Gogo Inc.

Thank you for standing by. Welcome to the Q1 2025 GoGo, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Will Davis, Head of Investor Relations. Please go ahead.

Thank you, Gigi, and good morning, everyone. Welcome to GoGo's first quarter of 2025 earnings conference call. Joining me today to talk about our results are Chris Moore, CEO, and Zach Kottner, 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 call. Those risk factors are described in our earnings release file this morning, and a more fully detailed note under risk factors filed in our annual report on 10-K and 10-Q and other documents that we've filed with the SEC. In addition, please note that the date of this conference call is May 9th, 2025. 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 have included a reconciliation and explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures in our first quarter earnings release. This call is being broadcast on the internet and available on the investor website at ir.gogoair.com. The earnings release is also available on the website. after management comments, we'll host a Q&A session with the financial community only. It is now my great pleasure to turn the call over to Chris.

Thanks, Will, and good morning, everyone. Thank you for joining us today. As we continue to merge GoGo and Satcom Direct, I'd like to say how proud we are of the progress our global team is making. The merger is already indicating that it was a positive strategic move for our employees, our customers, and investors. We've built strategic and commercial momentum in the last quarter, resulting in significant milestones achieved with PMA approval for our HDX and FDX Galileo antenna execution of new OEM agreements for our GOGO Galileo service, the confirmation of the fabrication of our 5G chip, and growth in the number of aircraft online optimizing our geo-satellite services. The PMA approvals are particularly significant as they will enable us to begin shipping products and developing STCs for both terminals. We've already made great progress with our Galileo HDX antenna as we continue securing new STCs, OEM wins, and generating revenue with activated customers. The FDX PMA approval came just this week, almost two months ahead of schedule, and we expect FDX to follow a similar successful rollout with 10 STCs already queued. I'm looking forward to talking you through a strong Q1 performance, which will cover our quarterly operating results, provide updates on our GONATG product lines, and highlight our success in realizing acquisition-related cost synergies. We will review the demand potential in our markets and outline our strategic approach to capitalize on these opportunities to enhance shareholder value. Following this, I will share progress on key strategic initiatives and conclude with a brief assessment of the potential impact of tariffs on our business. Finally, I'll turn it over to Zach for the financial updates and then open up for Q&A. Driven by a stronger than anticipated service revenues earlier than expected synergy realization and deferral of some expenses related to new product investments, we delivered quarter that exceeded our plans and consensus on revenue, adjusted EBITDA, and free cash flow. On the revenue front, our strong results were driven by both AOL and maintaining ARPA. GEO aircraft online grew to 1,280 aircraft, up 2.5% from 2024, year-end, and up 16% from Q1 2024. And even more encouraging, we shipped 31 new GEO terminals in the quarter, up from 18 units in Q1 2024. Many new units with line fit installations, buyers often want to avoid the cost, delay, and downtime retrofit installations incur, which is why securing a line fit option with OEMs is advantageous. Customers expect connectivity from the day of aircraft delivery to optimize bandwidth, redundancy, and coverage. This quarter we strengthened our line fit offering by confirming our plain simple KA band terminal as a line fit option for Gulfstream's G5 and 500 airframes. We experienced a modest decline in air-to-ground AOL, primarily due to maintenance suspensions on older air-to-ground classic installed aircraft. We expect a reversal of this trend once the launch of our new broadband networks offering this later this year. A key ATG metric for us is the increased penetration of our software-centric advanced platform, which delivers a cost-effective, simplified path to advanced technology like air-to-ground broadband and Galileo, and presents a significant advantage over competitive solutions. Our advanced platform gained substantial momentum this quarter with a record 119 upgrades from our classic products and 19% increase over the previous quarter as 241 units were shipped to dealers preparing for Galileo connectivity installations. We also saw a rise in advanced penetration within the air-to-ground fleet up to 68%, up from 65% the prior quarter and 58% on 2024. We are pleased to report significant progress towards our synergy goals with over 85% of targeted synergy savings already realized. Additionally, we completed key actions to reach the high end of our 25 to 30 million synergy cost savings guidance, positioning this for higher than projected cost savings this year and full realization in 2026. We currently have 40 integration initiatives that we expect to complete over the next 12 months. In addition, the combined company's headcount will be reduced by 21% by the end of the second quarter. Through leveraged common systems and process, we are streamlining the organization and expect to find additional synergy opportunities as we prepare the organization for the future. Key synergy projects include consolidating manufacturing by relocating SD avionics production from Ottawa to Broomfield, Colorado, transitioning data center