GOGO - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen and welcome to the First Quarter 2019 Gogo Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference may be recorded. I would like to introduce your host for today’s conference, Mr. Investor President, Vice Davis, Relations. Will ahead. Sir, please go

Will Davis

to Thank XXXX quarter Welcome you, good morning, and Gogo’s earnings first everyone. conference call.

Joining and Vice about President me our results are talk today Oakleigh and Barry and President CEO; Executive Rowan, CFO. to Thorne,

consider performance on like caution regarding Before materially take risk to the results the described future conference the the XX-K and of from Annual events SEC. this during those filed more in you may with we the other press caption financial and to this we our and that XX-Q under I These forward-looking this call, could you of make that are opportunity We cause our we statements Risk factors started, differ detailed on course get and have in filed to to are the would company. remind forward-looking this fully Report factors risk future statements Form release documents morning call. in the Factors actual

In make update addition, XXXX. result that no date. to of undertake statements this as Any statements or on forward-looking note May we date call We is of conference are as of new X, based obligation assumptions this events. that a information future these today please the

Oakleigh. earnings now pleasure also in community During with included on non-GAAP Internet a and press our measures this Relations non-GAAP a first only. comments, Q&A financial to section and of adjustments on session is is call to the the call, We earnings other we’ll available It comparable being quarter This considerations we’ll of website available call to measures management Gogo’s ir.gogoair.com. present financial Investor reconciliation is GAAP over the of measures. great on our both The press host at GAAP turn broadcast my most and the website. and release. explanation the the After release

Oakleigh Thorne

a Was same for welcome a value those in build I to belief Gogo the first earnings took in CEO and delivering delivering our my year business that company, connectivity this first I call, and Good QX invested call. earnings in-flight core a the profitable then hosted reason one XXXX of solutions. could morning Thanks a solutions and belief solid Will. ago, job the of

penetrated the Our will proposition there’s want in-flight think much with We is growth. this across from consumption longer to simple. no fact bandwidth connect continue rates in all business to point, the is Usage in-flight Today’s as to segment we grow. and a expect and but penetrated it. that feet runway grow a more What’s home it, about connectivity to penetrated consumers to don’t growing usage and Passengers of increasing in their of our to significant both airborne must is is our have, XX,XXX argument air. airlines is only about business connectivity of committed aircraft is and unpenetrated. it well they’re largely to globally. in global are owners have. XX% And the XX% North Aviation, North even Business XX% roughly markets operators are Aviation ahead exciting, penetrated as basis. on has a it want fairly Commercial America is America and At take I the of runway grow nice only aircraft to continue expect providing Gogo

of a for were vision whether a retrospective. lot about Gogo little year do questions So Last was achievable. our let me there

We’ve $XX ago. for flow cost reduced now significantly team the and XXXX We’ve least to our go And and improvement and the Gogo of the notes revenue making related almost cost and our row those Past largest advantage system QX offensive I the for to XXXX in weather strong trajectory, in has towards million. burn creating market United delusion for position We improved grow $XXX senior for are the issuance of front opportunities be of one $XXX quarter shareholders. de-installation the cash can the want or We our to Gogo and we at due that demonstrated $XXX Driving upgrade XX% to service Gogo. results all availability we’ve results, take maturities of winter in still great QX no QX million growth of the that of savings fluid. closed managed either to whether mainline compelling while as our it’s I solid improvement to million by And our flights until in quality secured year. us. our reduction the flew defer in the up questions. old million ATG can and With will XXX customers answering signing system while and close strengthened free our think to and XKu. in thrive expect as versus they in progress ATG on degraded efforts. interest collective million of improved of these profitability been flow our and quarter dramatically our XX% up we’re to fourth other the and incident year. we one in both closed fleets demonstrate we’re under acknowledge customers this positive ready provide substantially our bulk to easy model. our a entire rate IBP airline-directed not to XX,XXX at versus guiding aircraft lower at this value significant turnkey represents debt States which thank quarter achieved We’ve a $XX recently year without deicing deicing cash for availability

adjusted we and our QX Now let I that me expectations, though growth be significantly. to similar million caution improvement and had levels. benefits and revenue we underlying added to Even roughly the record one-off if a quarter. quarters both down turn EBITDA, have those to them one-time and adjusted to QX expect fairly when to in EBITDA. service quarters. from backs would adjusted want QX delivered you the strong But record one an add and strong two flow back, the free cash that $XX few benefits very adds strong would EBITDA hit look adjusted be out QX EBITDA would record revenue,

de-installs call, anticipated the out service with to made revenue in We the the and grew the expect quarter. XX%, QX we in combined installation a our than progress ago, by as for six controls objectives Satcom better revenue year the partly I but a adjusted the year coupled however, a the half. revenue I significant I’ll caused had capacity service in are for we rates. sorry, moment. moment and trough the and CA revenue growth That from equipment revenue BA our think largely one-time – to to EBITDA pickup adjusted because to a all healthy drove completed lag be I growth of also EBITDA strong FAA take utilization noted I’m On in due revenue there we good a set de-installs service due grew second In healthy segments, jump underlying however, a constraints mandates, despite BA increase which profitability. six nice last discuss revenue cost service in equipment good XX%, ADS-B in expect

