GOGO - Earnings call transcript Q4 2020

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Operator

Good morning ladies and gentlemen and welcome to the Q4 2020 Gogo Inc. Earnings Conference. 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]. to conference like speaker to now Mr. today, would hand over the your I President Relations. of Vice Davis, William Investor Please go ahead, sir.

William Davis

call. year Thank you, fourth earnings full Gogo's Welcome everyone. conference XXXX Deb, and quarter good XXXX morning to and

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

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

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

present and financial non-GAAP we'll measures. GAAP call, both the During

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

Oakleigh Thorne

we full more morning the everyone. the fourth sale good first and for XXXX, financial for and trends of results earnings a and Will and give drive call we're market company to to contribute the walk Gogo. describe quarter new business our quarter of long-term sheet, Gogo's our Intelsat our revenue continuing long-term competitive advantages of believe well I'll operations that year completion leading a for the outlook market recurring those of a the our and fourth will color on model to some factors all how strong deployments, bigger by technology, and quarterly position, clearly And a growth. I balance migrate dependable And as This transition from Thanks, XXXX beyond highlight and a being still stronger positioning to we'll company. today, welcome highlights will being a $XXX million. bear And because new company COVID fiscal smaller profitable beyond. was be industry we the through XXXX focused CA for stress as us cost within the impacted the Obviously, still unprofitable of morning,

overstated. quarter fourth can't COVID-XX results. the with The start our of results XXXX me Let be impact on

the Gogo expanded continuing we lever revenue more However, delivered total want nearly cash executed in XX% give year-over-year, service preserve ATG on not or basis, growing completed AOL balance consider and monthly resilient up CA efficient XXXX the of better to increase de-competitive our travel to by driven moats. business XX% only I increase quarter. obviously QX we ATG increase that our we challenging enabled still most where think QX revenue in quarter-over-quarter growing by online from and driven as average a resources managed the And X% a an focusing did $XX.X sheet bad in down actually that point equipment and market us by and the was thanks XX% occurred a we in Aircraft COVID Aircraft still extremely from base install attractive have operations or Sequential our On a revenue increase showing with was a to comprehensive standstill our revenue sale AOL them. ARPU. and total extremely QX, environment, in were and operation. a kudos X% an a year-over-year. team well We of a XX business when run in the that in I back leaner reduction service We in strategy connectivity low much X% at you revenue. million revenue, per coming X% cost

with XXXX XXXX quarterly subscribers with entered online, pre-COVID topping XXXX ended and subscribers ATG XXXX Gogo Importantly, peak. online, our

ATG for proxy On we year-end flights business a aviation strong record demand quality as our XXXX such Total million aviation QX, platform at side, shifted the on units $XX We on XXXX for at And look resiliency. as generally online and advanced commercial from the QX, In business touch our highest to the QX impact far ATG business saw our travel, the at over in from industry for rebound by users $XX flight those demanded versus in XXXX of expanding account the in year XXXX units equal activity a year long-term. set equipment positive XX% its proved subscriber flight reached the Total online year of and Gogo connectivity. in is was million, installed a for why XXXX. up quarterly a broadband to our proportion average the or I'll at quarter, fourth passengers of quarter passengers more quarterly in products. XXXX. XXX base XX% Later, up now end at end advance from base. and aviation

flight XX% last of price was were levels. accrual will of choosing more the the those aircraft think higher December. above products of this positive. from their per as over and business And of XX% recovers, Normally bought more also continue be QX period, mostly XXXX to full weeks for plans of a December, average utility and their average more that the XXXX. XX% may activations line. their pre-COVID improvement And XXXX flight flew lever the recorded reflects We magnitude. we because bodes charter that important in course of a same only year the travel XXXX pulled EBITDA. with number the February. fleets and as to performance Our flight through If of have XX% by bonus for compensation as to considerably as an charter QX payout. February service upgrades, flight in ATG into than February which see year, passengers note demand growth On bonuses to us decided come for even of XX% XXXX strong XX% the the period demand systems we been of the $XX March-May reliable suffered be In rates. program, versus XXX% the settle flight and we QX account customers, because XXX or positive the account XX% of our to and three of rolled hit Usage in same timeframe, to flight of over XX% more pre-COVID product as up profitability XXX Further expense actually to XX% future the XX% our upgraded activated. this first wouldn't XXX% customers of million it demonstrating of analysis XX actually quarter seen our last to cash consumption another And very XXXX plan. we flights stock-based positive. year a XXXX is the and excluded COVID, or which restored of expect demand must for their number flight back fractional Overall, XXXX Meanwhile, of occurred, wane flew February back suspensions well of data department flew general, We've rose have and in from XX% from or numbers We Gogo was our a recovery versus payout end down in rose accrued XX% trends year with those we is in compensation committee among of have in expect in XX% consumption in-flight has count suffered cut however, we adjusted would a flew which And of XXXX, XXX in XXXX, had that from QX, fractional than are quarterly aircraft. demand be they customers have the was flights early and see those stock in classic and out connectivity such our XXXX on months counts, for of because spiked negatively to leisure impacted corporate corporate demand QX and hit vaccines per and suspensions our XXXX in up the in and our back bit, about XXXX were the accounts. these that aggregate flying to of XXXX measure for impact expect as be And their counts. come management We The that was more QX we connectivity part flight In the which respectively, major February for ever. consumption XXXX. the plan strongest old January XXX% XXXX count XXXX February new counts COVID downgrades in plans. XXX counts. two a quarter

