Q4 2023 Gogo Inc Earnings Call

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Operator: Good day, and thank you for standing by. Welcome to Gogo Inc.'s fourth quarter 2023 earnings conference. At this time, all participants are in a listen-only mode.

Speaker Change: Good day and thank you for standing by welcome to Gogo, Inc. Fourth quarter 2023 earnings conference call.

Speaker Change: At this time all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automatic message advising that your hand is raised.

Speaker Change: After the speaker's presentation, there will be a question and answer session. Just a question during the session you will need to buy stock one one on your telephone email Daniel.

Speaker Change: Automatic message biasing, our handy space.

Operator: Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Will Davis, Vice President of Investor Relations. Please go ahead. Thank you, Olivia.

Speaker Change: Please note that today's conference is being recorded.

Speaker Change: I will now hand, the conference call, but your Speaker House will Davis, Vice President of Investor Relations. Please go ahead.

William G. Davis: And good morning, everyone. Welcome to Gogo's fourth quarter 2023 earnings conference call. Joining me today to talk about our results are Oakleigh Thorne, Chairman and CEO, and Jesse Betjeman, Executive Vice President and 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.

Davis: Thank you Olivia and good morning, everyone welcome to Gogo <unk> fourth quarter 2023 earnings conference call.

Davis: Joining me today to talk about our results are hopefully thorn, chairman and CEO and Jesse Benjamin Executive Vice President and CFO.

William G. Davis: 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.

House Davis: 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 conference call.

William G. Davis: Those risk factors are described in our earnings release filed this morning and are more fully detailed under risk factors in our annual reports on Forms 10-k and 10-q and other documents that we have filed with the SEC. In addition, please note that the date of this conference call is February 28, 2024. Any forward-looking statements that we make today are based on assumptions as of the present state. We undertake no obligation to update these statements as a result of more information or future events.

House Davis: Those risk factors are described in our earnings release filed this morning.

House Davis: And are more fully detailed under risk factors in our annual report on 10-K, and 10-Q and other documents we have filed with the SEC.

In addition, please note that the date of this conference call is February 28 2024.

House Davis: Any forward looking statements that we make today are based on assumptions as of this date, we undertake no obligation to update these statements.

House Davis: As a result of more information or future events.

William G. Davis: During the call, we will present both GAAP and non-GAAP financial measures. We've included a reconciliation and explanation of adjustments and other considerations of our non-gap measures to the most comparable gap measures in our fourth quarter earnings release. The call is being broadcast on the Internet and is available on the Investor Relations website at ir.gogoair.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 Oakleigh. Thanks, Will. Good morning, everybody.

House Davis: During the call, we will present, both GAAP and non-GAAP financial measures.

House Davis: We've included a reconciliation and explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures in our fourth quarter.

House Davis: Earnings release.

House Davis: The call is being broadcast on the Internet and available on the Investor Relations website at IR Doc Gogo are dot com.

House Davis: The earnings press release is also available on the website.

House Davis: After management comments, we'll host a Q&A session with the financial community only.

Speaker Change: It is now my great pleasure to turn the call or hopefully.

Speaker Change: Thanks will and good morning, everybody.

Oakleigh B. Thorne: 2023 was a busy year for Gogo. We continue to grow our high-margin service revenue and to drive Gogo's strong cash flows propelled by the accelerating adoption of Gogo's advanced platform and fueled by strong business aviation demand for connectivity. At the same time, we're making great strides in our investments to future-proof our business by extending the technology frontier in aviation, such as Gogo 5G and our low Earth orbit satellite

Speaker Change: 2023 was the best year for Gogo.

We continued to grow our high margin service revenue and to drive Gogo strong cash flows upheld by accelerating adoption of cargoes advanced platform and fueled by strong business aviation demand for connectivity.

Speaker Change: At the same time, we're making great strides in our investments to future proof our business by extending the technology frontier in aviation that goes out five gate and our low Earth orbit satellite product Gogo Galileo.

Oakleigh B. Thorne: We believe these new technologies will deliver order-of-magnitude improvements in the speed of Gogo's service. They'll increase our total addressable market by about 60%, and that they'll extend customer lifetimes by providing easy upgrade paths for existing advanced. With the addition of Gogo 5G and Galileo, Gogo will have the most complete product portfolio in the business aviation IFC industry, products that offer the right performance, the right coverage, at the right total cost, with great customer support for every segment of the highly unpenetrated 39,000 aircraft global business aviation market. We also encountered temporary aviation industry headwinds related to parts and labor shortages and busy maintenance schedules, and we know those continue to impact our OEM

Speaker Change: We believe these new technologies will deliver order of magnitude improvements in the speed of Gogo service, the Dell increase our total addressable market by about 60%.

Speaker Change: Today, I'll extend customer lifetimes by provide easy upgrade path for our existing advanced customers.

Speaker Change: With the addition of Gogo <unk> in Galileo, although it will have the most complete product portfolio and the business aviation IFC industry.

Speaker Change: Products that offer the right performance the right coverage at the right total cost with great customer support for every segment of the highly penetrated 39000 aircrafts global business aviation market.

Speaker Change: We also navigated temporary aviation industry headwinds related to parks labor shortages and busy maintenance schedules.

Speaker Change: Those continue to impact our OEM and dealer partners.

Oakleigh B. Thorne: We are seeing suspension intervals starting to shorten and reactivation rates starting to pick up, which will hopefully help boost aircraft online this year, despite the delay in the development of our Gogo 5G chip. The market continues to respond enthusiastically to the 5G value proposition, ongoing pre-provisioning programs, and a flood of STC programs that we believe position us for a highly successful launch later this year. And on top of that, we're executing the FCC Secured Networks Program, support from the U.S. government to enhance the security of our nation's infrastructure and at the same time deliver meaningful benefits to Gogo's network and growth trajectory Based on our new long-term forecasts, we're bullish on GoGo's opportunity for significant growth and long-term value creation. Today, we serve a highly unpenetrated market, with 76% of the world's 39,000 business aircraft flying without a broadband solution, and demand for connectivity in those aircraft growing dramatically from both passengers and operators.

