GOGO - Earnings call transcript Q2 2024

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Operator

Good day, and welcome to the Gogo Inc.

Second Quarter Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to turn the call over to Will Davis, Vice President, Investor Relations.

William Davis

Thank you, Michelle. everyone. morning, Good Second Gogo's XXXX Conference Earnings Welcome Quarter Call. to of

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

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

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

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

Oakleigh Thorne

reflects Good strength generative quarter revenue Will. us our model. service Gogo's for and recurring of joining thanks everyone, performance today. the morning, Thanks, cash second

with future strategic path of up they extend and beginning makes service, activity Gogo and now improvements in to and upgrade the to the industry new in the LEO of in in invest next today the inflection continue customer XG like XG addressable the we Galileo to fleet. move ground a Gogo revenue Gogo in will next-generation and expand customers ahead, at XX% of that aircraft the ownership life point the business rather technologies right that complete upgrade the right provider. products an bringing growth year of total base. a advanced with because our our easier support segment new consider will with aviation with quarter, product. record It's connectivity every performance, most total believe worth for Gogo cycle offer technologies because navigate the In path installation, the second installed near win highly XG right to it we for product XX,XXX-plus Avance than transition providing satellite product as market to aviation as of product cheaper IFC We approaching product America lineup. and months noting out is that Even Gogo and and our compelling market. lifetimes accelerate speed and network magnitude unpenetrated our by and our coverage have in North great customer Avance by another deliver order We the our global provides business of easy XX% every Gogo's portfolio Galileo cost upgrade exciting

well their up flight better through XXXX. needs Demand market. XXXX walk decreases. the for needs. BA levels, our of all on Though start demand typical outlook, behavior demand of that day, I'm this customer And Gogo. at products. slow in to and a Apple they It's reflects guidance going equipment customers Gogo numbers news The guidance, our at of older second which anticipation importantly, we're of Demographic is up to increases and per debuted that underpin from companies current progress our reigniting into Jesse XG Overall that initiatives, of QX QX good bode As launching at newer, launch second to it XXXX. flights anticipate products and expectations and those adjust in next-generation as the every This new flights by slides an counts quarter year-over-year. products in-flight growth demand results our support our bullish and coming launch for XG our connectivity for the from BA we other the are revised connectivity revenue morning, dive get meet are flyers customers connectivity seeing for with connectivity. seeing more pre-COVID flyer then unique arrival slightly is as overview Galileo the the penetration hours the X.X% aviation want types and our provide reflected connectivity technologies. for flight finally In discuss close elevated remain segment quarter, expectations long-term Gogo our XX% has trajectory. most at iPhone. aimed significantly BA business to aftermarket just launch, dynamic purchasing then Gogo-equipped This And see Sales younger satisfy our trends strategic superior remains to the some we're ages the timing. on highlighting in our when by products, into isn't will were age of of as now QX in to depending flyers market look and growth market. what of the of for you all products behavior trends as unique strong start different which continues their the on

seeing that XXX% demonstrating than market, a per much XX% biggest the data our in where the Galileo at the has and meet megabyte same for traditional conferencing demand step to storage which demand, and for ran our risen bandwidth and to over annual QX passenger hour, XXXX, are in video high higher change at period per cloud data XG consumed demand megabytes in consumption end products surge driving and As QX. average well We're average growth has networks demand provide, positioned that demand. from day in are and XX% designed risen of were flight

online. increasingly looking on voracious see continue Gogo X will ways. important aircraft those to and data trend Finally, we OEM on Gogo very order to and The is demand, towards strong, usage fractional growth trends in aircraft units sales of books in drive

highlights it our efficient importance course, we of key improve we to a invest of it decisions sold and quality our of and Gogo's years Commercial Aviation for our the creates First, to made heavily focus success. infrastructure, will demand the products. And dramatically tailwind when continue for ago our business in strong to customers. technologies to the capacity second, our continuous long-term remain new future-proofing products on and our we're X technology

equipment revenue X% was our QX by turn decline year-over-year revenue. me in offset record down about slightly was Revenue to let as service a performance. Now

or product sequentially XG XX% quarter. the are year-over-year and earlier. our much XX% year Avance shipments Gogo Gogo year life XX% On dynamic the said, ever the highest delaying X,XXX end, a Galileo. second of for of second purchases and in revenues approximately we we Customers to total that at to online described equipment in ATG With cycle attribute of of anticipation side, in and prior We base. still the I saw quarter expect aircraft decrease grew installed our Avance over units this XX%

grow Classic of to program to our as incent over FCC secured as next months. part we LTE Our almost advanced space X,XXX will only Gogo the XX migrate faster customers our networks

of second QX this line. in as is product a As Within of half our long-term the also by in fuel to our into modest on Avance online might revenue. business reversed ATG classic orders and the a due few shipments NetJets in total quarter, later pattern bulk This deactivations achieved boost reminder, slightly from of even a model, we we by we as equipment OEM last demand total usual call shift that shipments a driven year saw be service, pull-through year. last warned annual upgrades in our driven our net record declined higher

next decreased litigation which and go solid. due flow sequentially the side, will equipment XX% increased to programs, operating financing mostly over as the series On note, the of fees On and QX the in all away mostly deeply in of we as a a EBITDA issues, legal and a revenues remains lower free cash invest earnings Galileo XG positive expenses, year. and of result vendor SmartSky almost

is focused Gogo progress for with on three-pronged accelerating Now initiatives. strategy. a strategic our on growth

at and market segment by want by global our that of platform to expand unpenetrated deliver we leveraging flexibility globally the highly market. products since business of pricing Avance aircraft XX,XXX the business First, aviation each addressable expanding to