flow progress, division we towards First progress make quarter turning positive great cash positive made was EBITDA first combined our in our CA and for CA free to achieving the segments. steady adjusted

that least in it’s forecasting the positive not going progressed We’re forward, it will right all direction. for quarters stay but at

our BA invest attack to was our customer business in second existing and base The to segments. protect new

to plans and achieve objective, progress we’ll say We’re in on these our quarters. making that objectives, more good to have in that future

allowed our dilution on refinance we not the further extend on notes and results $XXX bulk dilution the without maturities to we The to our to interest the was full would promises. enthusiastic strengthen that and delivered response our us that us sheet. to allow of those November third to without shareholders. At said The to rate last time validates balance bond. refinance improved million This debt lower any convertible deliver we would our our offering decision

equity also and our [Audio which plan own we – ahead our fourth to to trying creative problem our objective future. a clear are to ahead in was Gogo plans of improve We and bonus our expectations. was The awards, while better Dip] culture. presenting processes compelling Fifth vision enhanced for invest people maintaining and our our business strengthened solving with XXXX+ by continue do of maturing in our

particularly of last also of for in tell out our the line story IBP and the our we to including Towards from the committing IBP processes that cost to to announced by control sixth, we Street. rolling media July. well in And end, month. and part cost we’ve as savings several satellite out wanted every a our with we’ve start begun to the plan were the been quarter, statement. that number management three shell get And next I’m through under conferences, income came investor cost in our where managed and of that pleased called

QX, flow As target EBITDA guidance our our tilting raising our in improvement direction. performance positive we’re adjusted of a a result cash and in

recent Now let trends our a me see strategy. that events From asset technology moment. reaffirm touch on strategic light and product strategy perspective, agnostic we for some a

in important this we XXe friends the incident. ways; affirms the our has sorry think Intelsat able unfortunate Intelsat, through would their agreements quickly. restoration XXe our Intelsat this we is to constellation not because two but [Audio competitors. at in Ku we we’re able to First satellites, been, Dip] to satellites was recover Well, happened model had to been were other belonging been XXe, on Intel to We have first

is of to airlines on that If that the to for satellites three constellation rely go four risk if highlights substantial satellites of one closed the portion the it another dark of could out, globe. a meant those cover entire globe Second, their managed or provider launch Ka run until airline they are satellite. knocked a

XX the space were partners it’s hours Today and relying satellite or on your satellites our coverage suffer same three to the could passengers’ needs. with debris increase most poses, Intelsat providers four if XX like to or Given risks satellite satellites. weeks utilizes Russian Gogo usage of And connectivity our issue experienced. that huge playing providers the with just they and most another at roulette move global for in within

forming technology. think we we but more only is extreme it. asset with suffers trend around particularly it utilization capacity Today lease planet when the when lease at low the dynamic capacity, hours the satellites light moves aero conducive to not beam strategic the Another XXxX, of all and market, of planes at are is underneath development smaller, flying around we use our we versatile strategy architecture mobility demand of the This day. where reinforces

quickly beams where far dynamic satellite lowering a forming improving mobility. costs ability and the advantage that open working Due take these build able technologies them, advances capacity our more extreme need on the the competitors our beam must and aim new we’ll when future. future we achieve satellites We’re They’ll to with our performance. technology systems, to partners architecture, us utilization closed launch to and much megabit dramatically with tuned are than who in be thereby same them, to give to need we better per of

have Another by increased successfully interest going is airlines Japan service, very two airlines free tailwind offering the strategic we Australia and Airlines. in free. Virgin Today

going moved for domestic We While number demand rival, of offered free time away increase Virgin on Gogo. share its market could growth ANA. last substantial airlines is it’s that its the points has And believe development, drive of relatively three in and of in flights. a meaningfully for JAL increase new Australia from free, years the several

we’re Given I well to that Dip] as positioned believe serve capacity up we’re demand will in the drive well just increase some described And airlines our ramp the of open in a to with the ago, future. positioned moment [Audio we free architecture, dramatic needed.

We Gogo operate and compelling So way allows that leader carrier with future. a partners work or the and to turnkey, and expect industry, market a to leading industry flexibility capability any our we enable to wish, whether technologies dynamic airline-directed us airline-directed models. [Audio they into believe that shifting remain in we the and it’s Dip] open Gogo’s technology in and turnkey free,

Equipment XXX segment dive quarter, not BA. quarter. into online service the each we was a records set in and year-end. XXXX, are year. Shipments as QX of prior reasons. by from rebound ATG a revenue aircraft for with Now the strong BA ARPU shipped few for the revenue, for down down units but as let ATG XXX me anticipate shipments We starting for in

as First QX pent the off, strong AVANCE unusually unleashed when XXXX platform up for demand was we was our product. launched

