Gogo Inc.

Thank you for standing by, and welcome to GoGo, Inc.' 's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to William Davis, Vice President, Investor Relations. Please go ahead.

Thank you, Lateef, and good morning, everyone. Welcome to GoGo's first quarter of 2024 earnings conference call. Joining me today to talk about our results are Oakley Thorne, Chairman and CEO, Jesse Betjeman, Executive Vice President and CFO. Before we get started, I would like to take this opportunity to remind you that during the course of this call, we may make forward-looking statements regarding future events and the future performance of the company. We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements on this conference call. Those risk factors are described in our earnings release filed this morning and are more fully detailed under risk factors in our annual report on 10-K and 10-Q and other documents that we have filed with the SEC. In addition, please note that the date of this conference call is May 7th, 2024. Any forward-looking statements that we make today are based on assumptions as of this date, and we undertake no obligation to update these statements as a result of more information or future events. During this call, we'll present both GAAP and non-GAAP financial measures. We've included a reconciliation explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures in our first quarter earnings release. Call is being broadcast on the internet and available in the investor relations website at ir.gogoair.com. The earnings press release is also available on the website. After management comments, we'll host a Q&A session with the financial community only. It's now my great pleasure to turn the call over to Oakley.

Thanks, Will, and good morning, everyone, and thanks for joining us on this call. So, GoGo achieved strong results in the first quarter. setting a record for free cash flow and open market share repurchases, even as we continue to invest in bringing our next-generation products to market. GoGo Galileo, our low-Earth orbit satellite product, and GoGo 5G, our next-generation North American air-to-ground product. We believe these products will accelerate our revenue growth beginning next year as they deliver, first, order of magnitude improvements in the speed of GoGo's service, second, deliver a 60% increase in our total addressable market, and third, extend customer lifetimes by providing easy and compelling upgrade paths for our advanced installed base. Our first quarter performance was fueled by advanced equipment revenue, which experienced a rebound from Q4 2023, and record service revenue, driven by a modest price increase and record advanced upgrades. We consider every advanced installation a strategic win because it provides that customer with easy upgrade paths to new technologies like 5G and LEO with go-go rather than going to the expense of installing equipment from a competitor. The jump in orders we had in Q1 is great proof of that point. Our surge in orders was driven by two factors. First, OEMs that want to line fit install of ANSEL-5s, often with 5G antennas, so that those plans are ready for easy upgrades to 5G or Galileo. And second, pull through in the OEM and aftermarket channels from NetJets, who also wants to install all 5s and MB-13s to be ready for either 5G or Galileo. This morning, I'm going to start by highlighting some demand trends we're seeing in the BA market that continue to underpin our bullish outlook, then provide an overview of our Q1 results, and finally, dive into our progress on strategic initiatives. Jesse will then walk through the numbers and discuss our 2024 and long-term guidance. Overall demand for business aviation flights and demand for connectivity on those flights remain strong. GOGO-equipped BA flight counts were up slightly year over year, a reversal of last year's slightly downward trend. And more importantly, flights remain significantly elevated from pre-COVID levels, with Q1 up 29% from Q1 2019. As for data demand, consumption per flight hour was up 13% from the year-ago quarter and up 101% from pre-COVID Q1 2019, demonstrating strong demand growth. Further evidence of this is that twice as many customers requested service plan upgrades in the quarter as requested downgrades. This demand is further demonstrated by strong OEM order books and very strong fractional sales. all of which we expect will drive GOGO shipment growth over the next few years. Now let me turn to our Q1 performance. Revenue was up 6% year-over-year, with service revenue up 4% and equipment revenue up 13%. Quarter-over-quarter total revenue was up 7%, with service revenue up 1% and equipment revenue up 34%. Our record service revenue was driven by a 19% increase in advanced service revenue over prior year, and a 5% sequential increase over Q4-23, offset by a decline in GOGO Classic service revenue as customers migrate to events. We grew total advanced units online 19% over prior year to 4,110 aircraft, or 58% of our ATG install base. Our advanced beachhead will only grow faster as we incent our 3,200 GOGO Classic customers to migrate to LTE as part of our participation in the FCC Secure and Trusted Network Program, better known as RIP and Replace. We had a slight decline in overall units online for the quarter as we implemented an inflation-driven 4% price increase, which included adding minimums to our hourly plans. And as expected, some hourlies dropped their service, accounting for a loss of less than $400,000 of annual service revenue. Equipment revenue was driven by advanced equipment sales being up 24% year-over-year and 39% sequentially from Q4 2023, and was partially offset by declines in our old narrowband satellite equipment revenue. As I mentioned, the increase in equipment orders was driven by NetJets' pull-through demand and a shift of a few OEM annual bulk shipments into Q1 from later in the year. And though inventory in the channels grew, the number of units that are not committed to a particular customer went down to 84 units from 108 units at the end of Q4-23. On the earnings side, in the quarter, we achieved our highest Q1 EBITDA ever, driven