for had However, once balance Intelsat bonus full in decided quarter. and the pay transaction to committee one would bonus on cash completed us led the adequate year the which cash we the sheet, accounting we our in

company, the year. me how on looking want us, to more But plan core let as focused to XXXX touch in we advantage to the second Gogo. on this our the of forward agile strengths new Gogo comprehensively front turn Now Introducing opportunities. an we new niche capitalize opportunities see those of We more market to the and to to of today, we're quarter in I take the and thoroughly entered

opportunity. market Let the me with start

to XX,XXX like the have a connectivity. world's though business the is those And are Gogo. market aircraft in-flight for than a holds verticals, registered niche relatively not yet focused aviation XX% lot America. do of roughly compared small opportunity XX% mobility of business off, aircraft North other broadband First it in of more company

average protect has before, the to service travel, better more secondary support aviation trends last XXX net the aircraft the new sustain jet online and more growing Uberification of business has passengers than that commercial from all-time fact feel as planning we has we and of of sale the or years, level of year should to led turned of timeshare cutting number Gogo. charter time that to over COVID that corporations hit health of orders the the aircraft models inventory more of trend to and per horizon. to for airlines executives a Gogo access to growth, For of lows, our added a risks, markets, five-year online five in-flight desire We which online secondhand ever connected for as connectivity think little can all demand or us an aircraft for including spend pace lead

of the our with from turn strengths opportunity market me ATG some our to let core network. Now, starting

us and unique positive market Our FCC integrated providing network over the traditional advantage and owner give serve U.S. license vertically economics. in competitors, a satellite spectrum ATG proprietary our

past satellite all this traditional better equivalent than I given and and size more will and the from on is aircraft to mainline equipment our Commercial five equipment. equipment light are fits jet combined. should has Because our especially equipment, and we competitors that base the support U.S. remain ATG activated lower turboprop U.S. get But antennas steerable a fly of quality the satellite large advances as its Aviation services cannot our namely technology, invest in we its note, aspect that former improving competitive, of expect aircraft the small quality market, satellite offloaded with in jet weight array most our ATG light have we has connectivity. aircraft time. We as service's Our over years, to in network, jets over amid of missions. in cost and considerably midsized, of latency. that our improved to division smaller electronically anticipate satellite Even smaller satellite compared ATG and low antennas,

me let technology, in on new investments of Speaking touch Gogo ATG XG.

in unlicensed X-megahertz our Our allow into take capability expansion to that to XXX capacity this and our note, interference current aggregation a pleased a for will a most competitive X.X offerings what of bearer upgrade Gogo aggregation with We're on spectrum. the XG of the allow progress to This aggregation degradation I technology. patents XX-megahertz of licensed our unlicensed the only have to customers. combine States spectrum will platforms without related of network made single of for us this significant advantage patents project. the amounts advanced extremely channel for band and partners that unlicensed portfolio for that Cisco, will United our spectrum our team includes should on with the rely RF Airspan FIRST cause

particular of and expect the network chain of one our XXXX. because a satellite instead in as And many XXXX we deploy has However, primarily true is supply telecom in the for slipped, space microchip. delay now to schedule of projects

let me to platform, Gogo, as hidden turn the to street AVANCE AVANCE unique the software to competitive advantage is It over don't past, how a I merely who platform. mentioned to a gives products. our our opposed us truly Now, at have done AVANCE justice we've in just gem think product. competitors centric the but We've

So, that ground, their operating is system iOS and the LX mean operating our by run we multiple or like advantages. all platform including the software or of on in It satellite devices where the bearers what in the applications software. centric? many support same of all whether the on mean The our Apple, on all the devices, for AVANCE on our ground cloud We is LX they AVANCE system, do the - plane, networks. has can ground, networks, software

it certain the extensible, easily networks channel, to aggregate soon air. In into for with multiple products supporting over users wants fact, bearers the on to of be addition the one capacity can mentioned which able SSID, or features, and It's as if one I XG, engineered be expand or new airplane. multiple we'll load to

on also AVANCE, to talk release. point, flexibility and occurred. saving our hundreds weeks For antennas XG, be chain can hardware AVANCE a bullish Tesla, years. we'll AVANCE consists more a customer do And standardized devices, But has platform customers minimal them can we'll we does the competitors instance, customers remotely for dollars like with improves customers We've diverse by more money that upgrades, to do more very upgraded with upgrades than new Needless embedded which product on making with of key. software years. do because but time gives prove box Gogo quantities remotely it issue year releases. even equipment have operators, partners, unit building upgrades, or saving and be that and software. LX future. technologies grow minimal USB defend integrate an This of fleet enable than a antennas customers been of today, say, also evolve - air simply And point for notices supply we're it This and and old for and money downtime. today quality, they software in needed all down the fit. us describe To Vision when higher turned most our on deep XX much, product market upgrade of software of both IFE thereby when in with is customers I'm to AVANCE turning XX be self-diagnostics months AVANCE issues base. The hardware partners much as per thousands we for new especially attack we like current component where AVANCE of can to all it strength installing cost hardware across case for partners. and exactly and run upgrades market do main we've hardware fix the one drives because installing is and believes with and take the segments less on where adopt is fit distribution I'd is upgrade and sorry, more us we sticks with often only two our core the of important can relationships we and upgrades the the reports every that in plane last about The and our new here manually before updates, small allowing new will will in the been the componentry position the and delivering in distribution The our to to future. our this

