v3.26.1
Fair Value of Financial Assets and Liabilities
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value of Financial Assets and Liabilities

11. Fair Value of Financial Assets and Liabilities

A three-tier fair value hierarchy has been established which prioritizes the inputs used in measuring fair value. These tiers include:

•
Level 1 - defined as observable inputs such as quoted prices for identical assets or liabilities in active markets;
•
Level 2 - defined as observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
•
Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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

Earnout Liability:

In connection with the acquisition of Satcom Direct, LLC and certain of its affiliates (collectively, “Satcom Direct”) in December 2024, the purchase price included up to an additional $225 million in potential earnout payments of cash and/or common stock of the Company tied to realizing certain financial performance milestones over a four-year period following the acquisition (the “Earnout Liability”). The fair value of the Earnout Liability was calculated using a Monte Carlo simulation based on future gross profit projections of Satcom Direct, gross profit volatility rates of comparable companies and a risk adjusted discount rate. The fair value measurement was based on significant unobservable inputs and thus represents a Level 3 measurement. The Earnout Liability has an estimated fair value of $34.2 million and $71.9 million as of June 30, 2026 and December 31, 2025, respectively. In April 2026, the Company paid cash of $40.0 million related to the 2025 financial performance milestones of the Earnout Liability.

Investment in Convertible Note:

On February 26, 2024, Gogo invested $5 million in a convertible note offering (“Investment in Convertible Note”). The Investment in Convertible Note accrues interest at 5% per annum, payable upon maturity of the note or upon conversion, and matures two years after the date of issuance. In February 2026, the maturity date of the note was extended for two additional years. In connection with the amendment, the Company was issued warrants to purchase common stock of the issuer. We have elected to measure our Investment in Convertible Note, including the warrants, using the fair value option and record changes in fair value, including accrued interest, in Other (income) expense, net on the Unaudited Condensed Consolidated Statements of Operations. The

Company elected the fair value option for the Investment in Convertible Note to eliminate complexities of applying certain accounting models.

The Investment in Convertible Note is included in Other non-current assets and in Prepaid and other current assets on our Unaudited Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025, respectively, and the reconciliation of beginning and ending balances were as follows (in thousands):

 

 

For the Three Months
Ended June 30,

 

 

For the Six Months
 Ended June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Balance at beginning of period

 

$

885

 

 

$

3,954

 

 

$

655

 

 

$

4,207

 

Investment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Change in fair value

 

 

1,739

 

 

 

253

 

 

 

1,969

 

 

 

—

 

Balance at end of period

 

$

2,624

 

 

$

4,207

 

 

$

2,624

 

 

$

4,207

 

Debt:

As of June 30, 2026 and December 31, 2025, our only financial assets and liabilities disclosed but not measured at fair value are the 2021 Term Loan Facility and the HPS Term Loan Facility, which are reflected on the consolidated balance sheets at cost. The fair value measurements are classified as Level 2 within the fair value hierarchy since they are based on quoted market prices of our instruments in markets that are not active. We estimated the fair values of the 2021 Term Loan Facility and the HPS Term Loan Facility by calculating the upfront cash payments a market participant would require to assume these obligations. The upfront cash payments used in the calculations of fair values on our Unaudited Condensed Consolidated Balance Sheets, excluding any issuance costs, are the amounts that a market participant would be willing to lend at such date to an entity with a credit rating similar to ours and that would allow such an entity to achieve sufficient cash inflows to cover the scheduled cash outflows under the 2021 Term Loan Facility and HPS Term Loan Facility.

The fair value and carrying value of debt as of June 30, 2026 and December 31, 2025 were as follows (in thousands):

 

 

June 30, 2026

 

 

December 31, 2025

 

 

 

Fair Value (1)

 

Carrying
Value

 

 

Fair Value (1)

 

Carrying
Value

 

2021 Term Loan Facility

 

$

558,000

 

$

600,464

(2)

 

$

550,000

 

$

600,225

(2)

HPS Term Loan Facility

 

 

217,000

 

 

221,924

(3)

 

 

238,000

 

 

243,273

(3)

 

(1)
Fair value amounts are rounded to the nearest million.
(2)
Carrying value of the 2021 Term Loan Facility reflects the unaccreted debt discount of $1.0 million and $1.2 million as of June 30, 2026 and December 31, 2025, respectively. See Note 8, “Long-Term Debt and Other Liabilities,” for further information.
(3)
Carrying value of the HPS Term Loan Facility reflects the unaccreted debt discount of $2.6 million and $3.6 million as of June 30, 2026 and December 31, 2025, respectively. See Note 8, “Long-Term Debt and Other Liabilities,” for further information.