initiatives as these the offering cost to segment each customer upgrade platform we're the ownership. LEO strides focused such easy to We're conversion technologies the customers then strategic path Ku-band making product of third, of and they our on the great and at And we technologies Avance to customer they total networks emerge. our support new Classic Second, new of achieve other network drive networks lowest market to best by goals. in to continually loyalty want improving ATG as have drive so to XG,

the we our Let to launches. our process support me go-to-market at Gogo a as HDX and up very is start exciting with regulatory approval time Gogo ramp and Galileo. This production FDX plans, Galileo

born a this Aviation XXXX in after of sold planning was division. Commercial the and out reminder, product dive a during X process XXXX strategic As we category conclusions deep

everything latency first to provide geo would constellations would file would pricing offerings like that pricing. value by for IFC enable very antennas. high be connectivity data penetration perhaps with well They in connectivity. antennas heavy They And would could small cloud-based aircraft. these ESA the global service BA extremely video easier with conferencing. ever. to applications cheaper aviation enable accelerate like to the aviation the have competitive support most geo increase capacity are created install They critical to They important, lightning-fast LEO truly in sharing. than They is in on coverage going broadband all global and fit business would satellite dramatic would and that support antennas low market. that dramatically the change First, business They supporting that would satellite applications time

a we Though in become process become later The that ramped they was QX. up Starlink. has anticipated Starlink that will little in we planning second launch a would significant competitor, than installations which thing as evident

technology the a big is us for aware addresses done satellite connectivity made they LEO of with much geo will BA much We have product market solutions. launch in-flight favor. more a than traditional market BA of that better offering, They've than and how their ESA the

Head the product and mousetrap get aircraft opens Sales an customers meaningful reliability it Business is X positioned observes critical, of customer out And on Starlinks cheese. a centered not imperative. support ease for is displays that a we their well. he the at mouse the of offering already important installation is demands. space does fat is And a incredibly door to those to is Aviation the areas. off-the-shelf second Our Gogo on captured aviation and part, that use of that feel repurposing strong gets the premium, the products in of be of mouse When for our eating and cheese. is tend that clear consumer differentiation just cheese meet It's well picture demanding a

and Our specific aviation satellite the market. and Theirs aviation is needs of designed is equipment from up business consumer-grade. aircraft the the grade to down

and is and can repurposed Buy aviation. You for suited at buy poorly it Best

provider. our of would is aviation $XX a with Second, just business from model the who on focused million expect an service support, type customer someone business spent personal aircraft

service levels, appointment-only level service speed access billion X best obligation and terminal our Galileo enterprise-grade theirs is aimed does many consumer-grade service X and OneWeb other and technicians. theirs larger While highly Network a network fixed direct smaller customers guarantees, partner, comes no HDX designed aviation our is to network, is chat pricing. at serve BXB allow efforts customers, And with a that global the commitment not markets variable only versions: a a while FDX to consumers in terminal. an web-based finally, to

already registered jets very LFDX is smaller dramatically HDX is Galileo our the jets Galileo antenna than and XX midsize have and range in and power-cabling deliver Starlink second turboprops that megabits cutting that the from mean the the America and really the missions resonating with huge aircraft FDX or XX will and are domicile upgrade or will The that to is off targets Avance will and antenna our faster It consistent America a to only advanced HDX terminal roughly XX installed top with spots absolutely second, larger the inside those I targets advantage consistent The then X,XXX international best-in-class and A to offerings. should North of customers a and first-to-market midsized that in add, any midsize right jets is current XXx smaller global to the run connectivity that product a often our deliver want the product aircraft to almost terminal. XX,XXX us XG X speeds fuselage roughly FDX the on roughly add the the current no small XXXx offerings. market product is The when our So, terminal, $XXX,XXX super to that antenna broadband XXX simple segments. still second XXX done, primarily megabits size outside advanced is from roughly that per for cost range, missions Galileo than midsized fly North solution that installed terminal XX aircraft very Galileo on than And per data now today. smaller aircraft of and plane our speeds installation. XX,XXX Galileo provide. million product you our needs megabits per faster fly

and all option already Galileo to that lifetime addressable market next customer easy on August creation more We at will X the very X already will accelerant many XX on and for big in testing that line-fit engineering authority relatively note, I order Galileo, our certification FDX changer industry service OEMs perspective In up drive for line-fit QX aircraft several total, produced for modest rendering agreements We and Challenger and We've milestones It premium driving aviation OEM the shipping cut-in we're advantage fit Another conclude to and is of set value for aircraft of a it have models and verbally value covering committed both equipment, in our which aviation-grade customer XX drive To STC our of major in these service and an network aircraft unique we're we'll half our in every of competitor, line and be XXX in currently dealers models to an by every terminals this remain signed our already be of covering flight from be aircraft our HDX for every since models, X in a XX campaign Galileo. excited. will of Avance with on our superior in capture option models model And X is penetration aftermarket, the for of long-term or we the conference reliability orders of Gogo's on We've manufacturing on launch those for certification those We're engineering year. a have and another and superior year. will support. business finishing superior next and July, to already first and levels on our exciting another offer SDC deliveries aggressively focused market sales and equipment go-to-market popular dates PMA QX. engaged XXX a a terminals of other with actively growth. our and month announced force deals. committed And call. a game than achieved aircraft developing aircraft the number a account OEM justified on of and value track should start installation parts to Gogo. have XX,XXX last Galileo, they've OEMs to milestones dealers XXXX. started started the aircraft. global taking long-term We've we pricing FCCs. signed of from

aircraft XG, smaller a let which that at a in at to and of experience Now North me America XX,XXX fly good and business turn the Gogo connectivity segments market midsized want targeted achieve is to around than lines XXx of speeds price megabits current solutions. satellite per second. speeds peak our second, should XX affordable of mean XX X megabits more predominantly to product Gogo and per XG XX

aircraft, the aircover. On antennas in containing belly-mounted internal it consists MDXX of X box XG an a

