Gogo Inc. Aktie

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.

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.

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.

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.

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.

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.

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.

Good day, and thank you for standing by. Welcome to the Q2 2025 Gogo Earnings Conference Call. [Operator Instructions] Please be advised that this conference is being recorded.

I would now like to turn the conference over to your first speaker today, Will Davis, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Gogo's Second Quarter 2025 earnings conference call. Joining me today to talk about 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 August 7, 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 second quarter earnings release. This call is being broadcast. The webcast is 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.

Thanks, Will, and good morning, everyone. We believe our Q2 performance reflects the fundamental strengths and capabilities of our business to revolutionize in-flight connectivity by leveraging our strong market position as the only independent global multi-orbit, multiband connectivity company in aviation. With LEO, GEO and ATG broadband we are strongly positioned to support durable demand trends.

In Q2, the business continued to show growth as demand for our GEO solutions remained strong across the global business aviation and military government mobility market as we see increased advanced shipments and continued rollout of Gogo Galileo's STCs. Zach will provide more details on our financial performance shortly. But I first want to highlight some key areas of growth and success.

Starting with ATG, we reached several significant milestones in the quarter. It gives our team great pride that we announced an important industry first as we completed the initial end-to-end call using the Gogo 5G chip. We now have the first 5G aircraft in hand and are progressing with the remaining development, integration and testing that will prepare us for our expected Q4 launch this year on the already deployed and operational 5G terrestrial infrastructure. We also have positive news regarding our FCC rip and replace program, which now provides a $35,000 incentive for C1 installations completed before December 31, 2025.

The C1 incentive enables to upgrade for over 40 aircraft models to our LTE network. This funding and citification allow classic customers to seamlessly upgrade in advance of the May 8, 2026 classic network cutover. We also had significant announcements for Gogo Galileo with the OEM wins. Embraer announced it will offer Gogo Gallileo HDX as an the aftermarket option for the popular been on 300 light jets, which has over 800 aircraft in operation. Textron also announced that the HD-X will be available for aftermarket installations on sustenation types once the FAA has confirmed the SEC, this is expected in late 2025.

We expect it to continue delivering on the 38 HDX STCs under contract through our dealer and OEM networks. We now have 8 HDX STCs approved, covering 10 aircraft types, with a further 13 development. STCs for the FDX variants are in progress with 10 STC contracts in the works with dealers, as previously announced, we have also signed an agreement with an undisclosed OEM, confirming STC will be live the option for all its production aircraft. On the back of this good news, I'm looking forward to reviewing our strong Q2 performance. I'll cover our quarterly operating results, provide updates on our GEO broadband services and highlight realized acquisition-related cost synergies.

We will also review our demand potential and outline our strategic approach to capitalize on these opportunities to enhance shareholder value. I'll finish by sharing progress on key strategic initiatives. Our free cash flow exceeded our internal forecast and consensus expectations. This is driven by high-growth profit due to record equipment revenue, lower operating expenses, continued synergy realization and higher-than-expected adjusted EBITDA at approximately GBP 62 million. On the revenue front, the higher-than-expected advanced equipment sales and higher ARPU on geo services contributed to driving revenue, 3% above consensus. Though we're still seeing a gradual decline in ATG units online, we expect to see this slow and perhaps even turnaround as classic customers start taking advantage of our C1 rebate program [indiscernible] to decide to upgrade from Classic to advance in anticipation of our classic network cutover to LTE in May 2026.

Towards that end, we set a record for ATG shipments in the quarter with 405, including 276 advanced and 129 C1 units. Shipments a strong indicator of future online activations. We also set a record 144 classic to advance upgrades for the quarter as shipments turned into activations. We had strong performance in our HDX LEO terminals as we recognized $1.7 million of equipment revenue. And year-to-date, we have shipped a total of 77 units. As I've stated earlier, we now have 8 HDX SDCs approved, covering 10 aircraft types with a further 3 DCs in development. We have also shipped our first 3 Gogo Gallileo FDX units to support STC generation for mid- to large business jet customers.

Our GEO products and airline aircraft online continue to grow up 41 units from Q1 with 1,321 aircraft connected to Gogo. This is up 177 units from Q2 2024, up 15%. This demonstrates the power of the OEM line fit as many of these systems are installed at the factory. We also believe it shows a predisposition of many heavy jet customers to take both LEO and GEO offerings to get the capacity, redundancy and global coverage that neither LEO or GEO can provide alone. For instance, no LEO provider today can provide service in China for CEO chem.

