Gogo Inc. Stock price
Is Gogo Inc. a Top Scorer Stock based on the Dividend, High-Growth-Investing or Leverman Strategy?
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Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🧮 Calculation
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🧮 Calculation
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🧮 Calculation
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🧮 Calculation
Market Cap = $465.24m | Revenue (TTM) = $903.28m
Market Cap = $465.24m | Estimated Revenue = $904.30m
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🧮 Calculation
Enterprise Value = $1.22b | Revenue (TTM) = $903.28m
Enterprise Value = $1.22b | Forward Revenue = $904.30m
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF) | ex SBC
📈 What is it?
EV/FCF compares a company’s enterprise value with its free cash flow. The metric therefore shows the multiple of current free cash flow at which a company is valued. EV/FCF ex SBC additionally accounts for stock-based compensation (SBC). While SBC does not represent a direct cash outflow, issuing shares as compensation can dilute existing shareholders. Therefore, SBC is deducted from free cash flow in this adjusted version.
🧮 How is it calculated?
EV/FCF ex SBC = Enterprise Value ÷ (Free Cash Flow (TTM) − SBC)
🏛️ Why is it important?
EV/FCF provides a valuation based on free cash flow and therefore complements earnings-based valuation metrics such as the P/E ratio. The ex SBC version additionally accounts for the economic impact of stock-based compensation and provides a more conservative view from a shareholder perspective.
🧮 Calculation
🎯 What does this mean for investors?
- A low EV/FCF means that enterprise value is low relative to current free cash flow. The reasons should always be considered in the context of the company and its industry.
- A high EV/FCF means that enterprise value is high relative to current free cash flow. This can, for example, reflect high growth expectations or temporarily weak cash generation.
- When SBC is positive and adjusted free cash flow remains positive, EV/FCF ex SBC is generally higher than the standard EV/FCF.
- The metric is particularly useful for companies with relatively stable and predictable cash flows.
- If free cash flow is negative or very low, EV/FCF has limited usefulness and should not be interpreted like a standard valuation multiple.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🧮 Calculation
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🧮 Calculation
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 SBC | in % Revenue
📈 What is it?
SBC (Stock-Based Compensation) refers to equity-based compensation granted by a company to its employees and executives. The percentage shows SBC relative to revenue.
🧮 How is it calculated?
SBC as % of Revenue = (SBC ÷ Revenue) × 100
🏛️ Why is it important?
Stock-based compensation is a real cost factor for shareholders. It can increase the number of shares outstanding and therefore dilute existing shareholders. The percentage of revenue shows how heavily a company relies on equity-based compensation and how significant this form of compensation is relative to the size of the business.
🧮 Calculation
🎯 What does this mean for investors?
- A lower figure is generally positive: Stock-based compensation is relatively small compared with the company's revenue.
- A high figure can indicate greater reliance on stock-based compensation and a higher potential risk of dilution. However, it is also important to consider whether the company offsets dilution through share buybacks.
- The trend over time should also be considered. A high but declining percentage presents a different picture from a persistently high or increasing percentage.
- A single-digit SBC-to-revenue ratio is not unusual among many growth-oriented and technology companies.
📘 SBC as % of FCF
📈 What is it?
SBC (Stock-Based Compensation) refers to equity-based compensation granted by a company to its employees and executives. The percentage shows SBC relative to free cash flow (FCF).
🧮 How is it calculated?
SBC as % of FCF = (SBC ÷ Free Cash Flow) × 100
🏛️ Why is it important?
Stock-based compensation is a real cost factor for shareholders. It can increase the number of shares outstanding and therefore dilute existing shareholders. The percentage of free cash flow shows how significant SBC is relative to the cash generated by the company. Since SBC is non-cash compensation, it is typically not deducted as a cash outflow when calculating FCF.
🎯 What does this mean for investors?
- A lower value is generally favorable. Stock-based compensation is relatively small compared with the company's cash generation.
- A high value means that SBC represents a significant portion of the company's reported free cash flow, even though SBC itself is non-cash.
- The higher the value, the more significant SBC can be as an economic cost to shareholders, particularly when it results in share dilution.
📘 SBC Growth 1Y
📈 What is it?
SBC Growth 1Y shows how much a company's stock-based compensation has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
SBC Growth shows whether stock-based compensation is becoming more or less significant for shareholders. If SBC increases significantly, it can lead to greater shareholder dilution over time. At the same time, SBC is a non-cash expense that reduces earnings on the income statement but is added back in the cash flow statement.
🧮 Calculation
🎯 What does this mean for investors?
- A high positive value is generally negative, as rising SBC can increase the burden on shareholders, particularly through potential dilution.
- What matters is whether the development of SBC is sustainable over the long term. Some level of SBC is common among many growth and technology companies.
📘 Share Count Growth 1Y
📈 What is it?
Share Count Growth 1Y shows how much the number of shares outstanding has increased or decreased over a one-year period.
🧮 How is it calculated?
🏛️ Why is it important?
The number of shares determines how many shares the company's earnings and assets are distributed across. If the share count decreases, existing shareholders' relative ownership increases. If it increases, existing shareholders are diluted. The metric therefore makes dilution and share buybacks directly visible.
🧮 Calculation
🎯 What does this mean for investors?
- A negative value is generally positive, as the number of shares outstanding is decreasing.
- A positive value indicates dilution of existing shareholders.
- A declining share count is not automatically positive: It also matters at what price the shares are repurchased and how the buybacks are financed.
📘 Shareholder Yield
📈 What is it?
Shareholder Yield measures how much capital a company returns to shareholders through dividends and share buybacks, relative to its market capitalization. It goes beyond dividend yield by also including share buybacks.
🧮 How is it calculated?
🏛️ Why is it important?
Dividend yield only tells part of the story. When a company buys back shares and the share count falls, each existing shareholder owns a larger part of the company. When the share count rises, for example through stock-based compensation or new share issuance, existing shareholders are diluted. Shareholder Yield combines both into one metric.
🧮 Calculation
🎯 What does this mean for investors?
- A higher Shareholder Yield indicates more capital being returned to shareholders.
- A negative value means the company issued more new shares than its dividends and buybacks make up for.
- Share buybacks are most beneficial when shares are repurchased at attractive valuations.
- Investors should also consider whether dividends and buybacks are sustainable over time.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🧮 Calculation
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF) | ex SBC
📈 What is it?
Free cash flow shows how much cash remains after a company has covered its operating and capital expenditures. FCF ex SBC additionally deducts stock-based compensation (SBC) to adjust the cash flow for the effect of non-cash SBC.
🧮 How is it calculated?
Free Cash Flow ex SBC = Operating Cash Flow − SBC − Capital Expenditures (CAPEX)
🏛️ Why is it important?
FCF reflects a company’s actual financial strength – independent of reported accounting earnings. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction. FCF ex SBC also deducts stock-based compensation and shows how much cash generation remains after SBC.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow indicates that a company has strong financial strength – independent of reported earnings.
- It is often a solid basis for sustainable dividends and share buybacks.
- Declining FCF can be a warning sign, even if reported earnings remain stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🧮 Calculation
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🧮 Calculation
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net Margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free Cash Flow Margin | ex SBC
📈 What is it?
The Free Cash Flow Margin shows how much free cash flow a company generates relative to its revenue. In simplified terms, free cash flow is calculated as operating cash flow minus capital expenditures. The Free Cash Flow Margin ex SBC additionally accounts for stock-based compensation (SBC). While SBC does not represent a direct cash outflow, issuing shares as compensation can dilute existing shareholders. Therefore, SBC is deducted from free cash flow in this adjusted metric.
🧮 How is it calculated?
Free Cash Flow Margin ex SBC = (Free Cash Flow − SBC) ÷ Revenue × 100
🏛️ Why is it important?
The Free Cash Flow Margin shows how efficiently a company converts its revenue into free cash flow. Strong free cash flow can provide financial flexibility for dividends, share buybacks, debt repayment, or further investments. The ex SBC version additionally accounts for the economic impact of stock-based compensation and therefore provides a more conservative view of cash generation from a shareholder perspective.
🧮 Calculation
🎯 What does this mean for investors?
- A high Free Cash Flow Margin shows that a company converts a high proportion of its revenue into free cash flow.
- This can provide greater financial flexibility for dividends, share buybacks, debt repayment, or investments.
- The Free Cash Flow Margin ex SBC additionally accounts for potential shareholder dilution from stock-based compensation.
- The long-term trend is particularly important. Declining margins can, for example, result from higher investments, changes in working capital, or weaker operating performance.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
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Gogo Inc. Stock Analysis
Analyst Opinions
9 Analysts have issued a Gogo Inc. forecast:
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Gogo Inc. Events
Past Events
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NOV
6
Q3 2026 Earnings Call
8 days ago
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AUG
6
Q2 2026 Earnings Call
3 months ago
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MAY
7
Q1 2026 Earnings Call
6 months ago
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MAR
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Morgan Stanley Technology
9 months ago
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FEB
27
Q4 2025 Earnings Call
9 months ago
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NOV
6
Q3 2025 Earnings Call
about one year ago
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StocksGuide Free
Gogo Inc. — Q3 2026 Earnings Call
1. Management Discussion
Hello, and welcome to Gogo's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Amy Greene. You may begin.
Thank you. Good morning. Welcome to Gogo's third quarter 2026 earnings conference call. On the call today to discuss our results are Gogo's CEO, Chris Moore, and CFO, Zach Cotner.
During this call, Zach and Chris may make forward-looking statements regarding future events and the future performance of the company. Participants are cautioned to consider the risk factors that could cause actual results to differ materially from those in forward-looking statements on this call.
Those risk factors are described in the earnings release filed this morning and in a more detailed note under risk factors filed in the company's Annual Report on 10-K and 10-Q and other documents that the company has filed with the SEC.
In addition, please note that the date of this call is November 6, 2026. Any forward-looking statements made today are based on assumptions as of this date, and the company undertakes no obligation to update these statements as a result of more information or future events.
During this call, Chris and Zach will both present GAAP and non-GAAP financial measures. A reconciliation and explanation of adjustments and other considerations of the company's non-GAAP measures to the most comparable GAAP measures is available in the earnings release.
The call is being webcast and available at ir.gogoair.com. The earnings release, infographic, and associated investor presentation are also available on the website. After management comments, Chris and Zach will host a Q&A session with the financial community only.
I will now turn the call over to Chris.
Thank you, and good morning. In the third quarter, we continued to execute on our transformation from a domestic Air-to-Ground connectivity company into a global provider of high-speed broadband to the underpenetrated business and military government aviation markets. We are pleased with the strong progress and growing momentum across our next-generation broadband technology portfolio, including record shipments of Gogo Galileo in the quarter. Shipments exceeded our expectations. We secured significant new fleet commitments, and we unveiled a multiyear technology road map that gives customers clear visibility into the future of their Gogo Galileo investment, taking speeds to over 1 gigabit by 2032.
As we expected, this momentum is becoming visible in our quarterly financial results, which continue to reflect the planned transition of our Air-to-Ground and legacy customers to our next-generation products. None of this is a surprise to us, and it does not change our conviction of where the business is heading and during this transition, which is consistent when reviewing our success with new broadband services. Consistent with the prior earnings call, I will spend time detailing each of the product areas before handing over to Zach to walk through our financial results.
We are very appreciative of our advisers and lenders who believe in the transformation of our business and agreed to amend and extend our approximately $600 million of Original Term Loan B debt. Zach will discuss the details in a few minutes, but the transaction allows the company to continue to prudently invest in our business going forward and improve our balance sheet. In addition, the FCC recently granted us a 10-year license renewal for Gogo's exclusive 4 megahertz of ATG spectrum in the 800 megahertz band. Recent transactions in the U.S. wireless market underscore the strategic value of nationwide unencumbered exclusive use low-band spectrum with favorable propagation and coverage characteristics such as the 800 megahertz spectrum Gogo holds.
As more of our ATG customers transition to our satellite-based connectivity, we believe our tower assets and the spectrum can be put to work in new ways, whether by Gogo or others. We are working with our banking advisers and other industry and regulatory specialists to evaluate the full range of possibilities for capitalizing on our spectrum and tower assets, determine their highest and best use and realize the value for shareholders and customers.
Let's now review the progress of Gogo Galileo, our global low Earth orbit service. Galileo has 2 products: HDX, our entry point LEO solution, purpose-built for smaller aircraft, currently at 60 by 10 megabits, moving to 300 by 100 megabits by 2032 and FDX currently at 195 to 32 megabits moving to 1.5 gig to 350 megabits over the same period, which extends the capability to mid- and large cabin aircraft and enhance performance. They combine to form a scalable full-fleet solution across the breadth of our customer base. We had a record quarter of shipments for Galileo of 172 units, a 59% increase from the second quarter and a 95% increase year-over-year. This is well above our expectations, bringing cumulative LEO terminal shipments to 690 by the end of the quarter.
In fact, as of today, cumulative shipments have surpassed 760 units, which we believe gives us between 35% to 40% market share of the LEO business aviation connectivity less than 12 months after introduction, making Galileo the most successful LEO product launch in business aviation. We also ended the quarter with 297 Galileo aircraft online, up 61% from the prior quarter. This growth in aircraft online continues to demonstrate our ability to convert shipments into aircraft online quickly and each aircraft that activates represents a 7- to 10-year recurring revenue relationship. We anticipate that our strong installation rate could continue to drive LEO ARPA growth and eventually offset legacy ATG declines.
As outlined during our last call, our 3-year pricing commitment is resonating with customers who value predictable costs alongside operational reliability, and we are seeing that reflected in our win rates and corresponding decline in competitive conversions. Our pipeline of qualified Galileo opportunities remains above 500 aircraft even after a record quarter of closed business, which indicates that the pipeline is being replenished as quickly as we convert it. There is also a second driver of Galileo service revenue growth that is only beginning to show. To launch the platform, we offered many early customers discounts for an initial period. Those terms are now starting to expire and those customers are converting to a standard service plan, increasing the revenue we earn from each aircraft already online.
In the quarter, we saw average monthly service revenue per Galileo aircraft increased 6% sequentially. We expect that effort to build through the first half of 2027. So we expect Galileo service revenue to grow both from new aircraft coming online and from rising revenue per aircraft across the existing base, especially as some fleet preferential pricing becomes less prominent.
Building on that momentum, I want to highlight the fleet commitments we secured this quarter. The rollouts we discussed last quarter with VistaJet, Wheels Up, and NetJets continue to make steady progress, and our Galileo deployment with NetJets is complete in Europe and continues in North America. In the quarter, we added 5 significant new commitments. First, Textron Aviation announced they will be the first OEM to offer no-charge installation of the Gogo Galileo HDX system on factory new Latitude and Longitude aircraft delivered starting in 2028, along with a preferred worldwide service rate guarantee for 3 years. PlaneSense, one of the largest fractional operators in the United States, selected Galileo HDX for its entire fleet of 71 Pilatus PC-12 turboprops and PC-24 jets as well as future deliveries with installations expected to be completed by the end of 2027.
The PlaneSense deal was a full fleet decision made in a competitive process, and it followed rigorous testing that gave PlaneSense confidence that Galileo can support a full cabin of passengers streaming video, joining video meetings and using other connected services all at the same time. In addition, Duncan Aviation placed an order of 40 Galileo HDX systems, our largest single MRO order of the year. Also, Bombardier ordered 10 Gogo Galileo FDX and 15 Gogo Galileo HDX units to support their demonstration fleet, aftermarket installations and OEM deliveries. Finally, and a powerful illustration of what Galileo can enable in a mission-critical setting, TransMedics is now equipping its fleet of 22 Embraer Phenom 300E aircraft with Galileo HDX to support time-critical organ transport missions across the United States with full deployment expected by mid-2027.
Taken together, these wins span fractional, special mission, MRO, and OEM channels and demonstrate the breadth of demand for Galileo across the market that other providers cannot meet. We also continue to expand Galileo's addressable market during the quarter. We received 4 additional supplement type certificates for Galileo HDX and 1 for FDX, bringing our total to 54 STCs across the business aviation fleet. STCs for our FDX are progressing. We anticipate adding approximately 5 more by year-end. These approvals driven by OEMs and MRO networks continue to broaden the range of aircraft on which Galileo can be installed and support the line-fit ramp we have discussed on previous calls.
Another exciting development for Galileo this quarter, we unveiled the long-term technology road map for the product. The road map outlines planned performance enhancements approximately every 24 months over the next 6 years, targeting download speeds of 5x and upload speeds of 10x current levels while preserving the existing installation infrastructure wherever possible. We believe this road map gives customers confidence that the system they install today will keep pace with their needs over the life of the aircraft, which is central to the 7- to 10-year customer cycle I described earlier. The response from customers has been positive and immediate. And going forward, we believe the road map will be an important factor in Galileo's competitive positioning against alternatives.
Turning to our Air-to-Ground business. Our Q3 results for this business reflect our continued technology transition. Total ATG aircraft online ended the quarter at 5,399, down 6% sequentially. ATG equipment units sold declined to 142, and ATG service revenue decreased due to customer deactivations, including migrations from legacy and AVANCE systems to competing platforms and our next-generation products. These declines reflect the expected ATG transition and customer attrition, and they are the primary driver of the change to our consolidated results this quarter. They also include the NetJets fleet transition we discussed earlier this year, which continues to be in line with our expectations and is partially offset by our Galileo deployment with NetJets, which is progressing well.
The substantial majority of our ATG base now possesses hardware that is ready to migrate to LTE. We're also seeing the transition take a second form as ATG customers upgrade directly to Galileo, a positive result that keeps those customers with Gogo on a platform with a longer runway, thereby preserving long-term financial results.
On 5G, we shipped 68 units in the quarter, down from the second quarter and ended with 94 aircraft online. 5G has been in the market for less than a year. And as with any new network, we are continuing to optimize the software and the performance as the installed base grows. A number of early placements were made at promotional pricing to seed the network, which reduces reported service revenue today, but brings aircraft onto the service and activations accelerated in the quarter as those units come online. We ended the quarter with 674 C1 systems online, broadly in line with the second quarter and 4,324 AVANCE aircraft online.
As was the case last quarter, the headline decline in ATG aircraft online is impacted not only by the fleet transition dynamics I discussed earlier, but also a cohort of aircraft that have deactivated ATG while upgrading to Galileo or 5G or in maintenance or being sold. Adjusting for those factors, the underlying rate of ATG attrition improved from the second quarter, deactivations to competing systems declined meaningfully. A portion of what appears as ATG activations does not represent customer loss, but customers migrating to newer Gogo products either already reflected in our Galileo base or expected to reactivate on 5G or Galileo in the coming quarters.
Now turning to the FCC reimbursement program. We have recently received a 6-month extension from the FCC beyond the original November deadline, and we are on track to complete the migration of our remaining classic customers in the first quarter of next year. Reimbursements continued to flow during the quarter and offset program costs. And we now assume $35 million in capital reimbursements for the full year, reflecting longer processing time for program modifications rather than any change to our approved amount. Once the transition is complete, Gogo will operate the only fully U.S.-based data-sovereign ATG network and the migration provides every remaining classic customer with a clear path to new equipment.
Turning to our geostationary or GEO business. GEO aircraft online ended the quarter at 1,285, down 2% from the second quarter and 4% year-over-year, continuing the moderating trend we have seen over the past several quarters as the market transitions towards LEO and hybrid solutions. GEO remains a strategically valuable part of our network-neutral offering. This quarter, we secured the renewal of a sovereign communications lease valued at more than $15 million annually to provide GEO connectivity to an overseas government customer. A reminder that for certain mission profiles, the global coverage and proven reliability of geostationary networks remains essential.
I would now like to turn to our military and government service. Service revenue was $37.2 million in the quarter, an increase of 36% year-over-year and a decrease of 7% from the record second quarter. As I mentioned last quarter, the second quarter reflected a particularly active operating environment driven by the conflict in the Middle East and the activity moderated somewhat in the third quarter, which is exactly how the business is designed to work. Our blanket purchase agreements remain in place through quieter periods and scale when demand increases. So incremental usage converts to revenue without a new procurement cycle. And while not as high as the second quarter, the third quarter still represents one of the strongest in the history of the business.
Beyond the core demand picture, the more important development in our military and government business is the diversification of this business into new mission profiles. Gogo Special Missions, together with Insitu, a Boeing company, successfully completed testing and integration of a modified high-speed satellite connectivity solution for Group 3 uncrewed aircraft systems, moving the UAV opportunity from concepts into a real flying capability. During the quarter, we also completed ground testing of a UAV payload on our Air-to-Ground network, and we plan to fly a Group 2 or 3 uncrewed aircraft on our LTE network before the end of the year. These developments, together with the sovereign communications lease I mentioned a moment ago, along with the business wins, significantly broaden the opportunity set for our military and government revenue and extend our network into high-value applications well beyond traditional aviation.
Before I turn the call over to Zach, I want to highlight a few financial themes he will discuss in greater detail. First, the decline in service revenue this quarter was driven by the ongoing ATG transition and customer attrition, as expected.
Second, Galileo equipment carries lower margins than the ATG hardware it is replacing, but comes with customer longevity, and we are pricing accordingly to win these long-term service relationships, and we believe there is an opportunity to increase ARPA at a later date. That is deliberate, and we expect it to pay off as those aircraft come online.