by, first, strong equipment sales, second, some permanent OPEX savings, and third, some changes in the timing of project-related OPEX. I'm also proud that GoGo set a new free cash flow record, which demonstrates the strength of our business, even as we invest deeply in the GoGo 5G and Galileo programs. Now for our progress on strategic initiatives. GoGo is focused on accelerating growth with a three-pronged strategy. First, we want to expand our addressable market by taking our broadband offerings global for the first time. and by leveraging the advanced platform to deliver products at pricing that suits each segment of the 39,000 aircraft global BA market. Second, we want to drive customer loyalty by continually improving our ATG networks to drive conversion of classic customers to the advanced platform so that they have easy upgrade paths to new technologies as they emerge. And third, we're focused on offering the best product and customer support to each segment of the market at the lowest total cost of ownership. We're making great strides on the strategic initiatives along all three of these prongs. Let me start with Gogo Galileo, and I'll start with a little bit of background. After we sold our commercial aviation division in 2020, we went through deep dive strategic planning around the BA business and came to two conclusions. First, that ESA antennas and LEO satellite constellations we're going to change everything in business aviation connectivity. They would support lightning fast connectivity. They would enable small antennas that would fit well on all BA aircraft. They could be cheaper and easier to install than geo antennas. They would provide truly global broadband coverage for the first time ever. And their service pricing could be very competitive with geo satellite pricing. And most important, that the dramatic increase in value created by LEO offerings would accelerate IFC penetration dramatically in the global BA market. The second thing we realized was that Starlink would become a significant competitor, and that has now happened as they entered the market with STCs on two aircraft lines earlier this year. GOGO has a history of disrupting our own industry. In fact, Galileo isn't our first LEO product launch. In 2000, we migrated 1,500 customers from our then analog ATG system to LEO, Iridium. We designed and manufactured the airborne systems, some of which are still line fit at OEMs today, and we still service more than 4,000 aircraft globally on the Iridium network. Like 24 years ago, our focus with Galileo has been on developing an aviation-grade product suite tailored to the unique needs of BA customers. Starlink, on the other hand, is focused on mass-producing consumer off-the-shelf products for much bigger markets, and then trying to repurpose those for aviation. They may have some initial success, if for no other reason than the allure of Mr. Musk, but ultimately, the simplicity of our Galileo terminal installation, the superior reliability of our equipment, and the white-glove customer support we offer position GOGO to compete well and capture a significant share of this market. So with that background, let me give you an update. Galileo comes in two versions, a smaller HDX terminal and a larger FDX terminal. The HDX terminal is a small antenna that will deliver a very consistent 60 megabits per second, which is 12 to 60 times the speed of our current product offerings, and will fit on all business aircraft, targeting two major market segments. The first, Roughly 12,000 midsize jets, small jets, and turboprops registered outside North America that have absolutely no broadband solution available today. And second, those aircraft inside the roughly 11,000 midsize and smaller jets that domicile inside North America that often fly international missions or want faster connectivity than ATG alone can provide. The Galileo FDX terminal is a larger antenna that will deliver very consistent speeds approaching 200 megabits per second, roughly 40 to 200 times the speed of our current product offerings. And it targets the roughly 7,000 global super mid-sized and larger heavy jets that generally fly intercontinental or long-range missions. A huge advantage for us is that Galileo is a simple upgrade from any advanced installed planes. One only needs to add our HDX or FDX intent on the fuselage and then run data and power cabling into the aircraft. And given that Advance is already a line fit option at every OEM and has STCs on every currently produced model of aircraft, it will be relatively easy from an engineering and certification perspective for OEMs and dealers to offer Galileo. We've already signed four STC agreements for Galileo. we have 10 more verbally committed and three in negotiations, which all in will cover 10,500 jets and 6,200 turboprops globally. We remain on track to start shipping HDX terminals in Q4 and FDX terminals in the first half of 2025. We achieved a number of exciting milestones since our last conference call. In March, we completed end-to-end connectivity using the HDX antenna, on the fully deployed Eutelsat OneWeb LEO satellite network. The next three big milestones will be aircraft installation in July, engineering flight testing in August, and parts manufacturing authority, or PMA, in Q4. In April, we announced our first SDC partnership, which significantly is with a European MRO for a very small size aircraft, the CJ series, demonstrating that we indeed can fit on any aircraft and that we have global distribution reach. Also in April, GOGO was granted Earth Station in Motion approval from the Federal Communication Commission to commercialize and operate the Galileo HDX and FDX antennas. This is important, not only for commercializing Galileo in the United States, but acts as a precedent for authorization in many other countries. To conclude, we are very excited about Galileo. It will be a game changer for the business aviation industry and will be a major accelerant for the growth of GOGO. Now let me turn to GOGO 5G. As you all know, more than a year ago, we completed our initial 150 tower network rollout. We completed our 5G data center upgrade. We received PMA for