Southern stations, the United the On States all the and Canada. of ground, base XG XXX across it Gogo-installed consists towers

that back all announced our QX closely second partners And guidance delay going this recalibrated that timing you now, generation and recall, on and to in to the would hardware all probably vendor We're chip shipping towards XG launch. call. and on As launch. provide call, we chip smooth into a launch with mass the issue further we pattern is milestones XG on of of we XXXX. discussed XG the fabrication our quarter our we planned have would of That redesign continuing path our of minor very our work

the LX an LXX We've the form that is on XG installed once they'll kits XG OEMs with have simply fit Importantly, the LX be quarter ongoing the network XXX to installing the LXs programs position swap have commitments kits proposition shipped from can XG same and line network. already a LXX, and is with using enthusiastically of STC with already our successful XG in which launch. antennas, and the chip the XXX programs to with and XXX customers We've from X a up been are Because for LX highly already LXXGLRU. last flood NVXX pre-provision us with is X an market with XG of the MXX the those installed NBXXs today. XG certified, value flying continues those the for respond as kits prepositioning that factor

On covering of of total, Avance North in will registered our team chip. that We're network aircraft. unique works, XX our front, another, our for aircraft XG we to models before our American final test XX with covering models of XX% the certification and of confident X,XXX replicates STCs XX all flights And virtual between in validate completed more entire able aircraft. FPGA that we version of MB the have simulator we functionality has representing network or XX built that XG one those XG a and united and XX the receive be

briefly as networks secured we SEC Now to the which Evolution. program, turning refer to Gogo

progress which improve of customers new Avance, It network, Classic at As million accelerate the XG $XXX upgrade reminder, a awarded XG program XG a this value-oriented the ATG for upgrading XG customer to was strategic of from the customers classic the considerable the the our its a hardware the Gogo will Gogo other incent network. has for products. upgrading customers and using us network telecom LTE old to the Avance It manage under XX% benefits great speed to will of of to number removal equipment from Overall, we're making lifetimes grant SEC can aircraft program This our of extending will due from Avance and Chinese to the accelerate line ease it Galileo LX our and our our product. versions double has benefit Gogo of of LX product simultaneously LX customers. and technologies. and number and Gogo to

customers. configuring majority and have they The and customers they than dealers X,XXX transition our promotions all LTE still line conversions, XXX little before customers A old XXXX. classic X,XXX are Avance which with than to product another. in hardware XXX indicated are of to in convert. had to under our customer incent customers how from fleet currently little at on are of move that EVDO plan of their conversations place of will operations have about little scale. convert a one doing the We've need and product year-end a which to more more or versions to will a have already great vast We smaller We job to our

we this year like time in called the not an will and both We also Avance is to product delay but levels swapping LTE improve EVDO cutover. before classic form will Avance product. exact which allow special a introduce service upgrading convert to that our of CX, who have factor we'll This more replica over aircraft after house cut to customers a an to later networks, will an Avance

as As job outstanding I point. incredible Gogo getting I to outset, we mentioned performance done us service and team. at Galileo. XG the want this is continuing prepare and thank They've to to to the Gogo Gogo an launch deliver and invest solid

with and the long-term the the to complete operationally in market is the business most Our the in positioned trends, the I continue exceed value for long-term and over well right continue significant has passengers strategically, strong outlook meet and supported capitalize the will technologically of Gogo demand for strategy deliver by on IFC to product and to our to long Jesse portfolio to we're needs term aviation numbers. it opportunity now place market. turn in And creation.

Jessica Betjemann

solid cash We to believe in revenue in and business, new core strength service the free invest our revenue the and Google second continues XG recurring of our as our by Galileo. fueled demonstrate quarter. we products, performance Service flow

and shift quarter, our in EBITDA ahead timing adjusted high second EBITDA pull-in resulted the sequentially but declined orders equipment was quarter of expectations. expenses, which of the OEM of first adjusted With in

the We continue plan XXXX long-term XXXX. for our year through growth within believe our trough extending that to is profitability and

strategic I'll with context through our start timing cash our guidance early finally, XG a turn performance capital targets, today, I'll current in which priorities. of Gogo now by XXXX. revised flow on the to then wrapped for conclude expected and long-term additional investments majority the acceleration reflects in walking continue XXXX Gogo's my quarter we significant In by I XXXX, sheet financial free currently balance will second As launch. target allocation and And our to our remarks

service driven delivered the equipment prior X% of quarter, by second the quarter. total over was $XX.X Gogo's sequentially, Gogo million, revenue about X% revenue. decrease than slightly revenue in up a first year X% record just the of and a higher and in year-over-year million, $XXX.X decline For

down Our defer to, a the decline ATG anticipation Oakleigh life as Gogo Galileo. year-over-year of new X% lower X% of was X.X% Total deactivations The decline XG aircraft and the we of grew and and product quarterly mentioned, sequentially. aircraft higher classic online activations driven due year-over-year was cycle are by dynamic X,XXX, and sequentially XX% total an in launch purchases now customers fleet. our of XX% Avance to online and X,XXX, as experiencing comprises increase

Our in progress has in the we upgrade to driving expect quarter reflects existing Avance to to accelerate XXXX. our from aircraft in Avance penetration Avance record within Converting these classic activity Avance less years. a Classic the remains doubled priority, X second and conversions fleet. our online base than

to once Gogo times on and the installations. to that win by continue for seamless path in providing upgrade cycle maintain Gogo retention to maintenance Galileo Avance flowed a is improvements a XG We a it conservative strategic launched. have upgrade prolongs Every view customer as

the ARPU However, and of cycle mentioned, $X,XXX, Gogo the will quarter. our process expand are to opportunity as XG X.X% on the over put X% quarters. previously life continue further The aircraft year-over-year product and over ATG the Total online dynamics ATG to time. to we coming upgrade grew and pressure Galileo initiated anticipated price growth ARPU growth increase launches first in sequentially, reflecting

was in revenue combination place expect with that product typically in equipment and a year-over-year XX% to we but sequentially, of the attribute strong quarter and the we second revenue. to first life our which to declined equipment XXXX. towards trend revenue Equipment the ramps delivered the in dynamic million in expectations of cycle. first and given shipments. life line Avance pull-forward the back and quarter Gogo's year, shipments the quarter equipment revenue Moving with half channel, overall XX% shipments OEM the for Gogo product cycle $XX.X the reverse of XXX

to margins center quarter, the than Gogo Turning of network and lower second to higher delivered costs. profitability. service our due expectations in XX% data