Third, the business continues to generate cash. Free cash flow was the highest of the year and up from the second quarter. Finally, the court vacated the $22.7 million jury award in the SmartSky litigation, and we have reduced our expected litigation expense. Final judgment has not yet been entered and the litigation remains ongoing. We are reiterating our full year guidance and with the amendment and extension of our Original Term Loan B complete, debt reduction is well underway and remains our primary capital allocation priority.
I will now turn the call over to Zach to walk through the Q3 numbers.
Thanks, Chris, and good morning, everyone. As Chris just outlined, our third quarter results reflect the transition we've been describing for several quarters as customers migrate from our legacy ATG offerings to our next-generation products. As we expected, that transition weighed on reported revenue and profitability this quarter, while our newer technologies continue to gain momentum. We saw record Galileo shipments, a growing base of aircraft online with our next-generation platforms and military and government business that delivered one of the strongest quarters on record. Following quarter end, we also took an important step to strengthen our balance sheet, completing the amendment and extension of the consenting lenders' loan under our Original Term Loan B, which I'll discuss in more detail later in the call. We remain disciplined on cost and capital allocation. Free cash flow improved sequentially, and we are reiterating our full year guidance.
Gogo's total revenue for the quarter was $213.2 million, down 5% compared to Q3 2025 and 4% compared to Q2 2026. Service revenue totaled $182.7 million, down 4% year-over-year and 4% sequentially. Business aviation service revenue was $145.6 million, down 10% year-over-year and 4% sequentially, driven by the expected decline in ATG service revenue as customers transition to next-generation products. Military and government service revenue was $37.2 million, up 36% compared to Q3 2025 and down 7% sequentially from a record second quarter as the elevated usage Chris described moderated somewhat. Even with that moderation, this was one of the strongest quarters in the history of that business. As our next-generation products move toward broader adoption and their full contribution, military and government revenue will continue to serve as both a stabilizing influence and an important driver of growth.
Equipment revenue totaled $30.5 million, down 9% year-over-year and 3% sequentially due to the decline in ATG unit sales, which fell 52% sequentially to 142 units. This was partially offset by a strong adoption of our next-generation products, particularly Galileo. During the quarter, Galileo equipment shipments increased 59% sequentially to a record 172 units, bringing the year-to-date Galileo shipments to 372. We also shipped 68 Gogo 5G units, down 51% from the second quarter.
Turning to our aircraft online metrics. Total ATG aircraft online ended the quarter at 5,399 or down 17% year-over-year and 6% sequentially, consistent with the customer transitions from our legacy ATG platform to next-generation technologies. Within ATG, Gogo 5G aircraft online grew to 94 as activations accelerated during the quarter. Galileo aircraft online increased 61% sequentially to 297 aircraft, reflecting continued customer adoption as additional supplemental type certificates come online. Broadband GEO aircraft online ended the quarter at 1,285, down 2% sequentially and 4% year-over-year, consistent with the moderating trend Chris described as the market transitions towards LEO and hybrid solutions.
Turning to profitability. Our results reflect the mix shift underway in the business. Gross margin for the quarter before depreciation and amortization was approximately 40% compared to 42% in the second quarter, driven by lower ATG service revenue, which carries our highest margins. As a reminder, Galileo shipments carry lower margin than ATG hardware they replaced and several fleet orders were aggressively priced to secure long-term duration service revenue. Below gross profit, we continue to exercise disciplined expense management. Engineering, design and development expense declined $5.7 million year-over-year due to lower development spending and G&A expense was approximately flat year-over-year.
Moving to our bottom line. The net loss for the quarter was $3.2 million compared to a net loss of $1.9 million in the third quarter of 2025 and $2 million in the second quarter of 2026. Third quarter results include a $6.1 million noncash increase in the fair value of the Satcom Direct earn-out liability. Adjusted EBITDA for the quarter was $41 million, down 27% from $56.2 million in the third quarter of 2025 and down 24% from $53.7 million in the second quarter of 2026, driven primarily by lower ATG service revenue. Adjusted EBITDA in the quarter includes $4.1 million of ongoing litigation expenses.
Looking at capital allocation, reducing leverage remains our highest priority and the Original Term Loan B amendment and extension we announced is a meaningful step towards that goal. With support from lenders holding substantially all of the facility, we extended the maturity of the consenting lenders loans by approximately 2.5 years to October 2030. We have also committed to $75 million of principal payments by the end of 2027, including $25 million paid down immediately at closing, $30 million by the end of this year and a further $20 million by the end of 2027. And the total debt repaid inclusive of our new amortization schedule is $92 million over the same period. This gives us the runway to execute the Galileo and 5G transition while putting our commitment to directing free cash flow towards debt reduction directly into the credit agreement. And the level of lender participation reflects confidence in both our cash generation and our strategy.
Turning to cash flow. Net cash provided by operating activities totaled $26.3 million compared to $32.3 million in the second quarter. Free cash flow was $28.1 million compared to $21.6 million in the second quarter and $30.6 million in the prior year quarter. The sequential improvement reflects lower net capital expenditures and a reduction in inventory as Galileo shipments accelerated, partially offset by lower adjusted EBITDA. We received $14 million in FCC reimbursement during the quarter, bringing the program-to-date proceeds to $150 million. We ended the quarter with $90.7 million in cash and cash equivalents, up $27.6 million from the end of the second quarter. Our net leverage ratio at quarter end was 4x compared to 3.8x at the end of the second quarter. The increase reflects lower trailing 12-month adjusted EBITDA rather than an increase in debt.
In our earnings release this morning, we reiterated our full year 2026 financial guidance. We continue to expect total revenue in the range of $870 million to $895 million, with approximately 84% generated from service revenue and 16% from equipment revenue. We expect adjusted EBITDA in the range of $175 million to $185 million. That range now includes approximately $18 million of ongoing litigation expense, down from $22 million in our prior guidance following the Delaware District Court's ruling in the SmartSky matter. Net capital expenditures are still planned to be approximately $20 million. This now assumes $35 million in FCC reimbursement, down from $45 million, reflecting longer processing time for program modifications with a portion of both the reimbursement and the related spending shifting into 2027.
Overall, our third quarter results reflect the planned transition of our revenue base as customers move from legacy ATG to Galileo and 5G, and our continued focus on execution through that transition. We are converting record Galileo shipments into a growing base of recurring service revenue. Our military and government business is delivering durable contracted revenue through changing demand environments, and we have taken a meaningful step to strengthen the balance sheet with the amendment and extension of our Original Term Loan B.
At the same time, we remain disciplined on how we manage costs, allocate capital, directing free cash flow toward debt reduction while investing in products and capabilities that will drive our growth. We believe this balanced approach positions us well to deliver increasing shareholder value over time. I finally want to thank the entire Gogo team for their continued hard work and commitment to serving our customers as we execute on this transformation.
Operator, this concludes our prepared remarks. Please open the line for questions.
[Operator Instructions]
Our first question comes from the line of Justin Lang with Morgan Stanley.
2. Question Answer
I wanted to actually start on the spectrum given the license renewals and as you alluded to some recent high-profile transactions in this space. So just curious, if you could talk a little bit more about what's on the table in terms of highest and best use that you referenced earlier and how developed some of that thinking is?
Before I answer that question, I will just say a quick remark. I apologize for everybody on the call that we had the late releases this morning down to our amend and extend for the Term Loan B, and we appreciate everybody's patience and support. Regarding the spectrum, it's a great question. We're really excited about looking at that prospect. We've obviously engaged the bank and advisers who are in this space. I would start with the -- if you look at the FCC posture at the moment, it's obviously highest and best use. We believe that even with our network utilization across our ATG customers, there is still room for further extraction of value. If you look at what we're doing in the UAV space with unmanned vehicles, I think there's more further opportunity in those use cases towards unmanned aircraft systems and that has opportunity in its own right, terrestrial mobile carriers, as you've seen with the recent Grain auction and also D2D.
The amazing thing with our spectrum and it's obviously very unique is that it actually can be applied across those 3 areas. We obviously need to explore those opportunities with our advisers. But we kind of find that with that spectrum, it can go through buildings, it's really high utilization potential. I think if you look at the D2D space, it's pretty exciting on that. Terrestrial mobile carriers, obviously, around Verizon, what they've been doing and then obviously, with the recent acquisition of Grain Spectrum as well, it will be -- it's the right time we feel to make sure that we extract the most value for our shareholders and our customers as we move to more broadband in our transition, but also utilize our assets.
Got it. That's great color. And then maybe switching gears to Galileo, maybe one for Zach actually. Just given where things stand today, can you give us a sense of sort of updated expectations around the shape of growth in Galileo AOL into next year and then maybe early HDX, FDX breakdown?
Yes. So I think it's still predominantly HDX, right? I think while we aren't giving 2027 guidance on this call, we do feel like the kind of shipments number we've seen this year is repeatable, especially as the OEMs come online, like as you saw in the release, and again, apologies, it was late, but the order from Bombardier is, I would say, a great kind of indicator of how they view the product and same thing with Textron. So again, too early to say where it's going, but we feel confident that the demand is still strong.
Yes. I would just add to that. I think we obviously quote Textron in the script, but that's standard fit. So to deselect it means you are deselecting a free service, and that is standard fit from production. I think that confidence from the OEM is going to start really shining through in the next 12 months. And then Bombardier also placing those orders, equipping its demonstration fleet. We're really excited. I think this is a really good start, and you can start seeing that momentum in our Galileo shipments.
Got it. And then just on the ATG deactivations, do you have a sense of what percentage of those this year are actually customer upgrades?
We do. I don't have it right in front of me, but Justin, we can get you that offline. But I will say it was the highest in this quarter that we've seen.
Our next question comes from the line of Scott Searle with ROTH Capital Partners.
Nice job in terms of seeing the Galileo momentum continue. Maybe just to follow up on the last question on the ATG front. Can you provide a little bit of color of when you look at the installed AOL base, what still is at risk when you look at legacy that has not converted over to C1 at this point in time to kind of calibrate how much we have to work through with the continued transition to at least the lower end of the equation? And then maybe as well, the AVANCE installed base for ATG, how much of that is churning off in a given quarter that you're losing to Galileo versus just going away or going to a competitor?
Yes. On the classic side, so as we said before, we anticipated about 200 of those would go dark at the end of the year, but that was based on the previous FCC cutover. So obviously, that gives us a little more time to work through those. The other side of the equation is, as you saw, the 5G numbers are a little bit softer. So we still anticipate the net Air-to-Ground tail to be down about 1,200, even with the 5G piece. On the AVANCE front, I will say we saw the lowest number we've seen for people going to competitors. So that was a good sign. And so like I said, some good upgrades. We can give you the number offline. I don't have the sheet right in front of me. But it's good to see that we are upgrading these guys at a higher clip than we've seen before.
Yes. I would also add to that. I mean it's just with the Air-to-Ground piece, clearly, the attrition going to competition slowing down a lot. It wasn't high anyway. But if you look at actually the quarter, over half of our equipment revenue was SAT-to-ground equipment in the quarter. So I think that's a testament to people utilizing our Air-to-Ground services with our LEO services and also transitioning potentially to LEO if they want higher broadband. And as we mature the 5G network and get those speeds for the customers as well, I think there's great opportunity there. And also, as I mentioned before, to Justin is utilizing the spectrum in the best form.
Chris, maybe just to follow-up on that. Is there a time line that you're comfortable with that the ATG business will bottom? Will that coincide now with the cutover being pushed out 2 quarters? Or is it the visibility and the comfort with that still not there yet?
I think it's a bit too early to give you the exact timing of that. One thing I would say is that FCC get us an extension for the Rip & Replace. So we're now planning on doing the flash cut into Q1 next year. I think when we see that, then we'll have more confidence. And then at the same time, I think with the Galileo momentum is offsetting a lot of that loss. I think the other thing that we mentioned in the call earlier is that every time we sell a Galileo system, it's really a 7- to 10-year cycle that we typically see on attrition with customers when they're making that capital investment on the airframe. So as the ATG numbers come down, it's also how the LEO business is also going up, and our long-term view on ATG is obviously still a very, very important service to us.
Yes. And Scott, Justin, I was able to pull up the numbers, you guys both asked. Apologies, [indiscernible]. But within those deactivation numbers, 71 are upgrades either to Galileo or 5G that's not been activated, with obviously the vast majority being Galileo. But it's nice to see, again, like I know we've been talking about it, but it's finally the upgrades are starting to accelerate.
Great. And Chris, if I could follow up. In terms of the GEO front, it sounds like just a little headwind on that front related to utilization in the quarter. But if you look at macro events and the recent throttling of Starlink, Starshield and the Ukrainian events, it's caused a lot of consternation out within the industry about reliability, about sovereignty. How is that impacting your business? Are you seeing a lot more inbounds on that front? How is the overall pipeline there? Is there some way you could help us, at least qualitatively, if not quantitatively, give us an idea of what that looks like?
I think I mentioned it in the call as well. If you look at our pipeline, the fact that we're still kind of like high confidence pipeline is still around 500, and we're closing that much business, and we're keeping around that number is actually really exciting. So we're actually feeding the pipeline really quickly now. We're also closing business. We've got really great shipments. The OEMs are becoming really, really engaged. I think there's a general excitement around the company. You can see it with the staff as well and when we're talking to customers and that momentum is really carrying through. So we're really generally very excited.
But from a competition point of view, I think the things that we're reliable on is and we're focused on is making sure customers have price guarantees for 3 years. That doesn't preclude us from looking at the ARPA over the next 12 months. That's -- I think there's some opportunity there because obviously, we're a lot cheaper than our competition at this point in time. So I think there's some opportunity. But at the moment, this is about how we perform in the market, how we enter the market. We are the new entrant in the market. But we're also the fastest-growing new entrants in the market, which is really, again, really good testament to the team, our customers and also our partners in that as well.
So I do think some of those global political events are probably giving us a good effect. And you can also see that in our government business, which is 36% year-over-year up, which is significant. And we're also closing more business around that and making Galileo more prevalent in that and also coming along with new opportunities for ATG with the UAV testing and looking at UAS, unmanned aircraft systems and potential around that. So I do think the geopolitical environment is definitely an opportunity for us. But at the moment, I think that's the big thing we're focused on is we're an aviation business. We're really good at what we do, and it's now starting to have some really serious momentum, which is really exciting.
Chris, with that backdrop, is there a growth rate that you're comfortable with for the Mil/Gov business over the next couple of years?
I think we don't want to discuss the growth percentages on the call, but we're very -- I've said on previous calls, we're very optimistic about this segment. I think the interesting thing about the segment is we're not having to repurpose our design technology because we understand aviation so well that ultimately, we're taking a product portfolio designed for commercial customers and going into global government customers and enabling them to go on to the same platform. I think it's really interesting for the government. It's not the $1,000 hammer moment for them, right? Our approach is making sure we have cost-effective solutions for them. So we really think this market has really got some great potential.
And then I just touched on the UAS. I mean if you look at that, there's a lot of talk about counter-drone or surveillance. So having it sovereign-based and really think of it as a sovereign-based owned communications network because not just the spectrum, but the towers and how we have those towers deployed really has a lot of value and how that can be really versatile in our growth strategy and how we use our assets moving forward. I think the team has really done a good job, and that's why we've engaged advisers as well because I think there's a lot more value that we can deliver for the business.
Last thing, if I could, Zach, in terms of litigation expenses have come down a little bit. How should we think about it in terms of '27 and calibrating the OpEx structure in general, at the current levels we're at, is this what we should be thinking about modeling over the course of '27? What are the gives and takes in terms of incremental costs to complete STCs and otherwise? How should we be thinking about that structure in '27?
Yes. Sorry. So I'll hit the litigation one first. So obviously, we are pleased with the win we received. And now it's kind of trying to work with the parties to figure out the next steps. It should come down dramatically. And obviously, if there's some sort of global settlement, it will go away. Our current estimate is about half of what we spent this year. And again, we're keenly focused, and we do feel like the last ruling gives us some good standing to keep -- to close this thing out. And then -- sorry, what was your second question?
Just OpEx in general, looking at where you finished the third quarter.
I mean I think OpEx, excluding G&A, should kind of hang out around the high 100s, low 200s.
We have a follow-up question from the line of Justin Lang with Morgan Stanley.
I thought I'd try one more on spectrum. Chris, you mentioned a few times that you've engaged an adviser here. Just curious if you can comment if that's been in sort of response to inbounds you received from other parties on your holdings? Or is this more forward thinking, hey, there have been -- there's a re-rating maybe of spectrum value and you want to explore optionality in that realm? Just curious what the impetus for the adviser was.
Yes. I think obviously, we've engaged the advisers and the banking guys. It's too early to kind of go into a lot of that at the moment. Most important thing is the engagement. And why we look at that engagement? I think just looking at the technology profile, the FCC positioning, recent transactions in the space. The team has done a great job strategically looking at this. We've been talking about UAVs, UAS for like nearly a year. We think this is a great asset for the business. It would be foolhardy of us not to look at this asset and look at how we extract the most amount of value.
And this asset has actually transformed over time. I think spectrum is a finite thing, and we have really useful spectrum. It's very unique. I think it is a real asset to the business that we potentially undervalued in the past. And it's our job and it's a good fiduciary duty to extract the most amount of value out of that asset moving forward. So we'll keep you guys advised on it, but we're really excited of how we look at this over the next few quarters, and then we'll obviously advise as these things unfold.
[Operator Instructions]
I'm showing no further questions in the queue. I would now like to turn the call back over to Chris Moore for closing remarks.
Thank you, operator. Just to reiterate, Galileo had a record quarter, strong progress on shipments, installations and early activations. I want to thank the team for working long hours, especially last night for finalizing the A&E of $600 million Term Loan B. I think that's a fantastic result for the company. Another strong quarter for Mil/Gov business, as I mentioned before, 36% year-on-year growth. And finally, as we've discussed a lot on the call, engaging outside parties to look at the utilization of our spectrum. We thank everybody for their time today. And again, I'm sorry for the late sort of releases this morning. Thank you.
That concludes today's conference call. Thank you for your participation. You may now disconnect.
Gogo Inc. — Q3 2026 Earnings Call
Gogo Inc. — Q2 2026 Earnings Call
1. Management Discussion
Welcome to the Q2 2026 Gogo, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today.
[ Green. ] Please go ahead. Thank you and good morning. Welcome to Gogo's second quarter 2026 earnings conference call. On the call today to discuss our results are Gogo's CEO, Chris Moore, and CFO, Zach Cotner. During this call, Zach and Chris may make forward-looking statements regarding future events and the future performance of the company. Participants are cautioned to consider the risk factors that could cause actual results to differ materially from those in forward-looking statements on this call.
Those risk factors are described in the earnings release filed this morning and in a more detailed note under risk factors filed in the company's Annual Report on Form 10-K and 10-Q and other documents the company has filed with the SEC. In addition, please note that the date of this call is August 6, 2026. Any forward-looking statements made today are based on assumptions as of this date, and the company undertakes no obligation to update these statements as a result of more information or future events.
During this call, Chris and Zach will present both GAAP and non-GAAP financial measures. A reconciliation and explanation of adjustments and other considerations of the company's non-GAAP measures to the most comparable GAAP measures is available in the earnings release. The call is being webcast and available at ir.gogoair.com. The earnings release, infographic, and associated investor presentation are also available on the website. After management comments, Chris and Zach will host a Q&A session with the financial community only. I will now turn the call over to Chris.
Thank you and good morning. This quarter we continue to execute on our transformation from a domestic provider of air-to-ground connectivity into a global provider of high-speed broadband to the penetrated business and military government aviation markets. We are pleased with the strong progress and growing momentum across our next generation portfolio, as well as the record-breaking performance of our military and government business this quarter. Consistent with the prior earnings calls, I will focus on the continued progress made across our compelling new product portfolio.
These new products include Gogo Galileo with 2 models, HDX and FDX, both of which provide substantial improvements in capacity, functionality, speed, and global consistency alongside our rollout, legacy ATG, and existing GEO offerings. The investor presentation we published on our Investor Relations website this quarter provides more detailed information about these products, the customers, and markets they serve. We continue to see steady progress on shipments, installations, and early activations across Gogo 5G and Gogo Galileo during the quarter. I will also highlight the new fleet commitments we secured this quarter together with the continued progress with the rollouts we announced last quarter.
Both demonstrate the expanding reach and growing adoption of our Gogo Galileo platform. I will then turn to our military and government business which delivered another record quarter. The current geopolitical backdrop continues to drive sustained demand for secure, reliable airborne connectivity and our air-to-ground network offerings are uniquely well positioned to meet that need. Let me begin with the meaningful progress we achieved with Gogo Galileo, our global low-Earth orbit, or LEO service, in the second quarter. As a reminder, Gogo Galileo has 2 products, HDX and FDX.
HDX serves as our entry point LEO solution, purpose-built for smaller aircraft, while FDX extends that capability to mid and large cabin aircraft with enhanced connectivity performance. Together they position Gogo Galileo as a scalable full fleet solution capable of serving the breadth of our customer base globally. This quarter we shipped 108 units, bringing our cumulative LEO terminal ship to 518 units, a 17% increase from last quarter. We now have a total of 184 LEO aircraft online, up 66% from the prior quarter.
