Q4 2020 Gogo Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to the Q4, 'twenty 'twenty Gogo, Inc earnings Conference.
At this time all participants are in a listen only mode.
Later, we will conduct a question and answer session and instructions will follow at that time.
If anyone should require assistance during the conference you can press Star then zero and an operator will be on line to assist you.
I would now like to turn the conference over to your Speaker today, Mr. William Davis, Vice President of Investor Relations. Please go ahead Sir.
Yeah.
Thank you Deb and good morning, everyone welcome to Gogo as fourth quarter 2020, and full year 2020 earnings conference call.
Joining me today to talk about our results of our Oakley Thorne President and CEO.
Barry Rowan Executive Vice President and CFO.
Before we get started I would like to take this opportunity to remind you of the during the course of this call. We may make forward looking statements regarding future events and the future financial performance of 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 the conference call.
These risk factors are described in our earnings press release filed this morning.
And are more fully detailed under the risk factors in our annual report on form 10-K, and 10-Q and.
And other documents, we have filed with the SEC.
In addition, please note that the date of this conference call is March 11th.
2021.
Any forward looking statements that we make today are based on assumptions as of the state.
We undertake no obligation to update these statements as a result of more information or future events.
During the call we'll present both GAAP.
And non-GAAP financial measure the measures.
We've included a reconciliation of an explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures.
In our fourth quarter earnings press release.
This call is being broadcast on the Internet and available on the Investor Relations section of the Gogo website at IR Dot Gogo are dot com.
The earnings press 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 Oakley.
Thanks will and.
And good morning, everyone.
Welcome to our first quarterly earnings call as the new Gogo.
Obviously, the highlight of the fourth quarter was clearly a completion of the sale of our CA business, the Intelsat for $400 million.
And today, we're a more focused company with an industry, leading technology, our strong market position.
The tangible recurring revenue model and a stronger balance sheet.
All positioning us well for long term growth.
This morning, I'll walk through the highlights of our financial results of continuing operations for the fourth quarter and full year 2020.
Give some color on the market trends and competitive advantages that we believe will drive the new Gogo as long term performance.
And describe how those factors contribute to our outlook for fiscal 2021 and beyond.
And I stressed beyond because 2021 will still be impacted by COVID-19.
And we will still bear transition costs as we migrate from being a bigger unprofitable company to being a smaller profitable company.
So let me start with the fourth quarter results.
The impact of COVID-19 on our 2020 results can't be overstated.
However, I think our team managed extremely well in an extremely challenging environment and a lot of gift kudos and thanks to them.
We executed a comprehensive 16 lever of cost reduction strategy that enabled us to preserve cash and run a leaner more efficient operation.
We completed the sale of the CA business, showing up the balance sheet and focusing our resources on an attractive resilient market, where we have deep competitive moat.
And we actually expanded our installed base growing our atg aircraft online or a O L by 2% year over year.
However, delivered Q4 of 2020 total revenue from continuing operations of $77 6 million down.
Down on the 10% year over year not bad when you consider that most business travel was still at a standstill in the quarter.
On a quarter over quarter basis, we obviously did much better as we were still coming back from the Covid low point that occurred in Q2.
The total total debt with total revenue growth nearly 17% from Q3, driven by a 7% increase in service revenue and the 57% increase in equipment revenue.
Sequential service revenue was driven by a 4% increase in a O L.
And the 2% increase in average monthly connectivity revenue per atg aircraft or our pool.
Importantly, the Gogo entered 2020 with 5669 AT&T subscribers online and.
And ended 2020 with 5000 and 778 subscribers online.
<unk>, our pre Covid quarterly peak.
On the equipment side Q4 was by far our highest quarter of the year at 21 million up from $13 million in Q3 and equal to our quarterly average for 2019.
Total atg units online set of quarterly record of 5778 versus 566 nine at year end 2019.
Total advance units online reached one 719 at year end up 532 of 45% from year end 2019 and.
And now account for 30% of the Atg Atg broadband installed base.
Later, I'll touch on while expanding the proportion of advanced platform users in our subscriber base is such a positive impact on gogo over the long term.
In the fourth quarter the business aviation industry generally proved its resiliency.
