GOGO - Earnings call transcript Q3 2021

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Operator

Good day, and thank you for standing by and welcome to the Third Quarter 2021 Gogo Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Vice President of Investor Relations, Will Davis. Thank you. ahead. go Please

Will Davis

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

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

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

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

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

Oakleigh Thorne

our focus Gogo’s recently all won’t today. A we so targets, that revenue, deliver a updated morning. and targets discuss provides I thanks instead quarter we few total why for long-term record joining was repeat Will, delivered adjusted hosted evidence service shipments Gogo on gross EBITDA. Thanks we’ll call third service record of ago QX weeks record record to record we financial believe and you those us performance. revenue, this a AVANCE further on long-term it record the quarter track recently financial profit, we’re discussed. and But to

powerful were We time. also on the positive first, prepared of and couple achieved a strong private for demand bottom driving travel tailwind but jet and we growth. top and deliver the excellent certainly for both notable per We line positive first income to share generating demand were by that capitalize net helped well earnings also

impact advantages walk reflects call guidance that revenue subscription XXXX strong competitive updated those introduce Gogo’s performance XG base advantage platform of the your and results, which of BA model quarter scalable are the demand provide take on before of XXXX with Barry context is tracks business converting network summary and the to current for finally and questions. the connectivity will the and sales. financial accelerating Our growing recurring latest and our service we of well demand to then and competitive our AVANCE meet sales guidance, value. I’ll highlights the margin high landscape then needs up customer a into vertically and shareholder third our begin quarterly our positioned the a some of equipment continued and through that integrated open

So QX let drivers. with demand our me on start

quarter pre-COVID many of in Gogo. increase for online, and consumed three or the XX% XXXX. QX XX% of to nicely in XX% fire. installed the flight and and customers that is X% growth up online, were fleet financial and number QX compared targets high XX% acquiring OEMs. downgraded on as as by flown. with ATG In of by raise Those total up As megabytes metrics and time market, aircraft operators aircraft service end connectivity all drove activity up pre-COVID from sales a record and ARPU industry But aircraft fleet Gogo equipment equipment for the as those to network, fleet. upgraded increase in And from a in increase delivered third grow, as and day the XXXX. and hour That long-term compared revenue XX Flight counts Gogo aircraft That times grow XXXX. XX% new as more more strong even a ARPU they impressive AOL, in from in than The in in increase X.X per want aircraft for of Gogo-equipped pre-owned revenue our XXXX saw consumed continued per has aircraft XX.X and data Those with are activated. has AOL two also per flight as times outstanding about and of many media us demand aircraft orders aircraft continues in monthly and increase for to customers often been used service deferring QX we units aviation new flights QX million on record XX.X for in XX% the ever-larger That written all AOL, increases on driven retirements can continues September of jet deferred combination revenue has and of high demand to our XX% good growth revenue recently, retirements million late placing hit QX, counts in the our plans of is million. a aircraft, up those is to drove growth megabytes up on business continue flight the extensively grow is the driving more those in is jets the QX in times ARPU plans, aircraft and retain time connected flights. to demand XXXX megabytes QX an hours growing from in and QX day, QX, per at for fueled XXXX.

I the revenue we’ve it’s extremely to important once we expensive life a with install and rate, X.X% started computing service averaged churn time now, From equivalent note sticky. consuming that in combined is until XX-year our implies a time it’s which installed also customer activated, to think new and a satisfaction churn system. driven by monthly fact that’s an high on very the that aircraft XXXX

weeks flow, of drives equipment our turn virtuous our turn generates shipments. high shared perfect with margin business recurring, in demonstration to All expand in improving ago, revenue, the usage continued model. of enabling new which targets factors and these few subscribers, invest deal we to which sales us basis circle profitably the that Equipment and long-term a drives more service sticky, generates in turn network, more in cash customers, attracts our

use us, is a continue. investors today’s creating still that. from the reasons not Importantly, connected Though XX% this but aircraft that so of as XX% approximately Gogo, we market of raising whitespace for couple penetration low. think will why broadband, There broadband for questions to demand does have

years. of age XX average First, today’s is aviation an aircraft business fleet the in

Wi-Fi manufactured before fleet much option. of an with line today’s fit So was was

turboprop line didn’t Gogo connectivity a doing on for in-flight broadband productivity using the or small do travelers business XX can’t capabilities I travelers when fit was insist business they’re compete. zoom tool, leisure email light and Gogo on also our all today, aircraft, considered for is interactive zoom been video passengers mostly is many a models where markets the social line that. world XX jet connectivity today’s now. Second, factor on market them. launched providers being and loving customers calls And business video But iPhone accelerating whether and with intense and Today, travelers is penetration, alphas the different even of the even geo-satellite AVANCE developed hadn’t driving LX of penetration surfing of business is online it’s fit form platform think media. and

broadband substantially expect the BA by to number our weeks by of of opportunity. these talked we increasing ago, on based about approximately a aircraft trends, end As few connected XXXX, the market we XX% grow

virtue our detail unique versatility plan ATG in XG to of our network, our network more about by AVANCE our namely our partners. win with rollout relationships and and the competitive minute, of to and in the a advantages platform, customers fair talk share I expect those new distribution aircraft We our of of strong

for Gogo’s drive been important this the next ability hit Another driver Supply our meet ability is challenges have targets demand. our years to few industry. systemic our of quarter across chain and revenue to

need the de-risking our we’ve to we strategy further strong the relationships demand, few ago. However, due with suppliers, but secured XX% our the supply only unit all to project a we AVANCE our growth meet a of our common for XXXX, meet for weeks shared long-standing sheet, we also balance and XXXX combination not targets component tree to

most And XX.X and production million, the share generated work demand, on diluted because last operations, but convert EBITDA shareholders. positive year-over-year continue that only for QX, line able fully record $X.XX our a value basis. we’ve a net income of up and we of profitability we and Gogo into important and meet demand sales teams, Finally, great of to In not been bottom above which computes to XX.X million quarter. achieved XX% a adjusted XX%