We are encouraged by the accelerated generation in shipments and growing number of aircraft now operating with our LEO service. The growth in Galileo aircraft online demonstrates our ability to convert shipments into the operational deployment over time, with each installed aircraft generating recurring service revenue. Given recent competitive developments in the market, we believe our 3-year secure pricing is resonating with customers who increasingly value predictable performance, flexibility alongside operational reliability. Building on this progress, I want to highlight the continued expansion of our Gogo Galileo fleet wins.
The rollouts discussed last quarter with VistaJet, Wheels Up, and NetJets continue to progress well, and we added Airshare as a new fleet win this quarter. Airshare is a leading U.S.-based fractional ownership jet card, data and aircraft management operator and is equipping its fleet of Embraer Phenom 300s with Galileo HDX. Notably, Airshare's decision followed a live demonstration flight during which the system transferred more than 16 gigabytes of data within 1 single hour. This further reflects the confidence leading operators across fractional charter and managed fleets continue to place in the Gogo Galileo platform.
We also received several notable supplemental type certificates, or STCs, during the quarter for Galileo HDX product, materially expanding its total addressable market. These included FAA STCs for the Gulfstream G650 and G650ER, as well as the European Union Aviation Safety Agency, or EASA, STC, for the Falcon 7X and 8X, 4 of the industry's most popular long-range business jets. In addition, our SD Government team also received FAA STC approval to install HDX on the Pilatus PC-12, expanding the market for this product to government defense and special mission operators who can now stream mission critical data in real time from HD video and imagery to secure communications and live medical information.
This exemplifies how we are extending Gogo Galileo into high-value mission profiles previously inaccessible to us. More broadly, these approvals, driven directly by OEMs and their maintenance, repair, and overhaul or MRO networks, demonstrate growing industry support for Gogo Galileo and support the line fit ramp we expect during the second half of the year. While we have received numerous STCs for Gogo Galileo, there remain several key ones for us to lock in over the next few quarters. In the second quarter, we saw continued momentum across the latest ATG offerings, particularly 5G.
5G unit shipments continue to increase, with 138 units sold in Q2 compared to 52 units sold in Q1. Overall, the transition of our air-to-ground customers to our next generation products remain on track. We shipped 83 of our C1s and ended the quarter with a record 690 C1 systems online, an increase of 24% from the end of the first quarter. We now have 400 air-to-ground Classic customers. Those who have not converted to C1 are upgraded to AVANCE. We expect a portion of that remaining Classic base to deactivate over time, and that assumption is reflected in our guidance.
However, the substantial majority of our air-to-ground base now possesses hardware that is ready to migrate to LTE and ultimately 5G. Put simply, much of the conversion risk associated with the transition is behind us. Customers intending to make the transition have largely already done so. We also have 4,603 AVANCE units online this quarter, a slight decline compared to the same time period last quarter. While reported ATG units online declined, more notably in the second quarter, that headline figure was affected by a small number of identifiable factors.
These include the NetJets fleet transition previously discussed, along with a group of aircraft that deactivated ATG while upgrading to Galileo or [ FIRE. ] 5G. Adjusting for those factors, the underlying rate of ATG attrition was broadly unchanged from the first quarter. A portion of what appears as an ATG deactivation does not represent customer loss, but rather customer migrating to newer Gogo products, either already reflected in our LEO base or expected to reactivate on our 5G network in the coming quarters.
Turning to the FCC reimbursement program, we continue to make strong progress toward the completion deadline of November 8, 2026. The record pace of C1 conversions achieved over the past 3 quarters gives us confidence that the migration will be completed on schedule. Under the FCC reimbursement program, we've allocated for a significant portion of our full approved amount of more than $300 million to cover the cost of removal and replacement of covered equipment across the U.S. network and ATG aircraft. Reimbursements continue to offset program costs as expected.
This transition provides every Classic customer with a clear path to upgrade to a new equipment, and once the EV-DO sunset is complete, Gogo will operate the only fully U.S.-based data-sovereign ATG network. Turning to our geostationary Earth orbit or GEO business, GEO aircraft online was unchanged from last quarter and down 1% year-over-year, continuing the moderating trend observed over the past 2 quarters. This continues to perform ahead of our expectations. We anticipated that the broader market transition towards next generation LEO and hybrid satellite solutions would moderate activity in our GEO business.
Much of this shift reflects the aircraft sales cycle rather than customers actively leaving the platform. Our sales teams continue to engage actively with new owners to capture that business. Given the proven reliability and accessibility of geostationary networks, GEO remains a strategically valuable component of our network offering, particularly for customers whose mission profiles benefit from the global coverage and who operate where LEO faces regulatory constraints. Our Plane Simple Ku-band platform continues to gain traction across both commercial and military end markets.
The AirX Challenger 850 upgrade program is progressing well and our U.S. Air Force Mobility Command approval on the C-130 is opening opportunities across a fleet of more than 100 aircraft. I would now like to spend some time on our military and government end market, which delivered another record quarter. Military and government service revenue increased by 40% year-over-year and 20% sequentially from last quarter. We continue to see strong demand and increased utilization of our existing services driven by the ongoing conflict in the Middle East, where the operational environment is accelerating the need for next generation communication systems across our global military customer base.
This pattern is not new to us. We have experienced similar demand dynamics during previous periods of heightened geopolitical activity and remain well-positioned to respond. Our blanket purchase agreements are already in place, enabling incremental usage converts to revenue as it occurs rather than requiring new procurement cycles. The capacity to serve this demand is already contracted and deployed. In addition, we are exploring alternative uses for both ATG and satellite networks, in support of unmanned aerial vehicles from both a technology and customer diversification perspective.
While this work remains at an early stage, the progress achieved to date is encouraging and we believe it may broaden the opportunity set from our military government business over time. While the second quarter represented a particular active operating environment and may not reflect a normalized run rate going forward, governments around the world continue to make long-term commitments to modernize their secure airborne communications infrastructure, and our contract structure is designed to support those requirements. Our agreements remain in place during quieter periods and scale when demand increases.
This is what makes the military and government business so valuable to Gogo. It provides a layer of durable contracted revenue that is less dependent on business aviation cycles and adds stability to our revenue base while our products transformation. As our next generation products move towards broader adoption and full contribution, military and government will continue to serve as both a stabilizing influence and an important driver of growth. Before I turn the call over to Zach, I want to highlight a few financial themes that he will discuss in greater detail.
First, the ongoing evolution of our product portfolio continues to enhance the resilience and visibility of our revenue base as customers make significant capital investments to install these next generation products. The transition also diversifies our revenue across multiple connectivity solutions and mission profiles. Second, the continued expansion of our military and government business, which is characterized by longer duration contracts than those typically found in business aviation, is further enhanced with this stickiness as heightened military and government activity continues. Finally, our primary capital allocation priority in the near term remains the continued reduction of our debt. I will now turn the call over to Zach to walk through the Q2 numbers.
Thanks, Chris, and good morning everyone. Our second quarter performance met our profitability expectations as we continued executing on our strategic priorities in a dynamic operating environment. While we continue to navigate the expected decline in legacy ATG service revenue, demand for secure, high-performance connectivity across both business aviation and military government markets remained healthy. Sequential service revenue growth was driven by continued expansion in our military and government business, accelerating adoption of Galileo on our 5G platform, as well as disciplined operational execution.
Together, these strengths helped offset the anticipated pressure in our legacy ATG business. Gogo's total revenue for the quarter was $222.8 million, down 1% compared to Q2 2025 and 2% compared to Q1 2026. Service revenue totaled $191.3 million, down 1% year-over-year and up 2% sequentially. Military and government service revenue increased 40% compared to Q2 2025 and 20% sequentially, reflecting high demand and increased usage of related services. This performance continues to validate our strategy of diversifying the business beyond traditional business aviation connectivity while expanding our exposure to mission-critical government communications.
Equipment revenue totaled $31.5 million, down 2% year-over-year and 18% sequentially due to the decline in AVANCE and C1 shipments. This is partially offset by the strong adoption of our next generation products. During the quarter, Galileo equipment shipments increased 17% sequentially to 108 units, bringing cumulative Galileo shipments to 518. We also sold 138 Gogo 5G units compared to 52, up 165% from the first quarter, reflecting continued adoption of our 5G ready AVANCE LX5 platform.
Turning to our aircraft online metrics, total ATG aircraft online into the quarter at 5,731, down 15% year-over-year and 6% sequentially, consistent with the customer transitions from our legacy ATG platform and the expected deactivation discussed in the prior quarter. LEO aircraft online increased 66% sequentially to 184 aircraft, reflecting continued customer adoption as additional supplemental type certificates come online. Broadband GEO aircraft online remains stable at 1,306. Turning to profitability, our results continue to reflect the ongoing evolution of our business mix.
Growth in military and government revenue helped offset the expected decline in legacy ATG service revenue, while equipment revenue normalized following the exceptionally strong first quarter. Below gross profit, we continue to exercise disciplined expense management, which helps support profitability during the quarter. Margin for the quarter was 42% compared to 41% in the first quarter. Moving to our bottom line, the net loss for the quarter was negative $2 million compared to $12.8 million in the second quarter of 2025 and $13.1 million in the first quarter of 2026.
In the second quarter, results reflected a $7.2 million non-cash increase in the fair value of the Satcom Direct earn-out liability. Adjusted EBITDA was $53.7 million, down 13% compared to Q2 2025 and up 1% sequentially. Strong Q2 EBITDA reflects disciplined operating execution, partially offset by lower equipment revenue following a strong first quarter. Adjusted EBITDA for the quarter also includes $3.2 million of ongoing litigation expense compared to $6.1 million in the first quarter. Turning to capital allocation, reducing leverage remains our highest priority.
In April, we made a $21.1 million principal payment on our HPS term loan facility through the excess cash flow sweep mechanism. We also funded the previously announced $40 million Satcom Direct earn-out payment while continuing to prioritize debt reduction and balance sheet flexibility. Our net leverage ratio for the quarter was 3.8x, increasing due to the Satcom Direct earn-out I just mentioned. While we expect leverage to fluctuate modestly over the balance of the year, we remain committed to reducing leverage over time and continue to view debt reduction as our highest capital allocation priority, targeting 2.5 to 3.5x.
Turning to free cash flow on the balance sheet, net cash provided by operating activities totaled $32.3 million compared to negative $7.2 million in the first quarter. Free cash flow was $21.6 million compared to negative $19.2 million in the prior quarter, reflecting improved working capital performance and stronger operating cash generation. We ended the quarter with $63.1 million in cash and cash equivalents after funding both the Satcom Direct earn-out and our debt repayment. In our earnings release this morning, we revised our full year 2026 financial guidance.
We now project total revenue in the range of $870 million to $895 million with approximately 84% generated from service revenue and 16% from equipment revenue. This revision is driven primarily by the timing of Galileo and 5G equipment shipments in the second half. Our full year service revenue expectation is essentially unchanged as the GEO and MilGov revenue lines are mitigating softness in the ATG service revenue. We now expect adjusted EBITDA on the range of $175 million to $185 million, including approximately $5 million of strategic investments and $22 million of ongoing litigation expense.
Litigation expense accounts for roughly half of the change with the remainder reflecting product mix within service revenue. We continue to expect net capital expenditures of approximately $20 million, assuming $45 million in FCC reimbursement. Finally, we've revised our free cash flow expectations for the year and is now expected to be in the range of $65 million to $85 million. This change primarily reflects the revised adjusted EBITDA outlook as our capital spending plans are unchanged. Our guidance continues to include $30 million slated for strategic investments, net of any FCC reimbursements.
Overall, our second quarter results reflect our ongoing focus on execution as we advance Gogo's transformation into a global multi-network connectivity platform. We are successfully managing the transition of our legacy ATG business while continuing to build momentum across Galileo, our sovereign 5G network, and our military and government revenue. At the same time, we remain disciplined in how we allocate capital, strengthening our balance sheet while investing in products and capabilities. We believe the balanced approach positions us well to lower increasing shareholder value over time.
I also want to thank the entire Gogo team for their continued hard work and commitment to serving our customers as we execute on this transformation. Operator, this concludes our prepared remarks. Please open the line for questions.
Thank you, Zach. [Operator Instructions] Our first question will be from the line of Scott Searle with Roth Capital Partners. Scott, your line is open.
2. Question Answer
I'm not sure if I heard on the call, but just wanted a quick update in terms of the outlook for Galileo units to be AOL by the end of this year. I think the number previously was 600, and I think in the past as well, you talked about a pipeline of 500 plus aircraft for 5G. Wonder if you could just update on that front. And then Chris, just a little bit more color on the MilGov opportunity. It's nice to see it starting to expand. I'm wondering if you could address a little bit about where you think that could be as we get into '27 in terms of absolute dollars and percentage of the mix.
It seems like a lot of it now is being driven by utilization as opposed to new aircraft coming online. I'm wondering what the opportunities and thoughts are in terms of incremental [ ARR ].
[ Well. ] In the near term, high demand and increased usage has been obviously driven by the Middle East. However, longer term, governments are modernizing their secure airborne communications. We think that's opportunities global. It's not just MOD in the U.K. or DOD in the U.S. We see that as a global opportunity. What we've said on previous calls as well is, I think what's nice about the Galileo product is we're taking in a commercial-based product and we're putting that into the military. So, you know, we can get to different cost structures, which these guys are not used to.
We've already started seeing good opportunities, which we've mentioned before in the past, and we're closing out new business, which is great. And then we do think, and it's early days, we're starting to see good traction around the UAV market, which obviously expands the TAM quite significantly for the government opportunity. But most of these fleets are definitely unmodernized. So we see this as a good growth vector for the business. On terms of percentages, we think that will grow into the mix. It's too early to say at this point on what that will be, but we're extremely encouraged.
Enthusiastic about the market. Yes, hey, morning, Scott. And then I think the other point you had was just on the Galileo units online. So the model assumes kind of at the high end, we're in the mid-500s for total Galileo.
Great, thank you. And if I could for a follow-up, Zach, I just wanted to get my hands around normalized OpEx going forward. A lot of the increase in the second half here seems like it's related to litigation, which I think is $14 million above your prior expectations. I'm wondering how you see that rolling out over the course of '26. Does it extend into '27? And I'm assuming this is related to SmartSky. But what would be the peak non-GAAP OpEx in '26 on a quarterly basis? And what will that look like as we start to pull some of that litigation out into '27? Thanks.
Yes, so I think, Scott, as we talked before, we look at it like sort of the normalized run rate, kind of in the mid to high 40s, obviously excluding D&A. You'll see, you know, sales and marketing should be flat. There will be a little bit of a pop in engineering because of some milestone payments that got pushed from Q2. And then obviously in the G&A side, you know, that is the litigation expense associated with SmartSky.
Great, thanks. I'll hop back in the queue.
Thank you, Scott. Our next question is with [ Justin Ling ] from Morgan Stanley. [ Justin ], your line is open.
Zach, I just wanted to start with you. Maybe you could put a finer point on sort of the drivers of the updated guidance. You called out lower equipment sales expectations and some service product mix headwinds, but maybe you could just unpack those a little bit further and a little more color on what changed since last quarter on those fronts. Thanks.
Yes, so when we look at the latest guide, obviously the single biggest driver is the equipment revenue, which again is assumed at almost break-even margins. And Chris can kind of get into some of the drivers on a little bit of the slow shipments. But even though we do expect it to accelerate in the second half, I think the really positive note is we've said service revenue is still pretty consistent with our prior views. And this goes back to having the balanced portfolio, because even though ATG was worse than expected and some of the LEOs didn't come online as soon as we anticipated, the MilGov and GEO side of the house completely offset that. So we're at least pleased that we're able to keep service revenue pretty static despite some of the pressures on the shipment side.
Yes, I would just add as well, we've still got 20 STCs outstanding with the FDX, which is the larger product within the Galileo portfolio, particularly around the mid to large airframes. So they're coming on a little bit slower than we would anticipate. That's really down to just the FAA backlog and then those guys taking time. The other piece as well, we've got positive momentum with the OEMs, we've got all OEMs now locked into contracts, which is great, but that process of putting Galileo into the OEM process at the factory also takes time. So we see a good ramp in the second half, but those are really the 2 factors which are kind of slowing down some of the product into the market on the OEM side and also the STC rollout as well.
Got it. That makes sense. And then maybe just 1 more. I appreciate, obviously, the ongoing transition around ATG. Curious if you could just update us on how many ATG aircraft do you expect to sort of net roll off this year, if there are any new dynamics to call out there? And then related, I guess, on a related question on GEO AOL, which is sort of held up. Do you expect that to hold through the year or does that start to taper in the back half? Thanks.
Hey, [ Justin ]. Regarding the -- I guess we could first take the GEO piece and then we back up and make sure I got the other one. On the GEO side, it's interesting because we've actually found the performance to be improving on GEO as a lot of these operators are investing in incremental capacity. So people have been sticking around longer and actually we sold over 50 GEO units in the first, or almost 50 GEO units in the first half of the year, which we typically hadn't talked about because it's a small number. I think it's important to say, the GEO guys are kind of coming back and then I think from a units online standpoint, we still expect to lose a little bit, not a massive number.
And I think the other part of this is, as we've said in prior quarters, the biggest driver of that is still aircraft sales. It's not as much people just turning it off.
Yes, I would add 1 other point as well. It actually goes to the earlier question with the Galileo STCs and the importance of the OEM line fit. All of our Galileo products were applicable on the mid to large range aircraft, are all line fit within the OEMs. So those aircraft are also already specified with the products. So we're still seeing that pull through. And we're still seeing customers from a global point of view because of obviously of the global capability of GEO as well, still taking the product from us. And we obviously are the #1 provider of GEO services in business aviation, so that kind of helps us out as well with those numbers.
Great, maybe on ATG, Zach? Oh, sorry, yes, that was the first one. Yes, so ATG, because of the trend we saw in Q2, the estimated total units online, we're saying about 1,200, and that's total including 5G. I will turn it around a little bit on a couple other points that I think Chris hit in his script. We were pleased to see, you know, albeit a small number, we saw more kind of upgrades to our new products, 5G and Galileo. So if you take what was the NetJets piece, which, again, we didn't have the full deactivation plan from them, so we were kind of flying blind on exactly when those are going to roll off. But if you take out NetJets and the upgrades, we were pretty flabbergasted from Q1 on the deact rates.
Thank you, [ Justin ]. At this time, I'd ask if there are any additional questions, and if so, to please press star 1-1 so we can ensure that you are in the queue. I'll give it just a moment. It looks like [ Justin Ling ], did you have another question? And if so, I'll open your line.
Yes, thanks. I'll sneak 1 more in. Just, Chris, on the MilGov front, we've talked in the past about the drone opportunity, and that market really seems to be gaining momentum. I'm curious if we could talk a little bit about that and how far along you are there and if there are any milestones to watch on that front. Thanks.
Yes, at the moment we're all looking at drone projects and we actually do do drone projects around GEO today. So it is a market we're already in. So we're expanding that for 2 product lines, really, which is Galileo and with the FCC upgrade rip and replace program. Obviously that makes the LTE and 5G network very applicable for the U.S. government. So we do believe we can get a lot of traction there. We are doing some product development and proof of concepts at the moment.
I can't talk about it beyond that. But we can. I think it's pretty exciting. I think the other thing is as well, we are a main contract holder. [ Golden Dome ] so I think as those things play out for both the U.S. market and overseas market we think that's got a really good opportunity. Obviously the TAM as well in drones is significant so we think that that's a great market expansion for us within the government sector.
Thanks for indulging me for 1 more. Appreciate it.
No problem. Thank you for the question again, [ Justin ]. At this time, I'm showing no other individuals in the queue, so I would like to turn it back over to Chris for closing remarks.
Yes, we'd just like to thank everybody for their comments today and listening to our call. And I'd say thank you. Thank you very much.
Great, thank you for your participation today in today's conference. This does conclude our program. You may now disconnect.
Gogo Inc. — Q2 2026 Earnings Call
Gogo Inc. — Q1 2026 Earnings Call
1. Management Discussion
Good day, and thank you for standing by. Welcome to the First Quarter 2026 Gogo Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jim Golden with Collected Strategies. Jim, go ahead.
Thank you, and good morning, everyone. Welcome to Gogo's First Quarter 2026 Earnings Conference Call. On the call today to discuss the company's results are Gogo's CEO, Chris Moore; and CFO, Zach Cotner.
During the course of this call, Mr. Moore and Mr. Cotner may make forward-looking statements regarding future events and the future performance of the company. Participants are cautioned to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements on this call. Those risk factors are described in the earnings release filed this morning and in a more fully detailed note under Risk Factors filed in the company's annual report on 10-K and 10-Q and other documents that the company has filed with the SEC.
In addition, please note that the date of this conference call is May 7, 2026. Any forward-looking statements made today are based on assumptions as of this date, and the company undertakes no obligation to update these statements as a result of more information or future events.
During this call, Mr. Moore and Mr. Cotner will present both GAAP and non-GAAP financial measures. A reconciliation and explanation of adjustments and other considerations of the company's non-GAAP measures to the most comparable GAAP measures is available in the Gogo's first quarter earnings release. The call is being webcast and available at ir.gogoair.com.
The earnings release is also available on the website. After management comments, Mr. Moore and Mr. Cotner will host a Q&A session with the financial community only.
I'll now turn the call over to Mr. Moore.