We look at business aviation flight activity as a proxy for demand for our products.
And in Q4, we saw a strong rebound in flights as more passengers shifted from commercial to the business aviation travel and those passengers to manage the quality in flight connectivity.
Our customers flew 83% of the number of flights in Q4 of 2020 as they flew in Q4 2019.
Up from 81% in Q3, 2020, Q3, 2020 versus Q3, 2019 and up from 47% in Q2 2020 versus Q2 2019.
In December that number actually rose to 85% of 2019 for like counts and actually hit 100 per cent for the last two weeks of December.
And we continue to see improvement this year as flight counts rose to 86% of the 2020 count for January and 88% of the 2020 flight count in February.
We see the strongest performance recovery, among our charter and fractional customers, which in February flu of 108% and the 103% respectively of.
February 2020 flight counts.
Meanwhile, our corporate flight department customers of cut travel considerably and in February only flow, 75% of their February of 2020 flight counts.
We think this bodes well for future business demand, because we expect corporate flying to come back as the vaccines are rolled out and the leisure demand may wane, a bit we expect the aggregate demand for flights to be positive.
And as demand recovers, we expect more aircraft to be pulled into service and Marc Gogo assistance to the activated.
Usage is another important measure for us because it reflects the utility of our products to passengers and the air demand to have connectivity other aircraft.
Overall average data consumption per flight through the end of February 2021 was 20% above average consumption for the same period in 2020.
And of major charter in fractional fleets consumption per flight was 30% over pre COVID-19 rates.
Further demonstrating that reliable in flight connectivity is more of a must have than ever.
The impact of half of these trends has been positive we.
We had 567 gross atg activations in the quarter of <unk>.
<unk> 349, or 62% were new accounts.
218 of those were upgrades, mostly from our from our classic product line.
We've also seen account suspensions, which spiked in the March 2020 timeframe settle back down to pre COVID-19 levels.
On an even more positive note of the more than 1100 account suspensions, we suffered in the first three months of Covid.
About 80% of come back with 93% of those choosing the same are of higher price plan.
And of the 928 planned downgrades, we suffered in that period, 87% of restored the all plans are bought upgraded plants.
And generally had a very strong quarter. However, our profitability was negatively impacted by of $10 million accrual for the full year 2020 bonus payout.
Normally that expense would be accrued over the course of the year and wouldn't hit quarterly numbers with such a magnitude.
This occurred because as part of our Covid 16 lever cash management program our cash.
Compensation Committee decided early last year that we would pay out 2020 bonuses in stock.
Was recorded as stock based compensation.
And excluded from adjusted EBITDA.
However, once we completed the Intelsat transaction and had adequate cash on our balance sheet. The committee decided we would pay the bonus in cash, which led us to of accounting for the full year bonus in one quarter.
Now, let me turn to the new growth New Gogo.
We entered 2021 is an agile niche focused company and we're looking forward the more comprehensively introducing the new gogo more thoroughly to the market in the second quarter of this year.
But today I want to touch on the opportunities we see in front of us and how we plan to take advantage of our core strengths to capitalize on those opportunities.
Let me start with the market opportunity.
First off.
So the business aviation market is relatively small compared to other mobility verticals it.
It holds a lot of opportunity for our niche focused company like Gogo.
66% of the world's business aircraft of registered in North America, and more than 70% of those roughly 18000 aircraft do not yet have broadband in flight connectivity.
For the last five years Gogo has added an average net of 400 aircraft online per year, and we feel the can sustain that pace or a little better over our five year planning horizon.
We think of number of trends support that level of growth, including.
The growing demand from the connectivity is Gogo has led all of Covid is that all of us to spend more time online than ever before.
The Uber vacation of business aviation is more connected passengers turned of charter of timeshare models to access travel.
The trend of commercial airlines cutting service to secondary markets.
The desire of corporations to protect executives from health risks.
And the fact that inventory of secondhand aircraft for sale has hit all time lows, which should lead the more new jet orders of new aircraft online for Gogo.
Now, let me turn from the market opportunity the some of our core strengths starting with our Atg network.
Our Atg network and proprietary FCC license spectrum gives us a unique advantage of sort of in the U S market over our traditional satellite competitors, providing positive vertically integrated owner economics.
