Gogo Q1 2025 Earnings Report

Gogo EPS Results

• Actual EPS: $0.18
• Consensus EPS: $0.05
• Beat/Miss: Beat by +$0.13
• One Year Ago EPS: $0.23

Gogo Revenue Results

• Actual Revenue: $230.31 million
• Expected Revenue: $214.93 million
• Beat/Miss: Beat by +$15.38 million
• YoY Revenue Growth: +120.80%

Gogo Announcement Details

• Quarter: Q1 2025
• Date: 5/9/2025
• Time: Before Market Opens
• Conference Call Date: Friday, May 9, 2025
• Conference Call Time: 8:30AM ET

Gogo (NASDAQ:GOGO), together with its subsidiaries, provides broadband connectivity services to the aviation industry in the United States and internationally. The company's product platform includes networks, antennas, and airborne equipment and software. It offers in-flight systems; in-flight services; aviation partner support; and engineering, design, and development services, as well as production operations functions. The company offers voice and data, in-flight entertainment, and other services. In addition, it engages in the development, deployment, and operation of networks, towers, and data center infrastructure to support in-flight connectivity services, as well as in the provision of telecommunications connections to the internet. The company sells its products primarily to aircraft operators and original equipment manufacturers of business aviation aircraft through a distribution network of independent dealers. Gogo Inc. was founded in 1991 and is headquartered in Broomfield, Colorado. As of May 2024, Gogo Inc. claims that "Gogo is the only company in North America with a complete, certified airborne 5G network, meaning that all components within the network (including onboard equipment) are 5G native."

Gogo Q1 2025 Earnings Call Transcript

Key Takeaways

• Gogo delivered a strong Q1 performance with revenue of $230.3 M (up 21% YoY), adjusted EBITDA of $62.1 M, and free cash flow of $30 M, all above expectations.
• The company achieved key product milestones, including PMA approvals for the Galileo HD X and FDX terminals, shipment of 31 new GEO antennas, record 119 ATG advanced platform upgrades, and confirmation of its 5G chip fabrication ahead of a planned late-2025 launch.
• Integration synergies from the Gogo–Satcom Direct merger are on track, with over 85% of the $25–30 M cost-savings realized, headcount reduced by 21%, and major consolidation projects underway in manufacturing and data centers.
• Gogo is targeting significant growth in unmet connectivity markets—only one-third of business jets and one-fifth of total business aircraft are currently connected—and sees over $13 B in DoD LEO spending as a major MilGov opportunity.
• The company reaffirmed its 2025 guidance of $870–910 M in revenue, $200–220 M in adjusted EBITDA, and $60–90 M in free cash flow, noting modest tariff exposure of roughly $5 M that can be absorbed within existing plans.

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the Q1 twenty twenty five Gogo, Inc. Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

[Operator]

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 1, 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Will Davis, Head of Investor Relations. Please go ahead.

[Will Davis, VP - IR at Gogo]

Thank you, Gigi, and good morning, everyone. Welcome to Gogo's First quarter of twenty twenty five earnings conference call. Joining me today to talk about our results are Chris Moore, CEO and Zach Kotner, 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.

[Will Davis, VP - IR at Gogo]

Those risk factors are described in our earnings release filed this morning. And a more fully detailed note under risk factors filed in our annual report on 10 ks 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 05/09/2025. 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.

[Will Davis, VP - IR at Gogo]

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 first quarter earnings release. This call is being broadcast on the Internet and available on the investor website at ir.gogoair.com. The earnings release is also available on the website. After management comments, we'll host a q and a session with the financial community only. It is now my great pleasure to turn the call over to Chris.

[Christopher Moore, Director & CEO at Gogo]

Thanks, Will, and good morning, everyone. Thank you for joining us today. As we continue to merge Gogo and Satcom Direct, I'd like to say how proud we are of the progress our global team is making. The merger is already indicating that it was a positive strategic move for our employees, our customers, and investors. We've built strategic and commercial momentum in the last quarter, resulting in significant milestones achieved with PMA approval for our HD X and FBX Galileo antenna execution of new OEM agreements for our GogoGalileo service, the confirmation of the fabrication of our five gs chip, and growth in the number of aircraft online optimizing RGO satellite services.

[Christopher Moore, Director & CEO at Gogo]

The PMA approvals are particularly significant, as they will enable us to begin shipping products and developing STCs to both terminals. We've already made great progress with our Galileo HD X antenna, as we continue securing new SDCs, OEM wins, and generating revenue with activated customers. The FDX PMA approval came just this week, almost two months ahead of schedule, and we expect FDX to follow a similar successful rollout with 10 STCs already queued. I'm looking forward to talking you through a strong Q1 performance, which will cover our quarterly operating results, provide updates on our GEO and ATG product lines, and highlight our success in realizing acquisition related cost synergies. We will review the demand potential in our markets and outline our strategic approach to capitalize on these opportunities to enhance shareholder value.

[Christopher Moore, Director & CEO at Gogo]

Following this, I will share progress on key strategic initiatives and conclude with a brief assessment of the potential impacts of tariffs on our business. Finally, I'll turn it over to Zach for the financial updates and then open up for Q and A. Driven by a stronger than anticipated service revenues, earlier than expected synergy realization, and deferral of some expenses related to new product investments, we delivered a quarter that exceeded our plans and consensus on revenue, adjusted EBITDA and free cash flow. On the revenue front, our strong results were driven by both AOL and maintaining ARPA. GEO aircraft online grew to twelve eighty aircraft, up 2.5% from twenty twenty four year end and up 16% from Q1 twenty twenty four.