In Q2, we completed synchronizing our Advance and SDR routers to schedule. The route located in the aircraft or the core of in-flight connectivity systems and data management. The SDR, DRG and advanced routers are now compatible for Gogo Galileo installation allowing for easy upgrade opportunities for customers. This adds to the approximate 2,400 aircraft equipped with SD routes to be almost 4,800 advents installed Gogo fleet. These aircraft can now be installed at Gogo Gallileo without extensive rewiring side the aircraft. It's also worth noting that the SacconDirect routers aligns that on 3 aircraft models, which add several hundred aircraft a year to that easy installed fleet. Additional software and hardware harmonization for our router family are scheduled for the next 2 years, which will continue to improve performance for customers and lower costs for Gogo.

Gogo remains the only company that can satisfy the needs of customers seeking multiple connectivity solutions from a single source. The military needs to fulfill pace, primary, alternate, contingent and emergency requirements and global customers want a short redundancy. This gives us a significant competitive advantage and some very attractive segments of the market. We are progressing towards our synergy goals. We've completed most of the key actions to reach our now anticipated $30 million to $35 million synergy cost savings. We have completed staff synergies associated with the merger, along with other actions such as Chicago data center transition to the Melbourne Florida side. the transition of the SD avionics manufacturing to Colorado, which is targeted to be completed by the year-end.

The FD Melbourne building cell is expected to be finalized by the end of August. This will offset the $15 million to $20 million investment required to achieve the projected recurring synergy savings. In total, we have another 36 integration projects still underway, focused on moving to common systems and process, and we expect further cost synergies from many of these. Business Aviation is currently characterized by strong OEM results, expanding fractional fleets and robust flight counts.

In Q2, the 5 major OEMs increased aircraft deliveries 11% year-on-year and reported a very strong aggregate book-to-bill of 1.3x the trend is set to continue. And with the 1 big beautiful Bill Act signed in July, allowing businesses to deduct the full acquisition cost of eligible aircraft, we believe this positive momentum will continue into 2026. We believe this presents a significant opportunity for the increased broadband connectivity and installations and a major opportunity for Gogo. This sector remains buoyant with recent announcements confirming strong market growth. fractional ownership operator, Flexjet announced an investment of $800 million. The company has indicated that much of it will be spent on improving passenger experience, much of which relies on connectivity.

In addition, Bombardier recently announced a new fleet order for 50 aircraft with an option for a further 70 presenting a considerable opportunity for Gogo. This trend indicates more business aircraft will be entering the global fleet than leaving and more hours being [indiscernible] As a result, demand for connectivity should continue to increase. International governments are seeking alternative satellite suppliers, which provides an opportunity for Gogo and our multi-network approach. The French government has already strengthened OneWeb's competitive position by becoming UtelSat's largest shareholder following a $1.55 billion capital commitment. This will support continued OneWeb network investments as [indiscernible] only connectivity service partner for Business Aviation, we believe this strengthens our position to respond to growing demand and maximize our global office expansion.

In summary, we see demand for quality in-flight connectivity in both business aviation and military government mobility verticals, surging, while overall penetration remains extremely low, only 9,700 or 24%, a roughly 41,000 global business aircraft, which have broadband connectivity today. Gogo's strategy for value creation is to grow our share of a highly unpenetrated market by strengthening existing and creating new long-term, high-margin recurring revenue customer relationships. We plan to do this by first delivering the many new products I've just described that significantly improved performance over traditional in-flight connectivity products.

Second, engineering equipment that is purpose-built for our market and easier to install, maintain and upgrade than competitive products; third, expanding our addressable market by utilizing the broad product offering and global footprint facilitated by the SD Gogo merger to satisfy the needs of all segments of our vertical markets. Fourth, leveraging our significant presence in those markets to attract the best technology distribution and network partners on the best times to serve our customers; and finally, provide the world-class customer support that our customers demand.