Our equipment is small and light compared to satellite equipment and fits on midsized light jet and turboprop aircraft that cannot support the size and weight of satellite equipment.
Even in the large jet market, we have more jets activated in the U S debt all of our traditional satellite competitors combined because of our equipment and service is lower cost and our services of equivalent or better quality of given its low latency.
I should note. This quality aspect has improved considerably over the past five years as our pharma commercial aviation Division is offloaded most of its mainline aircraft from Atg the satellite connectivity.
We anticipate the with advances in technology, namely electronically durable array antennas.
Satellite antennas will get smaller over time.
And as we invest in improving our Atg network, we expect AT&T to remain competitive, especially in mid to smaller aircraft. The fly U S space missions.
Speaking of investments and new Atg technology, let me touch on Gogo five G.
Our current dug out of <unk> network upgrade will allow us to take advantage of the advanced platforms bear aggregation capability to combine our four megahertz of licensed spectrum. The 60 megahertz of two of that for unlicensed spectrum into what amounts to a single channel for our customers.
Aggregation will allow for a significant expansion of capacity for most of the United States with the.
The degradation that interference in the unlicensed band will cause for competitive offerings that rely on only unlicensed spectrum.
I should note.
And our portfolio of 349 patents includes patents related to this.
Promote leap by simply turning of software key.
This year will enable an air of software updates, thereby saving customers time and money when installing new releases. This is especially important for fleet operators, we're installing upgrades manually with USB sticks can take months for every release.
The advanced run self diagnostics and it reports of them remotely, allowing us to often fix issues before the customer even notices and issue has occurred and it does much much more.
Talk about more in the future.
But the main point here is that we can do with minimal hardware upgrades.
I'm sorry, we can do all of this of minimal hardware upgrades because like Tesla.
Due of software upgrades, but competitors do with hardware upgrades saving customers hundreds of thousands of dollars on equipment and weeks of downtime.
The prove that point when we upgrade of ads five customers to <unk> most of the upgrade will be software the.
The only hardware needed will be one small box from the plane in two new antennas that fit exactly where the older tenants fit.
The advanced platform also standardize componentry across all of <unk> devices, which drives down per unit costs and improves quality because of our supply chain consists of a higher quantities of the less diverse component.
<unk> base.
Needless to say, we're very bullish on advance and believes it gives us the flexibility to adopt and integrate new technologies as they evolve the both defend and grow our current market position and also attack new market segments in the future.
The last core strength I'd like to describe the day is the deep relationships, we have of their customers and distribution partners.
We've been building and delivering product for our partners and customers from more than 20 years and then in the case of our distribution partners, we have been making them money for more than 20 years.
We are dedicated we have dedicated sales forces focused on the OEM and dealer markets from the line fit at all nine of the major business aviation of original equipment manufacturers and we have a network of 120 dealers worldwide that includes all of the major MRO.
The significant to note the dealers invest in developing stc's for gogo of equipment, because they're confident that they will sell enough installs to earn the return on that investment.
And that's why the day 36 different dealers have 93 different supplemental type certificates for gogo equipment covering more than 200 makes and models of aircraft.
Likewise Oems invest in type certificates and today Gogo of equipment as an option or standard 45 different mix of aircraft.
We also have dedicated sales teams focused on end customers and on strategic accounts to make sure that the ultimate user understands the benefits of our platform and pulls demand through the channel.
These deep relationships and the teams we have working with customers enable us to drive product penetration very quickly once the product is released.
We've sold more than 1700 advanced unit since we launched the product in 2017, and we believe that's more broadband IFC units in all of our competitors combined have ever sold into the market.
Now, let me summarize our strategy as we go forward.
First we will continue to enhance our atg network to protect our core markets and drive penetration of the advanced platform.
And second is <unk>.
I will give us the lay of new products and services on top of the advanced platform in order to drive improved product performance, thereby widening our competitive moats and driving customer loyalty.
Finally, I'd like to touch briefly on our financial strategy and trajectory and then turn it over to Barry to do the numbers.
Okay.
The last step in our transition to becoming the new Gogo is the refinancing of our current $975 million of first lien notes and settling our 238 million of convertible notes.