[Christopher Moore, Director & CEO at Gogo]

And even more encouraging, we shipped 31 new GEO terminals in the quarter, up from 18 units in Q1 twenty twenty four. Many new units were line fit installations. Buyers often want to avoid the cost, delay, and downtime retrofit installations incur, which is why securing a line fit option with OEMs is advantageous. Customers expect connectivity from the day of aircraft delivery to optimize bandwidth, redundancy, and coverage. This quarter we strengthened our line fit offering by confirming our plain simple Ka band terminal as a line fit option for Gulfstream's G5 and G500 airframes.

[Christopher Moore, Director & CEO at Gogo]

We experienced a modest decline in air to ground AOL, primarily due to maintenance suspensions on older air to ground classic installed aircraft. We expect a reversal of this trend once the launch of our new broadband networks offering later this year. A key ATG metric for us is the increased penetration of our software centric advanced platform, which delivers a cost effective, simplified path to advanced technology like air to ground broadband and Galileo, and presents a significant advantage over competitive solutions. Our Advanced Platform gained substantial momentum this quarter, with a record 119 upgrades from our Classic products, a 19% increase over the previous quarter, as two forty one units were shipped to dealers preparing for Galileo Connectivity installations. We also saw a rise in advanced penetration within the air to ground fleet, up to 68, up from 65% the prior quarter and 58% on 2024.

[Christopher Moore, Director & CEO at Gogo]

We are pleased to report significant progress towards our synergy goals, with over 85% of targeted synergy savings already realized. Additionally, we completed key actions to reach the high end of our 25,000,000 to $30,000,000 synergy cost savings guidance, positioning us for higher than projected cost savings this year and full realization in 2026. We currently have 40 integration initiatives that we expect to complete over the next twelve months. In addition, the combined company's headcount will be reduced by 21% by the end of the second quarter. Through leveraged common systems and process, we are streamlining the organization and expect to find additional synergy opportunities as we prepare the organization for the future.

[Christopher Moore, Director & CEO at Gogo]

Key synergy projects include consolidating manufacturing by relocating SD Avionics production from Ottawa to Greenfield, Colorado transitioning data center operations from our leased Chicago location to our wholly owned SATCOM Direct facility in Melbourne, Florida and the planned sale of our Melbourne headquarters building, which is expected to offset the 15,000,000 to $20,000,000 investment required to achieve the projected recurring synergy savings. We continue to expect strong free cash flows in 2026. This will be driven by higher margin service revenue from our Galileo and Air to Ground broadband investments and the benefits from the full year impact of realized cost synergies, further contributing to the profitability of is an anticipated €60,000,000 reduction in net program spend as AirsGround and Galileo program rollouts conclude and integration synergy investments are finalized. Moving on to the market demand, the Business Aviation sector presents a significant opportunity for increased broadband connectivity usage.

[Christopher Moore, Director & CEO at Gogo]

Currently, only

[Christopher Moore, Director & CEO at Gogo]

about a third of world's business jets and a fifth of all business aircraft, including turbine props, have any connectivity. The number are lower outside of The United States, with just 12% of business jets optimizing connectivity. Notably, there are 5,000 mid and small jets and 7,000 turboprops outside The US, that had no prior access to broadband solutions, highlighting a substantial unmet demand within a healthy and growing business aviation industry characterized by strong OEM book to bill ratios and expanding fractional fleets and robust flight counts. Turning to the mil gov mobility market, where demand is also strong. We see the opportunity for GoGo Solutions, 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, but will be replaced with growth from the transition of MilGov to SATCOM broadband solutions.

[Christopher Moore, Director & CEO at Gogo]

Under the proliferated LEO Earth Orbit program, KeyLeo, to which Gogo is now a key supplier, the Department of Defense recently increased its projected spending on LEO satellite services from $900,000,000 over the next ten years to $13,000,000,000 in the same period. The US Air Force twenty five by '25 program is lagging behind its goals to equip 25% of its 1,100 aircraft with satellite communications by the end of twenty twenty five. For us, this means more than 75% of this fleet is still without satellite connectivity, which the Air Force believes must be addressed, presenting a major opportunity for GOGO's growth. Our multi band LEO and GEO offerings also support the DoD PACE protocol, which requires the military to implement primary, alternate, contingent, and emergency systems. We also see increased demand overseas as non US governments disengage from their reliance on the DoD for military support and ramp up their investments in defense spending, including commercial communications systems.

[Christopher Moore, Director & CEO at Gogo]

Moving on to strategy, we continue to advance key initiatives that are critical for our continued penetration of the business aviation and military government mobility markets. Our strategy is to grow shareholder value by driving rapid growth in long term, high margin recurring revenue customers relationships in these dynamic sectors. We have invested three years in low Earth orbit satellite and broadband air to ground technology to improve service quality and coverage by developing a purpose built product portfolio that is easy to install, maintain, and upgrade. Crucially, our network agnostic hardware and software architecture allows for faster, cheaper upgrades, ensuring long term competitiveness. Expanding our target addressable market with business aviation and military government verticals, it is crucial to achieving our penetration goals.

[Christopher Moore, Director & CEO at Gogo]

SATCOM Direct's global sales and service network extends our reach and has increased our access to LEO TAM by 60%, while also providing GEO satellite solutions. This positions Gogo as the only IFC company offering multi orbit GEO LEO air to ground broadband solutions in the business aviation and government and military markets. Our comprehensive suite of hardware and software products, complemented by value added services, delivers a unique competitive advantage, enabling us to support more aircraft types than any other provider. We continue to strengthen our global network of 140 dealers across two twenty nine locations. These dealers act as a committed business partner and are invested in STC generation with us, which significantly amplified our sales effort.