This strategy underpins our approach to multi-network, open architecture platforms and enables broad mission coverage across both business aviation and military government markets. That flexibility is core to our future proofed hardware design strategy that can support multiple barriers with network-agnostic modular terminals such as our plan simple Geo and Gogo LEO antenna portfolio. With the upcoming launch of multiple Ka-band LEO networks, Gogo can leverage our terminal network architecture, so we remain agnostic about our customers enabling the latest developments from satellite providers on any aircraft type. Our expanding global support network is a key part of the distribution partners part of this strategy. We now have 148 dealers across 233 locations. These dealers are invested in STC generation, ongoing customer support and as our representatives across the globe act as a force multiplier to our sales efforts.

Now I'd like to share a few updates on the progress we are making towards some of the efforts that support this strategy. Since the start of operations in April, our LEO LEO [indiscernible] customers have used over 1,200 hours. HDX is ideal for the 12,000 midsized and smaller aircraft that fly outside of North America and have no broadband solution today, an aircraft among the 11,000 midsized and smaller North American registered aircraft, that often fly regionally outside [ Konas ] or on faster mean speeds than 5G alone can provide. The FDX terminal is designed for the 9,700 larger business aircraft operators many of which fly in into Continental missions as well as our VVIP and government clients. We are off to a strong start for Gallileo.

Our early customers are positive about the HDX performance and we have more than 500-plus immediate opportunities for HDX in our sales pipeline. 40% of these are overseas, and we are seeing strong interest from international operators. We've already signed our first multi-aircraft deal with the Middle East charter operator. As I mentioned at the start, we've made a crucial step towards forward in terms of our 5G product which is targeted at large segments of the North American midsize and smaller market that wants a good connectivity experience but a lower cost than satellite products. Our chipset supply successfully completed the first end-to-end call using the Gogo 5G chip in June.

The chip is now in the final phase of testing at our Greenfield and Chicago facilities. Following the integration into the advanced Alex 5 [indiscernible] is anticipated to commence in September and to go live by year-end. It is worth noting that we have already made a bulk chip purchase to ensure supply for our customers when ready. More than 300 aircraft are now pre-provisioned for launch, the 5G to tower network is complete with 170 installed across the U.S. and Southern Canada. Gogo has already received FAA approval to produce and manufacture advanced X5 LRU and 25 STCs in the new antenna covering 8,500 aircraft.

The new 5G core is installed in our data center. Our next-generation LTE network deployment is also underway. The first LTE Tower antenna has been installed, and we are beginning network build-out in anticipation with the cut favor. Supporting the transition we announced most for aircraft high STC for the Gogo C1 unit. This covers 42 aircraft representing 70% of the in-store Gogo Classic fleet. We have already shipped 234 units for customers. As mentioned previously, the FCC rip and replace program now provides incentives for C1 installations assisting customers with the replacement of the old Gogo classic installs. The C1 LTE box has the same form factor as the old classic product, allowing for a very fast unit swap. But has dual BDO and LTE aircrafts. This enables a seamless network cutover.

For customers lacking the time or budget for advanced upgrade before the May 2026 transition, this solution enables a cost-effective option and keeps our customers connected and preserves Gogo service revenue from this market segment. We are urging customers to commit before year-end to take advantage of the FCC rebate and be ready for the cutover. In the [ MilGov vertical ], we see an opportunity for Gogo Solutions to be integrated with SD's GEO offerings. Our current revenue mix in this segment includes a significant portion of legacy narrowband services which are expected to decline gradually over the next several years. However, we anticipate broadband growth in the mill gov sector will materially outpace the decline in narrowband as the segment transitions to broadband solutions.

Today, almost all [ MilGov ] mobility aircraft still rely heavily on voice over radio and narrow band for communications, which is limited in bandwidth there is a significant effort underway to upgrade to new broadband satellite technologies. The U.S. Air Force [ 25-25 ] program aims to equip 25% of this 1,100 mobility aircraft with satellite communications by the end of 2025. This still leaves 75% of the fleet without satellite connectivity, which the Air Force believes must be addressed, presenting a substantial opportunity for growth. We believe Gogo's LEO product will be an excellent complement to our GEO products in this market due to the DoD PACE protocol, which requires military programs to have primary alternate contingent and emergency systems.