Speaker Change: Our scheme suspension intervals, starting here shortly and reactivation rates starting to pick up which will hopefully help boost aircraft online this year.

Speaker Change: Despite the delay in the development of our Gogo <unk> chip.

Speaker Change: The market continues to respond enthusiastically to the <unk> value proposition.

Speaker Change: Ongoing pre provisioning programs and a flood of STC programs that we believe position us for a highly successful launch late this year.

Speaker Change: And on top of that we're executing the FCC secured networks program support from the U S government to enhance the security of our nation's infrastructure and at the same time deliver meaningful benefits to Gogo network and growth trajectory.

Speaker Change: As Jeff will describe in a moment.

Speaker Change: Based on our new long term forecasts, we're bullish on Gogo has opportunity for significant growth and long term value creation.

Speaker Change: Today, we serve a highly underpenetrated market.

Speaker Change: 76% of the world's 39000 business aircraft flying without a broadband solution and.

Speaker Change: The demand for connectivity in those aircraft growing dramatically in both passengers and operators.

Oakleigh B. Thorne: As a result of these trends, we expect global broadband connectivity penetration across all business aircraft to grow from 24% today to the mid-30% range by the end of our five-year planning horizon. Over that horizon, we expect Gogo's share of global installed aircraft to remain at roughly 75%, with our North American share remaining in the low 80s, and Gogo's rest of world share going from 0% today to the high 20% range by 2028, which equates roughly to 600 aircraft. To be conservative in our go-go projections, we've assumed that Starlink achieves its currently published STC schedule and launches a smaller antenna in the next two years.

Speaker Change: As a result of these trends, we expect global broadband connectivity penetration across all basins aircrafts go from 24% today to the mid 30% range by the end of our five year planning horizon.

Speaker Change: Over that horizon, we expect gogo share of global installed aircrafts.

Speaker Change: Maine at roughly 75%.

Speaker Change: Our north American share remaining in the low 80, <unk> rest of world share growing from zero percent today to the high 20% range by 2028, which equates roughly to 600 aircrafts.

Speaker Change: To be conservative and Ive got about projections, we've assumed that starlink achieves its currently published STC schedule and launches a smaller tenant in the next two years.

Oakleigh B. Thorne: And for planning purposes, we projected that as Galileo and Starlink come online, Cheryl will shift away from today's geostationary satellite incumbents, and then Gogo and Starlink will benefit from that shift. And though we have to muscle through a tough investment year to deliver 5G in Galileo, our long-term projections are driven by strong recurring service revenue that drives strong cash flow and a strong balance sheet, which acts as a flywheel to drive investment and further enhance our products and further secure our competitive advantage in the future. Now I'll highlight some demand trends and provide an overview of our Q4 results before I dive more deeply into progress in our strategic initiative. Demand for Wi-Fi in aircraft continues to grow. Data consumption per flight hour in Q4 was once again up 15 percent compared to the prior year and up 74 percent from Q4 2019, demonstrating a step change in passenger expectations for in-flight connectivity. Demographics transposed very well for connectivity penetration.

Speaker Change: And for planning purposes, we projected as Galileo and styling come online share it will shift away from today's geostationary satellite incumbents and that Gogo on Sterling will benefit from that shift.

Speaker Change: And now we have not and that we have to muscle through a tough investment year to deliver five gallon layout. Our long term projections are driven by strong recurring service revenue that drives strong cash flow and a strong balance sheet, which acts as a flywheel to drive investment in further enhancing our products and further securing our competitive edge.

Speaker Change: Standards in the future.

Speaker Change: Now I'll highlight some demand trends and provide an overview of our Q4 results before I dive more deeply into progress in our strategic initiatives.

Speaker Change: Demand for Wi Fi and aircraft continues to grow.

Speaker Change: Data consumption per flight hour in Q4 was once again up 15% compared to prior year and up 74% from Q4 2019, demonstrating a step change in passenger expectations for inflight connectivity.

Speaker Change: Demographic trends bode very well for connectivity penetration.

Oakleigh B. Thorne: So all ages want better in-flight connectivity. Demand for connectivity increases as the age of the flyer decreases. GOCOE estimates VA 2023 flight counts. We're down 2% versus 2022, but the gap narrowed to a half percent in Q4 and actually turned the corner and off to a two percent increase in January over the prior year. Certainly signals demand for end-to-end connectivity remains strong. I'm sorry for

Speaker Change: All agents want better in flight connectivity demand for connectivity increases as the age of the Flyer decreases.

Speaker Change: <unk> be a 2023 flight counts were down 2% versus 2022.

Speaker Change: GAAP narrow to a 5% in Q4.

Speaker Change: It actually turned the corner notched a 2% increase in January over prior year, but certainly signals demand for in flight connectivity remains strong.

Oakleigh B. Thorne: More importantly, flights are significantly elevated from pre-COVID levels. Q4 was up 28% from Q4 2019, signaling to many industry observers that stronger private aviation demand is here to stay. This is further supported by strong OEM order books and very strong fractional sales, which we expect will drive Gogo's shipment growth over the next few years. Now let me turn to our Q4 performance; revenue was down roughly 10% from our record Q4 2022, which was driven by a 2022 post-COVID surge in equipment orders. On the positive side, we achieved record service revenue in the quarter driven by record total advanced activations, which were up 20% from the prior quarter and 15% from the prior year, driven by accelerating reactivations and record upgrades from classic to the advanced platform. At the end of Q4, we reached 7,205 ATG aircraft online, representing 55 incremental ATG units in the quarter, and reached 3,976 advanced aircraft online, representing 192 incremental advanced units in the quarter, up 21% from the prior year, and now representing 55% of our installed base.

Speaker Change: I'm sorry for flight remained strong.

Speaker Change: More importantly.

Speaker Change: Flights are significantly elevated from pre COVID-19 levels.

Speaker Change: Q4 up 28% from Q4 2019 signaling that many industry observers that stronger private aviation demand is here to stay.

Speaker Change: Which is further supported by strong OEM order books, and very strong Tractional sales, which we expect will drive gogo shipment growth over the next few years.