[Christopher Moore, Director & CEO at Gogo]

Now I'd like to review our key strategic initiatives supporting our growth strategy. The EUTELSAT OneWeb LEO network is operational and represents the latest addition to our broadband sorry, broadening portfolio, powering our GOGO Galileo compact flat panel antennas, which can be equipped on a broad range of aircraft types. This new product opens an untapped market for us and gives us more capacity to offer to existing customers. This is a key differentiator, as Gogo is now the only provider that can deliver purpose built hardware and multi network capabilities, world class customer support, a global sales force, an extensive dealer channel, and OEM line fit positions to our target markets from a single source. The Galileo HD X terminal is our first to market LEO product, designed to fit on any business aircraft.

[Christopher Moore, Director & CEO at Gogo]

It is expected to deliver 60 megabits downlink, which is 12 to 60 times the speed of our current Gogo air to ground product offerings. We are targeted targeting the 12,000 mid sized and smaller aircraft flying outside of North America and have no broadband solution today, and the 11,000 mid sized and smaller aircraft either flying regionally outside CONUS or are owners who are willing to pay for faster mean speeds than our air to ground broadband products alone can provide. We're ahead of schedule on STCs, having confirmed five of them year to date: one in Canada, Three in Europe, 1 of which is for the world's most popular business jet, the Embraer Phenom 300, and our first US FAA STC, which was confirmed this week for the Gulfstream G200. We currently have aircraft type with the product installed in aircraft registered in Europe and Brazil, Perhaps most importantly, passenger reaction to HDX product has been outstanding, and passenger feedback is incredibly positive. EUTELSAT OneWeb has confirmed a software update that will improve performance up to 30% when it comes online.

[Christopher Moore, Director & CEO at Gogo]

In Q1, we shipped 36 HDX units, 20 of which were for STCs and eight for revenue. We recognized $1,000,000 of equipment revenue in the quarter. Year to date, we have shipped 59 units, including 42 for STCs. We have already announced that HD X is a line fit option with Textron for the longitude, latitude, and ascend operators. We are pleased to announce that we are close to signing with a second OEM and hope to confirm this at our next call.

[Christopher Moore, Director & CEO at Gogo]

In North America, we have over 300 opportunities for HD X and 25 for FD X, which is almost 60% of the pipeline. As I mentioned earlier, we have received PMA ahead of schedule for the FDX Terminal and can begin shipping products to dealers to develop STCs immediately. The FDX Terminal is designed for larger business aircraft operators that fly intercontinental missions and are expected to deliver up to 195 megabits per second. The 10 FTC agreements cover 10 super mid to heavy business jet types and are expected to be completed in the latter half of twenty twenty five and early twenty twenty six. We have previously mentioned another signed agreement as a line fit option with a major OEM for all its aircraft models.

[Christopher Moore, Director & CEO at Gogo]

I'll finish by noting that 4,700 advanced customers can take advantage of an easy Galileo upgrade when we release a software update for the Satcom Direct routers, another 2,200 could also benefit from the upgrade. As most of you know, our five gs tower network is built and ready to go live. As are the LRU and airborne antennas required to access the network. I am pleased to confirm that our chipset supplier has successfully completed fabrication and is now in the process of packaging the chip, which will be followed by the bring up process for deployment readiness. The market continues to respond enthusiastically to the five gs value proposition, with three zero one aircraft now pre provisioned for launch, up 29% from the two thirty three pre provisioned at the end of twenty twenty four.

[Christopher Moore, Director & CEO at Gogo]

We expect the launch to be relatively straightforward once we receive the five gs chip, because the five gs MB13 antennas and the five gs LIU have already received PMA and have 25 STCs in place. We look forward to bringing this product to market later this year, which will extend the life of our Aer2Gram product line, which supports a core set of GoGo customers. I'd also like to share a brief update on the FCC's Secured Networks program, which we call GoGo Evolution. Under this program, the FCC award GoGo a 30 three sorry, 334,000,000 grant to accelerate the removal of foreign telecom technology from our terrestrial network. As we announced last quarter, Congress passed the National Defense Authorization Act funding bill in December 2024, fully funding the Rip and Replace program.

[Christopher Moore, Director & CEO at Gogo]

This additional funding eliminates any potential shortfall anticipated to complete the project, and enables us to provide alternative incentives for GoGo classic customers choosing to optimize our new LTE network when we transition in 2026. The interest in the C1 LTE product continues. Upon launch of the C1 LTE box, 76 units were immediately shipped to customers. The C1 LTE product is a drop in solution for classic customers, have dual EVDO and LTE air cards, ensuring seamless support for our network cutover. For customers lacking the time or budget for an advanced upgrade before our 2026 cutover, this solution enables a cost effective option that keeps our customers connected and preserves GoGo's service revenue from this market segment.

[Christopher Moore, Director & CEO at Gogo]

Before handing over to Zach to talk financials, I would like to touch on the potential impact of current and proposed tariffs on our business. For context, under the Agreement on Trade in Civil Aircraft Treaty agreed at the Paris Accords and approved by US Congress in 1979, aircraft or aircraft parts were exempt from tariffs before the recent announcements. In that environment, The US aviation industry flourished, with aviation exports historically running six times higher than the amount of aviation imports. Ironically, imposed tariffs on imported aviation parts could push up the cost of US manufactured aircraft, potentially making the aviation industry less competitive. As you know, the situation with respect to tariffs remains fluid, and we are adapting as needed.