With the support of the government funding, Gogo is also leveraging our SD Pro operating system, which enables monitoring and utilization of pace. We also see the opportunity for 5G as ground as a possible new alternative for redundancy. While there have been some delays in awards the general trend towards better communication systems for aircraft aligned with the U.S. administration's broader goal for modernizing the military. We've also added a key resource to the Gogo Board of Directors with the recent appointment of retired General Mike Minehan. Finally, I'll touch briefly on tariffs. We have made provisions, and while our decisions remain fluid, we believe that as the trade deals currently stand, there is minimal impact on aviation and our exposure is much reduced.

In conclusion, we are pleased that our strategic investments are now being delivered. We are uniquely positioned to capitalize on the increased demand of in-flight connectivity as our multi-orbit multi-brand approach gives the business a competitive edge. We feel very positive about the merger process. So far, we are achieving the cost product and commercial synergies we wanted to accomplish with the FD Gogo combination. We expect to produce compelling financial results in 2026 driven by growth in service revenue from our new products, a significant reduction in product program spend the full year impact of synergies made in 2025 and full funding of our FCC rip and replace program.

And now I will hand over to Zach to talk about the numbers.

Thanks, Chris, and good morning, everyone. Like last quarter, I'm pleased to report that second quarter results were ahead of expectations for revenue, adjusted EBITDA and free cash flow. Our integration is progressing well. Cost controls are taking root and the demand for our new products continues to ramp. As our product investments roll off, we continue to expect solid free cash flow growth in 2016 combined with further deleveraging. Strong first half results led to improvements across the board in our '25 financial guidance, which I'll discuss later in my remarks.

Our 2025 guidance continues to reflect limited new product revenue given most HGX shipments are STC focused and our 5G network is anticipated to launch in Q4. We 2025 remains an investment year, priming the pump for new product service revenue in 2026 and beyond. I'll now provide an overview of Gogo's second quarter financial performance, then I will turn to our capital allocation priorities our positive outlook regarding a potential refinancing over the coming quarters. And finally, I'll conclude with additional context on our raise 2025 financial guidance. On a combined pro forma basis, Gogo's total revenue in the second quarter was $226 million, up 1% year-over-year and down about 2% sequentially. On a stand-alone basis, Satcom Direct Q2 revenue grew approximately 1% from the prior year. Total service revenue of $194 million increased 137% over the prior year and declined 2% compared to the prior quarter. At the end of Q2, total ATG aircraft online were 6,730 or a decline of approximately 4% versus the prior year period and down 2.5% sequentially. Despite the pressure on total ATG AOL, Advanced AOL grew nearly 14% from the prior year period and now comprises more than 71% of the total ATG fleet, up from 60% in Q2 2024.

In the last 2 years, our total advanced AOL has grown nearly by nearly 1,200. Our 2025 guidance continues to assume advanced AOL growth, but the total overall ATG AOL will be lower at year-end '25 versus year-end '24. We believe that the rollout of 5G and LTE will help improve the trajectory of our ATG subscriber trends. Total ATG ARPU of $3.445 was relatively flat versus both the prior year and the prior quarter. Total broadband GEO AOL, excluding networks that are end of life, reach [ 1,321 ], up 15% from the prior year and 3% sequentially. The strength underscores our strong line-fit position with OEMs. In addition, most geo broadband aircraft are under fixed-term contracts, which helps to create revenue stability and our GEO ARPU is holding up better than expected.

Now turning to equipment revenue. Total equipment revenue in the second quarter was $32.1 million, up 59% year-over-year and 1% sequentially. Total advanced equipment shipments of 276 increased 19% versus the prior year period and 15% sequentially. This was our highest advanced equipment shipment quarter in the last 2 years, and we believe this strength bodes well for the future conversion of Classic customers to advance ahead of our LTE network cutover. Regarding our profitability, Gogo delivered combined service margins inclusive of Satcom Direct of 52.9%, up slightly sequentially. Stand-alone Gogo service margin was approximately 77% and in line with our previously stated targets. Service gross profit accounted for 96% of our total gross profit in Q2, and we focus on driving this recurring high-margin service revenue. Equipment margins were nearly 14% in the second quarter. As a reminder, we expect Gala equipment pricing to be close to cost.