and forward going our high generation. margin costs have remain rising to leverage relatively revenue positive expect as operating operating growth We and service grows income fixed our in cash strong net

rise results to we’re building world’s the Gogo deploy to continues really proud of while ATG proud to first the team, demand XG We preparing of our exceptional which the challenge are of momentum I’m and network. and the

continuous on key and drives on our the that focus customers’ our success. team’s is needs Our ingredient improvement

proposition to landscape. BA and we each these three ATG AVANCE our attention enable serving network, to our and an importantly, including and our XX developed Gogo OEM dealer of value passengers future-proof years platform advantages in invest them. to strengthening market, manufacturer’s provide and BA us BA in with our deeply want unique to Now, the turn embedded and to unmatched the partners. owners I competitive continue has main Together, advantages dealers, relationships our competitive our proprietary

ATG So geo geo are than me radio ground current miles that only provides are have of with to spectrum more opposed proprietary the XX,XXX that to The licenses our XXX network. start only are deliver the our ground authorized aircraft. having North it virtue air North lower provide to operate by from as the we competitors can the from let which connectivity of exclusive America. aircraft, ATG in than in first, to satellites, And advantage aircraft America. Today, antennas no to we satellite network latency miles

and operating makes aircraft, than and having than that fund build fortunate finally, factors suffers operator that network power Gogo’s of a require were we to competitors. to antennas, total of close we’ve smaller our positive to basis. it’s network, not And $XXX costs. market and I which much an first on and geo less A our half with customers on the experienced proximity, geo installation XXX world’s on ATG between more strategy tower the achieved providing several letting raised for performance Gogo what network activating the ground. form models time, from the from track certification million allows the To those continue than more our they moved their milestones. development we service much on of in to We’ve some of and on we because to add network released key In fit it remain orders installation XXXX. that significant Second, into the with airborne an us ATG build is in to all the gear phase third improve coverage seven equipment, we of service that a expectations pricing XG And network test-bed way will second hardware nationwide to our nor larger thereby the antennas far than to and aircraft customers In and our its OEMs stations. manuals ATG to easy point, connectivity pace deploy costs. much margin from a that ATG costs quarter, dealers. enough customer sites addressable case on should deployment and to based equipment operating keep commercial of pricing of satellite-based placed up. to less geo equity have cover the losses airline is is have ATG QX at for We that hardware cover of qualification pillar their and easy design ground and ATG third, to up

and across megabits XX per on in across Gogo city by megabits XX the progress speeds to improvement average, Boston modeling recent second our Beyond payers, we deployment, our we’ve XX expect testing range, XG reported the the announced a peak from our second deliver XG Gogo customers approximately across per second megabits to program. interviewed significant to with that we Based eight Consulting made to on Group commonly per traveled five X experience the X significant today. delivered that

leisure access streaming for As intense Gogo business travelers video quality capabilities seamless conferencing for travelers media, top increasingly and room living accessing be a will differentiator and speeds require social data XG VPN expect video Gogo.

super network cabin the LX announced selling private to Edge, ISC system. customer. installing XG the the installed that upgrade across and fleet point jets upgrade has midsize much managed them launch simpler Gogo new Jet LX of also Jet cabin of XX is XG and as of path We key will large largest launch. A Gogo AVANCE the operator its platform AVANCE is large majority than Edge our a for to post our

inside And the same. access aircraft. antennas end as replace antennas small update software is new air. our add the stay a The just XX inch Gogo all enhancements. LX same box that The a has ATG over the seamlessly the and LX [indiscernible] points, and not You exact done that wiring, in current the of XG location the with two fit is antennas rest the

roadmap We our ATG for the aimed of years come. performance to have enhancements a network of improving at future

devices. software us advantage centric single system all first includes that transcends that to on products, is operate the operating competitive set which a is hardware a provide of a components, of customer drives of stickiness. platform Apple devices level Our AVANCE our built AVANCE service, second a AVANCE in Like platform. major cloud whole common on allows our new that all

because LRU deliver incorporating run to us ESA, market It AVANCE of predominantly advantage to North on could LEO network own. addressable addressing and a fly evolve stickiness. outside ATG could third, seamlessly coverage provide top aircraft and could America down to performance and steerable networks hardware issues, that us air monitors be opportunity, constantly auto And of over the good bandwidth allows drive system over network ticket electronically would add support The ensuring our aggregated next the and launched allowing our to customer us that technologies for more they of they tickets, increase to allows know the the add example wiring either our an seamlessly corrective are A features creation antenna, that problem. LEO update. us we of creates total and/or service customer apps tremendous America. new customers. deliver the users more are The network stickiness passenger thereby capacity, AVANCE software it technologies identifies Second, automated AVANCE the to on our the is service aircraft apps the trouble the North be the And to the and A recent gives upgrade. also than would example it a add to before LEO ARPU its even drive feature. good flexibility itself different XX,XXX AVANCE business each expand as over and experience. the remotely gets example on levels be include air over the registered mix allows app, departments which flight our a the have take of would be AVANCE extent scale completed good with action, being would often adding with a would appropriate upgrade of that to of different network few years. thereby aircraft, an as to network new rest that

relationships OEMs comments Our competitive discussed MROs. third these and ago, a with advantage dealers major moment so and is our dealers OEMs. focus I on we’ll

years and we to high took of As valuable dealers network has Gogo many are profitable said mutually quality incredibly a relationships before, build. These XXX worldwide.

the happy. in and will upon be on the can products of strength quality they Our a Evidence relationships relied are that basis, their distribution to invested deliver was by products of customers all announcement States Gogo more aircraft of the than FTCs Duncan Gogo United partners those to the will make Dassault LX aircraft we manufactured include to equipment cover XG, independent in know timely Gulfstream, these and AVANCE aviation, models by including MRO and largest Bombardier, XX full modify which its Textron.