[Christopher Moore, Director & CEO at Gogo]

The tariff risk relates directly to the manufacturing part of the business, not our service provision. Most of our manufacturing is conducted in The United States, at our Broomfield facility in Colorado, and what manufacturing we had at Satcom Direct facility in Ottawa was relocated to Broomfield even before we knew of the tariffs to be imposed. Based on the current tariff environment and recent analysis, we believe we have modest exposure to tariffs. Under the current tariff proposal, we can absorb tariff impacts within our current guidance. In conclusion, Milgov fleet worldwide are in various stages of upgrade strategies, demand for broadband from new aircraft categories is high, and we believe the opportunities presented by the new LEO networks and the upgraded GEO network will all continue to stimulate revenues.

[Christopher Moore, Director & CEO at Gogo]

We are looking forward to producing compelling financial results, due to growth in service revenue, a significant reduction in product development program spending, the full year impacts of synergies we expect to achieve this year, and full funding of our FCC rip and replace program. I will now hand over to Zach to present the numbers.

[Zachary Cotner, CFO & Treasurer at Gogo]

Thanks, Chris, and good morning, everyone. I'm pleased to report first quarter results were ahead of expectations on both the top and bottom lines. In addition, five months after the close of the Satcom Direct transaction, we see improved product execution, strong financial discipline, and integration progressing well. We're still in the early days of the integration, but we believe these positive developments are setting the table for future free cash flow growth and material deleveraging as we look to 2026 and beyond. Even this period of global macro uncertainty, we are reiterating our 2025 financial guidance, including the impact of current and proposed tariffs.

[Zachary Cotner, CFO & Treasurer at Gogo]

Our 2025 guidance reflects small amounts of Galileo HD X equipment revenue in Q2, an FDX launch in the late summer and assumes minimal five gs revenue beginning in Q4. We expect the Galileo HD X service revenue to ramp in the first quarter of twenty twenty six. I'll now provide an overview of Gogo's first quarter financial performance, then I'll turn to our balance sheet and capital allocation priorities, and finally, I'll conclude with additional context on our 2025 guidance. For the first quarter, Gogo's total revenue was $230,300,000 up a 21 year over year and 67% sequentially. On a standalone basis, Satcom Direct's q one revenue grew 10% from the prior year.

[Zachary Cotner, CFO & Treasurer at Gogo]

Total service revenue of a hundred and 98,600,000.0 was up a 43% over the prior year and 67% compared to the prior quarter. At the end of q one, we had 6,902 total ATG aircraft online, which was a decline of approximately 3% compared to q one twenty twenty four and two percent compared to q four twenty twenty four. We achieved record advanced upgrades in the first quarter, and converting our classic customers to advanced continues to remain a top priority. Advanced AOL reached 4,716, up 15% from the prior year and now comprises 68% of the total ATG fleet, up from 58% in the prior year quarter. Our 2025 guidance assumes continued advanced growth, but the overall ATG AOL will be lower at year end 2025 versus 2024.

[Zachary Cotner, CFO & Treasurer at Gogo]

Total ATG ARPU of 3,451 dipped slightly sequentially and was flat from the prior year as we initiated a price increase in February of twenty twenty four. Total broadband g GEO AOL, excluding networks that are end of life, reached 1,280, up a 79 aircraft and 16% year over year and up 31 units sequentially. The majority of GEO broadband aircraft are under fixed term contracts helping to create revenue stability. In addition, our GEO ARPU is holding up better than expected. Now turning to equipment revenue.

[Zachary Cotner, CFO & Treasurer at Gogo]

Total equipment revenue in the first quarter was 31,700,000.0, up 40% year over year and 67% sequentially. The number of advanced equipment units shipped increased 19% sequentially to 241. Regarding our profitability, Gogo delivered service margins of approximately 53% inclusive of Satcom Direct. Standalone Gogo service margin was about 77% and in line with our previously stated targets. 98% of our gross profit in the first quarter was tied to service revenue, and we run the business to drive this recurring high margin service revenue.

[Zachary Cotner, CFO & Treasurer at Gogo]

Equipment margins were seven percent in the first quarter. And as a reminder, we expect Galileo equipment pricing to be close to cost. Now turning to operating expenses. In the first quarter, total operating expenses excluding depreciation and amortization were 57,600,000.0 and more than 5% below our budget, which helped drive better than expected adjusted EBITDA. I will now provide some additional commentary on our major strategic initiatives around five g, Galileo, and the FCC reimbursement program.

[Zachary Cotner, CFO & Treasurer at Gogo]

In the first quarter, '3 point '5 million of five g spending was comprised of 1,300,000.0 in OpEx and 2,200,000.0 in CapEx. We expect five g spend to decline significantly in 2026 as we roll out five g in q four. Turning to Galileo, we recorded $1,200,000 in OpEx and $1,500,000 in CapEx in the first quarter. We continue to expect total external development costs for both the HD X and FD X solutions to be less than 50,000,000 of which 27,000,000 was incurred from 2022 to 2024, and approximately 13,000,000 is expected in 2025. We anticipate approximately 80% of Galileo's external development costs will be in OpEx.

[Zachary Cotner, CFO & Treasurer at Gogo]

And finally, our FCC reimbursement program. Following the passage of the National Defense Authorization Act late in 2024, we continue to anticipate increased reimbursement of about 50,000,000 for our FCC program to support the upgrade of our ATG network to LTE and provide incentives to upgrade our classic fleet to advance. This will reduce our total cash outlays under the program to 10,000,000 and should be a primary driver of our 2026 free cash flow improvement. In the first quarter, we received 5,900,000.0 in FCC grant funding, bringing our program to date total to 47,100,000.0. As of March 31, we recorded a 10,700,000.0 receivable from the FCC and incurred 6,900,000.0 in reimbursable spend.

