Gogo Inc. Q4 FY2024 earnings call

• Industry Market Space: The market for in-flight broadband connectivity has significant room to grow, with only 36% of world's business jets having broadband in-flight connectivity and a larger number of mid/small jets and turboprops having no access. Data usage per hour on Gogo planes continued to surge.
• Company Performance in 2024: Gogo standalone met or beat guidance on all financial metrics. Satcom's GEO AOL grew substantially and Gogo ATG AOL rebounded in the most recent quarter.
• Galileo Antenna PMA: Received PMA for the Galileo HDX low earth orbit antenna, started shipping product to dealers, and expects STCs to start rolling out in Q3 2025, driving equipment and service revenue.
• Investment Programs: Multi-year investment program includes delivery of Galileo FDX LEO terminal, completion of 5G ATG product, and LTE upgrade of classic ATG network. Combination with Satcom Direct brings satellite expertise and accelerates strategic goals.
• MilGov Opportunity: DoD increased spending on LEO satellite services, and the Air Force 25x25 program presents growth opportunities for Gogo's LEO product.
• Galileo Catalyst Program: Highly successful, but impacts free cash flow by about $25 million this year.
• Synergy: Expect to achieve run rate synergies at the high end of $25 million to $30 million range, higher than initial expectations.

In the fourth quarter, Gogo's total revenue was $137.8 million, up 41% year-over-year and 37% sequentially. Total service revenue was $119 million, up 47% over the prior year and 45% compared to the prior quarter. ATG aircraft online totaled 7,059 with 43 incremental units added in Q4, while total advanced aircraft online grew to 4,608, accounting for 65% of the total ATG fleet. AVANCE upgrades reached a record in the fourth quarter. GEO product line had 1,249 aircraft online, an increase of 65 compared to the prior quarter, with over 74% of GEO contracts lasting more than one year. ATG product line saw record AVANCE upgrades, with ARPU reaching a record $3,500, a 3.4% growth compared to prior year, and 906 AVANCE units shipped in 2024, the second highest ever.

• 2025: Expected total revenue in the range of $870 million to $910 million, adjusted EBITDA in the range of $200 million to $220 million, free cash flow in the range of $60 million to $90 million. 2025 is expected to be a trough of free cash flow.
• 2026: Set to be a significant free cash flow inflection point, with higher margin service revenue from Galileo and 5G investments, growth in MilGov business, and reduction in program investments.

• HDX PMA delay and small slip in Gogo 5G impact 2025 plans.
• Risk associated with 5G chip bring-up.
• Risks related to satellite operators and market competition, such as Starlink's competition.

Q: Ric Prentiss asked about the competitive landscape and global pushback against Starlink.

A: Chris Moore responded that Gogo's multi-orbit capability sets it apart, being the only competitor to Starlink with multiple service capabilities, and the opportunity for sovereign nations and high net worth individuals.

Q: Simon Flannery asked about FDX and Satcom Direct revenue model.

A: Oakleigh Thorne said FDX will launch in summer 2025 with service revenue picking up in Q1 2026; Zac Cotner discussed Satcom Direct revenue with modest growth expected and ARPU holding up well.

Q: Louie DiPalma asked about competitive environment and net additions for JX product.

A: Oakleigh Thorne and Zac Cotner said modest net additions expected with multi-orbit capability and GX services being sticky; Chris Moore added about multi-orbit importance for global mission aircraft.

Q: Sebastiano Petti asked about 5G timeline, synergies, and capital allocation.

A: Chris Moore said 5G chip expected out of fabrication in second quarter with testing needed, Zac Cotner discussed $60 million net saves and capital allocation focus on delevering; Oakleigh Thorne noted $27 million run rate synergies already achieved.

Q: Scott Searle asked about 5G timeline, non-GAAP OpEx, and Satcom Direct growth.

A: Chris Moore said 5G chip in boxes late Q3 and shipping in Q4; Zac Cotner discussed non-GAAP OpEx not specified and Satcom Direct growth with legacy business aviation growth at mid-double digits.