As of last night, we had cash on the balance sheet of $465 million and as Barry will discuss during the <unk>.
Most of our refinancing aimed at lowering our leverage ratio and lowering our interest expense.
Strategically, we'd like to strengthen our balance sheet for three reasons.
First the more free cash flow, we generate the more we can take advantage of future investment opportunities should we see them.
Two the stronger our balance sheet the more resilient, we can be against competition should it arise.
And three the more free cash flow regenerate the more quickly we can further delever and enhance shareholder returns.
Towards the vans are approach to settling the converts will now be aimed at producing a stronger balance sheet and.
And we expect to settle them in shares for the amount of debt.
Okay.
Importantly over 95% of units shipped in the fourth quarter were events.
And the number of events units online increased 45% year over year.
Historically, our business aviation business has delivered very strong profit performance stemming from the owner economics of our proprietary Atg network and the efficiency of our operations.
We continue to maintain attractive profit margins, even during the Covid pandemic.
Our fourth quarter.
Our inventory reserves taken in the fourth quarter.
Tied to the expected transition from our older Classic Atg product line to our events platform.
We expect equipment margin percentages to remain approximately flat for the full year 2021 versus 2020.
Yeah.
Now, let's turn to a discussion of Opex.
Combined E D N D sales and marketing and G&A expenses increased to $34 million in the fourth quarter of 2020.
From two of them.
Net of expenses to the approximately flat year over year, driven by growth and nonrecurring items related separation of migration costs associated with the C. A sale of.
Offset by a reduction in corporate cash.
We plan to exclude the separation and migration costs from adjusted EBITDA in future periods to allow for greater comparability.
We stated on our third quarter call. The we expected to reduce total G&A expenses meaningfully beginning.
Cash flow generation of the business.
I want to highlight one point relating to the accounting treatment of Gogo as debt, which is tied to the covenants in the senior notes indenture that govern the use of proceeds from certain asset sales.
If we don't use the net cash proceeds from the sale by December one of this year to repay certain debt or investing in our business, we will be required to offer to repurchase of senior notes in the principal amount equal to the net cash proceeds, which we calculate as approximately $341 million.
We have therefore reclassified this amount from long term to current debt.
Our expectation is that the comprehensive refinancing we plan to complete in the next several months, we will satisfy this near term obligation.
Yeah.
We are now set up well to refinance our balance sheet on much more favorable terms.
This is based on the attractive structure of the business aviation industry, along with our strong market position and compelling business model.
Combined with the resiliency of our results during the Covid crisis.
Our strong cash position also positions us well to execute on our planned refinancing.
Over the past several months, we have developed a robust strategic and long term financial plans and in light of continuing favorable credit markets. We are now moving with urgency on this important initiative.
Okay.
An important objective of our refinancing is to reduce our leverage.
We regularly consider refinancing liability management and other transactions with the goal of improving our balance sheet.
And certain of our investors often share of their ideas with us for how we can optimize our capital structure.
In this regard we have been approached by certain holders of our convertible debt and are currently evaluating their suggestions relating to potential deleveraging opportunities.
We believe that we can reduce our annualized interest payments by at least $50 million through this comprehensive refinancing.
Which would put gogo on a path to significantly delever and strengthen the balance sheet going forward.
In addition to the comprehensive refinancing opportunity in front of Us Gogo cash generation potential is enhanced by the significant tax assets. We retained after the sale of the CA business.
As of December 31st.
We would expect to retain a substantial majority of these tax assets under current tax laws.
Yes.
I'll now turn to a discussion of our outlook for 2021 and beyond.
I'd like to start by providing some background on our planned <unk> investments.
As of described in some detail the deployment of our five G network as a near term strategic priority for us as we look to deploy our nationwide network by the end of 2022.
We plan to approximately double our five G program investment in 2020, one for external development and deployment costs, which will be reflected in both opex and capex.
We expect five G opex to peak in 2021 at approximately $12 million.
And capex to be about $12 million as well for this year.
We expect capex cost to be concentrated in 2022 based on our plans for completing a nationwide 150 cell site network by the end of that year.
No.
Our expectations for the total cost of the <unk> network have not changed from the figure. We initially quoted more than two years ago.