Now turning to our operating expenses. Total Q2 operating expenses, excluding depreciation and amortization, were $55.9 million, down roughly $2 million sequentially. I will now provide additional commentary on our major strategic initiatives, 5G, Galileo and the FCC reimbursement program. In the second quarter, $1.5 million of 5G spending was all tied to CapEx. We expect total 5G spend to decline significantly in 2026 as we roll out 5G in Q4. Turning to Galle, we reported $1.3 million in OpEx in the second quarter. We continue to expect total external development costs for both the HDX and FDX solutions to be less than $50 million, of which $31 million was incurred from 2022 through the first half of 2025 and approximately $9 million is expected for the rest of the year. We anticipate approximately 80% of Galileo's external development costs will be in OpEx. And finally, our FCC reimbursement program.

Following the passage of the National Defense Authorization Act last year, we continue to anticipate increased reimbursement of about $50 million for our FCC program. This funding will support the upgrade of our ATE network to LTE and provide incentives to upgrade our Classic fleet to advance. In the second quarter, we received $5.9 million in FCC grant funding, bringing our program to date total to $53.4 million. As of June 30, 2025, we recorded a $9.8 million receivable from the FCC and incurred $5.4 million reimbursable spend during the quarter. The receivables 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 generated $61.7 million in adjusted EBITDA in the second quarter. Our adjusted EBITDA margin was 27.3% as compared to our initial long-term view in the mid-20s when the Satcom acquisition was announced last year. Gogo reported second quarter net income of $12.8 million and $0.09 of diluted EPS. I will now provide some color on our synergy progress. I'm pleased to announce that within 2 years, we now expect to achieve run rate synergies in the $30 million to $35 million range, up from our prior view of $25 million to $30 million. While we achieved the vast majority of head count reductions, we expect further cost improvements from non-headcount areas like real estate and back-office software solutions.

We achieved $18 million of run rate synergies at the close of the acquisition, another $9 million during the first quarter and a further $2 million in the second quarter. We continue to believe the cost to achieve these synergies will be within our previously expected range of $15 million to $20 million. Moving to free cash flow. Gogo generated $34 million of free cash flow in the quarter, above expectations and totaling $64 million in the first half. While we expect free cash from the second half of '25 to be lower than the first half, we believe our recent cash flow trends portend well for our longer-term outlook once investments roll off, new product service revenue begins, and we continue to delever.

Now I'll turn to a discussion of our balance sheet. Google ended the quarter with $102.1 million in cash and short-term investments and $850 million in outstanding principal on our 2 term loans with our $122 million revolver remained undrawn. Our cash balance as of last Monday was $116 million. For Q2, this equates to a net leverage ratio of 3.2x, and we expect this ratio to remain relatively flat through year-end with a slight downward bias. Our cash interest paid for the second quarter, net of hedge cash flow was $16 million. As previously discussed, our hedge agreement stepped down at the end of July to $250 million the strike rate increasing from 125 basis points to 225 basis points, resulting in approximately 30% of the loans being hedged.

As a reminder, the cash interest paid for 2024 net of hedge cash flow was $33 million and we continue to expect that to be approximately $70 million this year. Given our improved financial performance and relative strength of the credit markets, we and our banking partners believe there is sufficient market appetite to pursue a comprehensive refinancing over the coming quarters. We believe this will be a positive outcome for Gogo and its stakeholders. Our capital allocation priorities remain consistent with prior quarters and focused on executing across the following 4 priorities in order.

First, maintaining adequate liquidity; second, continuing to invest in our strategic opportunities primarily through Galelio on 5G; third, maintaining an appropriate level of leverage for the economic environment with a target net leverage ratio of 2.5 to 3.5x and finally, returning capital to shareholders. As a reminder, Gogo has $12.1 million remaining on its $50 million repurchase authorization that our Board approved in September of 2023. Until we complete our refinancing, we expect to continue to prioritize deleveraging over equity buyback.

Bottom line, we 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 increased key elements of our 2025 financial guidance. For the year, we expect total revenue at the high end of the previously guided range of $870 million to $910 million which reflects our HDX launch in Q1 and 5G generating modest equipment revenue in Q4. Adjusted EBITDA at the high end of our previously guided range of $200 million to $220 million reflecting operating expense of approximately $20 million for strategic investments, including 5G and Gallo versus our prior expectations of $25 million.