[Zachary Cotner, CFO & Treasurer at Gogo]

This 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 generated $62,100,000 in adjusted EBITDA in the first quarter, which includes approximately $1,200,000 of operating expenses related to Galileo and $1,300,000 of costs related to five gs. Our adjusted EBITDA margin was 27% as compared to our long term view in the mid-20s when the Satcom acquisition was announced in September. In addition, Gogo reported first quarter net income of $12,000,000 equating to $09 of diluted EPS. I'll now provide some color on our synergy progress.

[Zachary Cotner, CFO & Treasurer at Gogo]

We have made good headway driving synergies, we believe that we have more to go. We achieved $18,000,000 of run rate synergies at the close of the acquisition and added another $9,000,000 during the first quarter call, all in line with what we said on the fourth quarter call. Within two years, we continue to expect run rate synergies in the 25,000,000 to 30,000,000 range. As we said on the Q4 call, we still believe the cost to achieve these synergies will be at the low end of our previously expected range of $15,000,000 to $20,000,000 and we anticipate funding these costs with proceeds from the sale of the SD Headquarter building in Melbourne, Florida. Moving to free cash flow.

[Zachary Cotner, CFO & Treasurer at Gogo]

First quarter free cash flow was solid at 30,000,000, and we view the current and proposed tariff situation as manageable. We expect to have plenty of cushion to absorb any minor tariff impacts on our 2025 free cash flow guidance. We continue to expect that 2025 will be our trough year of free cash flow as new products ramp and the corresponding product investments roll off. We believe that sustained free cash flow growth minus expected future earn out payments is the key to driving shareholder value and will help support the return of cash to shareholders over time. Now I'll turn to the discussion of our balance sheet.

[Zachary Cotner, CFO & Treasurer at Gogo]

Gogo ended the first quarter with 70,300,000.0 in cash and short term investments and $850,000,000 in outstanding principal on our term two term loans, with our $122,000,000 revolver remaining undrawn. This equates to a net leverage of 3.4 times at the end of the first quarter, and we expect this ratio to remain relatively flat as we move through the year. Our leverage trends are better than when the Satcom deal was announced largely due to higher adjusted EBITDA and strong free cash flow. Our cash interest paid for the quarter net of cash net of hedge cash flow was 17,800,000.0. As we mentioned in prior quarters, we have a hedge agreement plate placed, and at the July, the hedge steps down to 250,000,000 with the strike rate increasing from a 25 bps to 225 bps, resulting in 29% of the loans being hedged.

[Zachary Cotner, CFO & Treasurer at Gogo]

As a reminder, the cash interest paid for 2024 net of hedge cash flow was 33,000,000. We expect that to be approximately 70,000,000 this year. Our capital allocation priorities remain consistent with prior quarters and focused on executing across the following four priorities in order. First, maintaining adequate liquidity. Second, continuing to invest in our strategic opportunities primarily through Galileo and five g.

[Zachary Cotner, CFO & Treasurer at Gogo]

Third, maintaining appropriate level of leverage for the economic environment with the target net leverage ratio of two and a half to three and a half times. And finally, returning capital to shareholders. As a reminder, Gogo has 12,100,000.0 remaining on its $50,000,000 repurchase authorization that our board approved in September 2023. At 3.4 times, we're just a tick under the high end of the targeted leverage range, and we continue to monitor the market determine a reasonable strategy to refinance our term loan B. 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.

[Zachary Cotner, CFO & Treasurer at Gogo]

In our earnings release this morning, the company reiterated our 2025 financial guidance, adding that it includes the current and proposed impact of global tariffs. For 2025, we expect total revenue in the range of $870,000,000 to $910,000,000 reflecting the HD X launch in q one and five g generating modest revenue in q four. Adjusted EBITDA in the range of 200 to 220,000,000, reflecting operating expenses of approximately 25,000,000 for strategic and operational initiatives, including five gs and Galileo. Free cash flow in the range of 60,000,000 to 90,000,000, and we expect 2025 to be the trough of our free cash flow as we have approximately 70,000,000 slated for strategic investments, net of the FCC reimbursement. And finally, we expect capital expenditures of approximately 60,000,000 containing 45,000,000 for strategic initiatives, including five gs, Galileo, and LTE network build.

[Zachary Cotner, CFO & Treasurer at Gogo]

The CapEx guidance excludes 20,000,000 reimbursement from the FCC. We remind you that preliminary targets for the combined company assume 10% long term revenue growth and adjusted EBITDA margins in the mid-20s. We anticipate providing updated targets once our long term plan is finalized. In summary, Gogo's first quarter performance highlights our focus on new product execution and financial discipline. The positive impacts of the acquisition are visible in our results, and we believe that a fully integrated GogoSatcom Direct global business will have the scale, market positioning, and the broad product portfolio needed to delever the balance sheet, drive free cash flow, and create long term shareholder value.

[Zachary Cotner, CFO & Treasurer at Gogo]

Before we open the floor for questions, I wanna 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 concludes our prepared remarks and we're now ready to take questions.

[Operator]

Our first question comes from the line of Rick Prentiss from Raymond James and Associates.

[Brent Penter, Associate Analyst - Equity Research at Raymond James Financial]

Hey, thanks everyone. This is Brent Pinter on for Rick. Appreciate the color on the modest tariff impact and it's absorbing the guidance. Can you size that for us in terms of the dollar amount that's now baked into your guidance on tariffs?

[Zachary Cotner, CFO & Treasurer at Gogo]

Yeah, it's about around 5 ish million. It's kind of half EBITDA, half working capital. You know, a lot of it's from our purchases of inventory. So and like we said, most of our revenue is service based, so that's that's exempt.

[Brent Penter, Associate Analyst - Equity Research at Raymond James Financial]

Okay. Got it. And then just on the broader economy, can you update us on the proportions of your customer base that are corporate versus charter, high net worth, etcetera, As a combined company now that we have SATCOM, in what portion of your customer base would you view as economically sensitive, given some of the macro fears out there, and if you're seeing anything, any impact so far?