Thank you, and good morning. The defining theme of the first quarter has been the deliberate transition of our legacy base services in air-to-ground and global satellite services into our next-generation technology portfolio. Consistent with prior earnings calls, I will focus on the continued demonstratable progress made across the compelling new product portfolio. These include Gogo Galileo with two models, HDX and FDX, both of which are providing game-changing increases in capacity, functionality, speed and global consistency as well as our 5G rollout and our existing GEO offerings. We are making steady progress on shipments, installations and early activations across both 5G and Gogo Galileo. I will also highlight our recent fleet wins and long-term growth prospects from our military and government customer base. We believe these next-generation products are not only enhancing the value we deliver to existing customers, but also expanding our addressable market and creating a reoccurring revenue stream that sets the stage for free cash flow growth and long-term strategic value in the future.
Let's start by reviewing Gogo Galileo, our global low earth orbit or LEO service in which we have two products, HDX and FDX and where we continue to see encouraging progress. HDX serves as our entry point LEO solution, purpose-built for smaller aircraft, while FDX extends that capability to mid- and large cabin aircraft with higher performance connectivity. And together, they position Galileo as a scalable full fleet solution spanning the breadth of our customer base globally.
Our Q1 shipments were largely in line with what we projected. We shipped 92 units in the quarter, including 82 HDX and 10 FDX. This brings our total number of LEO terminals shipped to 410 units since launch and across 35 commercial supplemental type certificates or STCs. Our 35 STCs cover a total addressable market of approximately 7,000 aircraft. We have 14 additional STCs underway to be completed in the next few quarters, addressing another 1,500 aircraft for a total of 8,500 aircraft.
Building on this progress, I want to highlight some significant fleet wins for our Gogo Galileo offering. VistaJet is rolling out Gogo Galileo across its fleet with approximately 100 aircraft currently in scope as part of the broader plan to equip more than 270 aircraft globally. Installations began in Europe and are now expanding into the U.S. with a steady cadence of roughly 1 aircraft every 9 days, supported by continued STC progress.
Wheels Up, another significant fleet win is also rolling out Galileo across its 80-plus aircraft in coordination with its fleet modernization strategy. Finally, we plan to have fully rolled out the committed aircraft with NetJets Europe in the first half of 2026, which currently make up half of our Galileo units online and have also started installations with NetJets North America.
We remain confident with our Galileo projections given the strong pipeline, which is demonstrated with the rollout at major fleet operators. We expect a great ramp of shipments as important installations at multiple OEMs are expected to start in the second half of the year with Galileo becoming a line fit option. Turning to our air-to-ground or ATG network. We are seeing significant momentum with our 5G rollout. Even though customers have been waiting a long time for 5G, we're seeing strong enthusiasm for the service. We sold an all-time record of 511 air-to-ground units this quarter, of which 52 were 5G, and we anticipate a very robust rollout throughout the rest of the year with units online ramping in late Q3 and Q4. We have a very robust total pipeline of over 500 units. In terms of our legacy products, we reported record C1 conversions of 254 in the first quarter. This momentum reflects a growing wave of customers upgrading to C1 to ensure a seamless transition from our EVDO network to our LTE network.
Additionally, I'm also happy to announce that we've secured an extension from the FCC regarding our classic product migration with the program completion deadline now extended to November 8, 2026. Under the FCC reimbursement program, we've also allocated our full approved amount of approximately $334 million to cover the cost of removing and replacing covered foreign equipment across the U.S. network and ATG aircraft.
We believe this gives us the necessary flexibility to transition our customers from our classic service to our C1 and AVANCE products, giving them the room they need to operate seamlessly between the old service and the new and adding robustness to our overall 5G and LTE rollout.
We're also seeing strong support from our MRO and OEM partners in the network transition, including Duncan, who is outfitting their demonstration aircraft with 5G as well as Textron, who is updating all of their STCs in the quarter. We are getting more customers exposed to our exciting new 5G network, which will continue to improve, especially with the new LTE network, which we expect to be fully operational by the end of 2026.
Finally, let's now turn our attention to our Geostationary Earth Orbit or GEO business. GEO units online declined by 15 in the quarter, a moderate reduction from the net reduction of 22 we saw in Q4, reflecting continued resilience in our installed base and demonstrating the strength of our OEM partnerships.
Looking across the balance of the year, we do expect some attrition in our GEO fleet, driven by broader market evolution towards next-generation LEO and hybrid satellite solutions. and we are closely monitoring ARPU dynamics within our customer base. We continue to view GEO as a strategically valuable component of our network offering, particularly for customers whose mission profiles benefit from the global coverage and redundancy where LEO has regulatory restrictions and proven reliability and accessibility of geostationary networks. As recently announced, our Plain Simple Ku-band platform continued to gain traction in the first quarter across both commercial and military end markets. AirX selected our Plain Simple Ku-band solution to upgrade its Challenger 850 fleet.
The selection was driven by the simplicity of installation and our ability to provide a fully integrated end-to-end connectivity solution for a high utilization global fleet. We were also pleased to receive U.S. Air Force Mobility Command approval to offer our Plain Simple Ku-band tail-mount. -- on the C-130 platform, opening access to a fleet of more than 1,000 aircraft and representing a meaningful new avenue of growth for our GEO franchise within the military and government vertical.
I now want to spend some time on our important military and government end market in which we see significant expansion and growth for Gogo. Military and government service revenue increased by 7% sequentially compared to the fourth quarter of 2025, marked the second consecutive quarter of growth. Geopolitical uncertainty and a focus on sovereign communication requirements are creating a sustained need for secure, reliable connectivity and our network military and government offerings have proven to be well positioned to meet that demand in an unpenetrated market. As a result, we are seeing a distinct rise in communication spending that extends well beyond the United States and NATO as global governments actively invest to modernize their secure and airborne networks.
During the quarter, we secured several contracts, the first being with the National Oceanic and Atmospheric Administration, or NOAA, totaling more than $8 million over a 5-year period. This represents a meaningful addition to our long-term backlog and a strong endorsement of our network-neutral platform's reliability for mission-critical applications. We also secured business with a U.S. civil government customer worth over $3 million for Galileo and 5G on their small to midsized airframes.
We expanded further into the growing global UAV market with customer wins for both GEO and LEO services for border protection and surveillance with major drone manufacturers anticipated to deliver over $15 million in revenue over the contractual periods. Another major milestone in the quarter also demonstrated the importance of avoiding vendor lock to OEMs as we adapted the HDX so it can be fitted under an existing STC and the Escape hatch for a major airframe OEM for European deployment.
Building on the growth we've delivered over consecutive quarters within our military and government end market, we are seeing high demand for our existing services driven by ongoing conflict in the Middle East, where the operational environment is also accelerating the cadence of adoption for next-generation communication systems across our global military customer base. The U.S. government can access our technologies quickly because of our blanket purchase agreement, which serves the U.S. Department of War. Outside the U.S., our partnerships with leading aerospace integrators and OEMs continue to deliver with strong demand for Galileo from international government customers. Taken together, this momentum has meaningfully strengthened our competitive position in the military and government end market for the long term.
An important point to mention is that the following sunsetting of our legacy EVDO network, Gogo will operate the only fully U.S.-based data sovereign ATG network. Our data originates in the U.S., lands in the U.S. and is entirely protected within the U.S., which makes our offering more appealing than our competitors. This transition away from EVDO, which is expected to open up new opportunities since the EVDO hardware utilize foreign components that lock us out of certain opportunities due to national security requirements.
Before I turn the call over to Zach, I want to highlight a few financial themes that his remarks will detail. The first is that our product portfolio shift is expected to ultimately increase the durability and resilience of our revenue as customers made the significant capital commitment to install these next-generation products on their aircraft as well as diversify our revenue across multiple connectivity solutions and mission profiles.
Secondly, the expansion of our military and government business, which is based on longer contracts compared to shorter-term business aviation contracts should add to this revenue as heightened military and government activity continues.
Lastly, our top capital allocation priority in the near term is to aggressively pay down debt. I will now turn the call over to Zach to walk through the Q1 numbers.
Thanks, Chris, and good morning, everyone. Our first quarter performance met our expectations as we built upon our strong finish to 2025. The quarter was driven by C1 and 5G demand, positive Galileo momentum, along with sustained growth in our military and government service revenue. This performance helped balance anticipated service revenue softness as we navigate ATG aircraft deactivations. Gogo's total revenue for the quarter was $226.3 million, down just 2% compared to both Q1 2025 and Q4 2025.
Service revenue was $187.7 million, down 5% year-over-year and 2% sequentially. Total equipment revenue showed continued strength at $38.6 million, an increase of 22% compared to Q1 2025 and flat sequentially. Sustained activity with record C1 shipments and increasing adoption of our 5G-ready AVANCE LX5 platform for total ATG equipment sold of 511, up 8% compared to Q4 2025. We sold 184 AVANCE units, a 5% increase compared to Q4 and 327 C1 units, an increase of 10% sequentially, bringing our cumulative C1 units sold to 1,063. Gogo C1 solution is a simple box swap designed to allow connectivity for classic ATG customers on Gogo's new LTE network, which is expected to come online later in 2026.
Galileo equipment shipments totaled 92 for the quarter, bringing our cumulative Galileo shipments to 410. Turning to our aircraft online. Total ATG AOL of 6,116 decreased 11% compared to the prior year quarter and 4% sequentially for the reasons Chris outlined in his comments. Advanced AOL now comprises 79% of our total ATG aircraft online and average monthly service revenue per ATG aircraft online, or ARPA, was $3,351, a 3% decrease compared to Q1 2025 and flat sequentially.
Broadband GEO AOL increased 2% year-over-year to 1,306 but decreased 15 units from Q4 2025, largely due to aircraft sales in the quarter. Moving to our bottom line. Net income for the quarter was $13.1 million, a significant increase on a sequential basis. In Q1, net income benefited from 3 noncash items: first, a $4.9 million pretax reduction to the SATCOM direct earnout accrual; second, the nonrecurrence of a $10 million litigation accrual that occurred in Q4; and third, a $4 million pretax charge to reflect the change in the fair value of the convertible note that also occurred in the prior quarter.
Adjusted EBITDA was $53.3 million in the quarter, a 14% decrease year-over-year, but a 41% increase on a sequential basis. Q1 2026 adjusted EBITDA includes $6.1 million of litigation expenses versus $8.4 million in Q4. The sequential increase in adjusted EBITDA of $15.5 million was primarily driven by improvement in equipment profit resulting from a favorable product mix and lower inventory reserves as well as a reduction in ED&D expenses.
Year-over-year, the 14% adjusted EBITDA decrease of $8.7 million was largely driven by a drop in service profit stemming from declining ATG revenues. However, we partially mitigated this impact through disciplined OpEx management and strong execution on the synergy front with annualized synergies reaching $40 million, exceeding our prior targets. In addition, ED&D expenses benefited from the reimbursement of costs related to the FCC reimbursement program.
Turning to our strategic initiatives. In Q1, our 5G program incurred $0.2 million in operating expenses and $1.4 million in CapEx. In addition, our Galileo project spend included $0.8 million in OpEx. Regarding our efforts to reduce our debt and improve our leverage profile, which, as Chris mentioned, remains our top capital allocation priority, we made a $21.1 million principal payment on the HPS term loan facility in April. This payment was executed as an excess cash flow or ECF sweep.
Turning to our net debt leverage ratio. We ended the first quarter at 3.6x. Based on our 2026 forecast, we anticipate this leverage ratio will increase slightly in Q2 and Q3 before dipping back within our target range by the fourth quarter. Moving to free cash flow and the balance sheet. Net cash used in operating activities was $7.2 million and free cash flow was negative $19.2 million for the quarter, down from $30 million in Q1 2025 and down from negative $4.9 million in Q4. Our cash story this quarter was heavily influenced by a $14 million cash outflow related to our annual bonus payout as well as a reduction in accounts payable associated with our inventory ramp related to the Galileo product launches. We ended the quarter with $103.5 million in cash and cash equivalents. In our earnings release this morning, we reiterated our 2026 financial guidance.
We project total revenue in the range of $905 million to $945 million. We expect adjusted EBITDA in the range of $198 million to $218 million, which includes $3 million in strategic investments and $8 million of ongoing litigation expense.
Finally, we anticipate free cash flow in the range of $90 million to $110 million. This implies a 12% year-over-year growth rate at the midpoint, driven by the winding down of new product investment, sustained cost synergies and an expected strong ramp of new product revenue. Our guidance includes $30 million slated for strategic investments, net of any FCC reimbursements and net capital expenditures of $20 million, assuming $45 million in FCC reimbursement.
To summarize, our first quarter results reflect continued strong execution, record ATG shipments and a 41% sequential increase in adjusted EBITDA. We are managing through near-term pressures in legacy service revenue while investing behind the two initiatives that we believe will define our next phase of growth, our 5G network and Galileo Broadband.
We also repaid $21.1 million on our HPS loan in April, further strengthening our balance sheet. Together, these actions should expand our addressable market and position us to deliver long-term value to shareholders. I want to express my continued gratitude to the Gogo team for their hard work in driving our transformation and their commitment to outstanding customer service. Operator, this concludes our prepared remarks. Please open the queue for questions.
[Operator Instructions] Our first question comes from Scott Searle with ROTH Capital Partners.
2. Question Answer
Nice to see you guys reiterating the outlook for 2026. Chris, maybe to start from a high level. It seems like there are a lot of shipments going out the door as it relates to Galileo and 5G, yet AOL has been slow to come online. I'm wondering if you could talk us through the comfort that you have in terms of that ramping up into the second half of this year in terms of dealer channel support, STCs, which seem like they're very much on track. And just maybe help us understand the competitive landscape out there, particularly as it relates to Starlink?
It's going to take time. We've got the building blocks in place. We have the real estate. Our equipment revenue is up 22% year-on-year. We've got record ATG unit sales. Galileo AOL grew 50% sequentially and adjusted EBITDA grew 41%. And then if you look at the current shipments on Galileo, then most of that's with MROs at the moment. And really, as we've stated in previous calls, the OEMs come online really in Q3, Q4, and then you see that ramp going from there. So actually, we're really excited about what we're seeing with Galileo, and it's going to plan at the moment.
Regarding competition, we're not really seeing any changes. I think the good news is this is probably the fastest product we've ever launched and the customer confidence is kind of showing with our results.
And Chris, I'm sorry, my phone blocked out for the 5G commentary. I'm wondering if you could just reiterate that quickly.
Yes. I mean if you look on equipment revenue is up 22%. And then we've got year-on-year record ATG unit sales as well, which we said on the call. So if you look at 5G from a standing start, the pipeline is over 500, and it's a really solid start. We're seeing already partners like Textron already completing all their STCs. We've got good product shipments, good reliability. So we're very, very confident about 5G. It's actually a really good start to the product.
And then quick two follow-ups. Maybe just in terms of the classic conversion, what you're ultimately hoping that looks like by the end of this year? I know you got an extension there, but what's -- what do you think the attrition is versus retention and conversion over? And then lastly, just as it relates to the traditional SATCOM business, I'm wondering, given the growth that you're seeing in the military opportunities, when -- what's the long-term growth opportunity when you look at the traditional SATCOM business? And how much do you expect military to comprise of that as we start to look out 2 years to 3 years?
Yes, that's a lot. All right. So let me start with kind of air-to-ground. If you look at record 254 C1 conversions this quarter and 1,058 overall, and our AVANCE base grew 3% year-over-year. So I think the tendency is just to focus on the quarter on suspensions, deactivations on the classic customers. They're not all deactivations. Some of those are suspension. So we expect some to come back. We, in the previous call, said that we expect to lose like 1,000 customers over the year. I think that's kind of holding. I think the big thing there, though, is the transition that we're showing with the new products is all of our customers have somewhere to go with a broadband experience, which they didn't have previously, which is pretty exciting.
And we continue to believe the ATG portfolio kind of will be a very, very important part of our business moving forward. Going on to the Milgov business, I think just what we're seeing with the wins that we discussed today is kind of a very robust business unit that's growing, which is really exciting. And the value of the commercial-based products that we're putting into that, lower cost support global capability, robust cybersecurity and then the drone market, we see that as a really exciting area for the business to grow into and service revenue up 14% year-on-year, 7% from the last quarter. So we're really excited about that revenue segment for us.
Our next question comes from Justin Lang with Morgan Stanley. This is Gaby Knafelman on for Justin Lang.
You had mentioned that NetJets Europe will fully roll out Galileo in the first half of the year. I'm curious if you could give us a sense of expectations for the overall Galileo domestic international split through the end of the year?
Yes, that's a good question. So let me just clarify a little bit on NetJets. I think there's a lot of misunderstanding around our NetJet relationship. And I want to clarify this is really going very well. If you look at the confidence in the broader fleet relationships along with NetJets, we're completing and rolling out NetJets Europe. We're starting to roll out NetJets North America. And we're also starting to see real big traction with VistaJet aiming for 270-plus aircraft, Wheels Up in their transformation with new aircraft, Luxe Aviation, Avcon Jet, AirX. So the confidence in the fleet operators, I think, speaks volumes for the business. And that 60-40 split is 60% North America, 40% overseas is really exciting for the business because previous to the Satcom Direct acquisition, Gogo was predominantly just a U.S. supplier.
So we're seeing that kind of international expansion, confidence in the fleet operators and NetJets is still in the fold with Gogo, and we're excited about rolling out with them.
Got it. Super helpful. And I'm just curious if you could comment on how GEO AOL figures this quarter compared against your expectations and whether or not you're thinking any differently at all about some of the pressures you had flagged around GEO coming into the year?
Yes. So effectively, GEO has held up exactly as we thought it would. The 15 units is sort of what we thought. I think the other kind of positive sign is, as we telegraphed in Q4, the minor drop was largely related to aircraft sales. I can tell you that's the same trend in Q1. So our sales guys are beating down the door to try to find the new owners and win those back. So I think GEO continues to be robust. The ARPA is down a little bit, but again, that's what we thought. So I think we've got a pretty good handle on GEO as of now.
This concludes today's earnings call. Thank you for your participation in the conference. You may now disconnect.
Gogo Inc. — Morgan Stanley Technology
1. Question Answer
Okay. Great. Well, welcome to Morgan Stanley's Annual TMT Conference. My name is Justin Lang. I'm a Space Tech Analyst at Morgan Stanley, part of the A&D research franchise here. Delighted to kick off our firesides for this conference with Gogo and especially thrilled to have CEO, Chris Moore; and CFO, Zach Cotner, up here with us. So welcome both.
Thank you.
Thank you.
Before we begin, I do have to read some disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/research disclosures. You're going to hear a lot of that for the next few days.
But look, we have a lot of ground to cover, exciting time in your business. You just reported earnings on Friday. This will not be an extended call back, I promise. But I think the discussion is very timely. So I want to just start though high level with you, because again a lot of change in the business, transformational merger a little over a year ago with Satcom Direct and Gogo. So, maybe just step back with me for a second, Chris and talk about sort of the original thesis, but more importantly, how you grade things a little over a year in here as you brought these two companies together?
Yes. I think as acquisitions go, it was a really good strategic move by Gogo to buy Satcom, I think, on a number of levels, mostly for international coverage. Gogo was predominantly a U.S.-centric business and with the Air to Ground network, and they were rolling out the LEO service, but they haven't got any international locations, staff, revenue. So this has really just accelerated that.
And then the other big thing with the acquisition as well is Satcom Direct also had a good strong business in the military government sector as well. So really, when you look at combined portfolio from a technical perspective, there wasn't a lot of overlap. Satcom Direct was predominantly a satellite communications provider. Gogo is predominantly an Air to Ground provider with the Air to Ground technology.
And we're getting into Satcoms, but it was still early stage. So actually, from a synergy point of view, Zach and I were able very quickly -- we did the deal on December 3. And by the end of Q1, we've already done quite a large portion of the synergies, which is -- was mostly headcount, but like a year on from that, we're done with all the synergies. There's some kind of things that we can still kind of refine from a financial perspective, but the businesses came together quite quickly. And when you look at a lot of other M&A around the space from the operator level, that's a lot more difficult.
If you look at the recent acquisitions of ViaSat, Inmarsat, that's still going through a lot of those synergies. SES with Intelsat, still a lot of synergies, because on the technical side, even though you might be in the satellite industry, the technology is still very proprietary, whereas from a Gogo perspective, with the acquisition of Satcom, our technology is very multi-network, which is on a satellite side, which is really beneficial so that you can actually move a lot quicker. You're not married to one technology.
Really, our technology is like a foundational platform and that can go across multiple networks. So that enabled us to do a lot of synergy savings quickly. And I think the business now is on a good trajectory to really -- now we've got the synergies done is really now transforming the customer base, which is a little bit more difficult from legacy-based technology to the new technologies of 5G on Air to Ground.
And when I say 5G, it's really broadband, true broadband, so you can stream, do Microsoft Teams in the back of the cabin and then going into LEO broadband, which, again, stream, you can do kind of broadband capable things. And then if you look at GEO, it's more like an underlying architecture from a -- these are all orbits, right, LEO, GEO. So that technology lends itself to being more global than LEO at this point in time. So for a lot of our customers, they want two services for redundancy. So that's really now what we're focused on is kind of -- we've got a lot of legacy customer base that we need to migrate into the new technology.