XX% Service with years the Galileo slight increases service revenue in quarter generation be revenue range a primarily the Gogo and We year of service continue margins and cash percentage year, decrease primary are as second for to margin a lower lower XX% quarter, expectations margins with periods, future and and free in levers as to due in this were shipments. a service prior the function profit to flow expect MAX. the creation. Equipment in as than prior value line of long-term lower revenue

margins due expect of to back XXXX product We to to decline shipments life dynamics. in largely the equipment due half lower cycle the

Now operating expenses. on to

was driven quarter development, design and The combined year-over-year general legal increased administrative year-over-year $XX.X and to and Second engineering, sequentially million. XX% and expenses and marketing XX% increased sales increase mainly by expenses. support External expenses and general legal total vendor matters, by and in million driven the for efforts. out of quarter million, of financing the litigation $X.X comprised spend second administrative expansion $XX issues global

Gogo significant continue to program. Galileo we investment invest XG and As discussed, year our in a is XXXX we as have

these flow target in next into off cash XXXX head many as costs that free Our we assumes of roll year.

growth these XXXX expect free revenue cash will investments and product We growth support in significant acceleration flow that and beyond.

million well allocation and XG, XG a CapEx. in in timing payments OpEx a adjustment the shift of more second mentioned of efficient million from of XXXX is XXXX to as approximately CapEx. of partner. million in to Gogo the OpEx OpEx million resources Gogo's the approximately will total $X and as in We $X.X XG of the push include in $X This of XXXX reflects expected $X of our $XX milestone quarter timing million $XX previously vendor This terms our comprised was for In spending at XG the and of expect XG second approximately and spend $X $X.X million million now CapEx million. of quarter, with our

the maintain from total anticipate development impact external estimate to our and recent XG in cost on overall We million the deployment program no program costs most continue for negative of delays. our and $XXX

of In Galileo in Galileo Moving due of initiative. to expense include XXXX our Gogo OpEx $XX quarter, We Gogo million now shift to the on to $X.X million expect million recorded approximately in Gogo $X CapEx. OpEx will second $X to a and approximately and Galileo. million CapEx Gogo XXXX related in

and costs to continue expect million $XX solutions external XXXX for of total, XXXX. the million HDX We $XX remainder less XXXX, and in development is in be expected XXXX both the was $XX is in incurred than million and to which FDX in projected

XX% Additionally, will costs Gogo OpEx. be Galileo's in we approximately external development anticipate of

of a to a the The as lower Gogo decrease bottom million was decrease and expenses XX% in million was the quarter expect and million EBITDA program. million taxes primarily unrealized in our In and FCC state at decrease sequentially. we on note program Potential in net as we $XXX operating operating Net decreased for market our to of The supplier adjustments we related had received million. losses XX% our on Based Moving $XX.X the our is XXXX, asset funding, continue at called loss loss balances grant chipset through on will end our to an driven in net provide to tax FCC sales XG second XX% million now our first not $X.X the net future to the of we value share total affect call. losses, our the in a federal income our value continued delivered made adjusted a income received cash of update to sequentially. quarter, horizon. $X.X investment will year-over-year fair increased primarily I and revenue deferred investment. $XXX on mark-to-market convertible net million $XX.X earnings that second second in this quarter our the million of the price by due do in X-year reimbursement out including quarter, adjustment due planning operating progress net support we date fair equipment We operating year-over-year meaningful to account $XX and substantial end line. after-tax quarter. on pay chip $XXX income volatility to XX% decline anticipated. key

granted equipment, and to with submitted XXXX, incurred reductions completion statement. will spend in to quarter, we deadline planning contract multiple income and that pushing FCC, and expenses we receivable to current our XX, to we receivable are As $X and we program of million to This request recorded with $XX.X program extensions complete corresponding June the first is inventory other in In from need January assets to XXXX. prepaid last a the in XX, and application, we our in reimbursable we plan included In the extension FCC, the X-month pickup assets have during our line balance the fourth and property the a quarter. in million extension the sheet stated with the were the quarter. next

negatively from run second will spend we of flow. with $XX.X funding rip Free and this in we in free cash In flow net reimbursement due cash generated million XXXX, quarter. ago FCC a On by million lower need we'll partial is cash a XXXX $XX.X out continue the the we cash that of timing As and XXXX to forecasting last to reminder, in driven to the the the XXXX, flow, and to capital. late of reimbursement which impact EBITDA our improved of year replace free the primarily and expected money increase through flow. in decreased million funds program, to are working cash program from support and programs solid an period, free $XX.X quarter, quarter, from lower interest

the in remaining $XXX outstanding to line our cash Gogo our and million our with our Gogo's Now short-term range investments $XXX undrawn. with discussion principal in target in net a and X.Xx. I'll leverage balance to X.X term of with on $XXX.X remains of turn sheet. ended loan million quarter of revolver X.Xx million

second Our hedge million. cash interest paid flow of was $X.X net cash quarter; for the

mentioned have from increasing a end the down million of of we loan the hedged. to million to of At rate hedge strike XX% July, stepped our prior hedged. in to $XXX XX% and had decline currently quarter, agreement fourth in a hedge place X.XX% X.XX%, Starting quarters, with previously expected in the hedge we per quarter. the approximately flow $X in resulting is cash loan the As

interest cash net the expected million. debt XXXX, hedge cash approximately be Assuming down, for to of is flow paid no further pay $XX