Given our guidance, we expect the second half EBITDA will decline slightly versus the first half largely due to timing of planned investments. Free cash flow at the high end of our previously guided range of $60 million to $90 million. And we expect 2025 to be the trough of our free cash flow as we have approximately $60 million slated for strategic investments, net of any FCC reimbursement versus prior expectations of $70 million. Our net CapEx is still expected to be $40 million after $50 million of CapEx reimbursement from the FCC reimbursement program.

After 2 full quarters following the close of the SP deal, we are seeing the clear benefits of the combination, including global expansion, product expertise, synergies and the addition of a [ MilGov ] business. We have more work to do, but I believe we are well positioned to delever the balance sheet, drive free cash flow and create long-term shareholder value. Before we open up the floor for questions, I want to express my gratitude to the entire Gogo team for their hard work commitment to our business and dedication to providing exceptional service to our customers.

Operator, this now concludes our prepared remarks, and we're ready to take questions.

[Operator Instructions] Our first question comes from Scott Searle from ROTH Capital Partners.

Thanks for the comprehensive overview. Chris, maybe to jump in on the ATG front, down [ 170 ] this quarter. I know there are a lot of moving parts in terms of 5G transitions reimbursement programs that are ongoing and there have been longer maintenance events. I'm wondering, can you take us through a time line of when you expect to see a return to growth in ATG and what the ultimate opportunity and penetration opportunity is for ATG when you look at aircraft within North America. I think there's a lot of different issues out there in terms of how much is ATG versus the Galileo potential. I'd love to kind of understand of stabilization time lines, which seem like it should be coinciding now with 5G commercialization, but how that growth should ramp up into 2016 and beyond with 5G and with C1.

Okay. There's a lot there. So let me -- I'll start with kind of by market opportunity and where we kind of see that, and I'll let a chip in with the numbers and kind of how we see that playing out. But I think if you look at the suspension and deactivations over that period of time in the quarter, obviously, it's a little bit more than previous. But I think if you look at the advanced shipments the real reason for that is upgrade. So you can already see there's a strong pull in that and the advance number is obviously extremely strong. So we're not concerns with the suspension obviously, they're a little bit higher than previous. I think also now we're building the strong backlog in Gallileo product portfolio we're feeling pretty confident that those customers are looking the product portfolio as well and then with the announcement of 5G.

So we're not concerned or any concerns at this point. that we can't migrate customers and then also with the FCC funding with the C1 that now those customers have really got a good path. And we've just got that done at 0 cost of upgrading themselves to the new LTE network as well. So we think we're going to kind of key customers. Also, they're not just leaving the network. There are a number of suspensions in there. We see that with kind of seasonal behavior, maintenance. We locked that pretty well. So -- at this point, we think we've got a strong growth path. We've got multiple products in the portfolio for customers to go to. And we're seeing strong performance with the advanced shipments I think we're in a good spot. I don't know if Zach, do you want to add anything to that on the numbers side.

Yes. I mean I think the -- like we said in the guidance, it's -- we still assume that the net ATG numbers are going to be down this year, but we're hopeful that next year with the C1 and the 5G launch, like you said, that will start to pick back up. The other thing that's interesting is when we look at the activation reasoning, it's -- the highest drivers are consistent with what we see in other quarters, which are like to Chris' point, sold aircraft or management changes, right? So I think we also mentioned in the last call, we kind of ramping up our inside sales team to really focus on these customers. It's early days, like we said, because it just kind of started in Q2, but they had a little bit of progress, but we got to get more focused on it.

Great. Very helpful. And just to clarify, Chris, on that front. It's -- these are not competitive losses to Starlink. This is suspensions, and this is the normal transition that we see in the ATG business now ahead of 2 major product cycles.

Yes, we're not seeing a mass of loss to competition now. It's -- like Zack said, it's the same reason. We have really comprehensive deactivation process. So we're not seeing kind of like math losses to competition and the activation.

Got you. And lastly, if I could, and then I'll get back in the queue. On the geo front, you guys, I think, continued to outperform the early expectations. Both in terms of aircraft and I think pricing. I'm wondering if you could just give us some longer-term thoughts in that market because I think at the time of the acquisition, there was some concern around the ARPUs related to the geomarket opportunity. It doesn't really seem like that's materializing at least not as fast. So I'm wondering if you could just give some updated thoughts on that opportunity and how you see Geo progressing over the next couple of years?

I'll cover the business side, but do you want to cover the other piece?