Speaker Change: Now, let me turn to our Q4 performance.

Revenue was down roughly 10% from a record Q4 'twenty to 'twenty two performance, which was driven by a 2022 post COVID-19 surge in equipment orders.

Speaker Change: On the positive side, we achieved record service revenue in the quarter driven by record total event, Activations, which were up 20% from prior quarter and 15% from prior year, driven by accelerating reactivation and record upgrades from classic to the advanced platform.

Speaker Change: At the end of Q4.

Speaker Change: <unk> $7205 Atg aircraft online.

Speaker Change: Presenting 55 incremental atg units in the quarter and reached 3976 advanced aircraft online representing 192 incremental advanced units in the quarter up 21% from prior year and now representing 55% of our installed base.

Oakleigh B. Thorne: We view every addition of an advanced unit, whether a new customer or an upgrade, to be a strategic win for Gogo because it extends the lifetime value of that customer. That's because once an advanced platform product is installed, it is far easier and cheaper for a customer to upgrade to new technologies, such as 5G and Leo satellite connectivity, with Gogo then moving to a competitor's product to upgrade that technology. The reason for that is generally to only work inside the aircraft to upgrade to new technology with a van and to add or replace an antenna on the outside of the aircraft.

Speaker Change: We view every addition of an advanced unit, whether a new customer or an upgrade to be a strategic win for Gov.

Speaker Change: Does it extend the lifetime value of that customer.

That's because once an advanced platform product is installed it is far easier and cheaper for our customer to upgrade to new technologies, such as <unk> and Leo satellite connectivity with Gogo, then moving to our competitor's product to upgrade that technology.

Speaker Change: The reason for that is generally the only work inside the aircraft to upgrade to a new technology with advance.

Speaker Change: As to add or replace an antenna on the outside of the aircrafts. The rest of the upgrade can be a change in the advanced box inside the aircraft with a simple software upgrades.

Oakleigh B. Thorne: The rest of the upgrade can be achieved on the advanced box inside the aircraft with a simple software upgrade. This gives Gogo a huge advantage in our distribution channel because Avance is already line-fit on every currently produced make and model of aircraft. OEMs have lower engineering and line-fitting expenses when they adopt 5G or Galileo than a new product from one of our competitors because they have already engineered and tuned their production for the Gogo equipment that goes inside the air. On the dealer side, because there are already STCs for advanced and all makes and models of business aircraft, they can upgrade their STCs or field approvals far more quickly than doing whole new designs for competitive products.

Speaker Change: This gives a huge advantage in our distribution channels.

Speaker Change: Because advances already line fit on every currently produce making model of aircraft.

Speaker Change: <unk> have lower engineering and line fit cut in expense when they adopt <unk> Galileo than a new product from one of our competitors because they are already engineered and Tuesday or production or the gogo equipment that goes inside the aircraft.

Speaker Change: On the dealer side, because they are already FTC's for event that all makes and models of business aircraft. They can upgrade the FCC's or field approvals far more quickly than doing whole new designs for competitive products and on the fleet front. If they have advanced installed they can invest in one on one set of advanced hardware inside the aircraft and then upgrade incrementally.

Oakleigh B. Thorne: And on the fleet front, if they have advanced installed, they can invest in one set of advanced hardware inside the aircraft and then upgrade incrementally by adding antennas at far lower costs than replacing the whole aircraft, to give an example of where we think this will work to our advantage. Today, there are more than 2,100 heavy jets flying with Gogo ATG Connectivity in North America, many of which also utilize geostationary satellite products when they fly outside North Carolina. Today, 61% of those have advanced installed, providing an easy path to upgrade from geo to Leo connectivity when they so desire. We believe this advantage will only grow as we migrate the 3,200 customers still using our classic ATG products to the advanced platform as part of our FCC Secure Networks Program customer conversion campaign. Moving from service revenue to equipment. Those shipments paled compared to our blockbuster year last year. 2023 was our second highest advanced shipment year ever, which we believe portends more good things for the strategic customer reasons I mentioned a moment ago. And finally,

Speaker Change: <unk> by adding antennas at far lower costs in replacing full systems.

Speaker Change: To give an example of where we think this will work to our advantage to <unk>.

Speaker Change: There are more than 2100 heavy jets flying with Gogo Atg connectivity in North America.

Speaker Change: Many of which also utilized geostationary satellite products will play Monday Fi outside North America.

Speaker Change: Today.

Speaker Change: 61% of those have advanced installed providing an easy path to upgrade from Geo Leo connectivity when they so desire.

We believe this advantage will only grow as we migrate to 3200 customers still on our classic atg product to the advanced platform as part of our FCC secure networks program customer conversion campaign.

Speaker Change: Moving from service revenue to equipment.

Speaker Change: Those shipments tailed compared to our blockbuster year last year 2023 was our second highest advanced shipment year effort, which we believe portends more good things for the strategic customer reasons, I mentioned a moment ago.

Oakleigh B. Thorne: Given the strong activations last year, Gogo inventory in the field has normalized. And we're now down to roughly 180 units in the field that are not committed to a particular buyer, of which only 37 are dealers that do not regularly move large amounts. On the earnings side for the quarter, despite our revenue headwinds, EBITDA came in higher than planned, and free cash flow set a new record, which demonstrates the durability of our business model. I'm proud of the Gogo team and want to thank them for their commitment to our strategy and strong execution throughout 2020. Now, for our progress on our strategic initiative. Gogo is focused on accelerating growth with a three-pronged strategy. First, we want to expand our addressable market globally by expanding outside North America and developing products and pricing that fit every segment of the 39,000 aircraft global market.

Speaker Change: And finally.

Given the strong Activations last year Gogo inventory in the field normalized and we're now down to roughly 180 units in the field that are not committed to a particular buyer of which only 37, our ideals do not regularly move large amounts of it.

On the earnings side for the quarter. Despite our revenue headwinds EBITDA came in higher than plan and free cash flow set a new record, which demonstrates the durability of our business model.

Speaker Change: I am proud of the Gogo team and want to thank them for their commitment to our strategy and strong execution throughout 2023.

