income taxes and depreciation and amortization expense.
Adjusted EBITDA represents EBITDA adjusted for (i) stock-based compensation expense, (ii) change in fair value of convertible note investment and (iii) gain on sale of equity investment. 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.
We believe that the exclusion of stock-based compensation expense from Adjusted EBITDA provides a clearer view of the operating performance of our business and is appropriate given that 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 it is useful for an understanding of our operating performance to exclude from Adjusted EBITDA the gain on sale of equity investment and changes in fair value of our $5 million convertible note investment because these activities are not related to our operating performance.
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 consolidated 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 EBITDA Margin represents Adjusted EBITDA divided by total revenue. We present Adjusted EBITDA Margin as a supplemental performance measure because we believe that it provides meaningful information regarding our operating efficiency.
Free Cash Flow represents net cash provided by operating activities, plus the proceeds received from the FCC Reimbursement Program and the interest rate caps, less purchases of property and equipment and the acquisition of intangible assets. We believe that Free Cash Flow provides meaningful information regarding our liquidity. Management believes that Free Cash Flow is useful for investors because it provides them with an important perspective on the cash available for strategic measures, after making necessary capital investments in property and equipment to support the Company’s ongoing business operations and provides them with the same measures that management uses as the basis of making capital allocation decisions.
10