service Now, service providers let provider. me ATG the turn Competitors landscape. to potential the satellite fall new two buckets, into geo competitive and

geo Let’s broader still service BA however, America, aircraft start of can North in serve XX% Gogo, main all that they satellite flights coverage providers. Gogo missions. advantage BA since Their with are than most is have

to mentioned to factors aircraft, and models interactive significant and are, a, zoom; cheaper c, latency which and smaller jets; serve all limited geos video installation over is larger a and are form geo of larger all like for while providers equipment, Gogo and us earlier, advantages b, allowing on advantage heavier service. including Gogo’s very form As factors fronts have is makes important applications

have network recently next end end the network they missed five potential to and XXXX, with once many lack now nationwide challenges turn of they will channels the distribution the over now quarter deploy starting in They and dates of launch their are slipped complete have said the network by entrants. a a let’s they would the originally years, that year. year, would by with series announcing the have last Now face a and of they again of credibility customers. complete new the saying but second ATG this After

our to jets North fly successfully especially and think credibility. for ATG they it capital use product new to which the will of They Their face AVANCE solutions their up they two service challenges per also today. ATG finish its that speeds More result network in the would space. -- global challenges. with equivalent range product discussions market, in XX market. average roughly period customers about network the their which that would add in heavy addressable with and per in size potential we all operate to challenge channel will customers both advantages, over no allow to to challenges profitability, the valuable and and more XX,XXX will before our the North the speeds second potential what time face us megabits also exciting given integrated and channels, business LEO speeds speeds XG. on LEO This us below to and they other to considerably to three XX and LEO to we the can distribution operate second. market, it credibility complete face X are Besides XX market, range, and them in LEO American per in second per launching to to the As years, opportunities raise a will launch as currently are X LX our and will well and achieve next the globally likely of delays, the that network satellite right. to experienced North around are own megabits competitor with partner speeds antennas XX speed they’ll Of second, generally expect we of and a to vertical America total models, a some to satellite need BXB to the regain expect these announced our it an in and has distribution broadly with few peak providing they to XG outside broadband then, geo megabits generate provide committed aircraft the entrants to we to megabits American be this of need recently their network Even see our peak of providers experience we Gogo

market is and the direct-to-consumer the $XXX among tiny at to is million billion connected is compared at market billion others. in billion market, with have pursuing global Business car $X discussed connectivity service less the LEO aviation estimated market, the year. third $XX this broadband year this The $XX aviation US estimated the and also model. test which XXX provider revenue currently opportunities, those billion revenue beta in They Starlink, military/gov than commercial pursuing in

launch BA highly Meanwhile, business -- has the we to of entering channels surprised customer for a size has if think the able BA we add channel large onto have Starlink. that platform, were XG. AVANCE market like will our we regulated, AVANCE relative for certifications distribution will base. a to is our we the current We’d doing market a a today that aviation LEO to that Given and given our priority distribution well complex be opportunity product and AVANCE relationships, install given would high base be are fragmented be positioned leverage given ready LEO given connectivity LEO just we’re highly our for

of touch creates our network XG adjusted strong Tower nature those we of in of tremendous our next year, our after complete largely cash our will operating tailwinds will it by expect an margin our XXXX on income growth are our come we call strong high in Gogo at year investments and meet range. the A growth as revenue high investors XG That guidance investments industry and This but subscription the that the relatively brief and raised substantial now equipment guidance to third completion recurring on I’ll equipment. growth morning, significant raised our our and revenue activation supported network updated year before EBITDA continued Barry. the in service we and briefly be cash leverage, the like to raised revenue turning costs of This to Now, by the flow in expected is net we’ve that would sales, and over driven XXXX installed. our XXXX. guidance fixed drive growth remind of adjusted is free our full XXXX expectations growth that financial note investment guidance EBITDA will operating margin we time are previous and follows until and generation XG end

and deliver We we strategy are shareholders, that, ability excited I’ll it about our and long-term With customers, the value for future to turn on Barry. to for our execute Gogo’s over as creation. employees,

Barry Rowan

Thanks, Oak everyone. and good morning,

the This Gogo’s tailwinds the mentioned, momentum. execution and picking Oak a with up aviation foundation strong, and coupled market for As business continued growth. driving business are all by creates indications are strong sustaining profitable

we that As in a is Strong to and high drives new financial service shipments revenue, we our shipments. flow margin more attracts invest in strong demonstrated, have virtuous can usage cash model equipment circle. leading drive recurring enhancing more which generates turn our customers, equipment network,

business of the exceed demand was unique key year-over-year and the are XX% growing the with demand. $XX.X revenue through revenue, for which results fueled line, by time, to Gogo shipments our de-risking firing balance market continues our strength eventually record quarter as capitalize walk our I starting and reflection million success both targets. of we foundation our will sheet on we point long-term for for our growth mentioned. equipment first model quarter accelerating to cylinders, income And of and results strengthen is to are returns. Strong strong a investment to which Our in net as Gogo’s a the enhance capital third positive record the expectations. in ability Oak the aviation quarter sequentially, and service demonstrate the a that continue increasing all innovation, equipment and company, Total X% for exciting future that an the inflection top EPS on reached generate third was as

second XX% X%, our benefit units record quarter third service million quarter one-time was up the recognizing of value deferred third year. second On XXXX, of sequential million year-over-year, revenue contract. our business. revenue customer a from $X.X mainly increase of a the our from this of aircraft an basis, subscription-based coming Growth recurring of revenue the driver long-term Our of online. service compared compared to XX% and in is ATG and third more quarter quarter driven key grew the AVANCE a online X% year, our in revenue $XX.X to last excluding service specific represents quarter of reached by

the activations several XX% total in quarters. customer of with representing last remain is New which the quarter, strong, activations over during line