operations from our leased Chicago location to our wholly owned Satcom Direct facility in Melbourne, Florida, and the planned sale of our Melbourne headquarters building, which is expected to offset the 15 to 20 million investment required to achieve the projected recurring synergy savings. We continue to expect strong free cash flows in 2026. This will be driven by higher margin service revenue from our Galileo and Air to Ground broadband investments and the benefits from the four-year impact of realized cost synergies, further contributing to the profitability is an anticipated $60 million reduction in net program spend as Air to Grand and Galileo program rollouts conclude and integration synergy investments are finalized. Moving on to the market demand, the business aviation sector presents a significant opportunity for increased broadband connectivity usage. Currently, only about a third of the world's business jets and a fifth of all business aircraft including turboprops, have any connectivity. The number are lower outside of the United States, with just 12% of business jets optimizing connectivity. Notably, there are 5,000 mid and small jets and 7,000 turboprops outside the US. They have no prior access to broadband solutions, highlighting a substantial unmet demand within a healthy and growing business aviation industry characterized by strong OEM book-to-bill ratios and expanding fractional fleets and robust flight counts. Turning to the MilGov mobility market, where demand is also strong, we see the opportunity for go-go solutions. Our current revenue mix in this segment includes a significant portion of legacy narrowband services. which are expected to decline gradually over the next several years, but will be replaced with growth from the transition of MilGov to SATCOM broadband solutions. Under the Proliferated LEO Earth Orbit Program, PLEO, to which GOGO is now a key supplier, the Department of Defense recently increased its projected spending on LEO satellite services from $900 million over the next 10 years to $13 billion in the same period. The US Air Force 25 by 25 program is lagging behind its goals to equip 25% of its 1,100 aircraft with satellite communications by the end of 2025. For us, this means More than 75% of this fleet is still without satellite connectivity, which the Air Force believes must be addressed, presenting a major opportunity for GOGO's growth. Our multi-band LEO and GEO offerings also support the DoD PACE protocol, which requires the military to implement primary, alternate, contingent, and emergency systems. We also see increased demand overseas as non-US governments disengage from their reliance on the DoD for military support and ramp up their investments in defense spending, including commercial communication systems. Moving on to strategy, we continue to advance key initiatives that are critical for our continued penetration of the business aviation and military government mobility markets. Our strategy is to grow shareholder value by driving rapid growth in long-term, high-margin recurring revenue customers' relationships in these dynamic sectors. We've invested three years in low Earth orbit satellite and broadband air-to-ground technology to improve service quality and coverage by developing a purpose-built product portfolio that is easy to install, maintain, and upgrade. Crucially, our network agnostic hardware and software architecture allows for faster, cheaper upgrades, ensuring the long-term competitiveness. Expanding our target addressable market with business aviation and military government vehicles, it is crucial to achieving our penetration goals. Satcom Direct's global sales and service network extends our reach and has increased our access to LEO TAM by 60%. while also providing geo-satellite solutions. This positions GOGO as the only IFC company offering multi-orbit, geo-LEO air-to-ground broadband solutions in the business aviation and government and military markets. Our comprehensive suite of hardware and software products, complemented by value-added services, delivers a unique competitive advantage, enabling us to support more aircraft types than any other provider. We continue to strengthen our global network of 140 dealers across 229 locations. These dealers act as a committed business partners and are invested in STC generation with us, which significantly amplifies our sales effort. Now I'd like to review our key strategic initiatives supporting our growth strategy. The UTELSAT OneWeb LEO network is operational and represents the latest addition to our broadening portfolio. Powering our GOGO Galileo compact flat panel antennas, which can be equipped on a broad range of aircraft types, this new product opens an untapped market for us and gives us more capacity to offer to existing customers. This is a key differentiator as Gogo is now the only provider that can deliver purpose-built hardware, multi-network capabilities, world-class customer support, a global sales force, an extensive dealer channel, and OEM line fit positions to our target markets from a single source. The Galileo HDX terminal is our first to market LEO product, designed to fit on any business aircraft. It is expected to deliver 60 megabits downlink, which is 12 to 60 times the speed of our current GOGO air-to-ground product offerings. We are targeting the 12,000 midsize and smaller aircraft flying outside of North America and have no broadband solution today, and the 11,000 midsize and smaller aircraft either flying regionally outside CONUS or our owners who are willing to pay for faster mean speeds than our air-to-ground broadband products alone can provide. We're ahead of schedule on STCs, having confirmed five of them year-to-date. One in Canada, three in Europe, one of which is for the