It dealers aircraft aftermarket. the by the underestimated the decade. been requires to past thought Apparently, space year-end. this installs. literally owners install has for now ADS-B equipment automatic installs and It crowding floor we are Second, in year. with budgets complete ADS-B year stands are with this ADS-B than dependent safety FAA shop more the and mandate of we by improve but owners by the to also are packed surveillance-broadcast. crowding IFC, MROs procrastinated on traffic impact dealers an the of to the end These install the for FAA’s booked initiative as both planes ADS-B trying for on

second issue The have AVANCE cutting ATG and from timing to our moving platform. do been mix A slow classic OEMs. OEMs product the a with has little in at and few our

than Right systems now units for about are AVANCE selling So right. classic the aircraft. price we’re systems new lower more

end complete OEM other the our We be feels have the for year. at AVANCE this channel excited team the line-fit already and by five will of four OEMs and at

the we’re LX been of AVANCE we’re network, because we plans. And we’ve customers and On are the touching product. customers and and the the divisions of XX% our free to able feeling customers all those trial some next-gen and streaming our by Gogo activation to LX AVANCE turn originally developing product on purchased our was for BA shortly. about be we’re activated CA, XXX IFE excited between but a software have architecture, year very them defined synergy XXX able XX-day selling the platform of business over particularly the Vision with customers is to A of front, purchasing which nice XX% up hope Generally, the plans developed Vision aircraft. even ever by customers. good to without our AVANCE share who success billing offering to we’re

CA turn aircraft. of In aircraft offerable front, report for let the on installation. our and were America of we XKu to saying out relatives Boeing which who XXX start we’re division which total backlog CA Now Overall, World. saw start for the XXX service that Lion by the new and like me The line-fit families hearts producing Flight aircraft said, incremental for Rest in the added approximately count X,XXX I’d two to Air MAX, the XXX and at bulletin XKu discussing aircraft of XXX. to go Commercial segments; of Air the we lost before quarter. than now XXX North Ethiopian a That majority online more a XXX I MAX, Aviation

and We’re for qualification for working we through model We and Australia At had AXXX-XXX, B B XXX-XXX line-fit AXXX testing Virgin the AXXXs track on on quarter, XXXX. deliver. AXXX XXX-XXX we’re line-fit have up new are to MAX. first line-fit customers Airbus, in still three aircraft Airways inductions the and our signed the and British line-fit the airline family GOL the install

the modest of revenue revenue and you earlier. Now of product exclude headwind we discussed XX% let if exclude software saw the segment, on I but service surface, the the North revenue benefit me turn where service to growth American de-installs growth the

a This the discussed a ROW is a IFC this the this program ago are from jump CA-Rest These quarter service illustrated satellite in fleets, We a flips equipment engine. of fact the we’re XXX% aircraft were up year and to ARPA remaining in in this expect by will revenue in is new QX competitive In tremendous year, go Rest fleets to our year. new large flipped service future. year-end that new model down fleets. strong but new the World saw up declined The in fleet were first to that quarter revenue growth the We de-install comparisons the XX% flip in I’ll The the that portion fleets. effect growth. aircraft – airlines the substantial last one by headwind airline-directed backlog revenue adjusted XX% we financial XXXX through revenue XX% and CA equivalent next previously point of of number of of ROW will the turnkey are quarter airline ATG reluctant expect we in is a new replaced begin World, airline as model create for CA XX% revenue fleet back quarter, with installed. XX ago. these in the now that help had wind by second system. and of until to fleets year, the online equipment as competitor as to a installations a because year We of making with the from growth for of expect to in to the marketing opportunity revenue result new being equipment well. hurt turn creates a of from first installations powered EBITDA

we we’re that some QX ahead Gross for now. see year. and for fleets $XX,XXX XX% in new ARPA in green XXXX look last $XX,XXX from new fleets As was to up QX starting to shoots from

in we really advantage to ready over good I’ll it to opportunities we’ve year take turn front start the to gotten Barry. summary, of feel in of us. are So With like a off and this that,

Barry Rowan

everyone. Thanks Oak, morning and good

key I’d Before accomplishments quarter. financial for reviewing summarize like operating our to results, the detailed our

structure results sheet, sheet service balance to driving capital have our managing is significantly is natural reductions. revenue strong And aggressively operational completely our refinanced the planned. improved cash including and on We execution focus as balance releasing working underlying cost growth

beginning process step notes. to of each embarked of refinancing a achieving refinance greater flow last $XXX and our strengthen, in Our I’ll detail, adding in raise achievements these guidance outlook cash us conviction improvement prompting late review adjusted greater continues free convertible million sheet two for $XXX balance to now XXXX. a at to with on over we million the to our EBITDA year year least

with on support we enabled million, performance great notes notes the financings Gogo’s tender describe offer $XX objectives par bringing place the million. to the Oak opportunity the we no complete for priced to These financing for After the $XXX announced. successfully launched of secured and in amount several million total key achieve our debt have improving XXXX. from million us fee As above $XXX senior closing We’ve recently secured to also Company. senior March, due the investors initially convertible the notes consent additional an in $XXX

due excluding XX% share. earliest our offer tender XXXX due price the The we is issued on per March, May are of XXXX was now maturities of convertible in of extended the which convertible XXXX. are First, subject the notes due previous debt. our recently date debt The the of notes, in conversion with $X the XXXX X%

had are better extend five-year both us It’s of the notes period on based term trading had terms a opted year financial projecting. the option closing we the two the a for the we X% noting While we sheet puts senior recently since refinancing performance accelerating transaction. in notes senior and maturity secured to further, non-call par been worth balance issued on the notes position that secured above the convertible to the even as our continue