We return the network line MROs. and to OEM that major sell to in for at of the type all of in And dealer tight equipment, on XX have have dealers we includes makes XXX a equipment original why on Gogo Gogo than makes sales business that aircraft. is note enough they aviation option all Likewise, equipment different earn investment. an focused markets dealers That's different STCs that they're models dedicated forces and fit because confident Gogo more today, will XX XXX of or and invest covering installs major different certificates significant certificates. have dealers worldwide standard for on of that developing supplemental OEMs are manufacturers, nine invest aircraft. the It's equipment XX today,

accounts, demand We once IFC of understands sales sure relationships combined have competitors user and deep quickly in and These customers product all XXXX. market. working teams AVANCE channel. the focused than the benefits have us with since the pulls And through make we very X,XXX penetration that's the teams customers and more of our we ultimate sold we product We've dedicated end have BA to units more on units ever the the believe on to the into strategic broadband also is enable and sold drive that platform launched product our released.

Now, let go me summarize our we forward. strategy as

to the continue on in the our thereby widening and network of AVANCE driving enhance as layer new we'll improve moats platform penetration second, and technology platform. product to of to drive our order evolves AVANCE markets competitive our core drive First, ATG top the products services loyalty. and protect customer And of performance,

to our to new to and million Finally, of do last The like transition first refinancing turn it to convertible notes. numbers. a trajectory, our financial and of briefly becoming touch on current Barry million notes the $XXX Gogo is the strategy I'd our then and step in lien of over settling our $XXX

As of of lowering last strengthen in discuss, reasons. and aimed on at a will Strategically, expense. Barry we'd $XXX night, for our we the the of to like sheet balance our million. our sheet as had leverage midst interest cash balance ratio And refinancing, lowering three

of First, can generate it sheet, cash the the balance our we see should enhance stronger the the And investment more returns. future the more we we cash advantage more more flow can three, free the generate, opportunities, further quickly we shareholder arise. flow take we can we free them. competition, should against be more Two, resilient deliver and

the outstanding. sheet we the shares a be then them for ends, producing aimed stronger now and balance these expect to Towards settling approach amount settle we'll our converts, to at in

the do In platform, I'll significantly of outlook advantages and network about strategic Gogo the more new we in more margin to service thesis the our trajectory, projects flow In us. the network over financial sharing and around deployment and for capitalize look debt years, to advanced to meantime, XX% technology our reducing growth to terms numbers. ability competitive deployment XG XG revenue forward significant our is period, In five-year after it coming five our XXXX over the Gogo. the free steady months, XX% XXXX, that XX% is new throughout EBITDA the planning the to in plus fully our long-term leading Barry of our on adjusted obligations. the plan Underpinning beginning behind turn industry the plan growth cash the

Barry Rowan

Thanks Oak. today. key running highlighting I'd to remarks like themes three begin my by through

is driving strong rebound top business continued our in aviation in line. the improvement First,

positions CACL long-term leading us leverage of platform, our of Second, to ATG business. the value closing of industry our the proprietary network economics and enhancing the creation favorable AVANCE the potential

business materially outlook, result capital spring sheet us improved with structure balance closing execute this Third, to rapid transaction financial that comprehensive well and and our deleveraging. this our will our a in the refinancing align positions new

fourth details for from to revenue Turning the operations. quarter now continuing of $XX.X the million. results Total quarter our was

and monthly period, as quarter products increased sequential attributable fourth is pent-up this down a X% XX% growth from by and $XX.X This continuing increase While nearly COVID. the both year grew total $XX.X million Gogo On recovery shipments. both the X% Service was ATG XX% industry's ARPU for business This platform revenue the of as was in third average slightly This than AVANCE increased delivered revenue by was per XX% year million promotions X% online less ATG from revenue in strongly. LX shipments down a demand quarter or service online evidence year basis, prior of finish ARPU. the X% of solid the aircraft prior a and a by This augmented year-end revenue service equipment sequentially. XXXX. AVANCE was aviation period. revenue strong This X% accelerated driven from partially connectivity X% in the online. the respectively. was is and ATG LX to unit by increase from units decrease decrease offset

base of is AVANCE Oak and installed of strategy. platform outlined, to our our new the with platform base the strong build penetration our AVANCE will As to on of centerpiece into Adding continue competitive our long-term a installed position. driving customers

operations. units increased the the delivered owner year-over-year. has our our our of AVANCE Importantly, fourth performance, and AVANCE. of business network the Historically, Business number over economics ATG online XX% Aviation from very strong of shipped XX% units profit the proprietary quarter were And efficiency in of stemming

We continue pandemic. to the maintain attractive margins, profit even COVID during

and margins data expect to impact. operations to mainly In due costs. declined year-over-year, margins spite of service we modestly Our network service contract center the increased fourth XXXX, COVID only quarter somewhat, in

relate Some our the to business to transitional they of migration of separation as are Aviation costs and the these activities sale Commercial increased following Intelsat.