Gogo's a capital allocation Now provide me of let recap priorities.

third, adequate for environment a finally, and and opportunities to with returning appropriate including and level competitive in Galileo, leverage invest XG target financial the X.Xx, First, second, net to continuing Gogo ratio to X.X economic liquidity; maintaining to of capital maintaining strategic value, an leverage drive of positioning shareholders.

approximately shares the debt has We the execute requirements, X.X total $XX million investment million repurchase evaluate We second our million approximately we believe XXXX. approved further in Gogo over a paydowns for Board $XX in million across quarter, and million million of shares. have our X.X we approximately all are remaining at priorities. repurchased and product opportunistically to cost September executed $XX of positioned the authorization $XX quarters. In well repurchase X shares last

and increase cash to our to pay further our to expected Our return is flexibility flow in shareholders ramps capital XXXX. up down debt as free

to turn financial I'll our Now outlook.

long-term XXXX X updated our guidance have financial reflect our and to changes. targets We

First, at XG XXXX for in to originally launch for the timing XXXX; is end that projected. QX of the aircraft and than the occur online now Gogo second, expected lower

completed we we that that long-term frame. do as note However, normally this a annually plan full bottoms-up not January have at time time the in

of the XXXX anticipate our fiscal million. reduction tied XXXX to year the cycle the the our $XXX $XXX of lower the revenue guidance versus and million in dynamic due range XG half we the of channel to now is life in of For the to in $XXX Gogo launch product second revenue Galileo. million equipment primarily $XXX ahead of to prior million The year,

now approximately anticipated Secondarily, million. to million expect $XX of be to XXXX service $XX our our online revenue lower-than-expected CapEx guidance aircraft We prior is versus reduce growth.

SEC cash spend million in to to XXXX quarter. primarily free Gogo also approximately for savings. the million spend is XG, spending prior including XXXX includes million XG for strategic our We target and $X expected in revised shift $XX in expected a of flow and approximately million. shift $XX million CapEx some million, $XX to $XX Galileo This spend. reimbursements flow LTE in lower the result our to $XX cash the million compared includes $XX due decrease XXXX, of and the anticipate million the The approximately $XX $XX as The decrease which recede. to and program LTE Our these and is cost stated development increase of the range within net reimbursements FCC a of shifts in initiatives guidance of of prior million FCC free spend is lower increase to guidance prior spend an expected from program. FCC spend, non-reimbursable network expectations to initiatives, strategic The reduction the and is reflective in compared build-out timing including

of to high the of guided target In million $XXX the EBITDA to adjusted million. end range previously continue addition, we $XXX at

increase lower are However, strategic initiatives, expect compared expenses $XX to Despite we year. strategic Galileo including EBITDA guidance, to to date reflecting in legal operating maintaining for now an for and and million expected approximately offset rest incurred expenses XXXX million the continue spend XG initiatives, to shift and previously. operational adjusted revenue, we to Gogo reduce of $XX the in to by the

and our guidance flow of to is of change now are from excluding of the tied end impacts XXXX latest target XXXX, aircraft in million timing a of to QX Gogo For the prior our range top lower-than-expected prior bottom-line million XXXX. effect program $XXX we FCC The targeting long-term and launch at million. $XXX versus free online targets, of to cash XG $XXX of the of the

in will long-term In by underscores our product unlock strategy significant reiterate and initiatives XX% drive shareholders annual to believe Galileo challenging life we value by in rate growth executing revenue expect Gogo's of XXXX EBITDA cycle, our that summary, and we we term, expect XX% to materially from period revenue XX% the growth. to beginning and customers contributing to our in reaching annual approximately long creation in XXXX. margin XXXX expect sustain that potential adjusted at compound investing we through that the we XXXX, be key outlook Over a to Gogo this continue growth for with and

questions, Before entire want service sentiment to exceptional well customers. their business work we Oakâ€™s concludes their prepared to our to our remarks. the to my to for in open hard gratitude this for I and expressing dedication team Operator, as as delivering the echo floor Gogo our commitment

question. We are take our first now ready to

Operator

JPMorgan. question [Operator first Instructions] from Sebastiano comes with Our Petti

Sebastiano Petti

here, it or any relates I hoping ARPUs but help XG about year us as a and Galileo. next revenue us strategy help it was guidance. we of be kind pricing XG long-term the And being price points delayed could back, more think think bit should then to you about maybe maybe expected thinking to the pertains that as in stepping broadly, about helping

Oakleigh Thorne

Sorry, everybody. I was on mute.

know about on than can would our don't yet, website be the actually current and pricing ARPU be higher average average FDX And points. would the HDX And at we've you So generally, XG our I price shared ARPU. higher on the then priced $X,XXX but that see now. ARPU

reflecting greater were FDX and the to and coverage priced reflecting world they bandwidth, at So, HDX around higher XG. premiums

William Davis

the projecting you if into or more those. know don't to to I we're go any of in what Jessy, want detail terms exact

Jessica Betjemann

Well, we expecting ARPU take obviously, in plan it starts the be providing. as that depends upon Galileo a an But are upon increase off. to we range depending would

with impact more revenue take the and As you'll that be XXXX. a regards see XXXX, service mean, revenue, the It much then of the off see more really I necessarily we start in reminder, equipment though, will to won't in to revenue. service

Sebastiano Petti

And follow-up. a quick

between a Just think new the thinking standpoint? or us about migration drivers Just perspective customer increase new nice Avance. net about behind planes Can to you there about the maybe the think trying help you a online saw.

