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Fair Value of Financial Assets and Liabilities | 6 Months Ended
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Jun. 30, 2024
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. 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. We have elected to measure our Investment in Convertible Note 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 fair value of the Investment in Convertible Note is measured using Level 3 (unobservable) inputs. The Company, with the assistance of a third-party valuation specialist, determined the fair value using a binomial lattice model. The significant assumptions used in the model include the yield, equity volatility, outstanding principal, remaining term, stated interest rate, risk-free interest rate and the current publicly available stock price. The yield is estimated using similar security yields for companies with similar credit ratings. Equity volatility is estimated based on observed equity volatility for similar companies. The outstanding principal, remaining term and stated interest rate are all determined based on contractually defined terms and the risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of measurement for time periods approximately equal to the remaining time to maturity. The reconciliation of beginning and ending balances of the Investment in Convertible Note as of June 30, 2024 were as follows (in thousands):
|  | For the Three Months Ended June 30, |  |  | For the Six Months Ended June 30, |
|  | 2024 |  |  | 2024 |
Balance at beginning of period |  | $ | 18,132 |  |  | $ | — |
Investment |  |  | — |  |  |  | 5,000 |
Change in fair value |  |  | (14,694 | ) |  |  | (1,562 | )
Balance at end of period |  | $ | 3,438 |  |  | $ | 3,438 |
Long-Term Debt: As of June 30, 2024 and December 31, 2023, our only financial asset and liability disclosed but not measured at fair value is the Term Loan Facility, which is reflected on the Unaudited Condensed Consolidated Balance Sheets at cost. The fair value measurement is classified as Level 2 within the fair value hierarchy since it is based on quoted market prices of our instrument in markets that are not active. We estimated the fair value of the Term Loan Facility by calculating the upfront cash payment a market participant would require to assume this obligation. The upfront cash payment used in the calcula tion of fair value on our June 30, 2024 Unaudited Condensed Consolidated Balance Sheets, excluding any issuance costs, is the amount 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 Term Loan Facility. The fair value and carrying value of long-term debt as of June 30, 2024 and December 31, 2023 were as follows (in thousands):
|  | June 30, 2024 |  |  | December 31, 2023 |
|  | Fair Value (1) |  | Carrying Value |  |  | Fair Value (1) |  | Carrying Value |
Term Loan Facility |  | $ | 602,000 |  | $ | 601,375 | (2) |  | $ | 610,000 |  | $ | 604,797 | (2)
(1) Fair value amounts are rounded to the nearest million. (2) Carrying value of the Term Loan Facility reflects the unaccreted debt discount of $1.9 million and $2.1 million as of June 30, 2024 and December 31, 2023, respectively. See Note 8, “Long-Term Debt and Other Liabilities,” for further information.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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