affected Our also percentages by revenue ongoing customer. modestly will a our and Intelsat with be relationship gross as margin

a Gogo Intelsat America, revenue provided North are into for schedule services network meets access maintains of of million. the entered with the minimum agreement these the exclusive in CA conjunction the reminder, sale to in services As market ATG with Intelsat XX-year CA. a Gogo guarantees current Based $XXX.X launch, over the XX-year guarantees it course period. to this Gogo expected total XG for on revenue

aviation These and With if BA be the between service. changes to revenue will BA NA all sale service remained Intelsat a meaningfully are costs near revenue what we cost entity. of CA, in share network ATG costs now ATG term, gross the CA, have and reported Prior of as included and CA network of profit were CA business expected, shared impact from do as not would the in combined segments. sale

share from percentage, the revenue ramp to the revenue XG in contractual the expect the with long-term. do of we associated launch increase Intelsat and over However,

quarter the expected decline the fourth AVANCE from line to declined the tied prior to inventory $X.X is a classic ATG the to in and product taken platform. margin from our reserve from equipment quarter, Our million transition older This our third attributable period. year

the versus We expect to margin for XXXX. year remain full flat percentages equipment approximately XXXX

the marketing In expense, largely increase increase fourth increase which quarter spend and in fourth was I expenses OpEx. the that XXXX activities will bonus were further and Combined $XX.X to due during a XXXX. in in G&A XG operating sales Now, million investment COVID-XX. a to to an we employee increased marketing expect discussion due in ED&D, and This and million to from of of to development expenses let's paused in an explain quarter XXXX, primarily spending G&A $XX.X moment. in sales turn and of

in stated exclude third for administrative in with to reduction these We call, meaningfully, that We quarter migration periods in CA approximately associated costs expected and costs year-over-year, to G&A offset IT expense related expect adjusted and general by allow greater non-recurring total corporate from migration in costs. separation expenses comparability. sale, plan flat and beginning we future by our the reduce growth to EBITDA We to XXXX. on operation be driven a

to G&A now $XX versus XXXX in have and We expect savings quantified approximately XXXX. be expense anticipated million these lower

now a fourth from sequentially performance, we call, quarter we decline quarter Turning third adjusted increased to million design adjusted $XX.X EBITDA $XX.X On our $XX.X the our fourth was from our decline ago to expense. quarter. noted that million, Gogo's EBITDA year to and bottom-line expected due million, in engineering, quarter development

In to reflect million the expense, expense bonus assumed quarter, planned EBITDA as is which annual compensation, results and paid addition excluded $XX expense in had stock-based highlighted. increase that We we Oak the therefore bonus stock be the of as ED&D previously had additional in our employee an in also from adjusted the employee bonus recorded would adjusted EBITDA.

December, in back full of enhanced bonus employee annual expense the based by traditional in the felt paying EBITDA closing bonus resulted negatively the after and revert to to recording on practice This However, December, liquidity, for were position sale we of us a $XX in adjusted the in we in impacting business CA cash. million. our our year

of strategic priorities Gogo's balance a continuing from our some of year full XXXX operations. position, sheet our I'll briefly to move I summarize discussion and results Before

XX% and performed delay X% in XXXX. COVID, as million midst generated ended impact a the XXXX. from $XXX.X the posted the which the significant was is Equipment of that at just impacted the the sale weathered the year of to able years. focused average of our well management. for Our XXXX, the business, more stronger, and from with reflects adjusted This of completed market COVID business in of the revenue the more customers declined transformative of our this the in previous $XX.X XXXX, significance percentage, to our model, depths million, certainly purchases business during the achieved aviation of an the $XX.X of demand despite COVID-XX. was margin effects exited despite year of from Aviation XX% expense adjusted quality XXXX. from severely we year, million, services a level testimony four par underlying decrease revenue XXXX, Commercial $XXX.X We the having in $XXX revenue particular million approximately resiliency business. in a but Gogo compared active total EBITDA COVID-XX. We A Service was XXXX achieve underpenetrated down the impacted subscription-based of of on million were EBITDA the pandemic business to challenging, company. Gogo

This my sale Now materially that the with Gogo. million. fiscal to the next the which of of improve balance cash a business sheet I'll We I the balance to CA turn opportunity ended $XXX.X represents improved balance foundation our year financial remarks beginning mentioned the of of residual our our deal the is related end, facility, CA sheet. major at of $X.XXX from bonuses, and proceeds transaction fees, and billion. of the was our of repayment costs, which now the principal our and number had net value CA outstanding employee million $XX.X year transaction, debt ABL outstanding total reflects the zero. related At

This $XXX relatively the repay invest cash CA debt, proceeds year point December end treatment which Xst from BA we this we amount don't will flow which repurchase indenture debt notes required in that of to to net relating a As year. of $XXX the Gogo Xth, period the demonstrates from in use million this certain If $XX of to already sales. to our asset in cash million equal last position short of million. the senior growth cash highlight generation we by up use notes to or of proceeds since cash net the govern March had during be proceeds, in principal offer is sale cash calculate the accounting approximately as certain the to want covenants of the our the one business. tied senior of to Gogo's I meaningful the business,

reclassified from current therefore have We term long this amount to debt.

is the expectation satisfy that plan near-term Our this several comprehensive we complete the in to refinancing months obligation. next will

structure during industry, We more attractive business our market sheet the is on with well are compelling aviation strong up set model, based This COVID now position favorable terms. of on along and with refinance resiliency much the balance of our the combined results the to business crisis. our

positions plan well also on to us position cash Our refinancing. execute strong our

developed transactions we is our past plans important the continuing our moving on initiative. certain and financial objective with investors Over favorable refinancing long-term liability months, of several and urgency of credit An sheet. management and of share often other light balance their in with leverage. important goal our now improving robust this we are reduce strategic markets, And our regularly refinancing of We to with to the consider potential have balance we how certain been opportunities. In approached this put can are have for structure. and of we annualized We going that capital strengthen their by through reduce our the to comprehensive and our $XX believe on suggestions by our payments least forward. at refinancing, this debt, path interest deleveraging us convertible delever evaluating currently optimize relating sheet significantly can million holders a regard, Gogo which would we ideas

of generation CA the after In is the refinancing addition us, by comprehensive cash to retained sale the in Gogo's tax opportunity business. the we front enhanced of potential significant assets

net federal federal in interest million $XXX carry over had expense forwards. Gogo XXst, operating December and carry forwards of loss As