Oakleigh Thorne

to into activations? want Jessy, the do you go

Jessica Betjemann

Yes.

this expecting. what talked we activations So, online product -- about. we that been by is this in have due as quarter, units noted cycle new was to impacted And dynamic were year, that our lower we the we than life

the we I as expectation X our net will expect, obviously, activations that the deactivation rate. would next new We products of And of neutralize launch that of think continue. would year our with deactivations. the well also able as for had these higher kind rest that year, our But accelerate to then the being

Operator

James. Our next question Prentiss Raymond comes with from Rick

Ric Prentiss

are Obviously, How you've the the next ATG year pause couple as out a through of expecting, you of second questions. called new are into, aircraft you stuff times year? for quarter in. expecting while come this the you let's say, rest look of many they couple aircraft to A customer behavior

Oakleigh Thorne

more get precise can numbers. Jessy into

online units new the bit expect count we total launched. little degradation until get a in we products think more our I

Ric Prentiss

Or if net aircraft it you $XXX there? that same does from magnitude XQ, XXX of had quarter? of kind So, on accelerate each

Jessica Betjemann

but it to necessarily anticipating not of not there but the up hopefully will deterioration, those some we're reach XXX. be to levels, No, each

Ric Prentiss

off, So more the coming pacing but in you XQ. maybe not saw

Jessica Betjemann

unique in had And the reminder, right. in deactivation. QX situation with that QX, hourly as a we That's

Ric Prentiss

times, You've happening What's I out us And a what think some a give are on kind there? you of hitting being costs that? couple incurred. cost Can of called color vendor side. little the financing

Jessica Betjemann

very in were expenses legal quarter. the high the general, in So,

investment So, convertible to the I an regards wanted note to expense. QX with G&A highlight in that noted, issues, vendor financing QX. and a had as our in inflating we But

that, a revolver bankruptcy, emerges that for support that Airspan around And business. have commitment And for legal Airspan from until and necessarily for to That of not normal that also activity you'll the support with support partnered a which then but effective legal not as supporting Fortress the a well. a the there's see disclosure is our was is in so, one area. XX-Q, we revolver

our kind really is spend. vendors this that and of unique we we're in So, supporting activities wanted to out call unusual

Oakleigh Thorne

course, they also in existing went when spend a sure that defend Airspan mean your case that have of to contracts, through on you happens, et rights your you prepackaged of making cetera. I Yes. money bankruptcy,

it it's them have terms So, all, with ourselves. we both, to through get helped in we protect to of helping also financing but some

Ric Prentiss

on question. the website Sebastiano's Obviously, last the for following Galileo. on the for And me, pricing got one you've

but You customer how customer are anecdotal have detail of as, versus point versus What your support. your do as outright customers customer about bandwidth make you coverage a network, or your far service. service price valuing and kind

Oakleigh Thorne

to You on basis mean relative other? each a

Ric Prentiss

Yes.

Oakleigh Thorne

connectivity that's more that It stable a in terms value with It's for long a they've our they value support. highest been think the frankly, doing of rate. count to responsive price and that as been the can I higher terms think was trust will they customer who pinned they customer I having of that time. in business you the very can probably do a feels and when ours And will products being themselves, mean somebody think of customers reliable and anything. about consistent very with on. at I Starlinkâ€™s, same relationship be network the look And a perform how

vessel, how will to So, Starlinkâ€™s pressure your be It's customers. et be from side, long that planes for valued really a going any equipment to vessel, the you be anywhere put the arrive There's doesn't in cetera. the grade. require we while. I that on pressure that can by minus cetera, have and outside before manufacture passengers the home. work then XXX inside And go withstand the going maintenance, consumer at how equipment going aircraft it's to of it et of in is what about think long XX,XXX be question in Business to degrees terms feet. reliable a the XX can inside Aviation rigors cabin the It's

they build So, equipment grade, haven't aviation that. to and there's done we reasons

for that wrong a about So, things of crusaders lot it better the don't people of LEO. way, installed than have million kind a IFC and using it are we any are to current liking have In a But experience think had because product of there. I now, that they're it I it's little out that going X right at how there's they're helps think kind be us. much things.

a or seeing I people already think market the real is that improvement. is LEO

service, our little a market those in the aviation that end, kind win helps think sway I lot differentiators think focus then products. of of I that the all we'll aviation our towards grade, So, will us. with And around

Ric Prentiss

XQ, for be that is might the XG thinking at 'XX? launch to cause risk? else one late now Last 'XX, what And early mid-XQ, XQ, XQ, we me are

Oakleigh Thorne

of sort loaded the retire X a have One of lot risk, right where we're I that Well, frankly, FPGA we in of mid-XQ the on now. in software FPGA or couple all been will we've things. retiring, able with. A our would ways. flying is to got flights say an That's be chip

to was provide. our of issues it has of First we the that that one the ways provider of some chip identified all,

means before can to the issues own all, ever of coming software And a the of down virtually fabrication got allowed network, early cause of those validate now, that as So, lot we year of will they and that continue inside a we second network problems after to actually out the our chip. which that us before test line well get whatever. model identify our we to even or

So a that's I'd amount risk. great be begin those it was actual some chip But once scrutiny of chip X will slated problem paid up if risk there this the shocked when comes out, to bring a some September. be came things there around point, deal. There's early help it is at the been out. this in still And with which to fabrication,

Operator

with question Searle Our Capital comes from next Scott Roth Partners.