The second secure key objective debt on our to X.XXX%. we XX.X% these rate that reduced we senior achieved was interest through financings from the

up in a investments months. proceeds secured XXX price the our Third, next XX to strategic notes of million flexibility we’ve of of anytime retained senior a portion redeem at to the within $XXX with

amount additional credit million based and of for revolving initial certain on double to buffer $XX ratios. with over provided an provision line an facility time this meeting have financial we Finally, liquidity a

on debt except plans driving now financings anticipate current requiring described The these completed additional With trajectory, strong execution in not as do XXXX financial to projected we is cash XXXX. significantly improved results. our needed refinance maturing flow capital operational our and and and based

and performing cost are through aircraft process targeted integrated ahead the end XKu XXXX our of by we well savings business plan. are running planning Our the of

seeing the benefit We’re management. cash on our focus also from

in of last Our of the plan cash well fall. place position of ahead end we $XXX was million the the quarter put at first

Okay.

capital. now another $XX XXXX. $XXX of Approximately against the improvements the of in XX% from year. higher the EBITDA we a in lower first quarter, equipment directed our improvement at XXXX driven balance partners turn coming and prior recorded improvement flow networking results Accounting of the the cash adjusted reason year-ago $XX preliminary of was to least one primary million the Unlevered quarter represents XXXX, I’ll These During for conjunction to the this in from range $XX has in free with of high-end achieved airborne The negative of quarterly first spend revenue of achievements $XXX XX% from free over by the first estimated consolidated this The confidence in declined. for at revenue this a the improved is operating was implementation total million equipment substantially. cash from Expected quarter free beginning the million $XXX which level. $XX quarter. million. $XXX also in the million achieving million versus our Standards cash Total positive the airline significant to occurred airline improvement flow add at to million million our decline flow quarter comparison switching of XXX. revenue resulting in with model, the turnaround

this would increased from prior revenue year. total Excluding impact X% the have

external service of to Importantly, both X.X% of exceeded year-over-year. was and our million revenue Adjusted EBITDA million high-end expectations. of $XX million $XX range at meaningfully consolidated and internal pre-announced $XX the increased

April As our the on Satcom one partners. highest spending we costs software lower we and expenses, EBITDA million product on of $X in million second development development service of the revenue adjusted operating benefited pre-release now CA adjusted quarter. EBITDA adjusted revenue delayed software Even revenue the represents incur EBITDA Gogo’s in record. expect the to XX, which of OpEx benefit in excluding and in underlying noted our Stronger from airline from $X million product $XX delayed

Regarding a outlined. of basis this first on combined at looking we EBITDA, quarters as for the adjusted XXXX suggest Oak second the quarterly profile and

performance. the BA XX% prior explained. strong the move moderated Now from revenue starting of segments increased the exceptionally quarter first about $XX.X and grew Oak of XX%. included in results Sign margin Business XXXX BA year as to program. final with of to After another basis, and results the the XX% revenue Fly million revenue On XX% as revenue X.X% declined an revenue to profit in grew yet year-over-year year’s while of grew line Total and about outstanding million or which recognition total delivered bottom XX%. $X.X nearly expected segment reasons service let’s our quarter for last business related Aviation. discussion a Segment BA equipment profit a

We be and each $XX also XX% in expect level and the XX% BA equipment in than year. to million last revenue ATG versus reflected quarter XXXX quarters grew year-over-year. rate launch grew decline the total We equipment remaining to higher growth revenue highly XXXX X,XXX over BA successful the online as LX expect this X% LX year’s first quarter’s in the quarterly of of about aircraft products. do ARPU Totally the reaching event of

We ARPU growth with the year to higher improving expect trend through product mix.

the believe years. We in for next XX% general several per of will range total year continue to the that grow BA revenue

revenue we increase to service expect XXXX, this in AVANCE significant as like largely During the number be benefit driven installed in XXXX. systems of the realize we growth recurring of

slow in growth XXXX, achieved significant growth the record during in reflected also was the growth, however, XXXX’s profit We year. segment XX% from operating leverage which expect rate BA meaningfully will

free cash year range profit We significant expect to margin generation. XX% with the continue segment BA to this in the flow be mid

Now a we’ll aviation division. our discussion commercial to turn of

the savings that impacted of in service underlying Aviation put cost are results increase from overall Commercial usage affecting to revenue the Business of by CA combined the initiatives we’ve and passenger the It’s attributable in improving primary place. Our factors, results, an worth and impact saw noting strong comparability two results. segments CA’s largely

XXXX, airline of of during airline. of directed to airline If in impact year-over-year first first was affects model revenue $XX comparability. the million the recorded which quarter and the the equipment I of de-installing the XXXX mentioned, is the First switch resulting in quarter

this ATG de-installations the our performance impacting changes addition, are meaningfully terms in year. business and In financial aircraft

other One of another affecting second the the comparability the by model from the airline to airlines. back for the to factor model directed results airline expected year. is the has year to The by the model and already switch end same the CA turnkey back do turnkey the of this is flipped

model As total we to in the have turnkey we is de-installs a of a revenue equipment representing This a reflects but $XXX noted previously, million us. level was ago. flow neutral discussed. cash the switching results CA back year-over-year the first $XX decrease million, year decline an impact have quarter otherwise in revenue to airline from

the In million comparison I’ve of quarter equipment described. also revenue in against is $XX addition, this recorded first XXXX, in the