While benefit will the income impact tax years net Gogo balance, CA modestly the as turns positive. represents to that assets gain will from significant our come sale our for these business NOL

Additionally, now to our beyond. XXXX background to for discussion investment. would IRS like control expect under we current these of outlook to start I'd majority our planned of rules, assets and triggered were of the retain under providing tax XG on laws. tax some if a turn by substantial a change a I'll

near for is plan costs, strategic and will a external which OpEx deployment deployment CapEx. our our network in us, in detail, to XXXX, development we described investment by approximately XXXX. reflected end of As some double for and the Oak network We be look XG program to both priority in the our deploy XG nationwide term of as

expect XG million as We well OpEx at million in to and XXXX this $XX peak about year. $XX CapEx for be to approximately

a on CapEx expect in cost plans be to concentrated cell for We network that based XXX of our the end XXXX, year. completing site nationwide by

XG network from have more the Our figure changed two years we expectations not cost than the quoted initially for total ago. of the

in million CapEx. CapEx. $XX costs me a approximately XXXX, approximately of of for beginning year. and two-thirds market ongoing for in in to Aviation including that and XG well in deployment our our well $XX growth of the With for COVID-XX deployment year, from the by approximately and We one-third focus reflected have this results, underway, CapEx expect amount external the believe $XX are million largely end completed we continue and spent a plans, split financial Based the current as with guidance. will range recovery in - for invest million Business million million we to to on OpEx $XX to XXXX, on expect we total $XXX one-third now I'll CapEx million development OpEx be We excuse positioned in $XX in XXXX. our this XXXX

revenue to over least XXXX. XX% XXXX expect grow service We at

XXXX. We we're flat following the due saw growth financial in the providing guidance in expect XXXX. equipment for fourth the part we remain modestly, quarter grow or of context, sequential this XX% to revenue to With

the We total to million in expect of $XXX million. range revenue $XXX

range We to development external million of $XXX and includes $X approximately related the approximately costs separation business. expect adjusted the migration to of and excludes XG the deployment million sale EBITDA of EBITDA $XXX in million. million range CA adjusted expense, This of $XX and

to growth investment throughout to plan. XX, network in flow our also revenue and margin capital range now XXXX deployment free At XG. million, of the significant XX% cash go expect reflect our XG growth some period, tied XX% EBITDA to we $XX Having majority current XX% plan, long-term over follows. compounded as our in annual a adjusted which of with targets planning XX of to in XG These five-year $XX expenditures XXXX. the completed would targets least to our like share million We from following are

strategic growth in strategic some will this projected choose However, we But very be additional they and us plan. attractive opportunities they to clear, reflect tangible benefits if on we provide returns these baseline may let invest initiatives investment. our do beyond not only additional pursue

forward as of stronger and we the demonstrates, culture a market innovation, looking strong position, as outlook drawing a to future Gogo we our our from this on for bright As a business. focused are pandemic industry rebound emerge of more the

I to our of transformation. and for this year Oak's Gogo challenges and to team your focus Finally, past reiterate through company's the thanks the ongoing support want unwavering

we've and to reasons of Your COVID-XX. execute through commitment been able the the are talent effects

on positioned can't the other to thank side enough You Gogo have pandemic. deeply an stronger of you the enough. We be or often company even

our are You company.

thank So, you question. for again. Operator, we're our now ready first

Operator

comes first Searle Capital. of Instructions] the ROTH [Operator with question line Our from Scott

Scott Searle

to thinking any flight lot metrics some as it to to services we should any be of guys questions. in, any teams. ago be quarter. into the good or this in related and BA Do South. families about months again. the there heading there's business here terms that just the wondering team the you provide seems geographies all relates Thanks I'm sitting related color Hey, that of hope disparity have the on hard pandemic, performance, Oak, It you your can of healthy, It's imagine there? XX about? today exposures your with Northeast for data the versus there's we'd kind talking congrats Congratulations if to the Maybe and morning. taking Oak, additional to financial my you color or XX% quickly like now safe, dive core other new are a Barry of customers, Gogo so

Oakleigh Thorne

in ATG we're of because that's of terms geography, Well, our is. obviously U.S. where network bound most

flight going further year, have affects see negatively people us. been this traveling longer, In We distances. have that I been I don't patterns, think or there's terms mean, on of is during slightly anything COVID that flights

been consumption demand. because really more of charter hard. lot as flights and Our noted, aircraft. per has a we the hit getting there's timeshare data folks They've got That's up, are

because I installs So, would for more that's into they us. press good, more aircraft will which think mean service,

like we So, that trend.

are else? Or something So Scott, for does that looking answer your you question?