Got it. That makes a lot of sense. And I want to spend a little time on Galileo and your LEO-based solution. So maybe talk about -- a little more about what the offering is and then give us the flavor on HDX and FDX.
Yes. So what Galileo is it's a LEO service. And at this point, we're partnered with Eutelsat OneWeb based out of Europe, and we're utilizing their constellation. The one thing we've done on GEO, which is an important point to make is we've always been agnostic. So we have Ku/Ka-band versions. Usually within satellite, there's two flavors the operators usually pick it's either Ku or Ka. Our GEO services are agnostic across Ku or Ka.
At some point, I see that being the same for LEO potentially. But at this point in time, our LEO services predominantly Ku, comes in two form factors, HDX and FDX. HDX is really 60x 6 to 10 meg service. What does that mean? Really, the uplink is 6 to 10 and -- when you look at that, what does that enable you to do in a plane? If you look at small jets that at this point, don't have the ability to put GEO services on, GEO services going on the tail or you put Air to Ground services on the belly of the airplane.
The LEO service actually goes on to the fuselage. It looks like two laptops kind of size. It goes on to the fuselage, you fix it on to the fuselage and now you've got the same broadband capability that you would have in your home or in the office. So you can run your VPN services, be completely tied into the office. And that's kind of -- the entry point is HDX. So you can get on really small planes like think of it like 6-person passenger planes like Phenom 300 by Embraer. -- or a PC -24 by Pilatus, so very small planes.
It could also be supplemented or stand-alone with the 5G service, which I can cover in a bit, but that's really HDX. Then going into FDX, that's really designed for mid- to large cabin airplanes. So that's really going from either kind of a Dassault Falcon 2000 right through to a Gulfstream G800 or a Global Xpress 8000. So there's a lot of technical terms, unfortunately, in our business. So these are just airplane types or you could go into an Airbus or a Boeing business aircraft. So really, we've got from our new technology, when you think of 5G, which is more focused on the smaller aircraft as a primary communications method and a backup for the mid- to large jets, we've got something for every single one of our customers.
So we've got something that goes on to a very small aircraft, right through to very large aircraft. The other exciting thing with HDX going into the government market, we can also put that product onto a drone. So that will -- that form factor can actually go on to a UAV. And with that government market, that opens that up. And then the other thing with HDX, where nothing else can do in the market, we can actually put the HDX terminal into the tail of the airplane and our competition can't do that. And that lowers the cost of installation. So the one thing we can do is get the cost of installation of this equipment cheaper than anybody else, which is really kind of important to open up the market opportunity.
That's great. You mentioned on Friday that the target for this year is 700 aircraft online equipped with Galileo -- and I think as of the end of 4Q, you're about 75 aircraft. So nice ramp there. So talk to me a little bit about the confidence you have in that number -- is that a conservative estimate? Do you see upside there? What are you seeing on sort of equipment side, STCs that derisk the 700.
I think it's an aggressive number, but we feel confident in putting out something aggressive at this point in time, when you look at our pipeline, our sales pipeline, we have over 1,000 aircraft in there. the qualified pipeline, which is effectively -- when we say qualified, most of it is qualified, but we go 50% and above. So really, that means you're very close to closing that customer from a sales perspective, there's a number of metrics in there.
We have over 400. This is what I said on the call last week anyway. So we feel very confident with the 700 number, although it's aggressive. If you think of it in terms of like our competitor who is very fast moving for the industry, that means in the same time period, we've put on like double what they have. So I think that kind of shows the strength of robustness to the business. So that -- which is great. I think it's a very realistic number to focus on. And I think the fact that we've now got contracts with all the OEMs who make the aircraft outside of a few. We're very confident within the next 12 months, you will not be able to order a business jet without selecting us as an option. It's a bit like when you're ordering a really fancy car. You kind of might put options.
I don't know anything about that. [indiscernible] on the ground.
Precisely. But if you want to upgrade the vehicle, you might want to put someone like an option on there. The jets and specifying jets is a very similar process. You end up putting this on as an option. When you're choosing the carpet, the interior, the veneer, you choose the Internet. So you will not be able to order a business jet without us selecting us as an option. That's a big deal.
And then we have a very extensive MRO market globally that can fit this on in what they call the aftermarket, which is really important. And we can do that. So again, that strengthens our confidence in the number. And then they're actually actively selling, not only our sales team is actually selling our product. Those MROs and OEMs are actually actively selling our product, because they want to sell either an upgrade option because that's good for them or the MROs are trying to get maintenance work in. And at that point, they will fit it on to the jet. So we feel confident about that.
And then our government business, they've got a good target on them for LEO services this year as well. And we believe that market will be slower to ramp just because of the sales cycles. Typical sales cycle from activation from shipment in our business is three to six months because you've got to put it on a plane. So that means the equipment leaving our docks and going to an MRO and OEM, we expect it to be activated on the network within that period of time. And then government can be a little bit longer, 6 to 12. So if you kind of think of it that way, I think the numbers this year are good, robust.
What's been kind of hidden, that's really explosive growth for LEO from our perspective, but that's being probably dampened a little bit with the positive shift that we're now making with our customer base from going from more legacy connectivity services to those services. So if you look at our total numbers, it's kind of being a little bit masked at this point in time on because we're in this technical transformation of the business.
Right. I want to get there. And I want to hit 5G as well as alluding to it. So another product just -- it was a long time coming. Finally, you turned the network live early this year, must feel good. Also, the target is 400 aircraft online with 5G by the end of the year, maybe just a handful as of today, also a very steep ramp. Talk to us a little bit about where that slots in and sort of the overall Gogo portfolio.
Yes. I think that's the bit just to reiterate, I think now we've got -- if you think of the business, so if you're purchasing something from us, you've got the entry point, which is 5G. And that entry point really serves small jets, could be interesting as well from a governmental perspective, but that we need to prove that case out. But if you're specifying kind of specking a small jet like a Finom 300, PC-24, a citation aircraft, you'll be able to get a line fit from Textron this year. It's -- and Embraer as well. That's a really great entry point to a true broadband service.
And our more legacy services on Air to Ground have been fantastic. But I would put it this way on transformational technology. This is like everybody in this room and it is all going back to a BlackBerry or a Nokia and then giving you an iPhone. It's completely transformative technology. And the usability of the system is completely different. So we have a test aircraft. We've both flown on it, and you can have simultaneous Teams meetings. You can have somebody on Teams, somebody on Netflix, somebody on the corporate network.
This is really transformation for kind of those Air to Ground customers. And it's a great entry point. It also adds a level of -- we keep talking about multi-network, multi-orbit. That also for more higher-end customers gives them a level of resilience within the U.S. because the Air to Ground network is just a U.S. network. It gives them a level of resilience that we have a lot of customers who will not fly unless they have Internet connectivity.
So we believe that service is really there. It's really nice now that we've got a true service that all of our Air to Ground customers can now migrate to if they want to, that is a very low-cost option for them to upgrade. And we just lowered the pricing of the equipment so that we know we can get an installation of that around $150,000 total on an airplane, which is very different to putting LEO services on an airplane, which is really entry point to that is like $300,000. So it's half the price of putting this equipment on board. And if you're just flying domestically in the U.S., it's a great service. So we're pretty excited about it.
That's great. So you'll have between Galileo and 5G, about 1,000 net new aircraft ads the end of the year. Just maybe unpack a little bit about the transition underneath that's masking it a little bit. It sounds like legacy will ebb to sort of wash up the number this year.
Yes. I just kind of -- we're migrating a number of services. So we're end of lifing one of our networks and has a new network. Actually, it's FCC funded, kind of what we call our LTE network. We have a lot of boxes and a lot of networks. So it kind of gets a little confusing. But if you think of Air to Ground, like we have an entry point into broadband, and we can take our legacy customers into that entry point in broadband and grow them into 5G.
That's the easiest way of looking at it. That deactivation of those customers is really where we're seeing some of those customers fall off the network, and we're anticipating some won't come back. What's the reason for that? Is it that migrating to alternative technology? They could be? Or is it also the age of the airframe. So if you look at like business jets, everybody tends to focus on the high end, the $70 million airplanes, they look nice and they're good to talk about. But the reality is the bulk of the U.S. fleet is also more older airframes -- and that could range anything from $1.5 million jet right through to what I just said, $80 million jet.
And within that, we've got -- we've been very successful in the past. We built a really good moat around the business with the classic Air to Ground business, if we call it that. So really, it's migrating those customers across. And some of those customers will fall off because they will not make an investment on the aircraft.
That being said, we have a migratory service called C1, which we have a lot of boxes, a lot of names. But what does that do? It really picks that customer up at no cost to them, the FCC funds it and migrates them to be able to take advantage of the entry point into broadband.
And that's been very successful to us. It was a bit of a slow ramp. But now where we stand on those numbers, we feel very confident that we can take a good proportion of those customers. There will naturally be some fall off -- but we've then got a good base to grow into 5G. So that's kind of -- I don't know whether you want to expand on that.
Yes. No, I think the only other point is probably mentioning GEO in with this whole piece is like the GEO is what Satcom kind of brought to the table, and it's held up incredibly well. And this is all in the larger aircraft, right, because it goes in the tail and it's a higher ARPA. And I think like we've been thinking it was going to drop more for the past two years, but it's held up because it is very expensive to upgrade, right?
And for a lot of people, the GEO works great, especially the FLEX network, which is the Ku. And so we do expect that to come down again this year, and we're working with a lot of the GEO operators to work on backup solutions to make sure they keep -- we keep the real estate on. So again, back to your point about the numbers are a little confusing because we have all these strong shipments and ramp, but you have a large bulk of legacy products across the board that just will naturally decline at some rate.
And I think kind of to the point of -- on the ATG side, I think the 5G was so late. That was -- that's part of the problem is if we had got that launched three years ago, I think we would have a better moat to build off of. But we feel confident we can do it, but it is -- you have a lot of moving pieces with legacy networks that are just -- it's the nature of it. Chris and I at Satcom, Satcom was 25 years old, and it had been through three or four of these. And the key is you have to start it well in advance, right? And I think some of these just took a little longer to get going, and we're doing them all at the same time. So...
Got it. Makes sense. Now Chris, one area that you've been pretty bullish about the past few quarters I've heard you talk about it is the fleet opportunity. You had the VistaJet win, which is a big win, maybe didn't get recognition in the market that probably deserved. And then you had this NetJets announcement late last year that the stock reacted pretty sharply to.
So maybe just talk about -- I mean, I thought you gave good color on Friday's call, but we can flesh it out a little bit. How you're thinking about contextualizing the NetJets announcement? And any shift to the sort of fleet strategy or is it steady as she goes?
No, I think the fleet strategy is -- ultimately, I think the big thing for people to get their head around, we have a competitor. And I think for the classic Gogo business, like I said, a really good moat around the business and really didn't have serious competition. And now I think it's real for people who have been invested in the stock for a long time, now it's -- you're looking at every win or loss, and you're going to have win and losses on both sides. So I think that's quite an important point for -- conceptually, you're in a competitive market.
That doesn't mean that every time your competitor wins something and you haven't won it, either one of you is going to go out of business. I think that would -- like there are many competitive markets in the world. Most people -- I think competition is a really healthy thing. You should have competition. It makes you better. So that's an important point to make.
Regarding NetJets specifically, we have a fantastic relationship with NetJets. Interestingly, when we announced the NetJets win in our press release, we never actually said we won the whole fleet. We were very specific about what we've won. And what we said in that press release still stands today. So we've won a portion of the fleet, and we're rolling out on NetJets Europe, and we will also be rolling out on specific airframes of NetJets North America.
What was probably disappointing from our perspective, but not a shock is we are still rolling out the technology. So the antenna, which is called the FDX, we just got that through the FAA regulations late in the summer last year, we're just rolling out STCs. That usually a 6- to 12-month program. And the reality is NetJets couldn't wait any longer and they needed to upgrade some of those aircraft, which is specific to that type of antenna, and they chose to go on those airframes at this point in time with our competition.
However, NetJets also, my belief, are some of the best negotiators I've ever come across, and they're amazing. They have an amazing procurement team. So we'll see how that goes. I think they've always been a mixed fleet operator when it comes to connectivity, because they really do a good job of leveraging their purchasing power. So this wasn't a big shock from my perspective. The other thing is just if you focus on the upside with NetJets, we also do cockpit communications. So we do the Datalink VHF, which is a really important part of our business.
So like safety services through that. We don't have that with NetJets today. That's with another competitor. The GEO business, we don't have with NetJets today. So none of that is impacting how people view us, but that just gives you a good broader perspective that NetJets has somebody else look after their GEO business. They've got 2 LEO providers and somebody else looks after the cockpit. So from my perspective, I think there's a lot of potential upside with our fleet strategy is, can we convince NetJets that we have good enough services in some other areas.
They've also been a great Air to Ground customer for us for a long time. So does that mean in our numbers, we've been very conservative. We've removed those out of our model. But those pieces of equipment haven't been removed off the fleet. So is that a thing that from a redundancy perspective, is that important to NetJet. So it's those things that we're still working through with the client. And then pivoting back to VistaJet. If you look at VistaJet, that's a huge win for us. They've just put a potential $5 billion order in with Bombardier.
They've announced they're rolling this out across a large proportion of their fleet. They've been a very good customer as those NetJets, by the way. But they're really a proponent to our strategy, and they're really vocal about why they went with us and why they didn't go with our competition. The other thing with the competition, we actually beat them out of that bid. They had 2 choices. It's all the competitor, and they chose us for a number of reasons. So -- and then if you look at Luxaviation, who we've announced multiple hundreds of aircraft. Avcon Jet over 100 aircraft. If you actually look at our fleet strategy, we still believe we've got over 1,000 aircraft with fleet customers that are with us today.
Wheels up are rolling out our services and actually did an announcement that it's quite revolutionary the Internet on board, and they're actually going to speed up their rollout. Again, no impact on our stock with this, which is kind of frustrating from one and Zach's point of view, but we kind of try not to look at the stock and just focus on running the company at this point. But I think we really -- we're in that kind of prove it out piece, like Zach said, our numbers at this point, we've got so many moving pieces, but we feel very good about our technology road map that if we execute we can transform these customers into new services. And at the same time, we have a very fierce competitor, but we're winning business against the competitor. So I think that's a really important point to make. But we're still focused on these fleet operators. And I think we're clearly getting votes of confidence from significant players in the market.
Got it. That makes sense.
The only other point I would add is I think it might have been lost to is when we started reporting the LEO units online, Galileo, a large portion of those for NetJets or NetJets, and they're in Europe. So I think that's also the thing -- the announcement people assumed that it's the halo effect, right? Like if they're not happy, then who else is not going to be happy, but they are a large customer and they are rolling it out and it's a piece of the business that you saw at your end.
We're going to end up having hundreds of aircraft on with NetJets. I mean there are still a major significant customer from our point of view, very supportive. And we feel good with the rollout to Zach point. They're still going as planned with NetJets.
Great. No, that's great, and that's encouraging. I want to come back to the military government opportunity set because that seems super exciting. When I think about the TAM, you got manned aircraft, drones. I think we got a report over the weekend, U.S. one-way drones in Iran were linked with satellite-based connectivity.
So drones, EV tool sort of a nascent business, but potentially promising. So just talk to us about how you frame the opportunity set for MilGov.
Yes. I think, again, we're a business in many parts of the -- where we're -- because we've been around for over 20-plus years, like Zach said, that business, we are currently pivoting it away from some narrowband services with sat phones, which has significant business around and really focusing on aviation broadband. So if we look at our aviation broadband for our government business, it grew 38% last year. And we said that on the call last week. That's a significant growth trajectory. And our international market was -- I can't remember the percentage, it was...
Like almost double that. It was a small book of business, right? So.
90% -- 90-plus percent the international business. Sorry, that number just went out in my head, but very, very significant growth. So if you look at that, focus that on aviation. The LEO product is really interesting for them because Eutelsat OneWeb doesn't have as bigger name as the competition, but it is a European network.
So we're seeing a lot of interest from NATO. Our HDX product that we talked about before is very small can get into UAV. The other thing is the cost of installation, because we really do know aviation very well. We brought the cost of install down, so it makes it more cost effective, because everybody thinks just when you're dealing with a government customer, they just have an open checkbook that is not the case.
So we've really brought the cost of ownership down. And we think that's a really interesting space for us. And also, we have within the Satcom Direct acquisition, a global footprint, and we've been selling to heads of state government for a while. So we have really good key relationships. And a lot of them will not buy from our competition just purely out of a sovereign-based communications need, security needs. And we've built up this underlying architecture in our business as well on the ground that serves NATO, U.S. DoD and other countries really, really well.
So we're really super excited about it. I think, obviously, going to the other point, eVTOL, we're talking to eVTOL players. That model is still not proven out yet. Let's see when these guys start flying. I think there's a lot of airspace challenges, but I'm sure somebody is going to get there 100%. I think from our perspective, short term, the next two to three years, the government UAV business and government opportunity with the underserved airframes.
If you look at U.S. government had a 25 by 25, so 25 meg on 25% of his Air Force aircraft and it failed that. And a lot of these guys are nowhere near, it's a very underpenetrated market. So I think the underpenetrated market, just the DoD. NATO is even worse because they haven't been funding as much as the -- I mean, nobody funds as much as the DoD anyway. So if you just look at a C-130, there's over 1,000 of them operational in the world today, it's quite clear that 25% of them do not have broadband connectivity. If you just outside of the UAV, so we just focus on that. We have a C-130 certified product on GEO, and we can also get LEO into that kind of mix as well. And we can really pivot those opportunities over to Gogo. We think that's pretty exciting.
I think two other points that are really critical that we've harped on a lot, but two phrases. One is called vendor lock, the other one is called pace planning. So pace planning refers to the military's view that on all these missions, you need to have -- it's an acronym, primary alternative contingency and emergency. So backup after backup after backup. And I think that's what's critical, because we are one of the only people that can do that, whether it's GEO, LEO, ATG, we can provide the pace planning. And that's also what we've tried to kind of push into the business aviation market is making sure you always have backup and connectivity.
And then the vendor lock is kind of another critical concept because they have gotten stuck with vendors before where they can get gouged, right? They put all these antennas on, then they have no agnostic or flexible capabilities. And that's one thing that we've really tried to push is, again, we're the vendor, we're the face. We're the storefront, so to speak, but we will use all these other guys in the background to get you the best deal.
And I think -- and it's -- like you said, it's tough because there was no Milgov business or Gogo before, but -- and it operates very differently, but we're still incredibly bullish. It just these cycles take a long time. And I think like you saw, our Q4 numbers were up pretty substantially in the MilGov business. And I know folks were trying to -- when is that going to hit, when is it going to hit, and we're starting to see traction.
We've got under a minute here, but I want to stick with you actually. just to close. We talked a little about the moving pieces in 2026. You've talked in the past about the balance sheet, potentially trying to refi or lower the cost of debt. Talk to us about what we should expect in '26, if anything?
Yes. So we've been actively talking to our bankers and the Board pretty regularly about this for the last probably six months. And from my perspective, the single biggest best use of -- for capital allocation is deleveraging. And we're exploring different ways we've already been analyzing whether it's a regular debt buyback or a Dutch auction.
But it's kind of been the views of the Board and a lot of our banking partners that, look, we do need to do that. We do have to address the balance sheet. But it kind of maybe we should wait and see how much traction we get in the first quarter or two kind of help with the debt pricing. But I think we've said it over and over, we have more cash than we need, but making sure we deploy it at the right time and making sure we give what we need because the debt does mature in April of 2028.
So it's just being thoughtful about deleveraging versus also making sure we get the maturity extension of we need and all that. So that's my biggest focus this year is kind of pushing that forward.
Good. Okay. We're out of time. Thank you, both. Great
Appreciate it.
Great. Thank you.
Gogo Inc. — Q4 2025 Earnings Call
1. Management Discussion
Good day, and thank you for standing by. Welcome to Gogo's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your speaker today, Will Davis, Head of Investor Relations. Please go ahead.
Thank you, and good morning, everyone. Welcome to Gogo's Fourth Quarter 2025 Earnings Conference Call. Joining me today to discuss our results are Chris Moore, CEO; and Zach Cotner, CFO. I would like to remind you that during the course of this call, we may make forward-looking statements regarding future events and the future performance of the company. We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements on this call. Those risk factors are described in our earnings release filed this morning and in a more fully detailed note under Risk Factors filed in our annual report on 10-K and 10-Q and other documents that we have filed with the SEC.
In addition, please note that the date of this conference call is February 27th, 2026. Any forward-looking statements that we make today are based on assumptions as of this date, and we undertake no obligation to update these statements as a result of more information or future events.
During this call, we'll present both GAAP and non-GAAP financial measures. We've included a reconciliation and explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures in our fourth quarter earnings release.
Our call is being webcast and available at ir.gogoair.com. The earnings release is also available on the website. After management comments, we'll host a Q&A session with the financial community only. It is now my great pleasure to turn the call over to Chris.
Thank you, Will, and good morning. I'm pleased with our product and synergy execution in 2025 as we transform Gogo from a U.S.-focused entity into a global multi-orbit in-flight connectivity provider in the fast-growing and dynamic business and military government aviation markets.
Consistent with prior earnings calls, I will focus on the continued demonstratable progress made across our compelling new product portfolio. These include Gogo 5G and Gogo Galileo with 2 models, HDX and FDX, all of which are providing game-changing increases in capacity, functionality, speed and consistency.