world's most popular business jet, the Embraer Phenom 300, and our first US FAA STC, which was confirmed this week for the Gulfstream G200. We currently have aircraft type with the product installed in aircraft registered in Europe and Brazil. Perhaps most importantly, passenger reaction to HDX product has been outstanding and passenger feedback is incredibly positive. UTEL SAP OneWeb has confirmed a software update that will improve performance up to 30% when it comes online. In Q1, we shipped 36 HDX units, 20 of which were for STC and eight for revenue. We recognize one million of equipment revenue in the quarter. Year to date, we have shipped 59 units, including 42 for STCs. We've already announced that HDX is a line fit option with Textron for the longitude, latitude and ascent operators. We are pleased to announce that we're close to signing with a second OEM and hope to confirm this at our next call. In North America, we have over 300 opportunities for HDX and 25 for FDX, which is almost 60% of the pipeline. As I mentioned earlier, we've received PMA ahead of schedule for the FDX terminal and can begin shipping products to dealers to develop STCs immediately. The FDX terminal is designed for larger business aircraft operators, that fly intercontinental missions and are expected to deliver up to 195 megabits per second. The 10 FTC agreements cover 10 super mid to heavy business jet types and are expected to be completed in the latter half of 2025 and early 2026. We have previously mentioned another signed agreement as a line fit option with a major OEM for all its aircraft models. I'll finish by noting that 4,700 advanced customers can take advantage of an easy Galileo upgrade when we release a software update for the Satcom Direct routers. Another 2,200 could also benefit from the upgrade. As most of you know, our 5G tower network is built and ready to go live, as are the LRU and airborne antennas required to access the network. I'm pleased to confirm that our chipset supplier has successfully completed fabrication and is now in the process of packaging the chip, which will be followed by the bring-up process for deployment readiness. The market continues to respond enthusiastically to the 5G value proposition with 301 aircraft now pre-provisioned for launch, up 29% from the 233 pre-provisioned at the end of 2024. We expect the launch to be relatively straightforward once we receive the 5G chip, because the 5G MB13 antennas and the 5G LIU have already received PMA and have 25 STCs in place. We look forward to bringing this product to market later this year, which will extend the life of our air-to-ground product line, which supports a core set of GOGO customers. I'd also like to share a brief update on the FCC's Secured Networks Program, which we call GOGO Evolution. Under this program, the FCC award GOGO a 33, sorry, 334 million grand to accelerate the removal of foreign telecom technology from our terrestrial network. As we announced last quarter, Congress passed the National Defense Authorization Act funding bill in December 2024, fully funding the Rip and Replace program. This additional funding eliminates any potential shortfall anticipated to complete the project and enable us to provide alternative incentives for go-go classic customers choosing to opt our new LTE network when we transition in 2026. The interest in the C1 LTE product continues. Upon launch of the C1 LTE box, 76 units were immediately shipped to customers. The C1 LTE product is a drop-in solution for classic customers, which have dual EVDO and LTE air cards, ensuring seamless support for our network cutover. For customers lacking the time or budget for an advanced upgrade before our 2026 cutover, this solution enables a cost-effective option that keeps our customers connected and preserves GoGo service revenue from this market segment. Before handing over to Zach to talk financials, I would like to touch on the potential impact of current and proposed tariffs on our business. For context, under the Agreement on Trade in Civil Aircraft Treaty, agreed at the Paris Accords and approved by US Congress in 1979, aircraft or aircraft parts were exempt from tariffs before the recent announcements. In that environment, the US aviation industry flourished. with aviation exports historically running six times higher than the amount of aviation imports. Ironically, imposed tariffs on imported aviation parts could push up the cost of U.S. manufactured aircraft, potentially making the aviation industry less competitive. As you know, the situation with respect to tariffs remains fluid, and we are adapting as needed. The tariff risk relates directly to the manufacturing part of the business, not our service provision. Most of our manufacturing is conducted in the United States at our Broomfield facility in Colorado. And what manufacturing we had at Satcom Direct facility in Ottawa was relocated to Broomfield even before we knew of the tariffs to be imposed. Based on the current tariff environment and recent analysis, we believe we have modest exposure to tariffs. Under the current tariff proposal, we can absorb tariff impacts within our current guidance. In conclusion, MilGov fleet worldwide are in various stages of upgrade strategies. Demand for broadband from new aircraft categories is high, and we believe the opportunities presented by the new LEO network and the upgraded GEO network will all continue to stimulate revenues. We are looking forward to producing compelling financial results due to growth in service revenue, a significant reduction in product development program spending, the full year impacts of synergies we expect to achieve this year, and full funding of our FCC Rip and Replace program. I will now hand over to Zach to present the numbers.