Scott Searle

some spin the quarters. lay of milestones expect I here. I'm prior you half relatively had just you thinking what if us walk for level and launching on I'm what a out should chip? comfort the you're of year? Jessy. And wondering It expectations in first of lot this was the than wondering Is about of question factoring expecting next the kind and around through you're Quick September. quarter? clarification delivery follow-up in we in you were in expenses they And a could wondering higher that if the quarter. on new chip us milestones of into over second this the remind Rick's XG. your in Legal the could were could It is then like your we've this sounds now a seems quarter there like mid-second conversations. steps if couple high

Jessica Betjemann

Yes.

spoke can first global and that vendor do as expansion in and we're well the also for that it We So, litigation across financing, was as efforts decrease. was The expenses global legal expect that $X.X about the I normal expansion. expenses, to take one. million, our we doing

there high QX. point in So, bit a was a of

not magnitude and So, that level forward going will QX. of be in QX at it

Oakleigh Thorne

Scott, say starts fabrication delivered said would September. I in then, I milestones, didn't I for think be in September, And the it chip

is is milestone one up coming up another. complete bring out Bring a then that's then So X/X to they of fabrication chips when and us.

right we then are of it away. testing really it arrival of flight regulatory STC is -- and start install which and would terms for regulatory And us Obviously, be gets will done. and with is getting chips in the PMA PMA to with approvals another STC, aircraft so, And milestone. the

going the main are those milestones think I forward.

Scott Searle

if I could. lastly, And

an terms front. Starlink, the competitive in if talk been presence, I'm hear given a give somehow they terms I was pricing? where fit just We don't wondering then there's their on around terms creeping us of recently will their market that forward, something SmartSky. into on the And impacting in lot about In they wondering a into competitor issues you the a regulatory be equation. given of could update network, landscape, lot kind equation. that the and/or of going could that of of wondering into that specifically about while mini address the specifically if in issue like FAA you factoring I'm

Oakleigh Thorne

just well, I don't customers. SmartSky market Well, this a way, this they have have is revenue-generating really in at factor the any not point, they -- I'll put think

is in many at basically ways case that think point. we us, with litigation this over the of terms In

to the We many extensive. budgeting anticipated As expenses up expired legal X in of of In being per might Discovery, so you discovery were ended in reasons expires our year. high patents, of and set sets and XXXX recall, Xx there that we in Scott, one that the quite of set initially are as discovery. this the had is documents one one patents as had August review

it did knew the patent office. are about in reveal expiring and trademark prior discovery, the art in XXXX that prior that they However, to was that patents SmartSky discovered not that that to art

most So and infringed we that the And said on, we that be them often to those will has they didn't to that patents raised might why. recall a very any determined have lead being have reason valid this significant equitable conduct we and is invalid. you issue that thought likely for patents

short-term patents So that, those infringe have risk the will We I think, we then we that. ones, And always did on eliminates, not win issue. patents. long-term frankly, being the of think an

expire miracle, by those out not to is were in XG lose, However, patents we coming till May some even August. and now, if

of a impact damages whole not us. would the in lot there on terms So, be of

are Sky. aviation of the on, instance, use fly a to The put -- with going not little you aviation in mini general going that's flyers, solution satisfy And to would business typically goofing lot kinds there's couple of Smart the is Business you'll I to but like. to reasons. windshield that and see people in mean, connectivity. Aviation. consider the got in That what look, that's phones people not for all I for to a be guys slides kind their fuselage inside a get around, of mini that's cell trying business There the of the aircraft. words, general flyers, sitting waves aren't aviation the toys of hit low people get not So of do who the the mini other going radio fuselages the to aircraft In speed penetrate aircraft. the through the and aviation

satellites in direction, it work right at in at from plane coming one the And dashboard, potentially not flying up mini the that the if windshield very pick to a will. satellites after rate. flying put from. flying speed, if to is your not have if will way. okay on But you These another high high direction, a your you the looking So, you're you're are that very you've in are got coming the

You're to have not reception. going

that the and unlikely, concerns having would FAA So, runway aviation sell but price. market. the something a that There but or happy. that fine of banking frankly, are much, around connectivity, make safety like to And kind doesn't it's pretty you intent fly the if on the it's going unreliable FAA also doesn't thing fine bulk would not that's it's last they happen. that, want for of Starlink very for it, very is an people. wouldn't there's that, probably you doing the business to lead sharp and catch to have some frankly, at that that The and like to to

detect off. they they you're you flying, And that so, turn when

question It for But have to satisfactory to maybe So and not that's And going Starlink supposed you're very something a do from it's the in, to right able vendor. about. [indiscernible]. business now, be not could will it do model all be safety implications.

Operator

comes with Our Simon question Morgan Flannery Stanley. next from

Simon Flannery

the To off, the on start or DX. just churn

customers past, churning these forth. I to Are we've upgrades think them these aircraft so going? in Or where are had for waiting the of and competitors? any maintenance,

Oakleigh Thorne

We for left then we Starlink that us We to for have a the of seen Simon. left [indiscernible]. us bit Ka-solution, competitors, had that had a little held churn and XX think XX we that

the that of there. So, there's margin bit a on

Simon Flannery

the that products to we through until the expect year continue balance And up. get these you'd of

Oakleigh Thorne

I video as news putting file on, at aircraft time. going spreadsheet the cloud, a they have on would, tremendous issue I the for live And got happening -- strain larger And on on sharing on everybody's products going live and think connectivity. the like, as a those lot don't same huge people with demand numbers older yes, I PC. then older products that, I to multiple will and talk in all products the that flight just frankly, like and well. you've because the departments their especially is the itâ€™s companies, older behind the It's that conferences our now is of GEO the good that think for

Leo So, going to all is are applications well. really support those that

so, be with first But serve to And going I very it think well we're positioned fortunate those. I be solution. the we're to is that competitive. And think will there Starlink

And so, they're getting market end right of of now. the the a lot high attention at

get FDX some our there So, pressure I until out. we'll think we see antenna

Simon Flannery

working to talked going Do you you before they're think antenna? antenna business be a is more do another the that having smaller aviation? Starlink to you mini think smaller about antenna. on that's suited Or And