grew we stickier, from an past as units evolves, XXXX, customers base said of In enduring customers. of installed both AVANCE XX% This to even over the unparalleled provides XX% from which relationships to new last is growth for third with As a laying as XXXX, to our units long-term to year ranged online September AOL, with a the XX% AVANCE the centerpiece platform total extensibility comprise our the and AVANCE penetration meaningful increase of quarter, our foundation technology our strategy. year, total AVANCE into ago. is for compared quarters, QX the XX%. AVANCE XX% XXXX. comparable five XX, a of increase the of

deferred revenue, year-over-year, As benefit from one-time quarter’s X% sequentially. we ARPU grew our X% excluding AOL, increased of ARPU also grew to last increase $X,XXX representing the an

least high our expect will XXXX our last full XXXX. announced the expectations full XXXX the XX% we revenue reflecting we at year that guidance end year be ahead, service revenue Looking range for the to at over the of quarter, grow

shipments product more that XXXX for XX% QX noting ahead the AVANCE are in shipments internal our XXXX of million, and our which It’s $XX a and LX a XX% XX% record expectations the year-over-year, equipment very due growth revenue third for equipment sequentially. sequentially to and growth XX% Gogo increase dramatic increase XX% products. to represents out delivered XXX demand XXXX strong LX than budget. Turning of from AVANCE original We revenue, worth AVANCE quarter, now had strong

business. the for XXXX as of strength in the dynamics on equipment revenue to guidance of this the to market, well year equivalent the year. above the sales revenue We half seasonality occur and XXXX based that XXXX expect as we our underlying is loaded full reflects levels. at same year Our XX% generally second the see seasonal performance back The strong

when we year end updated shared XX% AVANCE XX% on and is As continuing this we of strong this of at performance. next top our we year’s targets, September expect long-term of to in financial growth the with strength shipments

and the supply shipments the is important crisis. Let results me that operations to face in team add production point of equipment one by chain achieved our global regarding underscore the final

can our on efforts common drive chain AVANCE is also cash reduce Oak well manage described, costs quality. by $XX is ensuring that our LX XXXX. XXXX to committing into supply focused [indiscernible]. supply guidance which standardizing already platform results As hardware achieved certainly from our during stretch strategy, deliver component ensure purchases we de-risked to manage demand products to to benefited our for chain we our meet across by efficiently additional in and Gogo orders outstanding our and our The million LX and that team inventory on tree our long-term equipment

I’ll turn to the our a profitability discussion Now for of quarter.

than Universal expected third our through an performance this points margins in Gogo forward, margin revenue. delivered in -- late annual flows into in quarter year. the model, which and stronger of going from our of increase impact recurring exempt sale targets the exemption in quarter, Gogo reflected XX% service service mainly in percentage structure increase months from to to Beginning savings revenues companies this third the we their high the million million in long-term by basis was of September. the to power which Our result seven of pay was of the these sequentially. changes $X business have of the in and as XXX in fund credit January is for of credit factored regulatory we XXXX, this operating a August and and our Fund and $X user must the surcharges one-time This Telecommunications announced a from was favored exempt. a prior CA have federal XXXX become now division, catch will interstate Service driven from for recently up surcharges we due July

even this service have XX%. in expectations Excluding with with line approximately would credit, and quarter been margin last

As we’ve down to operating to for we as from benefit said to XXXX service anticipate quarter longer we year, this leverage. over XXs previously, and fourth margins of the come term and then the in the increased mid increase

relative profitable and customer line acquisition significant quarter, economics increased our sales XX% driven a businesses. margins side, traditional infrastructure our skewing business, points to products differentiator is AVANCE and This an XXX increase strategy. toward equipment the On equipment basis strong by unit other sequentially in telecom with the of of digital particularly mix to more the significantly of third in

are offerings, are is and on important LX half be to LX expect overall that course for the equipment two than the across full shipments. the margins to lower product, XXXX levels, margins above note equipment between of the lower largely quite year, business half margins year important We due It’s second most are service to first margins the expensive the to which product similar less in model. be even for the mix our LX XXXX in equivalent as expected continue of while to

by is the Our the as continued personal including well LX agreeing of its objective in product smaller referenced HondaJet this as on market momentum penetrating Oak previously announced demonstrated airframes, our call. Cirrus with as on delivering for strategic our announcement jets,

that to due expense year-over-year. engineering was This a Moving million and to and future quarter from reduction are sales development, third stock-based occurs impacted and of to operating in million periods. on of XX% a and combined up half marketing being our compensation to non-cash G&A of increased employee relative benefit catch QX deferred primarily primarily Gogo’s spending related expenses, OpEx and G&A. did expenses half $XX.X to which one-time savings previous design $X vesting retirements permanent expectations,

to to in XXXX relative expect continue We XXXX. decrease G&A to

on million end also the $XX XXXX deliver excluding targeted in G&A, from track our to stock-based level by compensation XXXX. reduction non-cash the of We remain

spending profile. our and details provide Now additional I’ll some on XG program Gogo

our track the OpEx. are external of factors CapEx split Two and of million we deploy evenly the quarter, half $X.X costs, spent the and of we to third ATG XXXX. in and in spending. total to mentioned, Gogo between contributed I’ve In XG level Gogo timing development XG a As second deployment on network XG-related

reached we demonstrated First, in to milestones in year. XG capitalize for the XXXX early feasibility R&D requirements of budgeted. We and achieved spend than completion accounting Gogo earlier July originally XG this technical Gogo

that anticipated were capitalize of as treated initially to As be in XXXX million a XG result, we $X expect OpEx. Gogo costs to