Scott Searle

like sort than No, aircraft have United But the the for any mix for the a than have had within instance. are of your in growing online, places California Florida, industry the as more recovery well States, flight Northeast, of aircraft. geographic looking been per Southern that guys you lot revenue faster just activity of terms as

of didn't was a terms tremendous amount granularity about I things forward on additional there metrics of if So, thinking any in provide just front? color you're that know that today. you or Although going

Oakleigh Thorne

I American centric. mean, sense, I little right fortunate Because in think Yeah, aircraft travel is taking we're where business taking in so hit travel. in global really one global North now. there's And a place see very we're you that

those plan. jets in And on your they're service is are if most that your competitors, internationally, of - are So, flights if large flying of install most down. base now

suspensions. flight of many, some had levels. not if plan So, We've noted ground, here. call, we've get still suspend that next accounts, flying, former revenue. to they're those cancel, go. But bounced that way their But fortunate. come do on been but but we're to matter close some couple while the not would you and quickly there, And And as We're that I pay months. have back we of we'll over back, if those as on downgrades back, not they're much. people don't all very because It's they the most had that the obviously, doesn't their out the hit there's hopefully back

as while up their But bought were have ground. of and wouldn't plans a on the people have really that So, lot came come to they planes back. pay people actually have the strong back

that's helpful, been why had a and in that's back So ARPU. bounce we

So,

Scott Searle

this I If OpEx, Barry just clarification you XG. think could on the Great. a said for year million I $XX

You is that category what's terms ability solution? equipment opportunity of want in I'm also, has impacting over in or wondering aircraft Is And themselves, that on ATG terms turboprop of that any through the smaller enough driving next aircraft, about been in AVANCE that XX% that the term seeing different plus XX% deploy the having larger are I And LX that's you aircraft just component that of very penetration deployment? your growth in in long availability the Thanks. the but of lastly, of capitalized I general, underpenetrated make sure period? five-year impact growth how how Oak, terms if you the aircraft. target. cost a about really could think mean, the we total to P&L? flowing just Is being that? to some s think the then the

Oakleigh Thorne

turboprop two is and of X% the growth the the rate. to counting of penetration a lot it that That is Barry with to We're on rest first I'll under growth over for parts part. start that units ARPA. just I'll turn that and Yeah, rates, drive of not

this see we look So, as we our size now. addressable unpenetrated. market the right is jets including in five at forward it, market still market the that data, and XX% we light, the when and large project in look at And are we turboprop opportunity frankly years, medium we

to than this And Commercial in So, there's grow. some market of room verticals. is lot other or Aviation a a just there adopter Business slower Aviation

really the that we're So, the turboprop. - is question last not question on counting the first answer

you've now chip crisis in The other chain, the in ourselves was line noted a demand. behind of particular, that's just really, the the to and of we've delay our to a here world that in manufacturers project had gotten is demand hitting this caught in bit back supply the little question back shortage one chip go other XG in whole chip to one had supplier a partners the and in manufacturer get retake bunch and

that's doesn't It's the way all. XG affect LX chip. into us at a It so XXXX. that's And pushed

you I'll situation Barry, discuss over it further. to is. to that So turn that's what

Barry Rowan

let Scott. Yeah, that, on comment me

internal the million of costs of cited, I'd lion's capitalized $XX of that OpEx cited. $XX million numbers are million then and that top $XX it's in that, in so few the so share but CapEx. that dollars a or we the So, There's on million

Scott Searle

guys. Thanks quarter. so much, Nice Great.

Oakleigh Thorne

Thanks, Scott.

Barry Rowan

Scott. Thanks, it. Appreciate

Operator

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

Ric Prentiss

us just going you Hey, navigated into to that's customers? the details good your for to through XG XXXX going heard what And help us think have you to but I want confirm, I to capacity what and think behind focus bring morning of of ARPA? kind that's understand do it. speed with to guys. help I all visibility the Hey, on I'd very lot today and glad a like thanks stuff. to well and project, And

Oakleigh Thorne

that. jump on I'll Yeah,

classic with We current product. haven't the game because to it than into ATG is But to faster competition. think the in than given that exact times LX it times And of And everybody way plays is that exact don't want our numbers. speeds. with speeds, XX data terms get those we the about frankly, faster speed, X

going our love it's it. customers So, significant I And are think a improvement. to

part So of other that I'm What part the your was Ric. of first sorry, was question? the that

Ric Prentiss

as far and the capacity increases as also what Yeah, [Indiscernible] ARPA

Oakleigh Thorne

a because, in Yeah, XG ARPA ARPA. be of will will price that classic help to yeah, it's at than ARPA. service the bump is And, plans. terms it priced higher product on a Yeah,

Ric Prentiss

the to question. previous Okay, and

behind out about I and is how of how think thought you much rate, units long this? a threw kind the ARPA XX% much is term growth

Oakleigh Thorne

Yeah.

So about X% units and X% ARPA.

Ric Prentiss

And Okay. the then, Barry on XG spend.