Oakleigh Thorne

one for on get that don't mini right they're the also smaller not is but solution, aviation. sure I now a the I'm working business impression

There's drives you have up inconveniences you top it, smaller got antenna lot on going installation they a install they've they're the antenna can aircraft a got I and on smaller fit like move AWACs when try and think an lot on can a this And those to FTC then an but to costs. they put of to you feel aircraft. antenna other it looks anything, it. colossal like which of aircraft, stuff and of on you

a they that only okay be the compete than think our they're point for big FDX, that is lot particular, It's will going antenna. the with that in our they're think But smaller So, much that more think we suitable large now. aircraft which antenna still I to was Starlink, their than a one. may my just there very right with one

Simon Flannery

then about you OneWeb. could And talk a maybe bit little

them consumption? I be and in to support think about I works pricing your before, able any bottom being help time on all Galileo think more And terms this volume margins color contracts on sort line understand rate Any it think consumption, later their of status through? to delays at network and from with line happens they to the faced flow bandwidth forth your on things the that. bit us what year. discounts, some any like how about would really the on it helpful Is just of updates your revenue so variable

Oakleigh Thorne

to in So, that, that able can't price be we or in for react floor we before have got would pricing we flexibility whatever to to market. off we changes a able on to position to a quickly we've sell. margin traded And be guess, price on cause a something per I an megabit aircraft need lowest not we like have, us because be where that the said

the we that selling but it matter much no we're product what into detail gone on it. I'll for, than haven't just more have end way, we to margin So, that, put going up

So that's number one.

The first of again, part Simon? your question

Simon Flannery

their Galileo. about and Yes, just support their readiness network to operational

Oakleigh Thorne

network, rolling they're of but the where at their they're some when about of we to out stations, end year. this Their be ground launch still going we feel good

aviation. the software feel we handle network are to their complete so, about good and with And They upgrading that. almost

also that's in good So shape.

we about. good feel So,

Simon Flannery

guarantees your And network? allows that customers to to their you give QoS kind of off

Oakleigh Thorne

does. it Yes,

Jessica Betjemann

just regards Simon, one the thing with to to margins. add

healthy we will So, slightly we the that lower margins strong indicate did obviously in very margins be have ATG. than the

service model mix margins long-term look expect you our we Galileo. do the when through our X at start XXXX, even However, with the with still handle to of

Operator

William comes from question And with our Louie DiPalma last Blair.

Louie Dipalma

of pivotal this milestone for market. a launch in is dynamic HDX Gogo The

PMA expectation first receive When the STCs receive quarter. you to the HDX mentioned the revenue? You fourth to service the Galileo generating in and expect your for to Galileo begin do customers

Oakleigh Thorne

the They'll Louie. in coming start quarter, first

Louie Dipalma

a And those regulatory hurdle. PMA, that's STCs and the

could I Your the think, Twitter that the are just the What account motion of potentially delay with major hurdles testing had, the general remain technical HDX the you how that antenna? antenna. table PMA functionality or recently successful receiving blogged

Oakleigh Thorne

technology antenna not is risk there's a Right where lot like our issues. developed, of using in different of a now, with chip been Hughes this Aero. form all new is There's technical it's which being not has caused risk XG of and XG, because factors the already this -- is this whole

not it's so, And unproven technology.

step finish Challenger our started very XXX, process right which testing. in into July. So, speak. the we when starts done be is The start we as system. It Then next installing is flight we'll shortly. you should It a go developing happening

authenticity case, do you plus in of stated grade to originally validate and constant that be. our parts would trying they're because all with what there this. sure in for, the the go And you've year as they in in that So, been the in a dialogue FAA all they're that aviation is pieces make to

don't FAA that. at I said that to think We're it's have that got the is was around in in a So point. something it touch going parts this the risk proving them has that it lot and that we with to of

I risk. flying put and works. that, can to think to And then be the So, think don't it Challenger, that's STC can once start a you the show I we'd huge plane, the able going you it fly it on be side, we on on

I So, be a to there, of think ton honest. risk there's don't

Louie Dipalma

to the of launch? terms launch the in should relative behind the far the of FDX be how And HDX

Oakleigh Thorne

at I'll details give the And call, and probably next leave call. half said, is, we it on year. more as Well, FDX the next first on that this we'll

Louie Dipalma

your to free the final is be flow If XXXX replace increased $XXX what and would one in Jessy. cover potentially? XXXX full to for rip funding and one significance million, generation cash And your

Jessica Betjemann

million. now, would That So was indicated deliver to off mentioned not all we've plans one, of to the right based application. our that original our up that current be $XXX the we've way

going the spend still it in that that expecting that's of and around be value cover has bit. $XX so or XXXX in 'XX, there's So, because not mainly, million the not total reimbursable. would negative hit But decreased but all it would probably to we're a we 'XX, need to

that then we to we cover part. would that fully need still But would need cover. for XXXX, would it in the piece do to everything there So most

Louie Dipalma

online pick one, final had aircraft revenue that? lower aircraft one next in up. about should the recently Or over ARPA that flattish service year? stay decrease even should online? trend slightly as offset think we Should You've And the how

Jessica Betjemann

products through the that's uplift won't in necessarily again, year we from next that yet an new the So, see service because, coming I think expectation revenue. on

the modest year. very growth there'll to flattish So, be next

Louie Dipalma

We'll HDX looking over the Challenger on forward do the to month. testing the for be the update flight you next the as

Operator

call Will There remarks. are no back further closing to questions. turn over for I'd the like Davis to

William Davis

Thank soon. you. earnings forward you, you We joining everyone, Thank look for quarter with talking our conference second call. to

disconnect. You may

Operator

the your This for you program. does conclude participation. Thank

Everyone, disconnect. a now have may You day. great

Gogo (GOGO) 7 Aug 242024 Q2 Earnings call transcript