Secondly, shift that change OpEx XXXX. first previously to timing of schedule shifts XXXX our the CapEx do to expense that I quarter and deployment. want network we will expecting our spend QX are expectations of on be and in some these the projected not clear

and fourth the launch XG ahead, quarter, anticipation first our Gogo in expected significantly the the to is As in in we of XXXX second to look half next our in of ramp spend year. peak of quarter

is We expect generated supporting EBIT our of will internally range amount launched, that $XX in in and by rate XG free be completed the To million cash fund costs $XX million after that significant million our the total investment deployment XG Gogo stronger Gogo entire Gogo expectations, $XXX expect capital from over flow. to long-term beyond. approximately we even XX% an of expenditures to able of It’s reiterate conversion XG the of XXXX XXXX. end ongoing annually, flow cash adjusted we remaining are to

line. our on Now, bottom to

adjusted the a driving business sequentially. underlying year-over-year represents and record EBITDA strength business. million and a new of $XX.X the and our This certainly a model XX% of reflects XX% Our increase our increase trends was record

does mentioned quarter credit some million I minutes namely include the surcharges. As expect Fund for $X adjusted Federal a we to third EBITDA don’t few our that ago, Universal recur, benefits Service

year and the we range full and this EBITDA, our versus quarter. This XG in of for due a is somewhat previous equipment in the margins in adjusted upcoming the than expected higher to quarter. surcharge and related adjusted QX, guidance expenses fourth one-time operating credit XXX $XXX Our million to EBITDA reflects lower quarter deployment more which million lower million to guidance increase to from our $XXX XXXX

achieved milestone income As We we call, tremendous net positive for in Gogo mentioned the achieved our first the third a in quarter. time. earlier

Free and growth margins, our in This as reflects annual we materially and EBITDA our the comprehensive which healthy the strategic and top for which $XX.X operations. expense translated share $X.XX completed April, per income strong share into this achieved adjusted operations, from and per and million interest basic in diluted flexibility. continuing XX% from earnings in million. reduced earnings flow our During was line enhances well quarter financial cash the impact quarter, continuing $X.XX net of as $XX.X refinancing we

have be While the free and free for our Based investment, due expectations cash there you XXXX, increased quarter, in positive XXXX variation as we free know, flow substantially ago. expectation XG increased particularly for our timing to from annual flow our to certainly forward. we going of performance, several XXXX this cash cash guidance will weeks is on and deliver to flow quarter Gogo

liquidity turn revolver very let’s $XXX.X a Now to in million discussion hand of about in $XXX strong balance XX, is Gogo and remains position on million our undrawn. cash with September as a sheet.

million third of including $XXX in debt, approximately in place the had million outstanding end we million in Term Loan outstanding and quarter, $XXX the at convertible recently the $XXX.X we As B put approximately notes.

as the highlight based our ratio our negotiate we performance I’m just net of our recent for a on annualizing financing, improvement XXXX. XX.X dramatic interest annualized pleased to double rate leverage This as also more ratio results leverage on a year ago than ago, most where leverage quarters CA strong continuing leverage year is from first our Our three that September and net was ratio. financial part would over before provisions able X.X times XXXX, the of one declines. times, of divestiture. our year-to-date of continuing was has to as of operations as our three decline adjusted a which September to for XX a quarters of operations we’re current EBITDA Based the were our reduced

the enabled During provided maximum point by as the Term Loan quarter achieve XX reduction rate the basis third our contract. interest in on our our lower ratio B, us to leverage

annual These rate LIBOR $X.X approximately effect in X result plus savings. be November basis will XX LIBOR [ph] will and a with in a points. in be Our commitment to floor by rates and revolver reduced basis aggregate XX point fee take X.XX% reduced reduced interest will will million in

expense in of our net rates planned, be we’re $XXX at notes, to moment to of currently will end million $XX refinancing leverage four in our been as stock, we this notes ago. and million interest comprehensive I refinancing to XXXX annually, interest have the from remaining plan, our due maturing ratio, the after million the conversions convertible able equalization a in before the times by convertible as expect reduced reduced ratio mentioned reflecting $XXX of annual final settle in we With our XXXX. Assuming approximately leverage lower May below step

Our afforded indicated sheet of levels On balance in previous flexibility. allocation that balanced and focused strategy of strategic capital areas primary unprecedented calls, would strong the following a financial financial four and pursue Gogo we priority. we order performance on

of deployment Gogo is First enhancing XG. our through network the

to overall operating is reducing appropriate leverage Second, an level.

global capitalize term, investing opportunities to And strengthen broadband longer strategically appropriate. market the returning in business position, considering is fourthly, further such our to the ways Third as capital competitive on opportunity. in as our or over shareholders

an operating first considerable the on two with Gogo the of a on and made have accelerated than stronger natural We basis XG with track occurred deleveraging progress on that expected budget, and performance. these has on

more We latter the are actively position now in a consider to two priorities.

opportunity. like will Over assess quarters, we the global broadband opportunities, LEO-based investment the continue coming creating value to

a targeted be a capital some We capital will updated to context begin potential the in our considering additional color on of timing financial in I’ll shareholders of position the structure. guidance. then to provide returning With that,

morning, previously had revenue press we the million in in $XXX the to come high expect communicated. $XXX end million release at we to announced we our year this range our As full of

guidance to division. $XXX million, the EBITDA guidance XXXX raised of the $XXX adjusted $XXX at separation also We to million, approximately least versus million of our range related to $X CA we a excludes million sale migration as This previously of expected. costs

XXXX flow, at $XX million we In terms which of cash million low free expenditures the Gogo to million flow I free cash now dynamics $XX guided. compared the finally, anticipate million to XG least at $XX to to spoke our $XX range. we for the previously in given anticipate earlier, fiscal generating And the to we end year, capital of spend had $XX XXXX million now

normally guidance XXXX to our XXXX on it plan as perspective, XXXX. we level provide full some do, year earnings thought be as high helpful look offer would and call, we out finish forward While we we to next to

line top continue to We growth. significant expect

delivering However, we bottom clear to at to expect be pace we want to the XXXX. line our in that grow we don’t continue are

recognition revenue a as USF approximately deferred have not did surcharge will million benefit in we we one-time with and one, XXXX For $X the credit.