our MB13 5G airborne antennas. and for our LX5 5G box, but with a 4G chip. As you also know, we're still waiting for our 5G chip. That chip has failed bring up twice, but has now been redesigned and was meant to go into fabrication again this month. On the good news front, we've been able to start flight testing on the actual network using the chip software on an FPGA simulation of the chip. Unfortunately, in testing, an issue was identified that has chip hardware design implications. That issue has led to a minor chip hardware redesign, which is now an integration testing, and which must be complete before fabrication can begin. We currently expect the launch of GoGo 5G to occur a few months later than the previously stated fourth quarter of 2024, and are working with our vendors to finalize that schedule, which we will discuss on our Q2 earnings call. The good news is that this was discovered now, before the chip was respun, saving what could have been a much longer delay. Despite this, the market continues to respond enthusiastically to the 5G value proposition, with ongoing pre-provisioning programs and a flood of STC programs that position us for a highly successful launch. We've already shipped 240 5G pre-provision kits with MB13 5G antennas, approximately 80 of which have already been installed and are flying today using our 4G network. We've commitments from five OEMs with most of those under agreements and one already installing the MB13s with L5's line fit today. Because the L5 is the same form factor as the LX5, once the 5 chip is certified, those customers can simply swap the LX5 for the L5 and they'll be on the 5G network. On the certification front, We have 11 STCs for MB-13s completed and 16 more in the works, representing 8,371 North American registered aircraft. We're confident that between our FPGA flights and a virtual simulator our team has built that replicates our entire 5G network, that we will be able to test and validate 90% of our 5G functionality and network before we receive the final 5G chip. GoGo 5G should achieve mean speeds of around 25 megabits per second, 5 to 25 times our current product lines, and peak speeds of 75 to 80 megabits per second. And we believe it is the perfect product for midsize and smaller business aircraft that fly North American missions and want great speed at a better value than competitive satellite products. Now let me turn to the FCC rip and replace program. The program was enacted under the Trump administration to incent wireless carriers to accelerate the removal of Chinese telecom technology from their networks. GOGO was awarded a $334 million grant under that program. Because there were more qualified grants than originally planned, funding for all grants were cut back to 39% of the original award, which in GOGO's case was cut back to $132 million. The White House included full funding for the program in its supplemental funding request to Congress last year, and there are two bills in Congress with bipartisan support that would fully fund the program right now. Based on changes we've made to our FCC program, we no longer believe we will need nor would we receive $334 million. However, if full funding is approved, we would be able to accelerate our program and cover all reimbursable costs. With the current partial funding, about 70% of the reimbursable costs of replacing all EVDL ground equipment and moving GOGO Classic customers to LTE would be covered by the grant, and that is what is reflected in our long-term guidance. There is also another $25 million of spend associated with the program that is non-reimbursable, and that is also reflected in our long-term guidance. This program has considerable benefits for GOGO and its customers. It will improve the speed of our 4G network 40% for customers using our Avance L3 product. It will double the number of aircraft that the ATG 4G network can simultaneously manage. And it will accelerate the number of GOGO Classic customers upgrading to Avance, which has the strategic benefit of extending GOGO customer lifetimes due to the ease of upgrade to 5G and Galileo from Avance platform equipment. We have 3,200 aircraft still on our old Classic product line, that will need to convert from EVEO to LTE versions of the hardware inside their plane, around 900 of which are in fleets and a little more than 2,200 of which are smaller customers. All of the fleet customers are in active discussions on how they plan to convert, and most are leaning towards upgrading to L5 so that in the future they can easily upgrade to either 5G or Galileo. On the smaller customer side, we've had conversations with all but 150 of them. Of those we've spoken with, 60% have already voiced a preference for what they would like to convert to, and almost all of them indicate they will move to one advanced product or another. We currently have customer promotions in place to incent conversion, and our dealers are doing a great job configuring their operations to transition customers at scale. We also have a special product we will introduce later this year called C1. which will house both an EVDO and an LTE air card in a form factor that is an exact replication of our classic product. These will not provide any enhanced performance. However, they will be relatively inexpensive and will only require a few hours to swap with the old classic boxes. We call this a time machine because it allows customers who delay swapping to advance before our cutover date time to convert to advance after the cutover. To zoom out, GOGO is approaching an exciting inflection point in our product cycle as we anticipate the launches of GOGO 5G and GOGO Galileo. GOGO will soon have the most complete product portfolio in the BA IFC industry with products that offer the right performance with the right coverage at the right total cost and great customer support for every segment of the highly unpenetrated 39,000 aircraft global BA market. We're excited about our future and believe GoGo is well positioned to capitalize on the significant opportunity in our market and deliver long-term value creation to shareholders. And now, I'll turn it over to Jessie for the numbers.