[Christopher Moore, Director & CEO at Gogo]

Yeah. We're not really seeing any impact at all. I mean, the good thing with the business is we're really diverse internationally, and, you know, we're not really seeing any kind of, impacts at this point in time. The other bit with the government business, you know, when we look at any potential impacts, usually there are, we've seen that in the past with trends in the past that business aviation, like when we looked at COVID in 2020, if it goes down slightly, then the government business goes up. So, we're feeling pretty confident at the moment.

[Christopher Moore, Director & CEO at Gogo]

The OEM deliveries look good. As we mentioned in the call, with the GEO activations, they're still up and the demand on the pipeline for Galileo is exceptionally strong.

[Brent Penter, Associate Analyst - Equity Research at Raymond James Financial]

Okay. And then last one

[Brent Penter, Associate Analyst - Equity Research at Raymond James Financial]

for

[Brent Penter, Associate Analyst - Equity Research at Raymond James Financial]

me. On the 10% growth at SATCOM, since we don't have all the historicals there, could you break down roughly the growth rate that you saw in 1Q between geo broadband versus narrowband versus mil gov? And since GoGo investors are newer to that business, how should we think about kind of a long term sustainable growth rate and what's baked into that 10% combined guidance that you gave in terms of SATCOM growth?

[Zachary Cotner, CFO & Treasurer at Gogo]

Yeah, there's a lot to unpack. I'll try to distill it as best I can. So I would say the vast majority of the growth was related to geo broadband. And with me, like you can see that, like we said, with the geo units online. So, and then, you know, within that, there's a pretty sizable piece in Millgov that was also geo broadband.

[Zachary Cotner, CFO & Treasurer at Gogo]

And we're not, you know, the 10% was the previously guided long term growth rate. So we're not prepared to discuss the long term rate on this call. But I mean, if you want to think about the trends, it's really the geo broadband units online.

[Brent Penter, Associate Analyst - Equity Research at Raymond James Financial]

Okay. Thank you, everyone.

[Christopher Moore, Director & CEO at Gogo]

Thank you. Thanks, Brian.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Sebastiano Petty from JPMorgan.

[Sebastiano Petti, Senior Research Analyst at JP Morgan]

Hi, thank you for taking the question. I guess just relatedly to that, if you could perhaps Zach give a little bit of color, with the tariff impact not quite that extensive, we would have thought that you would probably grow revenue sequentially from here over the balance of the year as shipments from Galileo start coming on. But the guidance, you know, if you run rate the first quarter implies you're above the high end of guidance for the year. So just any considerations as we think about that glide path from here? And then I have a follow-up.

[Sebastiano Petti, Senior Research Analyst at JP Morgan]

Thanks.

[Zachary Cotner, CFO & Treasurer at Gogo]

Yeah, so, you know, we noodle this a lot to try to try to, you know, make sure we're being kind of thoughtful about the trends of the business. And I think one of the two of the big factors that we monitor very closely that are really kind of outside of our control is the continued path of ATG units online, right? Because, Q1 was a little rough on that side. And then as well as the geo units online, as well as the corresponding ARPU, and, you know, we don't release ARPU for the geo business, but it's holding up much, much better. But we do anticipate kind of continued pressure on that piece going forward.

[Zachary Cotner, CFO & Treasurer at Gogo]

So, you know, if that holds up better than we kind of think there could be upside and closer to the high end. But again, it's early days, right? Know, we're only a quarter in, so we just want to make sure we're being thoughtful about those trends as, you know, the new combined business and kind of how the LEO story unfolds.

[Sebastiano Petti, Senior Research Analyst at JP Morgan]

Okay. That's very helpful. Thank you for that. And then just as you touched on, Zach, I mean, the ATG units online, a little bit softer. Think, Chris, in your prepared remarks, you talked about just maintenance suspensions.

[Sebastiano Petti, Senior Research Analyst at JP Morgan]

But obviously, the debate on the COGO story overall is obviously the competitive environment. And so how do we how should we think about just getting comfort about, you know, maybe this is maintenance related as opposed to, you know, share competitive losses within the ATG segment specifically?

[Christopher Moore, Director & CEO at Gogo]

Yeah. When we when a customer suspends, we actually have really good market intelligence data on why customers are suspending or leaving the network. So, yeah, when we look when we look at that information, actually, it's pretty well educated, so it's not kind of, you know, guesswork there. So, you know, on the air to ground side, we're we're still very confident. We can see also with customers still pre provisioning for five g, which I think is a good indicator as well in the market that people still want the service.

[Christopher Moore, Director & CEO at Gogo]

And then unlike the GA business, which is more kind of contractually over twelve months plus, the ex ground business is actually there's a lot of kind of customers within more flexible based contracts. So it's really kind of hard to put some trends around that, but when we're looking at the reasons why people are suspending, we haven't got really major concerns at this point.

[Sebastiano Petti, Senior Research Analyst at JP Morgan]

Got it. And then lastly on the, you know, geo broadband. I mean, obviously, Zach, you did touch upon this, some mil gov in there that you don't necessarily disclose, but units up 16% year on year, aircraft online up 16% year on year. Obviously, lots of concerns as well from a competitive standpoint about that. But help us think about how you see that business today from a relative competitive standpoint and how you're thinking about it over time.

[Sebastiano Petti, Senior Research Analyst at JP Morgan]

Are the GEO broadband aircraft online a source of potential upgrades to LEO and your Galileo solution over time? Just how you're kind of thinking about the trends in that over just a multiyear basis? Thanks.