CA-NA to Importantly, X% increased prior the year. revenue service million from $XX

the million from you exclude Excluding mentioned revenue de-installing Service revenue if the XX%, service of impact airline, software increased CA-NA previously. XX%. increased $X.X impact the development the product revenue, I

get We airline. service net negative for from up are flat ARPA a year. quarter to year de-installations bottom this comps the reach we CA-NA $XXX,XXX, quarter from we second revenue expect prior was de-installing total of the CA-NA the expect completed after resume the beyond and the as in it to XX% growing year next

ago was speaks versus session well the This prior as as software per XX.X%, XX% revenue Excluding the data period. the a service net XX% strong This year of development ago. drove from XKu, and the positive of quarter, the just impact revenue. for of to product of and grew year. at lower average growth benefit effect revenue the the as the XX% all-time is the from ARPA reached increased reflects encouraging revenue, third-party as it an business the high fundamentals capacity was up the year rates $XXX,XXX Take of underlying

all-time and revenue service $XX.X of to profit segment of result cost the year our by prior of million. high the CA grew $XX a controls As impact the growth an million versus

this Our year XX% quarter excluding spin, depreciation drove the functional cost total period. CA initiatives a prior in reduction versus

plan. As these of programs tracking are ahead

segment come CA-NA benefits quarterly we Looking first primary of quarter, our reduction from from EBITDA described. the expect of division we’ve of was the profile the the this for of most second to the as this at quarter the beneficiary adjusted XXXX, affecting which

the prior of discuss XX from CA-ROW million, revenue total prior described. in of aircraft. ago World take year, we revenue over drive year of new installed look to recent high brought Service the the to the as increase we XX.X%. ARPA of have was up improvement from net the won also longer Take XKu let’s ARPA trends natural from seasoned. should $XX ARPA aircraft quality for are year. revenue and Aviation-Rest XX% Commercial on CA-ROW from The rates over a I’ve reflecting new XX.X% fleets as ARPA the the the fleets. addition grew time. It’s to a number of Now our higher at full the year airlines, in on XX% these XX% grew declined year and Despite in global year prior versus XX% period the years helpful substantial they anticipated over XXXX rates as segment. prior from incremental of dilution

year period about than would the CA-ROW we being less expect in expect loss we considering For ARPA of $XX.X a to of prior to full XX% added. decline number fleets Segment this to begin be of improved from half rate increasing which overall million this And in achievement the new of ROW XXXX, be XXXX, year level. the meaningful loss.

excludes of This network. in benefits aircraft service the satellite see leverage and operating gross to utilizing which continue depreciation the amortization our more we of expense. margin, global is progression demonstrated As

time years course, aircraft of deploying. territory ROW of network the this significant negative through The We’ve XXXX was versus quarter. positive the reached strides in a number leveraging the have our for by service this of half first only achieved margin early is in more made are margin negative with in XXXX aircraft and number and Of it wins deployment cut now network. small than we the utilizing

from larger level to of benefit and and in of a losses full the peak we guidance. spread our across reduction from continuing as with in the conclude For new see XKu expect I XXXX, segment the year fleet expenditures for XXXX Satcom operating now discussion a will a costs major XXXX we reduction programs.

of already resulting has We year the initial the before to airline in which turnkey the Our model guidance to revenue. of XXXX, model airlines one impact with turnkey flip to one switching reduction back back expect now the the for end the included transitioned. of equipment two

of segments. allowing underlying some there between strength revenue CA the the on However, that service may based be business fluctuation and

consolidated are changing range our for not this We revenue at guidance time.

from XX% million our is follows: provided reduced as the initial guidance, X% $XXX revenue $XXX from on million, approximately from turnkey $XXX million unchanged. a we no million of the revenue. is with XXXX of revenue the in changing model. and are guidance updated business guidance prior $XXX range result Our This CA-NA as total from to of to the equipment airline-directed change airlines to

either measure. from revenue $XXX equipment from of with $XXX to revenue. million no CA-ROW expect prior again, guidance XX% from of We guidance. $XXX to million, No CA for approximately revenue change $XXX million change prior million

tone range growth We flow were XX% to of quarter expectations improvement from are higher profile, implies EBITDA EBITDA million we adjusted $XX our to to changing narrower adjusted the guidance $XXX cash over free to at Based our raising improving XXXX. XXXX second million This the cash the the Again, million the at million and approximately over be of expect the $XX adjusted EBITDA lowest of quarterly XXXX looking previous of $XXX in $XX the range. the guidance range flow least to at midpoint on from year. million. of quarter

year-over-year on be expect flow during modestly the We full to and this metric in year. positive a territory basis cash improve to for unlevered XXXX quarter every continue for to free

in guidance. unchanged XXX to metric an XKu increase prior XXX Our online is aircraft from of final guidance

work question. I Oak our As ready hard to we’re remarks, these want strong as to as first Operator, their our join and customers, employees now our conclude prepared in thanking well our I investors, contributing our for for results.