Yes. I think as we said before, we anticipated even last year before the deal that we were going to see more ARPA contraction. But I think the nice thing that's happened is like we said, a lot of times, this stuff is very expensive to swap out, right? And if it's good enough for a lot of folks, they're not going to spend $500,000, $600,000 if satisfying their needs. I think our view is longer term, it's going to have to come down slightly. It's just the rate at which it does -- it's kind of anybody's guess. But like I said, we're working on our long-term model and it will assume modest degradation over the next few years.

Yes, I'll just add to -- I think customers have been waiting for Gallileo. So I think that's a good testament to customers believing in Gogo, which is great. We've just got to get off led the products out to the merger. We're now executing on logs, which is fantastic. The other piece would be GEO business. We also launched our own products within the last few years, which actually really enhance the performance of those networks with the plain simple range. And then I think also like what I said in the script is just kind of like earlier on, it's a testament to having line-fit positions, which we're very lucky to have, really, and we've worked hard to get -- and you can see that kind of working through the OEMs as well as the MROs. But those products are predominantly really strong OEM products. So I think with that mix, like Zach said, our business is holding up really, really well.

[Operator Instructions] We have Scott Sherrill from ROTH Capital Partners.

Chris, it sounds like there's some interesting opportunities percolating with 5G private network opportunities, I think you referenced some military applications potentially in North America. I'm wondering if there's -- any additional color on that front? And also, I'm not sure if there were some 5G metrics that you provided in terms of the number of 5G-ready aircraft at this point in time as we start to get to that 4G launch time period.

Yes. The -- I mean, Acute government piece, and then I'll let Zach the numbers. So then I can accurate. The -- but without military business, I mean it's really new to Gogo, but not from the SP point of view from the business that we've been in the government business pretty much for over 20 years. So looking at the 5G piece and the opportunity of those increased speeds and then looking at the U.S. DoD, we really do think there's some opportunity there of giving kind of broadband resilience with pace planning. The other thing we're looking at is the potential with -- as which I mentioned on a previous call as well, we've started looking at that with ATX as well. on the fact that we see that market growing massively from the military markets, not only from a domestic point of view, but from a global point of view for Galelio, then actually, 5G could be a really interesting alternative for [ Konas ].

And we're pursuing those opportunities at the moment, it's very early days, but the fact that we're starting to talk to the customers about that. We're actually getting some level of interest on exploring that. Now we've got the product set. A couple of things really in June with the DP and different aspects of government within the U.S. So actually, we kind of -- we see that as being a potential new market. So we're just exploring it, early days but pretty excited and then on the backlog, it's thinking a little over [ 300 ] pre-provisioned. Yes, they will pre-provisions the network there. I mean it's all rolled out. The towers are done, as I said before, just kind of getting these 5G cards in those boxes and converting those customers really quick. And those customers have been fantastic, really patient. So we're really motivated on getting those guys over the rig really quickly.

Our next question comes from Justin Lane from Morgan Stanley.

A few quick ones for me. Maybe can you just add a little more color on the CapEx guidance change? I understand the net number doesn't change, but just maybe the underlying drivers of the difference in the guide?

Yes. It's all related to the reimbursement for the rip and replace program. Basically, we've accelerated some stuff that would have hit next year. It's really to make sure in advance of the cutover date that we're totally buttoned up. So it's just pulling in from next year. And then like I said, it's all reimbursed. So basically, everything else is pretty similar.

Okay. Great. And then maybe just on the HDX shipments in the quarter, it looks like they might have stepped down sequentially. Is there anything to call out? I mean, was that a dynamic that was sort of anticipated or anything to call out there?

Yes, that was anticipated. At the moment, we're rolling out those STCs and really, I mean, at the moment, this is all just preparation work for 2026. So the -- from an STC point of view, we're pretty much on the ACH got more shipped out to our MRA partners. So we've got great traction there. We do have customers now starting to deploy, which is great, but that's the aviation cycles. Unfortunately, I mean it's good and it's a bad thing. It's a difficult market to get into from a competitive point of view, kind of gives us good moat around the business. But equally, you've got to get the products ready, you've got them to go through the you've got all of those aspects. So as we've said previously on calls, 2025 for us is really a build year on making sure that we've got those STCs. So this is all kind of anticipated. We don't see any slowdown in ramp on the product.