[Christopher Moore, Director & CEO at Gogo]

Yeah, so I mean, obviously there's growth there in GEO, which is really encouraging. I think that just demonstrates the power of line fit as well with the OEMs and that customers are obviously still taking the service. You kind of hit, you know, a good point. I think that we see it in two things with Galileo. One is customers may upgrade and replace GEO.

[Christopher Moore, Director & CEO at Gogo]

That's a definite potential. But as I mentioned on the last call, we also see kind of the mid to large jet market taking it as a supplement. So having both LEO and GEO, and then going into the government sector, that's actually a requirement with the PACE planning, the primary alternate contingent and emergency. So we do see kind of, you know, modest growth and kind of difficult to predict, but that's kind of really why we see the market. But, you know, geo is holding up exceptionally well.

[Christopher Moore, Director & CEO at Gogo]

I also think that also is a demonstration to kind of like with competitive products. There may be a potential there. There's a little bit of cooling off. And, also, the GEO products have also got a lot more competitive with speeds, but obviously with the LEO, it's slightly a big different offering from a latency point of view. So, with our mid to large jet customers, we see that more kind of like as supplement, and then hopefully that's positive for the business.

[Christopher Moore, Director & CEO at Gogo]

Thanks again, everyone.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Scott Searle from ROTH Capital.

[Scott Searle, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Hey, good morning. Thanks for taking my questions. Congratulations on a great first quarter out of the gate. Chris, maybe to start, I want to confirm on the five gs chip front, you've used the word fabrication a couple of times in your opening remarks. I want to confirm that you guys have actually gotten some testing back on it and this chip is to go outside of some basic firmware upgrades and testing and otherwise.

[Scott Searle, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

I was wondering if you could also take us through the milestones to getting that launch up and running. It sounds like you're tracking towards the fourth quarter of this year. And finally, the five gs front, help me reconcile, AOL, ATG down exiting 2025, given the impact that we're expected to see from five gs at some point late this year and certainly into 2026? And then I had a follow-up.

[Christopher Moore, Director & CEO at Gogo]

I'll try and cover that. Think, you know, with the fabrication, it's just at this point, we've we've been at this stage before. So we've been, you know, pretty cautious at this point. I mean, obviously, you bring up the chip, they have to layer it and actually come up with the fabrication of the products. They will then go from our supplier, go into packaging, and then ultimately, then we have to bring up as well.

[Christopher Moore, Director & CEO at Gogo]

So we've got these stages that will unfold over the next several months, and, you know, that's why we've got, hopefully, the network being launched in the fourth quarter. Everything's looking good so far. We have been to this stage before, so we're very optimistic, but, you know, we we don't wanna really say much more than that at this point. Regarding the actual business, I think I covered it in the last comment, but, you know, it's, you know, we see that kind of suspensions, people coming back online. Q1 is usually a big heavy maintenance window for a lot of customers.

[Christopher Moore, Director & CEO at Gogo]

So, the story unfolds across the year, we still think there's strong upgrades for customers going into more advanced edge ground products and obviously opportunity for those customers with Galileo as well.

[Scott Searle, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Great. Thank you. Very helpful. And if I could on the Galileo front, it sounds like now with the PMA approvals, you're really progressing well on both the HD X and the FD X front. I'm wondering just from a competitive landscape standpoint, if your expectations for the size of the market and share are increasing given the success and early success that you're having with FD X and HD X?

[Scott Searle, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

And if kind of the flipping Twitter comments from Elon Musk are actually driving some competition and opportunities and share your direction? Thanks.

[Christopher Moore, Director & CEO at Gogo]

Yes. I think the big thing is we're really encouraged. We've got over 300 customers in the pipeline already for HD X, which I think speaks massive volume. So we're really excited about that. Also, the FTCs, we're seeing no slow up.

[Christopher Moore, Director & CEO at Gogo]

And that's why the MROs are so important to us. And yeah, competition's healthy. Think it's a really, really good thing. Think customers have been waiting with having a competitor in the market. And then also the FDX PMA, we're ahead of schedule.

[Christopher Moore, Director & CEO at Gogo]

Our engineering team has done an amazing job. We had a lot of lessons learned from HDX. We were able to accelerate the product into market, which is fantastic news. And those STCs are now starting to become a real thing as we can ship product. So we're really excited and from a competition point of view, think it's really important as well as, you know, competition's good, but we're really focused to providing that enterprise product global.

[Christopher Moore, Director & CEO at Gogo]

And then to the earlier point, you know, whether it's LEO and GEO together or LEO on its own, we actually see a really good kind of positive opportunity for the product overseas. We look at the mix in our pipeline just for HDX at the moment, it's about sixtyforty split between North America and the international markets. And I think that's a real strength of Gogo moving forward with the Satcom Direct acquisition. We've now got access to a complete global sales team, which also we can provide support anywhere in the world. So we can get on a plane in typically under twenty four hours if there's any problems with systems.

[Christopher Moore, Director & CEO at Gogo]

Then also, we've made massive investments in regulatory compliance as well. So we're really excited. We're getting really great reactions from customers. And I think that split as well is really interesting on kind of like that pipeline split with 40% from coming overseas, I think is really encouraging.

[Scott Searle, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Thanks so much.

[Christopher Moore, Director & CEO at Gogo]

Thanks, Steve.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Justin Lang from Morgan Stanley.

[Justin Lang, VP - Aerospace & Defense Equity Research at Morgan Stanley]

Yes. Hi, and Zach. Good morning. Thanks for taking the question. A lot's been covered.

[Justin Lang, VP - Aerospace & Defense Equity Research at Morgan Stanley]

I just wanted to ask one on the Milgov business. Chris, you mentioned at the top with Peleo and Pace, but I was hoping you could provide maybe a little more color on some of the trends you're seeing in that business just given some of the fast changing dynamics we're seeing in defense and government markets in The U. S. And Europe, right? European defense spend clearly on the rise.