Operator

Thank first with Cusick of line JPMorgan. the Instructions] Phil you. comes question [Operator from Our

Your ahead. line open. Please is go

Oakleigh Thorne

Phil. Hi,

Phil Cusick

Hi, time. Minor the right at right guys, thanks. distraction

CA the costs? bit. not a helping you’ve that what more detail just with forward savings in on cost the you going for us done have been and quite start last see but Can how let’s year, you opportunity, the this So in cutting year

Oakleigh Thorne

as them Yes, had it’s I savings the cost across XXX operations nail element because well a functional initiatives. ran hard a the they to G&A function. IBP I little to the and two-thirds of thing, Phil, mean, would them plan one guess all as had

base. it’s So very broad

Phil Cusick

And about – what forward going sorry. I’m

Barry Rowan

the to a investment is as that business of their a number that, the had new and of look at for number line-fit year, STCs think major airframes if had add we Phil, we like behind programs. in primary things large place you projects put including them, To this described, I to

some still strategic at There were We’re those lower but also investing a direction. the in with level. associated changes

year to as able we an we more marketing shifted of BXC to as consumer opposed example, For reduce some were the of BXB a as example. a expenses approach, or to last marketing

those Oak up processes things we’ll the all the as benefit So well really going operational see as tightening of operational, as mentioned. forward,

Oakleigh Thorne

described, plan. just part Barry as we’re the of Everything all IBP

is would second to to benefit through Phil, I run next that there’s XXX so from The projects other year. actually come are XXXX. run quarter The supposed still through or thing some say,

some out those. expect do of we coming savings cost So

Phil Cusick

And XXXX. Okay. bring about airlines in it Premier of you’ve on past then the and Can talked be some you about an those would out talk Rest World coming Thanks. some there? the Airlines, update during of in online online you give the us phase of RFP

Oakleigh Thorne

they often majors flying installed, down wide also get to at wide get big body so Well, wide then get they’re around it’s the systems day, little them to can harder planes are international let more. hours fleets every fleets. because planes quickly because install body Whereas these a into me, easier airlines the fly a them. grow the domestic you XX up They I’d slower to little bigger. ramp night, obviously, they’re it’s body With a and say fleets,

you time But is So making the we’re somewhat the fleets complete. from ramp good installing you progress. started slower until

instance a the I think fleets right at is British now. pretty along along good for Airways are further some or pace of moving getting like the

on Australia, some success have international relatively We airline and it’s to rates we encouraging seeing their and have we’re see – are and international. Virgin pretty free at ramp domestic new they’ve up both And off. take Australia, In quickly. model moved good taken to really

of was green part So the shoot there. there’s What out a your question? second

Phil Cusick

that about out are Just the talk RFPs there.

Oakleigh Thorne

the international A seen what airlines. is year the the process so the I are, system. or just give sort sales of and Airbus their of my entertainment programs they really I’ll these on there line-fit lot checked whoever last were decision mean, okay, in lot buy part part IFC A would provides making for or me the box, just airlines system, you of we’ve Boeing of yes, say, Yes, a who of want IFC. deliberate much more of

they’ve disappointed been Now enough.

getting in I much more deliberate that making think decision they’re process.

just longer. processes the are So taking

there. we’re In but lot terms United the a World some year don’t lot think I working a much pace ones. win out we’re that are the fair from and going RFPs are hopeful the in not on in of the has and States, to a there Rest the there’s of of number pace, last we’re many There think I changed and good

Phil Cusick

guys. Thanks Good.

Oakleigh Thorne

Phil. Thanks

Operator

from Thank question you. Morgan Simon next with comes Stanley. And of Flannery our line the

is go line Your Please open. ahead.

Simon Flannery

conversations think et airline bit so Interesting them of opportunities. to us you into are that? evolving you satellite Great. we’ve turnkey. discussion, options, cetera. the of to the at of airline as broadly back Thanks to on got insight on little just I do increase LEO Then the go a see leading from just cost top we with you. LEO part your Maybe constellations your a that’s and this how think more And forth? Ku lot. your as Is Good processing? switching give markets. one Thank Oak, that to I you was thought wanted highlighting free, pricing how your them was near morning. their the a directed show profile, Arrow something about that struck might lot And what’s of term do target

Oakleigh Thorne

Yes.

have we rapid and flip very they the at to LEO’s, first panel band a are mechanical piece. LEO’s coming back flat least XKu of them to Ku This handle it quickly gimbaled if at pace is forth a horizon. the have our the on antenna all, in ready come, So, for design. because over doesn’t would It

We our are economically they if become constellation, of an viable, for ready LEO’s, part should you important will.

about really We be the conducive the legitimate funding. up, tend a mobility. progress that up really blanketing The to most I LEO’s a aren’t dynamic earth still lot of manner, isn’t those whether revolve first proceeds, current have in because to on would get think get they around of much which questions relatively there’s even capability, if LEO extreme they depending don’t

Our had demand long. moves the pace. rapid all around a pretty They globe day

we able to them viable So where capacity utilization them. when we’re looking need aim to increase we want beams being

earlier Telesat say that. beams So design LEO’s, does have ones. handle of some the more later could dynamic The the designs of than some

LEO’s. not on depending we’re So

should piece. them answer emerge. think for I the that’s to ready that they we’re But

right? turnkey around only I has a to back connectivity it’s the in. because pay issue, the turnkey I On even almost airlines so hair, we’re that put to because been and long – kind red deals AD think didn’t want mean, company of in the we’ve days any to old old we’re

of if customer. now it, continue and will, had take distribution want then in we airlines arrangement installed to marketing the royalty if to to generally we and we they the the the support space, So marketed But more of you can over product. where we it for lease return