Speaker Change: Now.

Speaker Change: For our progress on our strategic initiatives.

Speaker Change: Gogo is focused on accelerating growth with a three pronged strategy.

Speaker Change: First we want to expand our addressable market globally.

Speaker Change: Spending outside North America, and developing products and pricing that fit every segment of the 39000 aircraft global market.

Oakleigh B. Thorne: Second, we want to drive customer loyalty by continually improving our network and leveraging the advanced platform to provide an easy upgrade path as new technologies emerge. And third, we're focused on offering the best product and customer support to each segment of the market at the lowest total cost to them. We're making great strides on our strategic initiatives to achieve these goals. Let me start with 5G. I'll begin with a little bit of bad news, which is that due to a non-technical contractual issue between sub suppliers, we've had a flip in our 5G delivery from Q3 to Q4 of this year. However, we believe that issue has been resolved, and we are back in fabrication mode on the computer.

Speaker Change: Second we want to drive customer loyalty by continually improving our networks and leveraging the advanced platform to provide an easy upgrade path as new technologies emerge.

Speaker Change: Third we're focused on offering the best product and customer support to each segment of the market at the lowest total cost of ownership.

Speaker Change: And we're making great strides on our strategic initiatives to achieve these goals, let me start with <unk>.

Speaker Change: I'll begin with a little bit of bad news, which is that due to a non technical contractual issue between sub suppliers.

Speaker Change: We've had a slip in our <unk> deliveries from Q3 to Q4 of this year.

Speaker Change: However, we believe that issue has been resolved and we are back in fabrication mode on the chip.

Oakleigh B. Thorne: Despite the shift in timing, we're really encouraged by the commercial and certification progress we're making with this product. We've already shipped 198 5G pre-provisioning kits with NV13 5G antennas, 59 of which have already been installed and are flying today on our 4G network with an L5 4G box. Once our chip is ready, we will start shipping the LX5 box to those customers. And because the LX-5 and L-5 have the same form factor, they can make a quick swap and begin 5G service immediately, saving downtime and expense. We have orders from five OEMs, one of which is already line fit installing the MB-13s.

Speaker Change: Despite the shift in timing, we're really encouraged by the commercial its certification progress, we're making bringing this product to market.

Speaker Change: And we've already shipped 198, five pre provision kits with envy 13 <unk> antennas.

Speaker Change: <unk> nine of which have already been installed and are flying today on our <unk> network with an alpha <unk> box.

Speaker Change: Once our chip is ready we will start shipping the Alf X five blocks to those customers because the <unk> side and <unk> had the same form factor. They can make a quick swap and began five service.

Speaker Change: Service immediately saving downtime and expense.

Speaker Change: We have orders from five Oems one of which is already line set installing <unk> 13 and <unk>.

Oakleigh B. Thorne: And we have stock orders for 46 systems from our dealer. On the certification front, we have 31 STCs in work, representing 41 aircraft models and more than 9,700 North American jets. Of those, 10 SPCs have already been completed for the NV13 antennas, and because the LX-5 is the same form factor as the L5, they will be quickly upgraded once we ship them the LX-5 boxes with the 5G chip inside. The other 21 programs are awaiting the LX-5 before completing work, which again, because they're the same form factor, is a relatively modest step.

Speaker Change: Stock orders for 46 systems from our dealer network.

Speaker Change: On the certification front, we have 31, Ftes and work representing 41 aircraft models and more than 9700, North American Jets.

Speaker Change: Those 10 sbcs have already been completed for the envy 13 intense and because the allergy side is the same form factor as the alpha will be quickly upgraded once we ship them. The <unk> five boxes with the <unk> chip inside.

Speaker Change: The other 21 programs are waiting the <unk> five before completing work, which again because they are the same form factor is a relatively modest sector.

Oakleigh B. Thorne: We also hit an exciting milestone earlier this month when we received our first FPGA version of the 5G chip and began testing the 5G chip software in our Chicago lab. We're excited to bring Gogo 5G to market. And with mean speeds around 25 megabits per second and peaks of 75 to 80 megabits per second, we believe it's the perfect product for midsize and smaller business aircraft that fly North American missions and want great connectivity at a better value than competitive satellite products.

Speaker Change: We also had an exciting milestone earlier this month when we received our first FPGA version of the <unk> Chip and began testing the <unk> chips software and our Chicago lab.

Speaker Change: We're excited to bring <unk> to market and with mean speeds around 25, Megabits per second and peaks of 75 to 80 Megabits per second we believe it is the perfect product for midsize and smaller business aircraft at slide North American missions and want great connectivity at a better value than competitive satellite products.

Oakleigh B. Thorne: Let me turn to our Leo-based global broadband. Galileo comes in two versions, a smaller HDX terminal and a larger FDX. The Galileo HDX terminal is a small antenna that fits on almost all business aircraft, targets A, the almost 12,000 mid-sized and smaller jets that don't fly outside North America and have absolutely no broadband solution today, and B, those jets out of the 11,000 mid-sized and smaller jets that domicile inside North America that often fly international missions. The Galileo FDX terminal is a larger antenna that delivers significantly higher bandwidth and targets the For Galileo, peak speeds and mean speeds will be in close proximity, with HDX delivering speeds to the aircraft in the high 50 megabits per second range and FDX delivering speeds close to 200 megabits per second, which is comparable to the speed Starlink publishes for its 39 units.

Speaker Change: Galileo.

Speaker Change: Let me turn to our layer based global broadband initiatives.

Galileo: And I'll now comes in two versions, a smaller HD X terminal and a larger FD extra.

Galileo: Galileo <unk> HD X terminal is a small antenna that sits on almost all business aircraft and targets a.

Galileo: 12000, midsize and smaller jets domicile outside North America.

Galileo: And have absolutely no broadband solution today and B those jets out of the 11000 midsize and smaller jets that domicile inside North America that often fly international missions.

Galileo: The Galileo Mdx terminal is a larger antenna that delivered significantly higher bandwidth and targets. The roughly 7000 global Super mid size and larger heavy jets the flight transcontinental missions.