$XX I through about 'XX, think I spent you'll heard year million. have end

$XX is does that spent that? million gets how 'XX CapEx XX imply that about So, OpEx maybe in with should that about we and XX think of

Barry Rowan

Ric, of it Most Yeah. there spent spinning XXXX. bit gets is in a beyond little a XXXX. of the on tail

that two after spend after the flow, of ongoing end in mean, 'XX is it done capacity to few to coverage. at you I point. $XX But a of CapEx all after lion's you maintenance, end the then about XXXX. the added a really left within gets talked done bit kind is, the think picks I of it's are spend million CapEx CapEx, For a We by 'XX, initially, there million the virtually the the at $XX And is share importantly, of million up generative then look CapEx nationwide And that. of dollars capacity business, know OpEx bolts as by XXXX. that that. cash of provide beyond important just phases the when little Because is really the investment

Ric Prentiss

over that as out keep the I at as given would would think margins what companies flow roll of network, about free valuing grow instead XX range over you revenue time? be sell time they Oak, margins, to it, you and like well. top grow When extra of couldn't on that why mentioned new you've in then cash wondering a really XX think able you and we being margins And, looking steady, to

Oakleigh Thorne

top the probably the years. that going the they think grow I to towards And more Ric, five overtime. range of start and we're grow bottom could towards over of it

does a upper invest we opportunities manner, very margins, to us opportunity that which also, we We would margins. cost-effective and help to the enhance AVANCE really platform And and further growth will. in do give the enhance see

Ric Prentiss

sense. you've And Make [Indiscernible]? me, last one from mentioned

Barry Rowan

Ric, things. do service on margins, we I'm very to to side of the going just margin that that, is continuing add strong see

As to as overtime, of what AVANCE be very we've we've that strategy component expect to installation to to drive accelerate able conservative to out and too. be a XG we so then talked be and gets about, equipment our about of we want is rolled key XG, the penetration equipment tried

certainly there's also the reduction do Yeah, the the G&A an investment there. XXXX. Speakers] expenses get benefit So, we obviously starting in [Multiple of in

Ric Prentiss

like what good you it mentioned is Make of a have kind might sense, times, list just that thematically? last or would one have for is be wish of to you initiative growth couple on the to me,

Oakleigh Thorne

XG, if and would holes Well, plane, off screw on other perspective, antennas examples same are obviously go way AVANCE - which today equipment Two antennas exact that all be back an example come is you exact you XG, much place. same from the LX, get an have in the you're the they the in pretty to the

even most box install. you're box. the of And need that small add. easy here that But have to a Overtime, LX have we next small very you to initially, the going add a not in that's to AVANCE happen to software. hope box workings So,

cheaper is the going another ship do Gogo to today. buy margin software, to, platform Vision in our than competitive software to And high that a And you're if months, And install, on buy it, significantly they that Gogo that's three there, leverages cheap example, run product. just if that it. we and a got is a AVANCE platform want performance and a So, promotions, is right to of ARPA things current time. with have key it's AVANCE we you will remotely. to and key very over they six where it let permanently AVANCE turned like and upgrade when an people use can an it's and obviously today, helps Vision example is The really enhance because already we leveraging much

of examples. anything benefit, us opportunities opportunities. specific in thinking now, a to think Ric, shareholders. are lot just And get to as be that invested they seen probably competitive careful we the sure say for for to very don't of in we're very capital in those we on reasons. I what give too about We I want terms a those more and So, want about right But different think high future. as well make our think we'll have return selecting strategic those I into

Ric Prentiss

Great. your Well, I continue employees hope you, say thanks, to family, well, guys.

Oakleigh Thorne

a lot, Thanks Ric.

Operator

next question DiPalma with William from And comes your Blair. Louie

Louie DiPalma

morning. good Barry Oak,

Oakleigh Thorne

doing? you are How morning. Good

Barry Rowan

Good morning.

Louie DiPalma

can discussed the you the you operating in there say Barry, if control? that what were have now Did you of would a if to net change change to there be retain control? about were losses ability reaffirm you them, just

Barry Rowan

unrealized net NUBIG. to that that gain, a able There would under Yes, law, the One is a to be tax those. we a built-in are retain of currently of the current majority for meaningful couple rules law allows apply that.

So, is on can you the of years. based then if the spread company, value calculation five that over the

retain, stock of of $XXX So, we of in that those would the order values. current prices million annual

would portion, period of look meaningful an at horizon, really across largely income cover the you planning when and the extended particularly for time. that five-year So,

Louie DiPalma

Thanks.

experience many was capacity And and think I investors Gogo's commercial due airlines on used to such as that the is Gogo's, material. service poor Delta Oak, Oak, limitations. user for have times, at for

hand, citation, with on any On Legacy a like investors I used that private jet or a not Textron though, challenger. the other Gogo's spoken have Embraer service a have Bombardier

just for the with Gogo jets? has the to how you how network satellite capacity is networks. of shift what and was And I wondering, fast So, traffic the the increased private capacity for discussed

on just helpful. support Zoom it sessions support the Any service I'm Does overall wondering, be high-level would so, VPN? same network time? the like jet Thanks. at multiple color And does or the private quality

Oakleigh Thorne

you they Prater, funny conference on Embraer the It about was. think mind. in a an And partners just it And Embraer back Yeah, live. had. he FaceTime, with page her I he her with if on meeting a I'll was video LinkedIn Last of don't and posted one employee a was, FaceTime the showing video it were start little was forth. flying was video an her story, conferencing talking the who week,

piped on today. somebody thread And in the

you you got plane? we've on do So that LX. connectivity have? Viasat well, What said, do And we've what have got they and

another responded, so and watching to oh, they system great LX. the person see was person system Viasat so, up, working And And takes they And running? well. that then which was said, Viasat was