Some airlines having done cost. and that realize that there’s a like necessarily don’t cost

and is be of big trend I one probably to don’t we and going back moved move to think them asked a either honest. are some another. so, have we’ll moving back And back will be

mix mix to capabilities. be that going it’s of their of think size going a and to depend a on airline, distribution and the always I the their bit profitability is own

move in. have of terms is Bob one the heroes the to we free, one industry board, of Crandall. the our all on airline In in, says, Bob of

So if go free, there’s airlines be going I pressure somebody other up to going ends think of on a to lot free.

to across that a in providers to think single multiple and are because have free. have that they advantaged get won’t going I airlines to be provider negotiate to try that

raise actually think I free that boats in all our will industry.

it that seem note get demands to that worth and profitable will that over tide couple customers the Anyhow, people of industry’s a free years free to quickest bottom. successful boats that taking in boats all it’s be was going investing nobody’s more the I to could disaster. of a be the the the that as was think have airline think – but liking satisfy their companies think either, the from perspective the And industry in last ride I profitable others. the a would except result can nobody capacity ramp that I that PR in. raises the sharing holes than I for think a

Simon Flannery

next-gen the ATG? any update Okay. And on

Oakleigh Thorne

things. the we – in say they system, not installed basically had successful in towers We installed, we’re the thing with their a Farmers seen we’ve and on note we’re with We’ve be said we’ve working partner our hard test very But I adapt flights. sadly, think to a understand telco on a ZTE. later. XX we’d my way fourth Insurance comments, couple or other to we’re that I because need LTE be to XG that. and now, developed in We should ATG as of XX at as a version to will foolish we risks and we’d of learned As to towers ATG Chinese our the the had having two. thing flying be been we’d next-gen a network or more This deployment point have say two and we’ll that

to of have So of we the engineers about smart lots lots it we who we since and have ideas been something And for thinking have working version do it next-gen been for working, long very very we’ve a and of have time. how different XXXX. on frankly, been

at issues about So where our alternatives, in those say future. distant and, too more since the utilizing direct that hopefully up have alternatives – looking we’ll time they’re the been hard we’ve to our crept break, first path GTE not at last

Simon Flannery

Great. Thank you.

Oakleigh Thorne

Thanks, Simon.

Operator

Raymond And the Prentiss our Ric with from comes question next of line James.

is open. Please line Your ahead. go

Ric Prentiss

Couple questions, cash quarter-out? on month-out, cash side, working think you’ve sheet, the you month-in run traditionally free the thanks. do mentioned, need quarter-in you some of balance aggressively Yes, How Barry been up working capital also. you much to

Barry Rowan

Yes.

those liquidity done underlying working we part when the the you first about liquidity, of cash projections is expected that remain I this be the driving transaction, million aggressively we’ve process it’s that would you are include and facility to but things. Rick. the the management say primarily. came on which $XX through we that, inventory $XXX at position ADL Yes, releasing revolving receivables improvements, The is we is that have including our with a and look going that above tack-on million and when and that in What

to that that good but, $XXX cushion a comfortable the forward. are cash million plans meaningfully, with In seeing to trajectory business. level required right current flow projections terms amount the the cash run below certainly liquidity we’re given and that our the of the of So range. position above It’s have our we’re

Ric Prentiss

strategic hope in two, is timeframe? investment I think in mentioned, you should of there? to Help one, out you financial, $XXX kind had we includes a $XXX the called in in make it on it would that flexibility why a you the think case million there’s what about us how And most is that on that that Barry strategic, past, a million up the universe And being in understand, type inserted should the be? XX Okay. in what customer note senior the just the is worked call? that a Is the we months. there recent Is actively is next or it something peer

Barry Rowan

about this that and something a conversations of mean the we of or we’ve that would those looks the I say That in I for that kind investment likely conjunction commercial has know evolved along one inbounds nature a the is the with a like last would had ongoing. of divisions sale conversations the that come that to in arrangement. selling outright been call, some another at had from an time, company. the extension strategic division kind more some we through had you of an Sure. if that developed as of process of example, relationships

strategic us investment as would would commercially as and augment So bringing to it’s the company. in more to well enable business business the some of that the a advance capital

sheet. a to pay partner in to amount – infusion amount as is cash to that add that And either we that down or like bring to that wanted obviously balance be a So meaningful, the to flexibility would that come cash the debt have where in that.

very that idea able were call our and well. three being it and, at of to us as gave debt So flexibility one supportive that of

Ric Prentiss

put you you the worry I’m or no to side out the to to the have don’t or months, that XX extends – about XX it on why just mean timeline the trying just cash does say, If beyond to call months?