[Justin Lang, VP - Aerospace & Defense Equity Research at Morgan Stanley]

U. S. Budgets could top $1,000,000,000,000 here in 2026. So just curious if you're seeing new opportunities emerge really in near term in this space. Thanks.

[Christopher Moore, Director & CEO at Gogo]

Yeah, we're seeing pretty much what you've just covered. Mean, it's really encouraging at the moment, the overseas markets, which in arguments been kind of a little bit sleepy before in the past, very dependent on the DOD. And really, we're seeing a lot more demand coming from more sovereign based networks, also the ability to have a little bit more control on their future capability. So, we see a great opportunity within European environment, also Southeast Asia and some other territories as well. Great news is we've got specialized staff in those areas.

[Christopher Moore, Director & CEO at Gogo]

And then the DOD is really, you know, as mentioned in the call, really looking at that tech refresh and, you know, that narrowband technology that have been very dependent on for a long time and the difficulty of really moving into new services and installations of those services. So we really kind of we feel with the HD X and the FD X, we've really kind of created a very easy to install platform, taking a commercial proposition into the government, to drive out costs for them as well. So, you know, we really don't want that kind of thousand dollar hammer moment for the government. What we really wanna do is drive in the scale of commercial solutions. So, we're very, very kind of encouraged about that business unit.

[Christopher Moore, Director & CEO at Gogo]

We feel very optimistic about it. Yeah, so all of the things you mentioned, we're starting to really see those. Also, the support for our partner, EUTELSAT OneWeb is really increasing and you can see that with a lot of press and kind of the traction they're getting as well. So, we're very excited about the whole opportunity.

[Justin Lang, VP - Aerospace & Defense Equity Research at Morgan Stanley]

Great. Appreciate it. Good to hear. I'll stick to one. Thanks.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Louis De Palma from William Blair.

[Louie Dipalma, Research Analyst at William Blair]

Chris, Zach, and Will, good morning.

[Zachary Cotner, CFO & Treasurer at Gogo]

Good morning. Good morning. Good morning, Louis.

[Louie Dipalma, Research Analyst at William Blair]

When taking into account the onetime program costs and and further expected synergies, how much of the 2025 costs, you know, should go away for 2026?

[Zachary Cotner, CFO & Treasurer at Gogo]

Yeah. So the estimate that we're saying is anywhere from 60 to 70,000,000. Like you said, you're seeing all of this stuff hit. You know, obviously, there there will be some, you know, investment as we roll out kind of our five year r and d road map, but I think it's gonna be a lot tighter. And that's sort of what we said is 60 to 70,000,000 of kind of costs that should be pulled out.

[Louie Dipalma, Research Analyst at William Blair]

Great. And what's the breakdown? How much of that should be OpEx versus CapEx?

[Zachary Cotner, CFO & Treasurer at Gogo]

I'm looking right here. I don't have that in front of me, but I when we

[Zachary Cotner, CFO & Treasurer at Gogo]

chat later, I'll be able to pull it up for you. Okay.

[Louie Dipalma, Research Analyst at William Blair]

Great. And an another question. Chris, from a high level, can you discuss the performance for HDX for the initial adopters? I know that you said that it's performing according to to spec, but can you remind us what those specs are and how the performance of HDX and and FDX should compare to the Starlink performance?

[Christopher Moore, Director & CEO at Gogo]

Yeah. I think I'll take that in a couple of things. So we've got customers flying around in Europe and US right now. Actually, paying customer in Europe, a large fleet operator. Services working flawless.

[Christopher Moore, Director & CEO at Gogo]

And, you know, they're able to do everything they wanna do from Teams meetings, streaming movies on the bulkheads. And then the nice thing with our solution is, you know, obviously, it's completely integrated into the cabin management system. Regarding kind of comparisons to competitive products, I'll just fold LEO Speed. Obviously, HDX is designed to go up to 60 megabits per second. We're seeing the product perform within that parameter.

[Christopher Moore, Director & CEO at Gogo]

The uplink speeds, solid. Really, when you look at the passenger counts on those jets, it's more than enough capacity, flexibility. I think everybody's gone kind of speed mad. Everybody talks about the speeds, but nobody talks about the consistency of the capability and the capacity capability within flight. So, what we're focused on is that and also having service level agreements that we can back that up with.

[Christopher Moore, Director & CEO at Gogo]

But everything we've seen with customers is extremely encouraging. We're really excited. We've also got some customers down in South America, and, you know, that's the other than I think we're seeing about the service is is just consistent wherever these customers are flying and it's completely global. And we've got the same expectations from FDX as well. And, we're pretty excited about it, Lou.

[Louie Dipalma, Research Analyst at William Blair]

Great. That's it for me. Thanks, everyone.

[Christopher Moore, Director & CEO at Gogo]

Yeah. Thank Thank

[Operator]

you. At this time, I would now like to turn the conference back over to Will Davis for closing remarks.

[Will Davis, VP - IR at Gogo]

Thank you, everyone, for joining our first quarter conference call this morning. This concludes our call. You may now disconnect. Thank you.

Participants

Executives

• Will Davis, VP - IR
• Christopher Moore, Director & CEO
• Zachary Cotner, CFO & Treasurer

Analysts

• Brent Penter, Associate Analyst - Equity Research at Raymond James Financial
• Sebastiano Petti, Senior Research Analyst at JP Morgan
• Scott Searle, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC
• Justin Lang, VP - Aerospace & Defense Equity Research at Morgan Stanley
• Louie Dipalma, Research Analyst at William Blair