Galileo: Ah Galileo peak speeds that mean speeds will be in close proximity with HCS delivering speeds of the aircraft in the high 50 megabit per second range and SPX delivering speeds close to 200 Megabits per second which is comparable to the speed Starlink publishes for 39 years.

Oakleigh B. Thorne: As I mentioned earlier, a huge advantage for us is that Galileo is a simple upgrade from any advanced installed plane; one only needs to add our HDX or FDX antenna to the fuselage and then run data and power cabling into the aircraft. As I also mentioned earlier, given that Advance is already a line fit option at every OEM and has STCs on every currently produced model of aircraft, it will be relatively easy from an engineering and certification perspective for OEMs and dealers to offer Galileo as an option to their customers. We've already signed one line fit agreement and have discussions underway with several others. And six Gogo dealers have already either verbally committed to or are under an MOU for 10 FDCs representing 28 different aircraft models and a global TAM of 8,000 aircraft.

Galileo: As I mentioned earlier.

Galileo: Huge advantage for US is it Galileo is a simple upgrade from any advance installed plane.

Galileo: And only needs to add our HD X Ray Fts antenna on the fuselage and then run data and power cabling into the aircraft.

Galileo: As I also mentioned earlier.

Galileo: Given that advances already a line fit option that every OEM and has stc's on every currently produce model of aircraft. It will be relatively easy from an engineering and certification perspective for Oems and dealers to offer Galileo as an option to their customers.

Galileo: We've already signed one line that agreement and have discussions underway with several others and fixed gogo dealers have already either verbally committed are under Mou for 10, FTC's, representing 28 different aircraft models and a global Tam of 8000 aircraft.

Oakleigh B. Thorne: We remain on track to start shipping HDX terminals in Q4 and FDX terminals in the first half. We hit an exciting milestone this month when we received the first fully constructed prototype of the Gogo Galileo HDX antenna, which marks a significant step in design validation preparing for flight tests this summer. With that, we're one step closer to our goal of offering a global broadband connectivity solution for every business aircraft, everywhere. Now, let me turn to the SEC Secure Networks Program.

Galileo: We remain on track to start shipping HD X terminals in Q4, and <unk> terminals in the first half of 'twenty.

Galileo: We hit an exciting milestone this month.

Galileo: We received the first fully constructed prototype of the Gogo Galileo HTS antenna.

Galileo: Which marks a significant step in design validation and preparing for flight test this summer.

Galileo: With that we're one step closer to our goal of offering a global broadband connectivity solution for every business aircraft everywhere.

Galileo: Now, let me turn to the SEC secured networks program.

Oakleigh B. Thorne: You'll recall that two years ago, Gogo was awarded a $334 million grant under this program to reimburse it for expenses associated with accelerating the removal of Chinese telecom technology from our 4G network. However, because there were more qualified grants than originally planned, funding for all grants was cut back to 39% of the original award, which in Gogo's case was a cutback to $132 million. As we mentioned last quarter, the White House included full funding for the program in its supplemental funding request to Congress last year.

Galileo: You'll recall that two years ago <unk> was awarded a $335 million grant under this program to reimburse it for expenses associated with accelerating the removal of Chinese telecom technology from our <unk> network.

Galileo: There are more qualified than originally planned.

Galileo: Funding for all grants for cut back to 39% of the original award, which in <unk> case was a cutback of $132 million.

Galileo: As we mentioned last quarter. The White House included full funding for the program and at some supplemental funding request to Congress last year.

Oakleigh B. Thorne: Given that full funding has brought bipartisan support in Congress, we feel that it has a chance of passage. Partially funding will cover about 70% of our reimbursable cost of replacing all EVDO ground equipment and moving Gogo Classical customers to advanced equipment that is compatible with the replacement ground. And that is what we are projecting in the long-term guidance we shared today. Based on changes we've made to our evolution program, we no longer believe we will need, nor would we receive, $334 million.

Galileo: Given that full funding has broad bipartisan support in Congress, we feel that it has a chance of passage this year.

Galileo: Partial funding will cover about 70% of our reimbursable cost of replacing all E. BDO ground equipment and moving classic customers to advanced equipment that is compatible with the replacement ground equipment.

Galileo: And that is why we are projecting in the long term guidance, we shared today.

Based on changes, we've made to our evolution program with <unk>.

Galileo: No longer believe we will need Norwood, we received $334 million. However, if the funding is approved we would be able to accelerate our program and cover all reimbursable costs.

Oakleigh B. Thorne: However, if full funding is approved, we would be able to accelerate our program and cover all reimbursable costs. On the customer side of this transition, our goal is to convert all 3200 tails still flying with our classic product today to new LRUs with LTE air cards over the next two years, and we are funding very attractive conversion rebate plans to encourage them to do so. We've been in conversations with more than 95% of these customers. So far, 55% have indicated a preference, with the overwhelming majority leaning toward an advanced upgrade, with half of those choosing L5s over L6s.

Galileo: On the customer side of this transition our goal is to convert all 3200 tails still flying with our classic product today to new <unk> argues with LTE Eric cards over the next two years and we are funding very attractive conversion rebate plans to encourage them to do so.

Galileo: We've been in conversations with more than 95% of these customers. So far 55% of indicated a preference, but the overwhelming majority of leaning towards an advance upgrade and almost half of those choosing a box of warehouses.

Oakleigh B. Thorne: This program has considerable benefits for Gogo and its customers, including a 40% improvement in connectivity performance for our Advanced L3 customers. A doubling of the number of aircraft that the ATG 4G network can simultaneously manage and an acceleration of Gogo Classic customers upgrading to Advance, which has the strategic benefit of extending Gogo customer lifetimes due to the ease of upgrading to 5G and Galileo and other new technologies I described a few moments ago. Perhaps the biggest news in the quarter was announced after the quarter was over.

Galileo: This program has considerable benefits for gogo and its customers.

Galileo: Including a 40% improvement in connectivity performance for advance out three customers.

Galileo: A doubling of the number of aircraft that the Atg <unk> network can simultaneously manage.