I will also highlight our long-term growth prospects from our military and government customer base, which will further improve our revenue mix and diversification. As we look forward this year, we expect the combined Galileo and 5G shipments to exceed 1,000 units. We expect that the activation of those aircraft will create a high-margin reoccurring service revenue stream that sets the stage for free cash flow growth and long-term strategic value.
Let's review the strong demand trends within the underpenetrated global business jet market. Industry sources indicate global business jet flights are 30% higher than pre-COVID levels, with aggregate growth from key global fractional operators even stronger at around 40%. Leading global business jet OEMs highlight strong book-to-bill ratios and backlogs necessary to support continued delivery growth.
The 854 new private jets delivering in 2025 marked the highest output since the industry delivered 874 units back in 2009. These factors, along with the relatively low broadband penetration of the 41,000 global business aircraft market create a backdrop for attractive long-term growth. Let's review our outlook for Gogo Galileo, our global LEO-based service with 2 offerings, starting with HGX, which was purpose-built to fit on all 41,000 global business aircraft.
It is ideal for the 12,000 midsized and smaller aircraft outside North America without broadband and the 11,000 midsized and smaller aircraft in North America that fly outside CONUS or want faster speed than 5G air to ground. By contrast, FBX is geared specifically for 10,000 large global business aircraft.
Galileo operates on the Eutelsat OneWeb satellite network, and we are pleased to see the continued measures by Eutelsat to strengthen its balance sheet and access the capital needed to support its recent order for 440 new LEO satellites, ensuring full operational continuity for its constellation into late 2030s.
Given that HDX has a total addressable market over 4x that of FDX shipments and installations of HDX will naturally be much higher than FDX. The product has also been designed to fit many mid- to large cabin aircraft tails, which expands the opportunity from standard LEO fusel large mountings. The average monthly service revenue and profit for FDX will typically be higher than HDX.
Our Galileo pipeline consists of over 1,000 aircraft with the current weighted sales pipeline of more than 400 aircraft. We believe this aligns with our projections for growth in 2026 as we expand opportunities and close new business.
We continue to see a favorable pipeline mix with a 60-40 split between U.S. and global markets. This mix is critical for our success as we upgrade loyal customers in the U.S. market and expand to unserved markets with high-speed connectivity in the international markets for business and military and government customers.
As a reminder, inclusive of all aircraft equipped with Gogo broadband connectivity, 35% to 40% are large jets, 30% are medium, 25% are light and less than 5% on turboprops. Now turning to STCs. STCs are a critical part to building our global LEO business, and we continue to make solid progress. Gogo has completed 35 HDX and FDX STCs in the U.S., Europe, Brazil and Canada with a total addressable market of 4,000-plus aircraft covering 34 aircraft models.
We continue to expect 20 more STCs to be completed in the first half of 2026. While the total number of STCs is important, not all STCs are created equal. For example, in recent weeks, we achieved FAA validation for the Bombardier Challenger models 300, 350 and 3500 and for all global models, except the 7500 and the 8000 and IATA validation for the Dassault Falcon 2000.
Given the installed base and growth potential, a Challenger STC is worth substantially more to us than a Learjet STC due to the operator's budget and airframe value. However, with the versatility of our product portfolio, the Learjet has access to our 5G air-to-ground product, which is a better solution for both the aircraft mission and budget, all without compromising the need for high-speed connectivity.
In 2025, Gogo shipped over 300 HDX and FDX antennas with 84% for named customers. By the end of 2026, we expect to have shipped nearly 900 Galileo antennas and with an expected ship-to-install time of about 3 to 6 months, we see a potential path to 700 Galileo aircraft installed by the end of this year.
If we assume a 4,000 average monthly service profit per Galileo aircraft, implying $480,000 in service profit over 10 years, if 1,000 Galileo aircraft are activated and paying, we will demonstrate the long-term growth opportunity with our LEO product portfolio and overall market position in aviation.
Let's shift to our global fleet business, which we continue to expect to be a key growth driver. As highlighted on our Q3 call, we have clear opportunity to provide Galileo service to 1,000 aircraft amongst our fleet customers, which include all major global and domestic U.S. entities.
I am now even more confident about that outcome. In 2026, we estimate that 1/3 of our Galileo shipments and AOL will be tied to our global fleet accounts. HDX installations by VistaJet began in November and will continue to ramp through 2026. We were pleased that VistaJet recently announced a major Bombardier order for 40 Challenger 3500 business jets with options for an additional 120 more.
If fully exercised, the total contract value would approach $5 billion, expanding VistaJet's fleet to around 400. VistaJet announced that Gogo Galileo was a cornerstone of its digital and in-flight innovation pillar as part of the Vista 2030 growth strategy.
Our largest fleet customers in terms of activated aircraft remains NetJets, and we expect that to remain the case for some time. NetJets is the world's largest fleet operator with over 1,000 aircraft, including EJM and existing orders are expected to expand this fleet by several hundreds over the next few years.
As a reminder, the NetJets contract renewal that Gogo announced in February of 2024 is still active. Gogo has installed HDX on dozens of aircraft in the NetJets European fleet, including Challenger 350s and Phenom 300 Latitude, and we continue to expand installations. Within the NetJets North American fleet, we currently expect to install HDX on the Phenom 300 and the Ascend platforms.
Historically, NetJets has utilized multiple connectivity sources globally, and they have confirmed that Gogo will remain a key partner to help facilitate connectivity upgrades for their global fleet in the coming years.
In addition to fleet, we expect the Galileo line-fit option wins will be another critical source of long-term growth. We are a line-fit option with HDX at Textron for the Ascend, Latitude and Longitude models and will benefit once our options are available later in the year.
Additionally, as announced last quarter, FDX will be a LEO line-fit option for all new Bombardier Challenger and global business aircraft types. We expect revenue generation from this important win in early 2027.
Further, I am pleased to say that we have secured another line-fit option win with a major global OEM for both HDX and FDX that will highlight the growing momentum for Galileo in the market. We would expect an official announcement before the end of 2026.
In our view, these wins validate Gogo Galileo technology and demonstrate the valuable long-term relationship we have with our global business aircraft OEM partners, along with the desire to have competition in the LEO marketplace.
Let's continue with Gogo 5G, which substantially increases the speed, performance and capacity of our air-to-ground network. We completed the activation of our first 5G aircraft in December and [ true ] network availability started last month.
Our current focus remains shipping boxes to pre-provision 5G customers that already have the 5G antennas and wiring installed. We are happy to report that 5G service commenced in Q1, and we expect 5G activations to significantly ramp up through 2026. Gogo has 5G licit deals with 5 OEMs, 2 of which are already installing the AVANCE L5 box on the production line today. These boxes will get swapped with the LX5 5G box upon 5G service activation. We continue to believe that 5G will fill a large void in the market for customers who only fly domestically in the U.S., particularly those with light and medium-sized aircraft.
Further, we suspect 5G will serve as an active valuable backup service on certain aircraft seeking redundancy and enhanced capacity. We recently unveiled updating 5G pricing, highlighting its positioning as a cost-effective way to increase speeds tenfold versus our current L5 solution.
Monthly service pricing for unlimited data is now $5,500 and 5G equipment MSRP is now USD 100,000, allowing for a full installation below $150,000 and making the connectivity market competitive. To that end, we expect to ship over 500 5G boxes in 2026 and expect to reach nearly 400 5G aircraft online by the end of this year. Let's shift to the LTE upgrade of our ATG network, which will be largely subsidized with FCC funding.
The LTE upgrade provides multiple benefits. One, it accelerates classic upgrades to AVANCE. It increases network capacity and fast speed, and it accelerates our U.S. government business on the air-to-ground network given enhanced network security.
We shipped a record 472 air-to-ground equipment units in Q4, up 8% from 437 in Q3, split between 175 AVANCE units and 297 C1 units. We believe that our C1 strategy is working. C1 AOL increased from 101 in Q3 to 330 in Q4, and we expect to end 2026 at around 800.
The C1 box swap takes only a few hours and benefits from FCC subsidies, allowing the system to activate once the LTE network is turned on. We completed 95 classic to AVANCE upgrades in Q4 as AVANCE AOL grew 8% year-over-year to 4,956.
AVANCE now represents 77% of our air-to-ground fleet and continues to grow each quarter. The combination of C1 installs and the AVANCE upgrades drove our classic AOL at year-end to around 1,100 or only 17% of our air-to-ground fleet. We expect our classic AOL to reach 0 sometime in Q4 2026.
As of Q4, about 300 classic AOL are part of fractional or managed accounts, AKA fleets with a defined upgrade path, leaving only 800 classic aircraft not associated with a fleet account. All in, our Q4 air-to-ground AOL trends were the best of any quarter in 2025.
The continued upgrade of our classic fleet to both C1s and AVANCE combined with our LTE rollout and the expected ramp of 5G in 2026 is expected to ultimately moderate the downward pressure on our ATG AOL. Sustained service revenue growth continues to depend on our new product ramp, including Galileo and 5G.
Let's now turn our attention to our GEO business. We ended 2025 with 1,321 GEO AOL, up 6% versus the prior year, driven by line-fit positioning. We attribute slower GEO AOL growth to deactivations from an increase in aircraft for sale triggered by the timing of aircraft bonus depreciation. We expect our GEO investments to continue to improve speed and performance, which we will also leverage with our military and government customers.
Our recent upgrades to the Plain Simple Ka products have already shown results of higher download and upload speeds. We continue to expect large business jets with long global missions to migrate over time to multi-orbit LEO and GEO solutions for increased capacity, consistency and redundancy.
Our SDR router is now on 2,500 GEO aircraft and is synchronized with AVANCE routers on another 5,000 totaling 7,500 systems available for new product upgrades without box swaps or expensive interior rewiring. Lastly, I will address our military and government growth opportunities over the next several years.
Global defense spending is rising and the broadband penetration of the military and government aircraft is even lower than the business jet market. Our expanded military and government sales force is in active discussions with government agencies across the globe, including the U.S. Department of Defense, NATO, Brazil, the Middle East and Southeast Asia.
A recent industry report highlights a market size of 6,200 combined transport and special mission military aircraft, globally of which 1,600 are in the U.S. We believe these represent excellent opportunities for our military and government broadband solutions as this is a very underserved market, primarily with narrowband service.
Global governments require diversity among their aero bandwidth suppliers and will place a premium on multi-orbit multi-band service for redundancy and performance. We believe that Gogo is the only player who can fulfill this requirement.
The reality is we are already seeing a significant transformation in our business. Our military and government aviation revenue grew 34% year-over-year, and our international growth was an impressive 94%.
The net effect of this growth remains muted by the winding down of legacy land mobile narrowband service. A process that is expected to largely complete in 2026. The key point is that our revenue mix quality within military and government will improve substantially over time.
In addition to the traditional military and government market, we are increasingly optimistic about the market potential within the UAV and ISR markets. The U.S. Department of Defense expects to order over 1,000 Class II and Class III drones in the next 2 to 3 years.
While not all details of our success can be publicized due to their confidential nature, we are excited to begin delivering on our recent contracts, including receipt of U.S. Air Force Mobility approval to sell Plane Simple Ka-band hatch mounts to C-130 aircraft with a TAM of over 1,000 airframes.
A multi-orbit [ win ] to provide LEO, GEO and 5G connectivity to a division of the U.S. government and a 5-year contract with SES Space & Defense for a blanket purchase agreement for U.S. Space Force Space Systems Command with a $33 million contract ceiling value. Thank you for the continued support, and I trust that you will all see our outstanding progress transforming Gogo into a global multi-orbit player with robust broadband growth opportunities in both the business jet and military and government markets.
I will now turn the call over to Zach for the numbers.
Thanks, Chris, and good morning, everyone. Fourth quarter results were largely in line with expectations, highlighted by strong equipment shipments and an increase in inventory spend in advance of our Galileo ramp this year. Additionally, our key 2025 financial results for revenue, adjusted EBITDA and free cash flow were all at the high end of our guided ranges as aggressive cost controls and synergies balanced out our product investments. As Chris discussed, we believe the ultimate activations of our Galileo and 5G equipment shipments will help drive service revenue growth longer term.
On our Q3 call, I flagged the potential need for incremental working capital in 2026 to support new product shipments and our anticipation of continued ATG AOL volatility, tempered with further optimization of OpEx and CapEx.
My discussion of our 2026 financial guidance later in the call will incorporate these elements. I'll now provide an overview of our fourth quarter and 2025 results, then I will review the outlook to streamline our balance sheet. And lastly, I will discuss our 2026 financial guidance.
Gogo's total revenue in the fourth quarter was $231 million, up 3% year-over-year on a combined pro forma basis as well as sequentially.
Total service revenue of $192 million increased 61% versus the prior year and increased 1% sequentially. Total ATG aircraft online at the end of Q4 was 6,402, a decline of 9% versus the prior year period and down 2% sequentially.
Total advanced AOL increased 8% from the prior year period and now comprises 77% of the total ATG fleet, up from 65% a year ago. Since the end of 2022, our total advanced AOL has grown by nearly 1,700 aircraft. Given the sequential increase in C1 AOL from 101 to 330, our classic AOL is now approximately 1,100 and our 2026 guidance assumes 0 Classic AOL by year-end.
Total ATG ARPU of $3,378 declined 3% year-over-year and 1% sequentially, largely due to the pricing reduction on several of our unlimited plans in advance of our new 5G pricing of $5,500 a month for our unlimited data plans. Total broadband GEO AOL, excluding end-of-life networks, totaled 1,321, up 6% from the prior year and down 2% sequentially.
As Chris noted, many of the GEO deactivations in Q4 were triggered by an increase in aircraft sales, which is common at year-end for tax purposes. Most GEO broadband aircraft are under fixed-term contracts, which helps support revenue predictability. However, our revised GEO outlook reduced the present value of our earn-out liability by $7 million.
Now turning to equipment revenue. Total equipment revenue in Q4 was $39 million, up 104% year-over-year and 15% sequentially. Total ATG equipment shipments of 472 were an all-time high and up 8% sequentially from the prior record of 437 in Q3.
In 2025, ATG equipment shipments totaled 1,631, nearly matching the combined shipments from the prior 2 years. As expected, advanced shipments of 175 declined sequentially as market demand shifted to C1, which increased 30% sequentially to 297 to support the classic conversions.
Now moving to our margins. Gogo delivered combined service margins of 50%, which was in line with our expectations. I will provide further service margin context in the 2026 guidance discussion later in the call. The write-off of legacy equipment drove equipment margins negative in Q4 and was expected as normal business course. In addition, HDX equipment pricing remains close to cost.
Now turning to operating expenses. Total Q4 operating expenses, excluding depreciation and amortization, were $58.2 million, up slightly sequentially due to the ongoing litigation expense, which was $8.4 million during the quarter. Let's now turn to our major strategic initiatives, 5G, Galileo and LTE network upgrade and the FCC reimbursement program.
Total 5G spend in Q4 was $1.7 million, almost all tied to CapEx. Total 5G spend in 2025 was $12.6 million, which we expect to decline by about 50% in 2026. Q4 Galileo spend was $2.6 million with 70% tied to CapEx. Galileo spending of $10 million in 2025 is expected to decline considerably in 2026 to $1.5 million as we exit the investment phase and embark on product shipments and service activations.
We expect total development costs for both HDX and FDX will reach about $40 million, well below our original plan of $50 million. Given our expectation for strong long-term Galileo success, we believe that our ROI on the Galileo investment will be very attractive. And finally, our LTE network upgrade and FCC reimbursement program.
In Q4, we received $34 million in FCC grant funding, bringing our program to date total to $93.9 million. As of year-end 2025, we reported a $27.8 million receivable from the FCC and incurred $35.7 million in reimbursable spend in Q4.
The receivable is included in prepaid expenses and other current assets on our balance sheet with corresponding reductions to property and equipment, inventory and contract assets with a pickup in the income statement.
Moving to our bottom line. Gogo's adjusted EBITDA in Q4 was $37.8 million, in line with our implied 2025 guidance. Net income for the quarter was negative $10 million, but was affected by a $10 million litigation settlement accrual, a $4 million charge related to the valuation adjustment on a prior investment in a supplier and a write-down of legacy equipment that I previously mentioned. While we have removed a significant amount of costs from the combined company, particularly in headcount, we continue to identify new sources of cost reductions in various areas, including real estate, back office software solutions and CapEx rationalization.
Moving to free cash flow. In 2025, we generated $89.2 million in free cash flow, which was at the high end of our guidance range of $60 million to $90 million. Free cash flow was slightly negative in Q4 due to previously flagged factors, including a $17 million increase in inventory tied to our new products as well as lower EBITDA.
Let's now turn to our balance sheet. Gogo ended the fourth quarter with $125.2 million in cash and short-term investments and $848 million in outstanding principal on our 2 term loans with our $122 million revolver remaining undrawn.
Our Q4 net leverage ratio was 3.3x and within our target leverage ratio of 2.5 to 3.5x.
Our Q4 cash interest paid net of hedge cash flow was $17 million. Our hedge agreement remained at $250 million with a strike price of 225 bps, resulting in approximately 30% of the loans being hedged. As a reminder, the hedge amount will decrease to $200 million on July 31st, 2026, and expires on July 30th, 2027.
In 2025, cash interest paid net of hedge cash flow was approximately $67 million. Our immediate focus remains exploring ways to optimize and delever our balance sheet while reducing interest expense. Between cash on hand and our revolver, we have approximately $250 million in liquidity, which we believe is significantly higher than our requirements to operate the business.
We continue to believe our expected free cash flow over the next few years will provide excess cash to refinance the debt and ultimately return capital to shareholders. In our earnings release this morning, we provided the following 2026 financial guidance.
Total revenue in the range of $905 million to $945 million, with 80% tied to service revenue and 20% to equipment revenue. This implies overall growth of about 2% at the midpoint. Adjusted EBITDA in the range of $198 million to $218 million and free cash flow in the range of $90 million to $110 million, implying 12% year-over-year growth at the midpoint.
We expect approximately $30 million for strategic investments in 2026, net of any FCC reimbursement, down about 45% from our strategic spend of $56 million in 2025. The majority of our strategic investments this year are tied to fleet promotions and STCs and will flow through operating assets.
Net CapEx of $20 million after $45 million in CapEx reimbursement from the FCC reimbursement program as we complete the LTE the ground network build. In addition, here are some incremental points that could aid in your modeling and provide context on how we look at the business.
One, we believe that MilGov revenue in 2026 will grow faster than overall Gogo revenue. On a sequential basis, Q4 MilGov service revenue grew an impressive 14%.
Two, AO mix heavily influences our overall service profit. ATG service margins are about 75% and blended GEO margins are in the high 30s with Galileo margins at scale in the middle of those. Three, equipment margins are expected to be in the mid-single digits and service profit is anticipated to account for over 95% of total gross profit.
And four, our 2026 free cash flow estimate excludes an estimated $40 million earn-out payment in April, which we expect to pay from cash on. In conclusion, we have made significant progress in the past 15 months since the closing of the Satcom deal.
Our 3-year product investment cycle is nearing completion, and we expect to see strong benefits from the rollout of 5G, HDX, FDX and our LTE network. I want to express my gratitude to the Gogo team for their hard work in driving our transformation and their commitment to outstanding customer service.
Operator, this concludes our prepared remarks. Please open the queue for questions.
[Operator Instructions] Our first question comes from Scott Searle with ROTH Capital Partners.
2. Question Answer
Thank you for the detailed outlook. Very helpful in terms of going through the numbers and the analysis. Maybe to start just real quickly, Chris, in terms of NetJets, this has been, I guess, a lightning rod for the company in the last several months.
What is your expectation in terms of your growth with NetJets? Will you ultimately be adding to the absolute number of NetJet AOL that you have online across the different types of aircraft across the different geographies? And then I had a follow-up.
Yes. I think the big thing is that NetJet remain a customer, and we're expanding the customer base with them, especially with the European fleet. We're in a technical transformation with the services that we provide them. So if you look at most of the opportunity that we have is on our Galileo service, and we're continuing to roll that out, and they still remain a very important part of our future in business and a customer of ours.
Got you. And then as it relates to the classic transformation, we're down to about 1,000 aircraft right now. I know there's a cutover point in the middle of this year. A couple of things. It sounds like by the end of this year, that's going to be resolved at one point or another.
You expect to have 0 Classics online. I'm wondering how you're seeing the conversion rate in terms of going to C1 and upgrade to AVANCE. So in other words, how many -- what's the attrition number going to look like within that base as we get to the end of this year?
And last one, if I could throw in as well. Satcom growth within the MilGov space has been very, very good. It sounds like you're going to be growing this year, going to be growing that faster than the rest of the business. But I'm wondering if you could give us a framework of what that could look like by in terms of percentage of mix by the end of '26 and maybe end of '27.
Yes. I mean the -- I'll start with the MilGov piece. The MilGov is expanding. We're seeing a lot of opportunity in Europe. Still as I mentioned in the call, we're also transforming that business and removing the narrowband exposure in that business to broadband. I think the exciting thing really on the product portfolio is we're positioned now in -- with 5G, Galileo and our GEO broadband offerings that we have broadband offerings for all of our customers no matter wherever they're in business aviation or government, and they have a true broadband offering or multiple broadband offerings, which is pretty exciting because then all of a sudden, you've got multiple revenue streams coming from an airframe instead of a single as well.