We continue to expect to invest approximately $100 million and external development and deployment of class split approximately one third for Capex excuse me one third for Opex and two thirds for Capex.
Based on our current plans, we'll have spent approximately $41 million of this total amount by the end of 2021 income.
<unk> $24 million in Opex and $17 million in Capex.
Okay.
With the five G deployment largely completed in 2022, we expect ongoing capex to be in the range of $15 million to $20 million of year beginning in 2023.
I'll now focus on our 2021 guidance.
We believe that with the recovery from COVID-19 in the business aviation market well underway as reflected in our financial results.
We are well positioned for growth this year.
We expect 2021 service revenue to grow at least 15% over 2020.
We expect equipment revenue to remain flat or grow modestly in part due to the 57% sequential growth we saw in the fourth quarter of 2020.
With this context, we are providing the following financial guidance for 2021.
We expect total revenue in the range of 300 million to $320 million.
We expect adjusted EBITDA in the range of 105 million to $120 million.
The suggested EBITDA range includes approximately $12 million of five G external development and deployment of expense.
And excludes approximately $4 million of separation and migration costs related to the sale of the CA business.
Okay.
We expect capital expenditures in the range of $25 million to $30 million with the majority tied to Gogo five G.
Having now completed our five year plan, we would also like to share some of our longer term targets, which are as follows.
At least 10% compounded annual revenue growth from 'twenty to 'twenty five.
Adjusted EBITDA margin of 35% to 40% throughout the planning period.
And significant free cash flow growth in 2023, following our five G network deployment in 2022.
Okay.
These targets reflect our current <unk> investment plan, however, they do not reflect.
Some additional strategic growth opportunities, we may choose to invest in beyond this baseline plan.
The let us be clear.
We will only pursue these additional initiatives if they provide tangible strategic benefits and very attractive projected returns on our investment.
As this outlook demonstrates we are looking forward to a bright future for gogo, drawing our strong market position.
Our culture of innovation and the rebound of the industry as we emerge from the pandemic as a stronger more focused business.
Finally, I want to reiterate Oaks banks of the Gogo team for your unwavering focus and support through the challenges of this past year and our company's ongoing transformation.
Your talent and commitment are the reasons, we've been able to execute through the effects of COVID-19.
You have position gogo to be an even stronger company on the other side of the pandemic.
We can't thank you often enough or deeply enough you are our company. So thank you again.
Operator, we're now ready for our first question.
Ladies and gentlemen of you would like to ask a question. Please press star one.
Congrats again.
At the consumption has been up as we noted.
Yeah, there's more flights per aircraft, that's because you know that the.
Yeah.
I mean, I think that's true.
In one sense, where we're fortunate in that we're so.
So if people don't cancel that doesn't matter that much but if they do want to spend their accounts, while other on the ground because of not flying you know obviously that would hit their revenue we've been fortunate in his bounce back very quickly here. They were not all the way back, but we're close to from a flight levels.
And as I noted on the call we've had suspensions.
Most of those have come back there's still still some out there, but not that many and hopefully we'll get those back over the next couple of months.
And we had from playing downgrades the pay as you go.
So people wouldn't have to pay while the planes are on the ground and about that bad debt the planned the <unk>.
Plans are really come back strong and a lot of people that actually bought up as they came back. So that's been that's been helpful and that's why we had the.
The bounce back in Arco Sul.
Great and if I could just bury a clarification on the Opex I think you said 12 million. This year from <unk> want to make sure of is it is that what's flowing through the P&L is that the total cost for some of that being capitalized just in terms of how we think about that and then also the component availability impacting the deployment is that having any impact in terms of your ability.
The two deploy just atg equipment on the aircraft themselves. The all the all five of our solution and lastly, if I could oak the 10.
10% long term growth target I'm wondering how you think about it in terms of penetration of the different aircraft turboprop has been a very underpenetrated category in general, but smaller aircraft is I mean are you seeing enough opportunity in the larger aircraft, that's really driving that the 10% plus growth over the next five year period.
Yeah I'll stop at the.
The two parts of that and I'll turn it over to Barry for that the first part.
We're not counting on a lot of turboprop.