Galileo: And an acceleration of Gogo classic customers upgrading to advance which has the strategic benefit of extending gogo customer lifetimes due to the ease of upgrade to <unk> in Galileo and other new technologies I described a few moments ago.

Galileo: Perhaps the biggest news in the quarter was announced after the quarter was out.

Galileo: And that is the 10 year extension of our 20 year relationship with net jets.

Galileo: Net jets is by far the largest operator of business jets in the world.

Oakleigh B. Thorne: That is the 10-year extension of our 20-year relationship with NET. That company is by far the largest operator of business jets in the world, with roughly 600 aircraft in North America, which they plan to go to 1,000 over the next five years, and another 85 aircraft operating in NAVCHES Europe. Of the North American aircraft, roughly 40% are on advanced today, and 60% are classic Gogo ATG products. They are planning upgrades to advance for all their North American aircraft, and then future upgrades to either 5G or HDX, depending on mission. That's just Europe by 70 aircraft that are equipped with gogo equipment today, largely to provide in-flight entertainment. 40% of those are already on the advanced platform, and they plan to upgrade all of those 70 to advanced with the HDX Galileo in town. Most importantly, NETJET is the bellwether of the business aviation industry. In order to curry business from NetJets, OEMs and dealers make sure that they can provide the products and services that NetJets wants to install.

Galileo: Roughly 600 aircrafts in North America, which they plan to go to a 1000 over the next five years.

Galileo: And another 85 aircraft operating in that just Europe.

Galileo: Of the North American aircraft, roughly 40% are on advanced today, and 60% of our classic Gogo Atg product that are planning upgrades to advance for all of their North American aircraft, and then future upgrades to either <unk> or <unk>, depending on mission.

Galileo: Net jets Europe by 70 aircraft that are equipped with gogo equipment today largely to provide in flight entertainment.

Galileo: 40% of those are already on the advanced platform and they plan to upgrade all of those 70 to advance with the HTS Galileo intent.

Galileo: Most importantly, net debt is the bellwether of the business aviation industry.

Galileo: The current business net jets Oems and dealers to make sure that they can provide the product and service that net jets wants to install and that should create great pull through demand for gogo.

Galileo: As I mentioned at the outset.

Galileo: 24 is an exciting year for Gogo as we deliver Gogo <unk> and Galileo and continue to execute on our strategy.

Oakleigh B. Thorne: And that should create great pull-through demand for Gogo. As I mentioned at the outset, 2024 is an exciting year for Gogo as we deliver Gogo 5G and Galileo and continue to execute on our strategy. We are more in demand, more innovative, and more poised for value creation than ever. Now I'll turn it over to Jesse for the...

Galileo: We are more in demand more innovative and more poised for value creation than ever.

Galileo: Now I'll turn it over to Jesse for the numbers.

Jesse Benjamin: Thanks, Eric and good morning, everyone Gogo continued to demonstrate strong demand for our products and services in the fourth quarter setting New records operationally and financially.

Jesse Benjamin: Despite the unfortunate delays of our hygiene program, we discussed on our Q2 earnings call the industry headwinds inventory and the significant strategic investments, we have undertaken and Gogo <unk> and Galileo we delivered solid bottom line financial performance and record free cash flow in 2023.

Jesse Betjeman: Thanks, Oak. And good morning, everyone. Gogo continued to demonstrate strong demand for our products and services in the fourth quarter, setting new records operationally and financially. Despite the unfortunate delays in our 5G program we discussed on our Q2 earnings call, the industry headwinds we've endured, and the significant strategic investments we've undertaken in Gogo, 5G, and Galileo, we delivered solid bottom-line financial performance and record-free cash flow in 2023. Our ability to achieve these results is a testament to the strength of our business model, financial position, and investment strategy. And with the bulk of our strategic investments coming to completion at the end of 2024, we expect our free cash flow to accelerate substantially in 2025. In my remarks today, I'll start by walking through GoGo's fourth quarter and full-year financial performance. Then I will turn to our balance sheet and capital allocation priorities. Next, I will provide an overview of the financial impact of the SEC program.

Jesse Benjamin: Our ability to achieve these results is a testament to the strength of our business model financial position and investment strategy.

Jesse Benjamin: And with the bulk of our strategic investments coming to completion at the end of 2024, we expect our free cash flow to accelerate substantially in 2025.

Jesse Benjamin: And Ryan My remarks today, I will start by walking through the fourth quarter and full year financial performance.

Jesse Benjamin: I will turn to our balance sheet and capital allocation priorities.

Ryan: Next I will provide an overview of the financial impact at the SEC program and finally I will provide additional context on our 2024, our financial guidance and our long term targets, we announced this morning.

Ryan: For the fourth quarter total revenue of $97 8 million.

Ryan: Down 10% year over year and remained relatively flat sequentially.

Ryan: Because the top line was driven by record service revenue of $89 million up 5% year over year and 2% sequentially.

Ryan: In the fourth quarter, our Atg aircraft online reached 7205.

Jesse Betjeman: And finally, I will provide additional context on our 2024 financial guidance and the long-term targets we announced this morning. For the fourth quarter, Gogo's total revenue was $97.8 million, down 10% year-over-year, and remained relatively flat. Gogo's top line was driven by record service revenue of $80.9 million, up 5% year-over-year and 2% sequentially. In the fourth quarter, our ATG aircraft were online reached 7,205, up 4% year over year and 1% sequentially. Total advanced aircraft online grew to 3,976, an increase of 21% year-over-year and 5% sequentially, driven by a record number of total activations, as Oak described. We expect another strong year of advanced activations in 2024 as we plan to aggressively upgrade our classic Gogo biz ATG customers as part of the FCC program, while maintaining a reasonably conservative view on improvements in the maintenance cycle times that have slowed installations over the past Upgrading our customers to the Vans is a critical part of our strategy, as it extends customer lifetimes due to the easy upgrade path to Gogo 5G and Galileo. However, it will mute the ATG aircraft online growth rate.

Ryan: 4% year over year and 1% sequentially.

Ryan: Total events aircraft online grew to 3976, an increase of 21% year over year, and 5% sequentially driven by a record number of total activations.