The government part of the business, we're already seeing a lot of opportunity with UAVs. Europe is obviously doing a lot more focus on expenditure on military spending. I think we're reaping the rewards of that as well. The DoD is a very underpenetrated market, as I mentioned on the call. If you look at that, they had the 25x25 campaign a few years ago. They still haven't reached that.
Our technology is a lot more deployable, cost-effective, aviation bill, aviation grade and they also don't want interdependencies on a single supplier. So I think as we see that mix, it will take a long time for that to be the same levels as business aviation, but we just see that as continuing to grow between '26, '27 and beyond.
Yes. And I think from a mix standpoint, we -- like we said, we do anticipate it's going to grow faster this year than last year. And a big driver of that is obviously equipment, but we also won a pretty sizable contract kind of late Q3. That's why you saw the nice Q4 pop in the MilGov numbers, which should continue for most of the year.
And the equipment side, you're going to see a lot more growth on that largely because if you think of the aircraft, those go on, those are obviously quite a bit different than business aviation. So it just takes a little bit longer to get those put on the aircraft, and the guys are keenly focused on it.
Yes. And the mix of Classic or what you expect to be the outcome of those remaining 1,000 Classics in terms of conversion to C1 versus upgrades to AVANCE and kind of what you've got factored into the current 2026 guidance?
Yes. So when we look at the Advanced Classic mix, the guidance does assume that there's an extension granted and so it doesn't go dark in Q2, but it's still going to decline, right? And there will be some advanced declines. There will be some C1 decline Classic, right?
So long story short, our view is between Classic Advance, but then also with the addition of 5G, the total ATG portfolio will be down about 1,000 units by year-end. And then 100 or so Classics basically are assumed to not convert at year-end.
Our next question comes from Sebastiano Petti with JPMorgan.
I guess, Chris, just following up, I think you talked about specifically the NetJets expanding their fleet there in Europe. Overall, can you maybe give us a little bit of color on what you're seeing from an international perspective across the portfolio between the backlog on Galileo.
You touched on some of the MilGov interest for DoD, but also maybe internationally. Maybe kind of start there, and then I'll have a follow-up.
Yes. I think the big opportunity that we announced back on the Q3 call was the fact that we won VistaJet, and I talked about that today as well. That's a significant win. But also if you look at Luxaviation, Avcon Jet, that back order on those large fleet operators outside of NetJet, specifically within Europe as well is significant and 1,000-plus aircraft, we know that we're still holding true to that number regardless of NetJet.
We're still excited about the NetJets rollout in Europe as well and the feedback we've had on the product have been extremely ecstatic. If you look at our pipeline, it's around still maintains a 60-40 split with international.
I think the sentiment is definitely from our international customers. I think the fact that Eutelsat OneWeb is also a European operator. I think that has some cloud to it. But more importantly, these guys have not had a broadband solution on a number of these aircraft, especially those that can't support the rather expensive installation costs of going into the tail or the size of that. So we expect that to expand. And we're seeing market very interesting markets pop up in Southeast Asia and other markets where popular airframes like the [indiscernible] are there, but we have 0 connectivity.
And we're really the only solution that can get down to that size of airframe with a true aviation install. The MilGov market there as well a lot of that expansion in the MilGov market that we've talked about specifically mostly at this point is coming out of NATO.
We can't talk about specific projects, but we're winning projects against our competitor, which is great. I think that's a really important point to make as well. So we are not the only bid when we are winning these.
And I think that pivot towards our technology just shows its versatility from going into anything from a UAV to something that's a small platform aircraft. I think that is also giving us good dividends as well. So we expect that to grow. We've expanded the international team for the business as well. And yes, we're very hopeful and enthusiastic about where that's going.
Yes. And I would just make one other point to reiterate Chris' comments. If you look at some of our metrics we reported, you'll see we've started adding the LEO units online and more than half of those are in Europe. So I think that's really proving the point that Chris has articulated that that's a very strong market for us.
Our next question comes from Justin Lang with Morgan Stanley.
Chris, I appreciate the comments around Galileo and 5G aircraft online expectations this year. But curious if you could provide a little more color on what level of service revenues from the new products are factored into the guide currently? And just on the top line range, what factors might push you to the high end versus the low end this year? And what should we be watching for?
Yes. So I think from a -- there's obviously a lot of ins and outs to this because the ATG revenue on the existing book is going down significantly, right? That's about $40 million. And then the remainder of kind of the decline in service is from the GEO business. But we do expect a nice little uptick on the LEO, right? I'd say the LEO service revenue is offsetting not quite half, but almost half of the decline in the legacy products. And then obviously, the equipment mix, that's a big piece of the revenue bridge from last year.
Got it. That's helpful. And then just on a sort of cadence basis, should we expect a much stronger second half here as some of these new products dial in? Or is that a stretch? And then maybe Zach just on free cash flow cadence because I think you've suggested some unique working capital demands this year. If we could hit on that, that would be great.
Yes. So I think a couple of points. One, it does take 3 to 6 months about on the HTXs to get installed. So you're right, it is going to take a little bit of time to see the service revenue. From a free cash flow perspective, like we said in Q4, you saw kind of an inventory build. You'll see -- you'll probably see that in Q1 as well. But then -- and that's really for the -- all the shipments, right? So we had to make sure we can deliver these orders as requested.
So we're ramping up. I think the ramp should -- it will be done this quarter, and then you'll see more and more flows out in Q2 and Q3. So I think from a cash flow perspective, you will see better cash flow in the other 3 quarters. And then was there another one? Did I get all of them?
That's helpful. If I could sneak one more in just on the MilGov topic and specifically around the C-130 opportunity you're talking about, Chris. And I think there's a mention of over 100 aircraft in the TAM.
So how big of a discrete revenue opportunity is this for you? And sort of separately, I think we saw you won a seat on the MDA SHIELD IDIQ a little while ago. So how should we think about potential Gogo contribution to Golden Dome?
Yes. I think if you look at the TAM for the C-130, it's 1,000. So that's pretty significant and getting that hatch mount, which is a really important product for those guys because it's a very low-cost installation again. I think that has been one of the prohibiting points for the military is actually fitting communications onto the aircraft.
I think the wins that we're having with the DoD around things like Golden Dome, we'll see how that pans out over time. But I think our approach is really kind of pushing in the adaptable really easy, low-cost install. We're moving away from the 1,000 [ on a hammer ] or them having to fund our business by hundreds of millions of dollars. We don't need that. We're really very specifically focused towards our military customers to get them quick expandable technology that can be upgradable very easily in the future as technology changes.
I think that's really resonating with the military. And then if you look at the overseas military outside of the DoD, which is a huge opportunity, obviously, the DoD does the largest spend globally on military spending. Aviation is becoming so much more important, border patrol and also head of state.
And we've had wins in the last 12 months around anything from surveillance aircraft right through to significant heads of state wins. And so it's a really versatile portfolio. We believe it's a really underserved market, very much like the business aviation market with broadband connectivity.
So we just see that being a very positive outcome for the business. And the nice thing is as well, we really don't have to put a lot of CapEx in adapting the technology either. It's really kind of off-the-shelf commercial aviation technology that we've kind of developed for business -- purpose-built for business aviation, we're actually able to take that and put that into those markets.
And I think the C-130, just kind of that's one platform that's obviously utilized globally, but there's other airframes there like the A400M, which is very popular in Europe. So we're really going after that part. We've really boosted up the sales team. We put that under new leadership, and we're seeing significant kind of uptick from that. So we're really excited about it.
[Operator Instructions] Our next question comes from Alexander Phipps with OHA.
Overall, congrats on the quarter. It seems like it's starting to stabilize a bit. How should we think about, I guess, I understand the concept of people getting a backup with GEO to supplement their LEO. But how should we think about where ARPU should stabilize on the GEO business longer term if someone is just using it as a backup solution?
I think the big thing is if you look at total revenue by the airframe, right? So I think that's going to change over time to where we've had a traditional single kind of source coming from the airframe as a primary communication method, whether it's GEO or air-to-ground within CONUS with the U.S. market.
Now with Galileo and obviously, the demand that we're seeing for LEO, which is brilliant. I think the big thing is for those global operators, having continuity of service globally is so critically important. I think the way we're looking at it is kind of a blended ARPA for those larger aircraft, which is similar to what we probably get from GEO today. And -- but we'll see that more as a blended ARPA from multiple connectivity forms. So that's the way we're kind of looking at it right now.
Got it. And then on line fitting, so it's good to hear that you guys are going to be getting a bunch of new line fits for the HDX. Do you know what percentage of -- I guess, what percentage of planes on the GEO side let's say, that are line-fit with a Satcom Direct solution are also currently line-fit with the Starlink solution?
And I guess, how exactly does that work? Does the customer need to keep the GEO solution in the tail of the plane and then get the Starlink solution installed at an MRO after the fact? Or can they actually opt just to get Starlink and not have the SD solution put in the tail?
I'll answer in a couple of different ways. So at this point in time, I think we have set ourselves up that when you buy an aircraft across any airframe over the next 12 months, we're in a position that ultimately, you'll either choose the competitor or when it comes to LEO. That's a really important point to make.
GEO is still line-fit across those OEMs, which can actually fitted into the tail. And we're seeing the fact that customers do want an alternative if at the moment, they are not installing our solution as the LEO solution, and they are still seeing the need for GEO. And the reason for that is when you look at the larger airframe manufacturers, these aircraft fly 14 hours.
They're flying all around the world. And there are large portions of the LEO network from a regulatory perspective that are still not connecting today. So you really need that assurance of that GEO backup. The other thing which we're also seeing is a lot of our customers like that assurance because we provide a lot of different things that other people don't provide as well, such as cybersecurity, continuity of service and a number of value adds.
And also having that connectivity allows our support, which is global we've got human beings who can answer the phones, but we've also put a lot of technology into our back end so we can filter through where really the issues are with the aircraft and fix issues for customers really before they even know about them or reporting them back to us.
So I think that GEO position as a backup, but also from a continuity of service, providing bandwidth, we're seeing that customers are also still utilizing the service even if they have LEO on board because we're also pushing off a lot of information and synchronizing those with other OEMs such as engine manufacturers, operations, tracking the aircraft. So it's a lot more nuanced than just providing connectivity. So we're seeing that. But I think the really exciting thing just to reiterate is we will be in a position over this year that we are a genuine choice for a customer no matter the size of the airframe, but all of our customers now have a true broadband solution, whether it's kind of 5G as an entry service and then LEO service as like a primary LEO, low latency, high-bandwidth product at an enterprise-level communication method as well. So it's a really exciting time for the company.
Yes. And I would just kind of to dovetail on that. It's -- I think it's a critical point on the line-fit. When you look at the GEO adds we've had this year, those are almost all exclusively line-fit, right? And that was kind of the old Satcom way that we were able to grow that business so well is because like you said, you had to pick a provider, and that's where we'll be at the end of this year and the beginning of next year, whereas this year, it's a lot of aftermarket and you got to slot guys in the maintenance times, and it's a bigger sales lift until you get line to it.
Yes. And I think now, at least, we've also got like both ends of the market. We've got a really strong MRO base. We've got amazing MRO partners, and we've also got amazing OEM partners, and we have a direct sales team who are going out to customers when they're specifying their airframe or they're maintaining their airframe, whether it's in the aftermarket, that can actually walk customers through what connectivity solutions are needed for the size of airframe and the mission that they actually have for that aircraft as well.
So I think we're going to the market in a kind of multipronged way anyway.
Yes, that's super helpful. I guess just 2 quick follow-ups on that. I guess on the point where customers are going to still use -- they'll have the GEO as a -- I guess just to my earlier point, like they have the GEO as a backup, but they're going to be using a LEO high-bandwidth solution, like where should ARPU shake out? Is it half of where it is now for the GEO solution?
Is it like a quarter? Just any comments on that? And then I guess on the line-fit, like just to kind of say it a different way, like I mean if you go on a commercial airplane right now, there's still an ashtray in the bathroom, and that's not because they think someone is going to smoke in it, it's because the door to the bathroom got an STC back in 1960 with an ashtray in it.
Like do you -- do planes have to -- like if they get -- if they have an STC with an SD solution in the tail, will it be rolled out? Like will that plane always be delivered with that in the tail? Or will customers have the option to like just get Starlink and not have that in the tail of the plane?
Well, I think the big point is on communications, it's always choice. So outside of safety services, the OEMs always enable choice on what connectivity solutions that you have, and that's also then dependent on the STC. So you absolutely have choice on not specifying different connectivity.
However, if you're very different to commercial aviation, where kind of utilizing the connectivity service on board is a chargeable event and kind of the attrition for the airlines quite -- it's a really different model for a business jet, it's a necessity and a need. And then also, it really depends on the utilization who's using it.
And therefore, whether it's primary or backup, we've seen that this is not a new thing for us. And if we look at our narrowband service when GX came in as a service, that didn't just go away. I just -- we are still activating narrowband services with OEMs today.
So I get your point on kind of like the analogy with the ashtray. I think this is more kind of really, yes, the FTC has been invested in. It's also very difficult to get things on airplanes to your point. So those things linger around for a while. But we are seeing utilization on the GEO service even if another service is on board as we do with narrowband services that are being utilized with GEO on board as well.
So we've got a lot of experience in this, and that's a bit where we do feel that it will be a multipoint approach with a lot of customers with the larger aircraft. Obviously, on the smaller aircraft, that's a little bit different. We usually see a single source of communications as the primary communication method.
However, the nice thing is with the HDX it can really get down to those smaller airframes, where actually our competition with [indiscernible] is quite large. So I think that's a bit where we feel really quite strong about the different sizes of the market. And then with 5G coming in, as a revolutionary service for these classic customers or people going to C1s, really, this is going to true broadband. So again, we're seeing OEMs investing in 5G for the line as well. But I think the choice for the customer has always been there, and there's nothing new with that. I think that's the biggest takeaway from my perspective.
And then on the number side, really on the ARPA, the ARPA will really settle -- that's a really tough one to navigate at this point because we're still seeing strong ARPUs from GEO because of the necessity of having that backup. But at some point, we truly do believe that it's going to blend together where we really see the true blended rate -- we see that being around what we get from GEO today on the kind of higher end from customers because they're ultimately getting multiple services.
The nice thing with Gogo, we're the only company who provides all of those services, and we can send the customer an integrated bill. So they're not looking at -- it's almost utilizing your mobile phone. You're not looking at how much network utilization you took off AT&T versus Verizon. You'll be looking at this from us as a blended bill from Gogo, very simple, but ultimately knowing you've got the assurance of backup on your data as well. I hope that makes sense.
Yes, that's super helpful. Just I promise one more quick one, and then I'll shut up. The -- if I [gun] to your head just to help conceptualize what the white space looks like because to me, it seems like there's a lot of white space. Like what -- excluding MilGov just is a like what do you think the mix will be 5 years down the line in terms of composition of your fleet -- like North America or, let's say, Americas, EMEA and APAC?
On types of service, I think.
Just like AOL, like I mean, obviously, right now, the AOLs are, like you said, half of the LEO that came online are Europe, if I recall correctly. Like do you think that that's going to be the mix longer term? Do you think it's going to be like 50% of your LEO fleet is non-U.S. and 50% is domestic? Or is that just right now?
I think -- no, I think we're seeing the demand -- we've always been seeing the utilization of business aircraft outside of North America is growing at a rapid rate. So therefore, I think it would be a logical assumption that the splits that we've got at the moment, North America is obviously the biggest market.
We believe we will hold good percentage in that. And I think having that kind of 60-40 split is a good way that we're kind of thinking of it long term as the international market grows, and we'll grow into that. We also have offices all around the world, so we can really kind of support those customers. But also those customers over a period of time, they'll be taking aircraft from the OEM. And the nice thing now is they can actually spec it at the OEM with our services. So I think that will naturally grow as well. But I think that kind of 60-40 split is the kind of way we're thinking about it for the business over kind of the next few years.
That concludes today's question-and-answer session. I'd like to turn the call back to Will Davis for closing remarks.
Thank you, everyone, for your participation in our fourth quarter earnings call. You may disconnect.
This concludes today's conference call. Thank you for participating, and have a great day.
Gogo Inc. — Q3 2025 Earnings Call
1. Management Discussion
Hello, and thank you for standing by. Welcome to Gogo Third Quarter 2025 Earnings Conference Call. [Operator Instructions]
I would now like to hand the conference over to William Davis. You may begin.
Thank you, and good morning, everyone. Welcome to Gogo's Third Quarter 2025 Earnings Conference Call. Joining me today to discuss our results are Chris Moore, CEO; and Zach Cotner, our CFO.
Before we get started, I would like to take this opportunity to remind you that during the course of this call, we may make forward-looking statements regarding future events and the future performance of the company. We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements on this call.
Those risk factors are described in our earnings release filed this morning and in a more fully detailed note under risk factors filed in our annual report on 10-K and 10-Q and other documents that we have filed with the SEC. In addition, please note that the date of this conference call is November 6, 2025. Any forward-looking statements that we make today are based on assumptions as of this date, and we undertake no obligation to update these statements as a result of more information or future events. During this call, we'll present both GAAP and non-GAAP financial measures. We have included a reconciliation and explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures in our third quarter earnings release.
This call is being webcasted and available at ir.gogoair.com. The earnings release is also available on the website. After management comments, we'll host a Q&A session with the financial community only.
It is now my great pleasure to turn the call over to Chris.
Thank you, Will, and good morning. I will let Zach handle the numbers, but I am pleased with our financial discipline, integration and synergy execution and free cash flow generation as we prepare for growth as a result of our new product ramps and global contract wins.
My remarks will focus on the significant progress made across our key new products in the third quarter, including 5G, HDX and FDX, all of which are expected to provide a step function increase in speed, consistency and performance.
I will also discuss our progress in the military/government end market, including several recent contract wins that validate our unique multi-orbit multi-band strategy for this important customer base. We believe Gogo is well positioned to execute on our new product launches, and this bolsters my confidence in achieving long-term sustained revenue and free cash flow growth.
Before we jump into our product rollouts, let's review the positive demand trends within our underpenetrated market. Global business jet flights are about 30% above pre-COVID levels, and at an all-time high. Fractional demand is robust. Overall demand for business jets remains healthy with major OEMs reporting strong backlogs and estimating 2025 final book-to-bill ratios 1x or higher.
Last month, Honeywell estimated business jet deliveries globally of 8,500 over the next 10 years, representing an annual growth rate of approximately 3%. Given that our global addressable market of 41,000 business aircraft is less than 25% penetrated with broadband connectivity, these factors create a robust end market.
In summary, our value creation is to grow our current strong position in the underpenetrated market with long-term high-margin customer relationships by delivering a set of new products and services, which deliver order of magnitude improvements in performance with purpose-built equipment that is easier to install, maintain and upgrade than competitors' products.
Let's start our new product update with Galileo, our global LEO-based service that comes in two flavors: HDX for smaller aircraft and FDX for larger aircraft.
The recent announcement by VistaJet, a leading global business jet operator of its plans to deploy both HDX and FDX across its fleet of 270 aircraft is a powerful endorsement for Galileo. HDX installations begin this month in Europe and start in the U.S. and Asia in January. Vista expects one aircraft upgrade with the Gogo Galileo terminal every nine days, reaching at least 60 aircraft with the Galileo terminal within the first 18 months.
VistaJet was comfortable with both the robust performance of our Galileo service and our commitment to long-term global customer support as well as the ability to manage capacity and route traffic across a global fleet with multiple aircraft types.
The VistaJet contract continues our momentum across multiple global fleet operators. In addition to VistaJet, Gogo has announced wins with the following fleets, all with plans to upgrade their fleet to Galileo and/or 5G, NetJets, Luxaviation, Wheels Up and Avcon Jet.
All in, we believe that there is a path with Gogo to reach well over 1,000 fleet aircraft with either Galileo or 5G representing a true slingshot to propel our LEO and ATG business on a global scale. Further, our combined Galileo pipeline for both HDX and FDX is now approximately 1,000, up from 500 at the end of Q2, and we continue to see a favorable pipeline mix between U.S. and global market of about 60-40. Note, as we win new contracts like the VistaJet deal, this pipeline rolls off into new business won. So, a pipeline is just one piece of the puzzle in tracking our progress.
Next, let's drill down on HDX. HDX is ideal for the 12,000 midsized and smaller aircraft outside North America without broadband and the 11,000 midsize and smaller aircraft in North America that fly outside of CONUS or won faster speed than 5G. Our execution on HDX bought significant fruit during the quarter as we increased our completed STCs from 8 to 19 out of 40 under contract. We are very close to reaching critical mass with our HDX STC count.
Additionally, we have now shipped over 200 HDX units year-to-date, nearly 3x the 77 shipments we announced on our Q2 call in August with 93% earmarked for specific customers. Our HDX installations are now 50, including outstanding FTCs, which we expect to ramp significantly as we begin to install on our major fleet accounts and execute on line-fit installations with Textron beginning in early 2026.
Accelerating AOL in a new product is truly where the magic happens and will be the key to future service revenue acceleration. HDX is performing ahead of speed expectations and was purpose-built to fit on 41,000 global aircraft, and we expect a very significant ramp in shipments and AOL growth in 2026 and beyond. Now let's shift to FDX, our larger LEO antenna for the large global business market of 10,000 aircraft.