Turbo crop in the turboprop penetration to drive that growth rate that that growth rate just under 8% of that is units and the rest is in the ARPA. So.
We see that opportunity frankly in in the light medium and large sized jets right now and yeah.
As we look head of it when we look at our addressable market and we project forward five years.
And we are including the the turboprop market in this data with the market, it's still 60% on penetrated so the non theres just a lot of raw in the mezz market to grow.
In business aviation is in either it's a slower adopter than commercial aviation or some other verticals.
So.
The answer the first question and the last question is that we're not really counting on the turboprop.
The other question you noted was the delay in the supply chain now really we've gotten ourselves caught in the world the.
Chip shortage crisis here, a little better than the demand that's the hinting at chip manufacturers in the just one manufacturer in particular, that's a supplier to one of our.
You're one of our our partners.
In the five G project debt and had to go back and re tape of Chapman had to get back in line behind the whole bunch of other demand and so that's the that's delayed us and pushed us into 2022 it doesn't affect all five at all it's a five G chip so uh huh. So that's.
That's what that situation is.
Barry.
I'll turn it over to you that's gotten better.
Yeah, Let me just comment on that Scott so the the $12 million that we sided so it's 12 million in Opex from.
And 12 million per so in Capex theirs.
A few million dollars of the capitalized.
Internal costs on top of that but the lion's share of that or the.
The two I think is a really important point because when you look at the cash flow generative Kapoor.
The capacity of the business it really picks up after that investment bulge in 2020 two.
Now, we really like looking at the free cash flow and valuing companies as well one when you think about margins. Okay. I think he mentioned that margins would be steady wondering why they couldn't grow over time, given as you rollout the new network and then you sell extra revenue on top of it what would keep margins in that 35 to 40 range of instead.
Okay.
So the ARPA.
Over time so.
Those are examples I don't think we want to get into anything too specific Rick in terms of what we're thinking about right now just from competitive reasons, but I.
I think we have you see a lot of different opportunities.
We want to be very careful in selecting those and make sure that they give us strategic benefit as well as a very high return on invested capital for our shareholders.
And I think we'll probably have more to say about those opportunities in the future.
Great. Thank you.
Your family of employees continue to stay well thanks guys.
Thanks, a lot Rick.
And your next question comes from Louie Dipalma with William Blair.
Okay.
Really okay. The oak buried in the real good morning.
Good morning, Larry doing the morning.
Barry can you reaffirm what you just discussed about the the net operating losses. If there were to be of changing control did you say that now you would have the ability to retain them. If there were a change of control.
Yes, Larry any of that.
The tax law, we would be able to retain a meaningful majority of those there are couple of rules that apply to that one is the.
Rule currently allows for a net unrealized built in gain a new big so it is the calculation is based on the value of the company and you can spread that over five years. So so we would you know at current.
The stock prices you know retain a you know on the order of $500 million of those NOL values. So you know.
A meaningful portion of it, particularly when you look at across the five year planning horizon that it would really be largely cover the the income for an extended period of time.
Thanks, No I think that is.
<unk> and four for Oak.
Many investors have used Gogo is where all the Gogo is service on commercial airlines such as Delta.
And at times, the the user experience with poor due to capacity limitations on the other hand, though I have not spoken with any investors that have used gogo service on a private jet like of Textron Citation and Embraer the legacy legacy.
Or a bombardier challenger and so I was just wondering now how fast and what is the capacity for the Gogo network for private Jets and you discussed how the capacity has increased with the shift of traffic to satellite networks and so I'm just wondering does the the private network.
The poor like multiple zoom sessions at the same time does it support.
The Pea and any <unk>.
High level color on like the overall quality of service would be helpful.
Thanks.
Yeah.
I'll start with the funny Little story, if you don't mind.
Last week and Embraer employee.
The the video on her Linkedin page.
Showing her video conferencing of of face on the face time conference where the.
With a one of her partners, who was flying in is in and of Embraer trader I think it was and they were.
I'm talking about the meeting he just had and he was you know there was line with video back.
And then responded by that was the El five okay.
So outside you can have a variety of different experiences.
With our product depending on you know, what which product you have and what plans you buy right. So.
L five delivers in a much more of.