Ryan: Right.

Ryan: We expect another strong year of events Activations in 2024, as we plan to aggressively upgrade our classic of Gogo Biz atg customers as part of the FCC program.

Ryan: Maintaining a reasonably conservative view on improvements in the maintenance cycle times that have slowed installations over the past year.

Ryan: Upgrading our customers to advance is a critical part of our strategy as it extends customer lifetimes due to the easy upgrade path together and Galileo. However, it will mean, the atg aircraft online growth growth rate.

Ryan: Total atg ARPA grew 1% year over year to 3000, $380000 driven by a shift in product mix.

Ryan: Launch of <unk>.

Ryan: Either extend our ARPA growth opportunity over time.

Ryan: Turning now to equipment revenue cargo delivered $16 $9 million in equipment revenue in the fourth quarter, a 45% decrease year over year.

Ryan: <unk> had a tough comparison to a record prior year quarter compounded by the parts and labor dynamics and orders slow down in anticipation of our new product launches.

Ryan: Equipment revenue decreased by 8% sequentially as the 5% increase.

Ryan: 202 advance units sold in the fourth quarter was offset by a $4 million reserve, primarily driven by a specific customer circumstance.

Ryan: Now onto profitability cargo delivered service margins at 78% in the fourth quarter remaining relatively flat compared to the prior year quarter, and one percentage point higher sequentially.

Jesse Betjeman: Total APG ARPU grew 1% year-over-year to $3,387. This was driven by a shift in product mix and the launch of Gogo 5G in Galileo to further expand our food growth opportunity over time. Turning now to equipment revenue, Gogo delivered $16.9 million in equipment revenue in the fourth quarter, a 45% decrease year over year. We had a tough comparison to our record prior quarter, compounded by the parts and labor dynamics and order slowdown in anticipation of our new product launch. Equipment revenue decreased by 8% sequentially as the 5% increase to 202 advanced units sold in the fourth quarter was offset by a $4 million reserve primarily driven by a specific customer circumstance.

Ryan: We expect service margins to be in the 75% range. This year with a slight decrease in future years as Gogo Galileo's concentration on product mix increases over time.

Ryan: Service revenue and margin continues to be the primary lever for free cash flow generation and long term value creation.

Ryan: Equipment margin from 9% in the fourth quarter 23 percentage points lower than the prior.

Ryan: Prior year period.

Ryan: The decrease was primarily due to an increase in production costs as a percentage of revenue due to lower equipment revenue in the quarter and also by increased inventory reserves, which negatively impacted margin by nine points.

Ryan: Equipment margins were 24 percentage points lower sequentially, driven largely by the $2 million accrual taken in the third quarter for the expected FTC reimbursement of costs incurred in prior periods for aircraft replacements.

Jesse Betjeman: Now on to profitability. Gogo delivered service margins of 78% in the fourth quarter, remaining relatively flat compared to the prior year quarter and one percentage point higher sequentially. We expect service margins to be in the 75% range this year with a slight decrease in future years as Gogo Galileo's concentration of product mix increases over time. Service revenue and margin continues to be the primary lever for free cash flow generation and long-term value creation. Equipment margins were 9% in the fourth quarter, 23% lower than the prior period. The decrease was primarily due to an increase in production costs as a percentage of revenue due to lower equipment revenue in the quarter and also by increased inventory reserves, which negatively impacted equipment margin by nine points.

Along with the increased inventory reserves I just mentioned.

Ryan: We expect equipment margins in the 20% range in the near term and to decrease slightly in the long term as the mix of lower margin Galileo unit sold increases over time.

Ryan: Yes.

Ryan: Moving on to operating expenses fourth quarter, combined engineering design and development sales and marketing and general and administrative expenses increased 20% year over year, and 19% sequentially to $35 million.

Ryan: The increase in the fourth quarter is primarily due to approximately $3 million in legal expenses related to the smart Guy patent litigation and global efforts to support Galileo.

Jesse Betjeman: Equipment margins were 24 percentage points lower sequentially, driven largely by the $2 million accrual taken in the third quarter for the expected FTC reimbursement of costs incurred in prior periods for aircraft replacements, along with the increased inventory reserves I just mentioned. We expect equipment margins in the 20% range in the near term and to decrease slightly in the long term as the mix of lower margin Galileo units sold increases over time. Moving on to operating expenses, fourth-quarter combined engineering, design, and development, sales, and marketing, and general and administrative expenses increased 20% year over year and 19% sequentially to $35 million. The increase in the fourth quarter is primarily due to approximately $3 million in legal expenses related to the SmartSky patent litigation and global agency efforts to support Galileo.

Ryan: I expect 2020 forward to be significant investment in here as we continue to invest in our growth strategy in Galileo program.

Ryan: We expect that these new products will accelerate revenue and free cash flow growth over the long term and are the key foundation for our long term financial targets that I will discuss shortly.

Ryan: In terms of <unk> in the fourth quarter, our $2 million of <unk> spending was comprised of $4 million in opex and $1 $6 million in Capex.

Ryan: The <unk> delay has pushed approximately $10 million of Capex and approximately $7 million of Opex from our original plan in 2023 into this year.

Ryan: The delay also dampens revenue EBITDA and free cash flow in the coming quarters.

Ryan: We expect 2024 will include approximately $8 million or <unk>, opex and approximately $12 million in capex.

Jesse Betjeman: Gogo expects 2024 to be a significant investment year as we continue to invest in our Gogo 5G and Galileo programs. We expect that these new products will accelerate revenue and free cash flow growth over the long term and are the key foundation for our long-term financial targets that I will discuss. In terms of Gogo 5G in the fourth quarter, our $2 million of 5G spending was comprised of $0.4 million in OpEx and $1.6 million in CapEx. The 5G delay has pushed approximately $10 million of CapEx and approximately $7 million of OpEx from our original plan in 2023 into this year. The delay also dampens revenue, EBITDA, and free cash flow for the coming quarter.

Ryan: We continue to maintain our estimate of $100 million in total external development and deployment costs for our <unk> program and anticipate no negative impact on the overall program cost from the delay.