Barry Rowan

Yes, you then a that, something period is down months no-call, we which reasons. par as I remain which going period, first couple will I no-call think you benefit get to period the XX those that get get to beyond know, get probably it’s with that the the And we as – think for XXX is that is One come a happen secondly of you and see if When years. call to note closer the is you shorter of in the time. is as the done, closer plus ongoing to of coupon. of two does happen half conversations

So XXX.X so.

was kind of period that for rationale including that So of time. the

Ric Prentiss

you’ve Make sense. know on Piggy Simon’s question me. next-gen I happy The to your last about for back say got one the more ATG. later, you’re with progress.

roll us within be, physical break about just our what look OpEx out? the and are If CapEx you as or might that solution or requirements, codes, you new help to far you talking as zip as

Barry Rowan

little you give, I we road. more bit can And not more we’ll for think maybe give different. than the had a prior down dramatically fifth at, a solution, in guidance that but looking on we’re the

Ric Prentiss

good. That’s Yes.

it what outside that change Is nervous, just big people helps. talking you Some a are about? are of

one. the Thanks. me Let than a previous more little say it

Barry Rowan

Thanks, Ric.

Operator

line our DiPalma And you. with the of from Blair. Louie Thank next comes question William

go line Your is Please ahead. open.

Louie DiPalma

Good morning.

Barry Rowan

Louie. Hey,

Louie DiPalma

and complete, generation the being now the Do the press year? after de-install being remarks. fully basis? many on for positive release and a generation free the free in flow with year been levered refinancing, actual XXXX funded cash nearly free and next flow cash to you there’ve debt scripted and de-icing flow Guys, breakeven the references the anticipate cash So for in fully

Barry Rowan

Louie. Yes,

specific that. to say, cash around continues given But for what improve. is guidance outlet free haven’t I would We that flow our

cash question XXXX, XXXX, to and around be flow expect in solve positive approaching. do we your in to think I the free XXXX

putting with the of when the those to are programs cash you management profile the with have liquidity contributing that. at now, we’re in all with we look of benefits the place, the improving So cash EBITDA, flow that

there, all it approaching wouldn’t way I the positive so flow XXXX. cash get say generation XXXX, meaningful we’d in but free So, then in

Louie DiPalma

think continued more the segment show as and international Oak, and thinking Sounds modeling a should seems in Virgin for several online wondering good Australia the division improvements development. it I was it guys free, the Barry. of international passenger do segment first the are $XX the more how shifting progress aircraft a you that beyond roughly which you How million good year come the and also $XX of And seasoned, commercial part as improved for of positive the in are, year just could solid think like years? to they by number become quarter. to noted And million, EBITDA or that per XXXX, investors be full that and you next about increase improvement is division? is

Barry Rowan

Sure.

primary There are really the three drivers rest I can of then talk the the, improvement maybe and to expectations. first improving Let frame me about the world kind of profitability. drivers of the the

The first is, increasing planes. of number

have and over aircraft, different world. coverage certainly coverage as utilization more we to in, that imply you backlog, the turns of of will that better world get as required. obviously installed of into because we That benefit the utilization that a as and as that add we can So get we around seeing that drive parts then it’s better the of required more network and as you’re have now cost, variable capacity

I’ve the second aircraft. expect high of we some, third first average the as cost as the aircraft is is to we’re one per plane, the the there is seeing we these continue the and get then these revenue So described, that structure. is, improvements as And quality the with addition And fleets. some outlined real installed

started down are cost there getting we do rest of see then investments addition, to even some opportunity in Satcom So meaningful in further. in world. And the drive

technology to that. that Oak airborne satellite that So see as technology doing for do plants had we expected when we were bandwidth what see summer. in the helping in probably cost advancements last really and the I’m the we the these us outlined the, we significant beyond utilization well is no reasons as benefits

back the, case. overall some the, has ROW to the context and In in terms year, of for – Yes, you we expected ROW. that the be we the investment the what and while been improvement said the for a the giving peak burn XXXX in

coming of depend XXXX. of see of from $XXX would magnitude then an year. improvement beyond coming online to really on to four ramp will the it those as growing we rate. said order to we we’re you to a XXXX. in sure. those the You going summer more revenue take that that, that, a million back ARPA from planning on most of the opportunities say there out we for because And it’ll in here. expect out wasn’t, over aircraft optimistic going mean that I least quantify were XX.X% for projecting $XX And back the current million XXXX backlog then that of this see was be purposes get it installed But last were into we it summer I There would of last the had to just kind

We’re beyond that already.

cash EBITDA So generation, expectation certainly improved. for has flow generation free our

Louie DiPalma

Thanks lot a guys.

Will Davis

last our question. That you. Thank was

Oakleigh Thorne

I’d you everybody you our QX XXXX for thoughts. like attending few thank with a Call. leave Earnings And Well, right. All to

really also very we ample because own run relatively advantage BA not rate flow strong by is BA. our for has Which spectrum, has a a but unique competitive only First, of virtue cash in generating growth, unpenetrated. have business

an positioned XKu global our attractive to share, and unpenetrated the market. our strong And rest platform, growing, with it’s Second share think but we of wide-body when world extremely of we’re win long-haul, is backlog, large well market.

about believe our Thank growth We you in strong take flow. industry-leading free to Fourth, the by very quarters as and return to the of sheet it, ARPA us. really demonstrating finally, share cash to scale, CA-NA opportunities our Third, in we’re take strengthened much. that in front look of we market increasing we forward to talking come. in positioned as noted. XXXX, solid to virtue advantage you rates balance we’ve drive will of and And

Operator

great Ladies gentlemen, and disconnect. thank conference. all does a program in This the day. you conclude and may today’s participating for Everyone you have

Gogo (GOGO) 9 May 192019 Q1 Earnings call transcript