XG to equipment and we network. year somewhat investments and significantly next our contract ramping service deploy expect be to We Gogo will margins

will anticipate we XXXX and XG. will meeting to investments continue capital. on growth spending Gogo unit post-COVID some that be in advanced sales require as significant addition, we particularly to In the normalized And more working returning expected in commercialize shipments Gogo marketing, and

the the which September, term, drive Over unchanged. flow cash growth, continue for free in remain and we late long-term adjusted toward margin longer announced revenue to we EBITDA financial targets

a our is in the achieved XXXX, Free growth annual our reminder, in hitting a really EBITDA annual may than higher XXXX XXXX. target the In competitive million in adjusted XG deployment are remains capitalize of declined unchanged. XX% the XXXX, cash its the driving at trends year, level advantages $XXX VA underpenetrated As the in compounded attractive modestly Gogo stride, network margin the from following year growth to approximately XX% rate business from XXXX, in described market. financial leveraging at million this flow growth margin conclusion, for of the our reaching on adjusted expected to XXXX, approximately due positive $XXX investments and to targets unique Revenue approximately as in XX% but EBITDA follows. XXXX long term example, of we for next

virtuous circle Our shipments the chain that as continue de-risk our long-term our to aircraft and financial for feed come shareholders creates and strength equipment supply employees. projections, customers, and value more online

of net like quarter. milestone for first team question. the over hard call remarks the is the the questions, concludes thank exciting so we’re the outstanding our turn to team, our income Operator, for prepared you. performance ready achieving this we progress, this our for thank including testament of positive Gogo and talented your now a to work Again, we Before continuing delivered I’d our reaching

Operator

line from first [Operator Morgan. Instructions] J.P. the from question Phil of Your comes Cusick

open. now is line Your

Unidentified Participant

to what to of that This that in you’re does that the are from come takes you’re puts you agreement seeing and were that, into and guys. for Phil. Intelsat morning, can then to wanted know confirm for hitting one is launch back you that when Good supply today if and [indiscernible] airlines [ph]? XXXX your goal the at kind work the -- back start you. XG should and that? chain counts I addition guys And may, how Thank ramp for revenues as looking I another flight

Oakleigh Thorne

takes and the half and the going Thanks. very deal we’re we part. I’ll when on part second of with to first Intelsat any wouldn’t have I take delivering puts that deliver, Barry confident let the in XXXX. say we’re

very XX on case putting see are feel -- and now demand down still have as for already QX, If greater in stay year. secure second we’re are now in are similar occurs current in so projections XXXX. bit have pretty of XX% orders this orders then -- surge into we supply and now we working I unit that that ordering we QX, year, and in it. yellow for than placing growth. growth, ahead a if we unit but handle XX% that meet being to you chain, parts the six delivered QX other secured but year, supply, in know part we in had issue and managed all As of and quarter And confident the supply parts There next still we -- good that’s chain, And project we that’s secured this have chip, needed we next resolved on a required was a QX in the our actually in XG supply second schedule. and quarter and on been for chip delay first the we for surge are months we And we’re shape, terms month meet demand, the year to right we’re of systems confident we that that our all a actually to that. we our ordering schedule we actually year was so have all demand commitments very next can order additional we’re year, and to next question think for

we think really well area. in feeling that about So pretty we that and I were good we performed

the as network, actual XG and schedule. in right run the itself far now now of that’s the coming supply on network is to right the around equipment most As

and But are there the as a -- – don’t see In focused of on supply we very we airborne terms supplying certification three us use leverages componentry put and have any who of a issues vendors equipment, way, bells will all we chain whatsoever. LX AVANCE no the also that’s of process the good vendors are it that on Remember, there for that lot our we lot products. -- very project are right LX that I that same alarm now.

chain supply is and consistent the AVANCE. XG across pretty So

good. feel we So,

Barry Rowan

yes, the that Intelsat revenue, And on track. on your is second question regarding

of XX-year As and to grow time the have total a that contract period. over the over $XXX amount XX-year a million minimums reminder, with them we

track amount takes the are step is in XG that We there up that deployment share for a on as place. and rev

Unidentified Participant

the Great. Thank you, guys. Congrats on quarter.

Oakleigh Thorne

Thanks a lot.

Operator

comes question line Your of Capital. next Roth Searle the from Scott from

is Your open. now line

Scott Searle

for Hey, taking questions. good the morning. color, and Nice thanks quarter. my as for Thanks always,

a of off order aircraft coming Just versus retrofits. talking plus chain that ‘XX, about looking terms about time well quick And clarification, coverage I supply have when it growth, had at sounds in you this the like breaks the you point follow got how kind unit to rate new think attach couple in what and ups. XX% you’ve wondering down on of a order. real I’m to in visibility

Oakleigh Thorne

market. develop to think the I take aftermarket, we’ve more are our about in that’s And right we of aircraft the seen committing and older I’ll as units about get of skew of our line-fit XX% kind beginning X% in been Yeah, here penetration now that. a

Barry, a to flow? do that we So trend the is want about to continue. you order anticipate would talk

Barry Rowan

we time had are as terms now are to the somebody the They’d the have had times the Those closer months our history out Yeah, and demand lead a been. we’ve significantly from backlog, longer start so expectations. previous bit two Scott, six the in normally has the in outstripped to highest run that our a one than strong months. shipment, stretching of where actually and company’s orders, they

able taking So shorter that timeframe. we’re May we’re the we’ve continuing times for return down chain be to based and now to the But with demand equipment really that seen. on the but work time, delivered orders lead to in work, supply to to be expect over those booming it’s

Scott Searle

AVANCE I AVANCE gross about the you aircraft, equipment you’re to both to to start high the margins terms translates of in could, talk low at field. XG, rates, the the if lastly, And securing helpful. very how the are and years the basically XX% which in you but thanks churn looking for easy is can upgrade then with very what so that basically, And XX LX the customer. growing Great, do then and LX,

being wondering really because front in I’m your how you’re the the So to years. about XX that thinking locks AVANCE aggressive customer more on for XX effectively plus next

if If you don’t balance the aggressive And kind this because I’m overall standpoint you part you point supply time, of demand industry of margin XXXX? you Thanks. get at accelerate an also, what think is on in installation the gross from as that, have capacity more simply that, the or of to, within industry. the do wondering in