And much faster speeds and the old classic product does.
And so you know you could run into if you gotta in Idaho, the plane that was very crowded United and I've been on a plane with like 15 people using the internet all at once on the old classic product and you could get timed out and you could have a bad experience, but that was back on the lot of mainline aircraft are still on all of the network now that the network.
There's much better and and is relatively empty we could support.
Three to four times the number of aircraft we have today on today's network no problem. So we have a lot of capacity to grow and.
And people with all five are very very satisfied our NPS scores.
Have gone up steadily and our very strong now over the last four years and.
The.
And then we're going to further enhance that so you know of moving people now five of significantly improved the performance.
And deeply the deconversion of the network has significantly improved the performance for the classic products already.
And but you know I think our goal is to continue to improve the performance of People's expectations are driven by what they get on the ground and with the launch of five day, and then there's going to be fixed G and everything else one has to continuously improve.
What you delivered in the aircraft to try and keep up with those on ground expectations and that's what we aspire to do.
Awesome. Thanks.
Okay.
Operator lets take one more question and then that'll be that'll be it.
Your next question is from the line of steel Cusick with JP Morgan.
Hey, Phil Hi, Thanks also ask I'll ask day.
Sure.
Adding the converts and debt.
With the converts being so from our into the money now it's really essentially of decision to make a stock buyback.
And so when we think about the allocation of capital and the opportunities to invest in our business.
That pushes us to lean toward being more willing to have.
The <unk> those converts and of course that would improve the leverage ratio. So after the kind of see how that plays out but the weak.
That would put us kind of out of the gate with leverage ratios in that kind of six times type range, but with the opportunity to significantly reduce net leverage in the coming years.
Okay.
So it sounds like you.
You, let the converge the equity and that results in six times leverage is not the math of what I remember.
Sorry, if I'm correct. There were some some ranges in there, but if that were to be the case since the generals of colon or were lower at the Bonanza kind of how you what the bases in the web.
Period of time, the use of the basis for calculating the leverage.
But I think of the main pointed out of state a couple of points here is that we want to.
Run the company with a more conservative balance sheet 0.1, 0.2 is with the cash flow, we expect to be able to significantly delever going forward and would plan to do that.
And thirdly is that when you look at the analysis.
The dilution from the.
From issuing shares to satisfy the convert is more or less offset by the benefits of the lower leverage when you look at the value creation opportunity overtime.
Yeah right. Okay tell me out of the right way look at it is if you sell the thing for cash are essentially doing a stock buyback.
And you know I.
I think debt.
From our perspective.
Okay.
Probably not as cautious as we'd like to be at the moment.
So.
Is there a is there a mix between the two that we should think about or do you think.
Running the most of two early that he is the right way to think about it yes, it's too early to tell on the point that would look like and there's certainly some rules you have to follow to be mindful of in terms of how much you can do.
But I think area of our general predisposition is to be able to echo times more of them.
Perfect and then and then is there sort of a chance for an analyst meeting between now and <unk> earnings or is that probably after once you.
Yes.
Robley after I would make Phil.
Got it got it.
Right, let me get the hit late second quarter.
The timeframe I think.
That's helpful.
To follow up on a couple of other things you also you offered a 10% CAGR in revenue from 'twenty to 'twenty five do you think you can reliably grow.
At 10% of better in each of those years as well.
Okay.
Uh huh.
Yeah, I think so Phil yeah.
Created some of when you look at the kind of ex growth rate that we have in mind still over half of the aircraft at the end of the five year planning horizon, we do not have broadband connectivity. So the market is.
Itself provides the background of being able to grow with those kind of rates.
So that's the sort of goes to my last question wishes L. Three sales of doing so well and given the trend and in fixed and mobile I don't see why someday there isn't nearly 100% penetration of broadband on the private claims do you want to offer an even smaller or less capable product for the.
Smallest aircraft out there.
Yeah. So today of there's two of Atlas and the only real difference is the size of the box and look if we got one less carbon and the and the L. Three I think so the L. Three of small and that's meant for the light jet market turboprops.
And then L. Five is there Todd.
The more easily accommodated in midsize and large aircraft. So we do of a product that goes down market and we're having a lot of success in the light jet market and we're good.