Okay. Great. And maybe just last 1 on [ MilGov ] business. Chris, I think you mentioned in your prepared remarks, some delays in awards. Just curious if you could elaborate there. I mean, is that trend holding steady? Or does that look like it might reverse? And then just because we get the [ President's ] budget and the one big beautiful bill act, just from a [ MilGov ] perspective, anything above or below expectations on either of those?

Yes. I just got to things are even a little bit lower than expected. So -- and then it's just the nature of the government business really, awards come, you try and influence as much as you can. The budget cycles, they operate a little bit differently as well. So we're hoping kind of we start seeing a little bit more movement where you typically -- from a trend point of view, we've seen that. The fiscal year starts. I think it's October, right. So I think hopefully, we start seeing things through. But I would say there's definitely a nowledghment with the administration on the need for the technology refresh. We've had a lot of interest on demonstrations technology, the CIPR awards as the [indiscernible] is really strong.

We're looking at kind of next year rolling out our software within the Air Force, which is a really kind of good point for us. I mean, they've been a great partner with us as well, the U.S. Air Force on developing that software platform with them. So I think things will start picking up, but it's a really difficult thing to predict. So -- but -- and then -- the 1 piece of it, what we've seen, right, it's small business, but it's exceptional growth this year. It's actually been the international market. And I think that kind of step up of Nato, people looking at their budget. We're starting to see a lot of interest being generated from overseas clients, and that team has been growing quite a lot. And the way they contract is quite different to the DoD as well, and the fiscal cycle is a little bit different. So we're very optimistic. Team's working really hard, doing a really good job. So we kind of wait and see. But the technology is there, which is the exciting piece. It's not like we're now waiting for the technology to come, I think, with the advance of the product portfolio and delivering on the product portfolio, I think we've now got something really interesting for the military.

Our last question comes from Louie DiPalma from William Blair.

Do you remain confident in I think, approximately the $65 million in cost for 2025 coming out in 2026 as it relates to the different synergies and milestone payments for 5G, HDX and FDX and -- how should we think of like the cost in 2025 versus 2026?

Yes. I think we still feel like the vast majority of that will go away. Like you said, we get the full year -- and then obviously, we're kind of working on our R&D road map. We -- I don't know that we're ready to release what all the projects are we working on. So some of that will get backfilled, but the vast majority will be pulled out.

Great. And 1 final one. From a high level, as you and customers have done more testing of HDX and FDX. Just in general, how does it compare with StarLink in the market, even though there are many left OneWeb satellite in Starlink, it appears that the OneWeb constellation is far less utilized. So how has the performance and testing been for the different solutions. And also, I missed the first part of the call, but what is the timing for flight tests of 5G?

Yes, we I'll handle the 5G thing, Louise, we've got the customers ready to go really got STCs and things flying. So from a network point of view, I think rollout in Q4 as planned and migrating those customers over there's no hold up there. So the 5G thing is pretty straightforward. Now we've got the jet. On the performance on Galileo, we're seeing great performance metrics. I think the nice thing is we're not seeing people do futile speed test in the cabin because they can do what they want to do and that low latency, snappy product field is what they've got. We've got aircraft now flying around capturing a lot of data. We're seeing very consistent, service, happy customers.

I think the fact that we've truly designed an aviation-grade products. And more importantly, we've got the support because things do happen from network point of view that we make that seamless for customers we can get an engineer. We advertise under 24 hours on an aircraft anywhere in the wells. The reality is we don't really go beyond 12 hours, and having that human touch if we need it. But the team has been great. Customers have been fantastic, some big anchor clients who we've announced before in the past. -- they're moving ahead and very, very happy with the service. So we're very enthusiastic. And we're seeing great performance on the FDX as well. And we're just wrapping up the STCs on that. So yes, it's -- I think it's -- I think this is a bit where everybody kind of looks at satellite networks and speed test, whereas having consistent performance in flight, and you can fly anywhere in the world with our services, whether you're using dual purpose service or you're not. So you're using multi-networks or a single network I mean our aim is to have consistent service anywhere a client flies anywhere in the world. And I think we can safely say that we can do that.

The question-and-answer session is now closed. I will now turn it over to Will Davis for closing remarks.

Thank you all for your participation in our second quarter earnings call. You may disconnect.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.