Oakleigh Thorne

now, strategy. our jump just for And of frankly, don’t start mentioned, chain I’ll right supply AVANCE yes, reasons a the a at in Scott, driving are need Yeah, you we the drive I because is that. pillar there penetration lot of orders, constraints. some all central more to mean,

equipment is XX% broadband us space. sure and advantage space can than LEO actually coming which are are classic global in relatively we our our to we growth to people off case margins we think might get incentives of next we to to bearer of that it’s demand in trying to in AVANCE could from year all, Now its easily of in we to multiple to add account of lower we add competitors next over that other the I product is to as would The think We have -- to in gives you and to managed first satellite way thing the guidance, products above products. about we this fend years of and have to now, year, that. upgrade create that manage we the ourselves AVANCE we because well, trying a a couple can partly, talked -- an greater mentioned kind what is add-on order make we potential the in ourselves you one capabilities, order satisfy take built do benefit into our

it’s to to install -- growing XX% So, a our that. AVANCE XX% it’s [ph] roughly great. is and by year, year, getting we’re going this We growing, next is that which people move XX% base our of yeah, driving major of thrust, the hope of with and end keep

Barry Rowan

your gross in you as margin the question really margin of driver accounts the the And about Scott, to of on dollars. margins, the XX% economics service know, overall is for

for that’s the So drives terms really margins on creation quarter. Gogo. in equipment, the this value they that factor of were And the high

we As the XG Gobo expect AVANCE and said, as to worth us we’ve because invest in even much down for we come driving reasons we driving penetration launch XG the those it’s because about. to very also to it conversion to all talked the

adds future people proof we the enables products operate as AVANCE online, we So, more of customers, stickiness as to to get the described. it its

business gross So for couple see next overall those over years, it’s equipment, -- model. margin of very somewhat but as we good the even compressing the percentages,

Oakleigh Thorne

to Yeah, think go in an really there’s of MRO capacity Thanks. the I then I don’t plenty to that’s capacity, issue. to up terms MRO of install, now think

you Gogo. the happy are and catbird the compelling product to a something And, on on they sell and their is that now, that our customers seat happy. really right the MROs for distributors have Now, in with with make that that thing we’re the very makes to money relationships that be

that to So weapon now, that’s limiting factor. And don’t of see driving penetration. as sort a keep really another the right we in way that

Scott Searle

Great. Thanks, Nice guys. quarter.

Barry Rowan

Scott. Thanks,

Oakleigh Thorne

guys. Thanks,

Operator

Ric question from now Prentiss next the your from open. line Raymond of is comes James, Your line

Brent

Ric. And Brent this little how this expected going within one bit think timers? should there than in on quarter. about Good you guys, category for any that morning. lower came or is a trending deferred that costs Were forward? we ED&D Hey,

Barry Rowan

that pointed were did bit to a was One cost we and helped. a milestones feasibility will Gogo into previously the technical couple of of year. of capitalize of able that and it some a of next certainly deferred dollars had because come the some we that the was out. crossed be which reasons, lower, little having for in be will proof anticipated couple than which more deferred, Yes, There XG products we there were million

to ramp in quarter, XG in spending expect next do continue we as we ED&D the to product. So invest Gogo the

Brent

Got the where connectivity Just international to these have provide these guys you other talked about And term aviation upside general you question expectations? some and then could on and provide cockpit? of my it. most to markets the Thanks. your update of is, think long most expectations, markets an that encouraged you to you’re and new your could upside could provide which

Oakleigh Thorne

Yeah, I’ll take that.

that global one would broadband the have think would be most initiative. the the upside I

stage more Board move However, approval HondaJet into is ahead with gotten in STC we detail Jet now, weeks and that’s when that. aircraft to Vision we’ll STC; and aviation announced there. having business most couple still like the the about external moving relationships we’re That’s formed the mean something success smaller have we that’s not with aircraft by Cirrus in ago. like any both parties we right case business aircraft of the course, formal or I down get of talk general small market and that a Where

right good now success. we’re So, having

or hard further shorter XXXX over get We to routes two to the feet the small big and very going drive we floor products AVANCE flight not that competitors to ways, the an our that can getting tend feet, fly we like far small and at because of area modify floor factor then so to have to were are planes The compete, for often. LX form for things our is been in looking factors driving altitude keep connectivity where smaller XX,XXX and lowering there. and other it’s our aircraft requires form penetration we’re LX and keep

can that we’re that. things other to on, further there’s do working So drive we

be revenue the ones. the those accelerate drive half half the of think driving start for So until dramatically decade, by of would we the wouldn’t the would second decade. the [indiscernible] two but that -- big far probably growth biggest, second

Brent

Great, thanks.

Operator

from from the of Your line Blair. next William Louie question DiPalma comes

Your line is open. now

Louie DiPalma

Oak, and morning. Barry Both, good

Oakleigh Thorne

morning, doing? How you morning. Hi, Good are Good Louie. Louie.

Louie DiPalma

been you work? of four results spectrum your and unlicensed bonding megahertz bonding spectrum the megahertz Have positive? able of Does XXX of licensed test band XX the Great. the the been with to Wi-Fi megahertz have

Oakleigh Thorne

the the there’s that that our to actually an we end call. tower in equipment all aggregation end right aircraft center actually and so not difference and on we’re them. right engineering it’s Yeah, first to have setup That’s more Louie, bonding, through of now, tower between come to the through now -- two way -- data to next testing

Louie DiPalma

And antennas are Great. on working future you And antennas? and still supports the mentioned will also new Iridium Certus service? own system easily your how Oak, Certus developing also existing you AVANCE systems. LEO Will the support AVANCE Iridium L-band broadband

Oakleigh Thorne

Certus a It like other or the installation new a get LEO. to LEO antenna with was just could required antenna. support any

really not Certus still a don’t bandwidth but not a for we would a don’t what we’re so around, dealer, like that we yet plans We’re so I would, that about call, have think, to on LEO’s that. -- ready talk lot not of we’re lot band of product sell add have focused we us think I’ll and iridium I narrow the

Louie DiPalma

will that your growth the Barry. with you guidance Right. And XX% end this XXXX to of quarter’s upper one final financially long-term range? your at one XX% revenue for still upside, do be project growth Even

Barry Rowan

yeah, we each be growth, to so, expectations – forward, be from it for XX% to ‘XX revenue do we it actually service yes, expect that to range up we saying Well, expect the for year that at year. going compounding XX% increase next

Louie DiPalma

Thanks, Awesome. guys.