A successful flight test with OEMs, dealers and fleet customers is a fantastic endorsement to the status of the new product. At the recent NBAA show, we flew multiple flight demos with speeds reaching 200 megabits at the high end of our predicted speed range. As we see, this is streaming. We operated 27 streaming devices simultaneously and consumed an outstanding 36 gigs of data in 36 minutes. I've been launching and testing aviation WiFi systems for a couple of decades and have never seen such flawless execution on a flight demo within a week of aircraft installation and delivery. It was truly an awesome performance.
Hats off to the Gogo team and our partners, Hughes, StandardAero and OneWeb. We were thrilled to announce in our earnings release this morning that FDX will be a LEO line-fit option for all new Bombardier Challenger and global business aircraft types. In our view, this validates our technology, our team and shows great trust from a major global business aircraft OEM. We expect revenue generation from this important win in early 2027. We have now announced strong Galileo relationships with the following major global OEMs, Bombardier, Textron, Dassault and Embraer.
Let's now move on to 5G, our multiyear investment to substantially improve the performance of our ATG network. I am thrilled to say that we are at the goal line on 5G. Our 5G flight testing began on October 28, and the results have exceeded our expectations. As a result, we reiterate a Q4 launch timing for 5G, and we plan to begin shipping boxes to our 400 pre-provisioned 5G customers in early Q1. They already have the 5G antenna installed and the wiring is completed. We expect our 5G service revenue to begin in the latter part of the first quarter once installations have begun.
Beyond our focus on preprovisioned aircraft, 28 out of the 33 FTCs under contract are now completed, and we expect the remaining 5 will be completed by the end of the year. Further, Gogo has 5G line fit commitments with 5 OEMs with already installing the AVANCE L5 box on the production line today.
These boxes will be swapped with the LX5 5G box when service is turned on. We continue to believe the significant pent-up demand exists for 5G among customers who predominantly fly domestically, particularly those with light and medium-sized aircraft. 5G offers a tenfold increase in speeds versus the existing L5 ATG solution and is a cost-effective solution versus the more premium priced HDX or FDX.
Keeping the focus on ATG, let's move to our LTE upgrade. The upgrade of our ATG network to LTE, which will be largely subsidized by FCC funding, is expected to bring multiple benefits: one, accelerating the upgrade of Classic aircraft to AVANCE; two, increasing ATG network capacity and increasing speeds; and third, accelerating our U.S. government business on the ATG network given the enhanced security of the network.
We shipped a record 437 ATG equipment units in the quarter, up 8% sequentially split between 208 AVANCE units and 229 C1 units. Equipment shipments are typically a leading indicator of future installs. We recorded a record 145 Classic to AVANCE upgrades in Q3 as AVANCE AOL grew 12% year-over-year to 4,890. AVANCE now represents 75% of our ATG fleet, and that figure is quickly heading to 100%.
Correspondingly, our Classic count of roughly 1,500 aircraft is only 25% of the ATG fleet and over 400 are part of fractional or managed accounts with a defined upgrade path. This leaves approximately 1,100 Classic aircraft not associated with a fleet account. We expect that our count of 101 C1 aircraft will ramp significantly over the coming quarters. The C1 box is identical in size to the Classic box and allows the system to operate after the LTE system is turned on. This box swap takes only a few hours and benefits from FCC subsidies.
Bottom line, we are accelerating our progress towards the anticipated LTE cutover in May of 2026, and our entire dealer network is pushing all out to upgrade our Classic fleet as they have a strong vested interest in a smooth transition of our air-to-ground network. While we are encouraged with our efforts to improve the performance of the ATG network across multiple levels, including the 5G and LTE rollout and the C1 upgrade process, we continue to believe that industry trends will pressure our ATG online count for the next several quarters.
Our ability to return to sustained service revenue growth will be dependent on 2 things: First, the pace of the ramp of our new products, including HDX, FDX 5G and second, progress in the military/government end market.
Let's jump into the discussion of performance of our GEO business. We ended Q3 with 1,343 GEO AOL, up 161 units or 14% from the prior year, powered by our line fit positioning. We expect that our investment in GEO technology will continue to improve speed and performance over time for business jet, which we believe can be leveraged across our military/government customers as well. Our SD Router called SDR is on about 2,400 GEO aircraft and is synchronized with the advanced routers on other 4,900 aircraft. That is a total of approximately 7,300 systems that should be upgradable to new products without box swaps or expensive interior rewiring.
Now moving to our military/government end market. Given that our military/government service revenue is relatively new to most of you, let me provide context about how we view it. First, the global military/government aircraft number has an even lower broadband penetration than the business jet market, and this presents a compelling long-term growth path.
The 25 by 25 initiative from the U.S. Air Force is a great example of this. The U.S. Air Force set a goal that 25% of its 1,100-non-fighter aircraft would have broadband speeds of 25 megabits or greater by the end of 2025 and that the goal will come up short. Of note, the architect of the 25 by 25 initiatives, retired General Mike Minahan, joined our Board this year.
Second, we believe governments globally will seek diversity amongst their aero bandwidth suppliers and will place premium on multi-orbit, multiband service for redundancy and performance. These capabilities are military prerequisites for PACE standing for Primary, Alternate, Contingent, and Emergency.
And Gogo is the only company that can fit that bill. This was a major contributing factor in our recently announced 5-year federal contract to deliver 5G, LEO and GEO services to a U.S. government agency. This is the first service win for 5G in a multi-orbit government contract.
Third, we can reuse business aviation terminal offering for military/government use without incremental R&D spend. This advantage was highlighted with our recent 5-year contract with SES Space & Defense for a blanket purchase agreement for U.S. Space Force’s Space Systems Command, we will plan to deliver managed global Ku-band Geo Flex air services utilizing our Plain Simple Ku-band Antenna to provide scalable, secure and high-speed satellite connectivity across government operations worldwide.
This contract ceiling value is $33 million, of which aviation is a major component and a total revenue split, 80% service and 20% equipment.
Finally, given that military/government contracts are typically multiyear, we believe that increased predictability revenue streams under contract in this segment have the potential to add a new layer of strategic value for Gogo. Given that context, we expect that military/government, which is 13% of our total revenue, is likely to move towards 20% over the longer term.
Thank you for your attention, and I trust that you share our enthusiasm for the significant progress we have made over the last few quarters in transitioning this global business.
I will now turn the call over to Zach for the numbers.
Thanks, Chris, and good morning, everyone. Third quarter revenue was in line with expectations, highlighted by strong equipment shipments.
Also, adjusted EBITDA and free cash flow were ahead of plan as our integration synergies and financial discipline continue to materialize. As a result, we are reiterating the high end of our 2025 financial guidance ranges for revenue, adjusted EBITDA and free cash flow.
As Chris mentioned, global demand for our new products continues to expand, and we believe this will ultimately lead to service revenue growth. As implied in our 2025 financial guidance, we expect to return to modest year-over-year revenue growth in Q4, while increases in Galileo and 5G investments as well as elevated inventory levels driven by our new product launches should decrease adjusted EBITDA and free cash flow sequentially.
We are still completing our 2026 annual plan, and we'll be providing guidance on our Q4 call in February. However, in the meantime, we would like to provide a bit of context around next year. We see the potential for some incremental working capital need in '26 to support our new product ramps as well as continued ATG AOL volatility, particularly amongst our Classic fleet.
Despite these considerations, we believe that new product growth, the roll-off of 5G and Galileo investments as well as further OpEx and CapEx rationalization will benefit us next year.
I'll now provide an overview of our third quarter results, then I will turn to our capital allocation priorities and outlook for the balance sheet transactions to reduce interest expense and further de-lever. And finally, I will provide some additional color on the guidance.
On a combined pro forma basis, Gogo's total revenue in the third quarter was $224 million, down 1% on a pro forma basis year-over-year as well as sequentially. On a stand-alone basis, Satcom Direct's Q3 revenue declined about 4% year-over-year. Total service revenue of $190 million increased 132% over the prior year and declined 2% sequentially.
Total ATG aircraft online at the end of Q3 was 6,529, a decline of approximately 7% versus the prior year period and down 3% sequentially. Consistent with our strategic goals, total advanced AOL increased 12% from the prior year period and now comprises 75% of the total ATG fleet, up from 62% a year ago.
Since the end of 2022, our total AVANCE AOL has grown by over 1,600. Total ATG ARPU of 3,407 declined about 3% year-over-year and approximately 1% sequentially. Total broadband GEO AOL, excluding networks that are End of Life, reached 1,343, up 14% from the prior year and 2% sequentially. This strength highlights our OEM line positions.
In addition, most GEO broadband aircraft under fixed-term contracts, enhancing revenue stability and our GEO ARPU continues to hold up better than expected. This performance was the primary driver in the increase in the fair value of the earn-out liability that affected our net income in the quarter.
Now turning to equipment revenue. Total equipment revenue in the third quarter was $33.6 million, up 80% year-over-year and 5% sequentially. Total ATG equipment shipments of 437 were an all-time high and up 8% sequentially from 405 in Q2, which was a prior record.
Advanced shipments remained robust at 208, while C1 shipments ramped substantially to 229 and up from 129 in the prior quarter. Given that equipment shipments are generally a leading indicator of future installation activity, we believe our strong Q3 shipments bode well for the future conversion of Classic customers ahead of our expected LTE network cutover in May of 2026.
Now moving on to our margins. Gogo delivered combined service margins, inclusive of Satcom Direct of 52%, which was in line with our budget. Service gross profit accounted for 97% of total Q3 gross profit.
We continue to focus on driving this recurring high-margin service revenue. Equipment margins were about 8% in Q3 as Galileo equipment pricing remains close to cost.
Now turning to operating expenses. Total Q3 operating expense for G&A, sales and marketing as well as engineering design and development were $57 million, up slightly sequentially, largely due to SmartSky litigation spend.
Now let's turn to our major strategic initiatives, 5G, Galileo and the FCC reimbursement program. Total 5G spend in Q3 was $6 million with approximately $5.5 million tied to CapEx. We continue to expect total 5G spend to decline in 2026 as we launch our 5G network in Q4.
Turning to Galileo, we recorded $1.2 million in Q3 OpEx and about $2.2 million in CapEx. We continue to expect total external development costs for both the HDX and FDX to be less than $50 million, of which $34 million was incurred from 2022 through the first 9 months of 2025, with approximately $11 million expected this year. We anticipate approximately 80% of Galileo's external development costs will be in OpEx.
And finally, our FCC reimbursement program. In the third quarter, we received $6.6 million in FCC grant funding, bringing our program to date total to $59.9 million. As of September 30, we recorded a $26 million receivable from the FCC and incurred $22.8 million in reimbursable spend during the quarter.
The timing of reimbursement payments has not been affected by the government shutdown, but we are monitoring the situation closely. The receivables is included in prepaid expenses and other current assets on the balance sheet with corresponding reductions to Property and Equipment, Inventory and Contract assets with a pickup in the income statement.
Moving to our bottom line. Gogo generated $56.2 million of adjusted EBITDA in the quarter, and our adjusted EBITDA margin of 25% was consistent with the initial long-term view of the mid-20s we described in the Satcom deal was announced. Net income for the quarter was negative $1.9 million and EPS was negative $0.01.
Net income includes a $15 million pretax fair value adjustment related to the Satcom acquisition I described a moment ago. As of Q3, we have achieved over $30 million of annualized synergies and expect run rate synergies to modestly exceed our previous range of $30 million to $35 million with approximately 2 years of closing the Satcom deal.
This is a significant improvement from our original guidance of $25 million to $30 million. We continue to anticipate total cost to achieve synergies in the range of $15 million to $20 million. While we have achieved the vast majority of our headcount reductions, we feel confident that we can further reduce costs as we head into '26 in multiple areas, including real estate, back-office software solutions and CapEx rationalization.
Now moving to free cash flow. Gogo generated $31 million of free cash flow in Q3, above expectations and totaling $94 million year-to-date. Based on our current 2025 guidance, we expect Q4 free cash flow to be the lowest of the year, mostly due to the timing of strategic investments and inventory purchase related to the launch of our new products. Now I'll turn to the discussion of our balance sheet.
Gogo ended the third quarter with $133.6 million in cash and short-term investments and $849 million in outstanding principal on our 2 term loans with our $122 million revolver remaining undrawn. This equates to a net leverage ratio of 3.1x for Q3, down from 3.2x in the prior quarter. Our cash interest paid net of hedge cash flow was $16.3 million. Our hedge agreement is now $250 million with a strike of 225 bps, resulting in approximately 30% of the loans being hedged.
In 2025, we continue to expect cash interest paid net of hedge cash flow to be approximately $70 million.
Consistent with our Q2 call, our immediate focus remains exploring ways to streamline our balance sheet, reduce interest expense and continue our deleveraging process. Between our cash on hand and our revolver, we have more than $250 million in liquidity. This is significantly more than we need to operate the business, and we believe this provides plenty of financial flexibility to find the right balance sheet solution in 2026.
Bottom line, we continue to believe our expected free cash flow growth over the next few years will provide ample excess cash to pay down debt, reduce our interest expense and ultimately return capital to shareholders.
In our earnings release this morning, we are largely reiterating key elements of our 2025 financial guidance. For the year, we expect total revenue at the high end of the range of $870 million to $910 million, adjusted EBITDA at the high end of the range of $200 million to $220 million, reflecting operating expenses of approximately $15 million for strategic initiatives, including 5G and Galileo versus our prior expectations of $20 million.
Given our guidance, we expect Q4 EBITDA will decline sequentially largely due to the timing of planned investments and an expected decrease in ATG service revenue. Free cash flow at the high end of the range of $60 million to $90 million. We now expect approximately $40 million slated for strategic investments in 2025, net of any FCC reimbursement versus prior expectations of $60 million. This reduction is largely due to timing. Our net CapEx is still expected to be $40 million after $30 million of CapEx reimbursement from the FCC reimbursement program.
In conclusion, 2025 has largely been a year of blocking and tackling execution that include the integration of Gogo and Satcom, significant product investments and launching HDX, FDX and 5G. Now nearly a year after the close of the Satcom deal, we are seeing the results of our transformation. Shipments and installations of game-changing new products are starting to ramp, significant costs are being removed, and we are winning long-term contracts with global fleets, OEMs and governments.
I want to express my gratitude to the Gogo team for their hard work in driving this transformation and their dedication to providing exceptional customer service.
Operator, this concludes our prepared remarks. Please open the queue for questions.
[Operator Instructions] Our first question comes from the line Scott Searle with ROTH Capital Partners.
2. Question Answer
Maybe just to dig in initially on the fourth quarter implied guidance. Chris, Zach, I'm wondering if you could dive in a little bit more in terms of detailing that outlook, it implies adjusted EBITDA in the $40 million range. You've mentioned incremental strategic investments and the ATG kind of roll-off. Could you take us through that a little bit more in detail in terms of the thought process and if you're being conservative on that front or ATG is expected to continue to transition, particularly on the Classic front? 
Thanks for the question. I think the way we're looking at it is, as you've seen, the ATG pressure continues, right? And that's the highest margin revenue, right? So, we anticipate a decline, albeit not as aggressive as the prior quarters, largely because the C1 should start they're shipping. 
But the other piece is our revenue is actually going to be up, right? And another piece of that is equipment shipments. So, if you have lower margins on equipment shipments, so the mix changes. And as well as that, we have significant testing on 5G. So, there's a little bit of compression on gross margin because of the mix and then the OpEx side is going to be a little bit higher largely because of 5G testing. 
Yes. I think also if you look at the record AVANCE shipments, C1s as Zach picked up, it's clear that customers are also planning to upgrade. I think the fact that we're rolling out the 5G network, and that's successful, I think that's also a very positive sign at this point in time. 
Got you. And for my follow-up, I'm wondering if we could dig in a little bit more in terms of existing Classic, the transition to C1 and kind of the offset there now that we're starting to see momentum on 5G and Galileo as we go into 2026. So could you help us frame in terms of Classic, how that's expected to roll over the next several quarters. Now with the C1 out there, you had a lot of momentum this quarter. Is the majority of that base expected to convert pretty quickly to C1? Or are some of those expected to upgrade to 5G as well? 
I think it's a mix. If you look at the record AVANCE shipments, clearly, those customers are looking forward to 5G. It depends also on the customer budget. The C1 is really a placeholder product, but it's really encouraging that people are also taking that when you think it's just moving them on to a more modern network. 
And our MRO partners putting in field service team. So, we expect that to pick up and derisk Classic customers not cutting over. Everything we see at the moment is extremely positive. So, we're feeling pretty good about it. 
Chris, if I could just add on to the back of that. From an ARPU standpoint, how do you see things trending as we go into the first half of next year? There's some downward pressure, I would imagine, as we're going to C1, but you're also having some of the higher ARPU services starting to kick in. So how do you see that playing out as we go into '26? 
Yes. I think what's encouraging is if you look at 5G ARPU is worth twice that of a Classic customer. So that conversion, we actually see upside. And I think that's really where our heads are at the moment. Obviously, you've got more price-sensitive customers, but we've got a lot of price flexibility within the plans. So, people cutting over from over to C1. That's one aspect. 
And then you've got people who I mean, we're going to be delivering a 50 to 80 megabit service on 5G. So that's I mean, that's completely and utterly a different service level than these customers have ever experienced. So, we see that as those customers really being a higher ARPU as they're streaming and being able to use video applications within the aircraft that they've never been able to do before. 
[Operator Instructions] Our next question comes from the line of Justin Lang with Morgan Stanley. 
I just want to double back on the implied 4Q EBITDA guide. Maybe you could just put a finer point on how much of the implied headwind is related to Galileo and 5G investments versus some of the ATG pressures you flagged? 
Yes. I would say it's kind of split a little bit evenly between ATG pressure as well as like increased OpEx. I would say there's a bigger piece of it related to 5G versus Galileo. There's still Galileo costs, but the STCs are running through and 5G, there's a lot of testing that has to go. We got to own aircraft right now. So that's a big driver. 
Okay. Got it. And then I know you've mentioned in the past sort of regular maintenance has been a big driver of some of the ATG AOL declines. Are you still seeing that trend? Or are you seeing heightened competitive pressure anywhere? 
Not really seeing competitive pressure. I think one of the natures of the market is customers have scheduled maintenance for upgrades. So going to the C1, what I mentioned on the previous questions, really, it's that our MRO partners, I put field service teams. It's a very simple upgrade for C1, which we've designed. 
So, we're doing a lot of those in the field. And there's been a lot of press about that with Omni, West Star, our MRO partners there. So, I think that will continue to have positive momentum for us. And we see that really encouraging. And I think you can see that with the C1 numbers are starting to really pick up now. So, but obviously, customers who are also waiting for scheduled maintenance, they'll wait until that point as well. It's just the nature of the market. 
Got it. Okay. That's helpful. And then just really quick one on the shutdown. I know Zach you mentioned that it's not really impacting FCC reimbursement. But are you seeing any other impacts maybe around military/government or I'm not sure if there's any regulatory oversight outstanding for 5G flight testing, but are you seeing that creep up anywhere else? 
Yes. I think you can definitely see things have slowed down a little bit with kind of like when you need government approvals in certain areas. But they're not it's not really affecting our business at this point in time. So, we're just keeping a close monitor to it, but we're not seeing major effects in our revenue outlook because of government shutdown. 
[Operator Instructions] I'm showing no further questions in the queue. I would now like to turn the call back over to William for closing remarks. 
Thank you for joining our third quarter earnings conference call. You may disconnect. 
Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect. Goodbye.
Financial data from Gogo Inc.
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| Jun '26 |
+/-
%
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| Revenue | 903 903 |
30%
30%
100%
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|
| - Direct Costs | 527 527 |
55%
55%
58%
|
|
| Gross Profit | 376 376 |
6%
6%
42%
|
|
| - Selling and Administrative Expenses | 162 162 |
17%
17%
18%
|
|
| - Research and Development Expense | 46 46 |
11%
11%
5%
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| EBITDA | 167 167 |
57%
57%
19%
|
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| - Depreciation and Amortization | 63 63 |
56%
56%
7%
|
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| EBIT (Operating Income) EBIT | 104 104 |
58%
58%
12%
|
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| Net Profit | -0.85 -0.85 |
112%
112%
0%
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In millions USD.
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Gogo Inc. Stock News
Company Profile
Gogo, Inc. engages in the provision of in-flight broadband connectivity and wireless entertainment services. It operates through the following segments: Commercial Aviation North American (CA-NA); Commercial Aviation Rest of World (CA-ROW); and Business Aviation (BA). The CA-NA segment offers a broad range of connectivity and entertainment services to commercial airlines flying routes. The CA-ROW segment covers satellite-based connectivity and entertainment services to foreign-based commercial airlines and North American based commercial airlines when flying routes outside of North America. The BA segment comprises of a broad suite of in-flight Internet connectivity and other voice and data communications products and services under its Gogo Business Aviation brand to the business aviation market. The company was founded in 1991 and is headquartered in Chicago, IL.
StocksGuide Premium
| Head office | United States |
| CEO | Mr. Moore |
| Employees | 680 |
| Founded | 1991 |
| Website | ir.gogoair.com |