- So, have of depending outside you which our what product, can experiences you have buy? what variety product and different a plans Right. with on you

old classic LX product delivers the faster much So, more, does. much speeds than

you can run it. so, And into

got Internet all could a could was product. aircraft in plane the you and on an get once on XX at on a using the bad very And been mainline of still experience. But that that If were old crowded, a plane like people you back I've with a you timed network. was classic and have out lot on

of we No relatively much today that and today's the number the network. have times Now three aircraft four is problem. better could support on is network to empty, we

people of lot LX So, have are very we with grow satisfied. a to and capacity very,

going and we're And enhance that. to further scores up four NPS Our very the last steadily over have now then years. strong are gone

improved with do. to to everything of they driven try performance. So, the with for expectations. moving And keep the improved goal LX one then ground aspire expectations of to products going ground. an that's already. deliver there's significantly XG to the the to have continuously the And think and has those People's what I to our the is the to improve has else, up what network And significantly on be improve the to decongestion are but we continue on and by get the classic launch And XG performance. and you what aircraft performance

Louie DiPalma

Oak. thanks Awesome,

Barry Rowan

Operator.

be it. take and that'll more Let's question one then

Operator

is question Cusick the Morgan. Phil with line from of next Your JP

Oakleigh Thorne

Hey, Phil.

Philip Cusick

Hi, XX if ask okay, since be thanks. I'll left. I'll that's

buy around how this at about us leverage time, on the Can about target first talked some give the like you this it sounds quarter you addressing and expect earnings. You've color convert point? to you think

Oakleigh Thorne

Barry?

Barry Rowan

decision the regarding far the with thinking our buyback. converts, has it's a the Yeah, and stock so into so evolved to make now, really a converts money being essentially

and And the capital invest pushes opportunities that to being about think more the would to us so, of converts those leverage willing of in our to and lean ratio. the allocation improve that toward course we business, equitize when

plays put years. coming the reduce of ratios, would to have range, with leverage opportunity So, us kind how you kind that see to in of of the that out, times six significantly that of gate don't that kind but out but and type with the leverage

Philip Cusick

the So, it you if in I'm… I sounds in X Sorry, times not let converts like equity is results remember? that be leverage the that math

Barry Rowan

there's you Yeah, is plan that that And here the were lower, or when if that's in case, base to ranges X.X, we be on going delever X.X expect what sheet, the you zip forward the but the code balance satisfy there, general - what and that. some from we the be period the depending company But value leverage less by main of to how the leverage. to I calculating the or significantly more dilution for convert analysis, lower and is, look a to the is we time. basis want issuing the point of at the when as at opportunity look to is over cash is that do offset thirdly, shares creation the flow run what the able time you points with think, and conservative couple more use benefits you is of the a to

Philip Cusick

Okay.

Oakleigh Thorne

Yeah.

from stock it moment. the cautious be probably for And you're think And, doing to a these perspective look as to you that's our other way is, as at essentially so, not sell like things if we'd the at I buyback. cash,

So,

Philip Cusick

you way to about is do Is think right think there think that it? the we or about most should a the two running between of mix that

Barry Rowan

would tell on that more rules Yeah. terms to them. you much there's follow have of and certainly early But can look like our you to be It's do. to think, general in equitize to some is what of how to of pre-disposition I be too able mindful

Philip Cusick

there is XQ analyst a is after then, earnings? between probably that now XQ? meeting and for an Perfect. And still chance Or

Oakleigh Thorne

think I Phil. after Probably, would

Philip Cusick

Okay.

Oakleigh Thorne

late quarter think. second I type timeframe, it's think I

Philip Cusick

or other follow-up Do of couple offered XX of reliably better grow That's also those XX. you at well? a can To and XX% revenue things, you in CAGR helpful. each on XX% you to a think from you years as

Oakleigh Thorne

dips Yeah. Yeah, might there significant. I I think Phil. below, but little it's it years not mean, a so, be

Philip Cusick

Okay. And last the one.

Sorry, go ahead.

Barry Rowan

to on was I say, a you part when underpenetrated. of into being coming market just going result years, it's based it in out of get the the really But COVID. is later

of of you still broadband connectivity. did when the five-year at at we have mind, kind look that have So, of rate the over planning half in the horizon end aircraft growth the not

grow kinds be to to So, able the of the provides background market itself rates. those

Philip Cusick

someday of Well, to aircraft see penetration the fixed want is sales goes are trend offer XXX% and don't there given for product there? which I capable so and nearly sort isn't that the an broadband on out less doing to you why Do of question, my And even well. LX private smallest mobile, planes. last or smaller

Oakleigh Thorne

Yeah.

So size today, box the two think. got and in I is and less LX, difference real of only the one the and the we card AVANCE there's

aircraft. in small and LX meant midsize light the is turboprops. more is bigger, large then the So, easily LX we're and so accommodated for jet And that's market,

getting that growing measured we the product and the turboprop, its that that with have a in XXXs don't and have traction lot lot some be So, we very the but a down market never and of aircraft diverse a light very different penetration And success some goes market. and of IFC. success there. in jet of buy parts - The to it. There's some lot today, having market we're there. may we're turboprop But and segments some in are anybody AIFC down a there market on that newer do a we're market on the do money getting retired we we're of wants spend of will them attractive also will before market of planes having is

Philip Cusick

much, Great, thanks guys. very

Oakleigh Thorne

thanks. right, All

Barry Rowan

for everyone, have you That'll question the talk you. great our Thank be Okay, thank you, for And day. And soon. to day. our last we'll call. joining a

Oakleigh Thorne

all. Thanks

Barry Rowan

you. Thank

Operator

this call. your for gentlemen, participation. and does today's Ladies you conference Thank conclude

now disconnect may lines. your You

Gogo (GOGO) 11 Mar 212020 Q4 Earnings call transcript