Oakleigh Thorne

Thank you.

Operator

line Your next from the question of Jonnathan comes from Navarrete Cowen.

is open. line now Your

Jonnathan Navarrete

the And good viewpoint is expansion morning. perhaps and of of any how the seeing is, XXXX quarter? is pricing Lance. fourth what in that question and pricing? for the quarter. the Jonnathan will on on terms terms of expansion unit Hey, trends Congrats company beginning look This are into the My first in

Oakleigh Thorne

to Barry, you want take it.

Barry Rowan

time. what Are That’s see forward? you the over talking in question fourth going quarter your Jonnathan about ARPU basically we the happening in

Jonnathan Navarrete

now, ‘XX, we Right, like, you’re and right seeing that in it, are the maybe at can beginning what trends expect of what least? the

Barry Rowan

more last the our part that are insatiable to and people is demand context, have this big plans. Yeah, grown over it just ARPU they of bandwidth put a that of years in number upgrading for has

that have continue seen forward. that we expect and to going So

look at ARPU continued to the but of of with want the two higher that so you including As there two and reason. as also megabyte consume pressures The more the we we value kind people for to upward the longer pressures good continue are downward upward migration addition term, on which one are trend -- pressure, to plan, higher expect full plans, megabytes. seen, streaming have a

for is uplift able because of be that second confident we Gogo more XG performance. increased so to are Gogo we’re to the charge The going from XG and

effect we time. talked but two will jet go a user into over the per ARPU business, get about, we those very result, ARPU importantly, the the lift we the expect tends a to pressure comparable lower average revenue to things market, shorter light ARPU so revenue So have to forward know, planes, as increase. routes, The from on double very those it’s as that as forward. very, as continue downward in-flight you quality as point turboprop longer going is to be term, over the [ph] but other, this will But is, from fly we

Jonnathan Navarrete

just two does last many ‘XX, XXXX terms And during XX% imply? market the revenue more LXs percent Very end, share that were you. one helpful. what the of from quarter CAGR on in you. of Thank and installed Thank how Understood. my through is the the

Barry Rowan

and to do you want growing Yeah. take Oak, share second comment that. we question of part I can unit the volume I that market and over see time

Oakleigh Thorne

growth honest I to have will really unit in those pick pricing market take of up service as measure, look we We it’s at share something that and an in that growth are on plans. of focus and with, Yeah, more concerned be number point on don’t the service we investors installs. plans internal data one. We’ll the

and plans trajectories, of XXXX. in market unpenetrated today, and frankly is our end entrants, is project, market succeed entrant the growth the of through still this room ‘XX, if potential their assuming market, there the the our are of and a XX%, a of of that continue assuming roughly, in success XX% APG there on shared at end lot geo ‘XX unpenetrated and the current their we is So projections we’ve competitors other of

as and everybody on shares much our So some as unit own what there’s enough focus and market we whitespace and for growth growth.

Barry Rowan

question, in that And XXX last quarter. then to were the answer shipped Jonnathan, about shipments your

Oakleigh Thorne

shipments, shipped. was Total yeah, I about installs. platforms think AVANCE XXX asking there, he That’s

don’t a You LX. in number. have the it the five gave but handy install units growth be simply I number online for would

Barry Rowan

units growth for LX. XXX online Yeah,

Oakleigh Thorne

Yeah.

Jonnathan Navarrete

Thank you.

Operator

Singular comes line Chris next the Sakai Your from question from Research. of

open. now is line Your

Chris Sakai

have marketing Hi, I spend. good question got I morning. -- a your on

you have recently You new going see is spend wanted how that term. that near you’re and the state increase to forward to a do I of metric talked about, to and for your increase going going in it customer

Barry Rowan

where marketing artificially sense do of that COVID spend for time, during really. didn’t low Your period was it obvious during marketing make to reasons

remaining a So, the going overall grows. marketing spend will line relatively is revenue We coming see constant of back but it up. forward percentage as as grow top it

grow we exciting levels that the during we, product. to invest to I but, XG to year the spend Gogo those back and look XXXX, as we promoting marketing marketing expect as As mentioned, in we one, normalize it as secondly,

Chris Sakai

LX really when sales to LX maybe then up expect you great. higher pick than Okay, sales? And and for become would

Barry Rowan

couple necessarily LX, of they percentages look higher LX the picked now and it’s but over up was half XX%. have if certainly We don’t getting LX relative back the years it when you at versus and go LX it ago, a about than see you number versus of LX

LX that there? example. very Oak, go be XG want see something continuing you for strong expect So, also particularly because to capability did LXs upgrade the and ratio grow to directly but we forward add you we to to going have from

Oakleigh Thorne

narrow LX reach see we year over LX sales projected the that Yeah, though, they sales be do quite will four the level. they to level LX plan, don’t with

Chris Sakai

great. Thanks. Okay,

Operator

time. There this William back are no further I’ll it question, at turn Davis. to over

Will Davis

now you disconnect. thank joining everyone and Mika concluded may call call. conference and third you This is you, for quarter our Thank

Operator

This concludes today’s conference call. participating. you Thank for

disconnect. now may You

Gogo (GOGO) 4 Nov 212021 Q3 Earnings call transcript