Ryan: All of these impacts are reflected in our 2024, our financial guidance.

Ryan: Now on to Gogo Galileo initiative.

Ryan: In the fourth quarter, Gogo recorded $2 $5 million in operating expenses related to Galileo.

Ryan: Continue to expect external development cost for both the Acs and <unk> solutions to be less than $50 million in total.

Ryan: Of which $9 million has been earned in 2023, approximately $25 million is projected in 2024 and the remainder in 2025.

Jesse Betjeman: We expect 2024 to include approximately $8 million of 5G OpEx and approximately $12 million in CapEx. We continue to maintain our estimate of $100 million in total external development and deployment costs for our 5G program and anticipate no negative impact on the overall program costs from the delay. All of these impacts are reflected in our 2024 financial guidance. Now, on to the Gogo Galileo Initiative. In the fourth quarter, Gogo recorded $2.5 million in operating expenses related to Galileo.

Ryan: We anticipate approximately 90% of Google Galileo external development cost will be in Opex.

Speaker Change: Moving on to our bottom line.

Speaker Change: Because our recorded $35 $1 million and adjusted EBITDA in the fourth quarter at 24% decrease year over year, and 19% decrease sequentially driven by lower equipment profit and an increase in legal expenses as I previously described.

Speaker Change: So as we delivered net income of $14 5 million in the fourth quarter down 48% year over year translating to <unk> 11 in basic and diluted earnings per share.

Jesse Betjeman: We continue to expect external development costs for both the HDX and FDX solutions to be less than $50 million in total, of which $9 million was incurred in 2023, approximately $25 million is projected in 2024, and the remainder in 2025. We anticipate approximately 90% of Gogo Galileo's external development costs will be in OPEC. Moving on to our bottom line, Gogo recorded $35.1 million in adjusted EBITDA in the fourth quarter, a 24% decrease year-over-year and 19% decrease sequentially, driven by lower equipment profit and an increase in legal expenses. As a result of the previous, Gogo delivered net income of $14.5 million in the fourth quarter, down 48% year-over-year, translating to $0.11 in basic and diluted earnings per share.

Speaker Change: As a reminder, our financial statements reflect noncash income tax expense as we continued to generate positive pretax income.

Speaker Change: Based on our substantial NOL position at the end of 2023, including $446 million in federal net operating losses and $377 million in state and operating losses.

Speaker Change: Results in a net deferred income tax asset of $270 million to $217 million.

Speaker Change: We did not expect to pay meaningful cash taxes through our five year planning horizon.

Speaker Change: As a reminder, our shareholder rights plan that was designed to preserve Nols expired in September 2023.

Speaker Change: There are no limitations to shareholders buying over 5% of our equity.

Speaker Change: In the fourth quarter, we generated record free cash flow of $28 4 million, an increase from $25 million in the year ago period, and $21 million last quarter.

Speaker Change: The year over year increase was primarily driven by lower capex associated with <unk> and lower net working capital.

Jesse Betjeman: As a reminder, our financial statements reflect non-cash income tax expense as we continue to generate positive pre-tax income. Based on our substantial NOL position at the end of 2023, including $446 million in federal net operating losses and $377 million in state net operating losses, this results in a net deferred income tax asset of $217 million. We do not expect to pay meaningful cash taxes through our five-year planning horizon. As a reminder, our shareholder rights plan that was designed to preserve NOLs expired in September 2023. Thus, there are no limitations on shareholders buying over 5% of REC.

Speaker Change: I will now turn to a discussion on our balance sheet.

Speaker Change: <unk> ended the quarter with $139 million in cash and short term investments and $606 $9 million and the outstanding principal on our term loan with a $100 million.

Speaker Change: Oliver remaining undrawn.

Speaker Change: Net leverage remained at two nine times in line with our target range of two 5% to three five times.

Speaker Change: As previously mentioned, we have a hedge agreement in place and we currently have 87% of outbound hedged.

Speaker Change: Next step down in the hedge to $350 million occurred in July 2024, with an increase in strike rate from 75% to one 5%.

Jesse Betjeman: In the fourth quarter, we generated record free cash flow of $28.4 million, an increase from $25 million in the year-ago period and $21 million last quarter. The year-over-year increase was primarily driven by lower CapEx associated with 5G and lower net working capital. I will now turn to a discussion of our balance sheet. Gogo ended the quarter with $139 million in cash and short-term investments and $606.9 million in outstanding principal on our term loan, with our $100 million revolver remaining undropped.

Speaker Change: Our cash interest paid between train three net of hedge cash flow was $41 5 million, which includes approximately $10 million for two months of interest expense related to 2022.

Speaker Change: Assuming no further debt paydown and cash interest paid for 2024 net of hedge cash flow is expected to be approximately $33 million.

Speaker Change: Now I will provide a recap of our 2023 full year results.

<unk> generated total revenue of $397 6 million down.

Speaker Change: Down 2% from train train two at the top but at the top end of our guidance range. We.

Speaker Change: We delivered record service revenues of $318 million up 7% from 2022, driven by a record number of total advance activations, including traffic to advance upgrades.

Jesse Betjeman: Gogo's net leverage remains at 2.9 times, in line with our target range of 2.5 to 3.5. As previously mentioned, we have a hedge agreement in place, and we currently have 87% of our loan hedged. The next step down in the hedge to $350 million occurs in July 2024, with an increase in the strike rate from 0.75% to 1.25%. Our cash interest paid for 2023 net of hedge cash flow was $41.5 million, which includes approximately $10 million for two months of interest expense related to 2022. Assuming no further debt pay-down, the cash interest paid for 2024 net of hedge cash flow is expected to be approximately $33 million.

Speaker Change: Because this equipment revenue was 79.

Speaker Change: $6 million down 26% from 2022.

Speaker Change: We reached adjusted EBITDA of $162 $1 million.

Speaker Change: Down 7% midpoint in 'twenty, two but above our 2023 guidance range, despite lower revenues throughout the year.

Speaker Change: Net income increased 58% year over year to $145 $7 million, primarily driven by a $48 $1 million tax benefit due to the partial release of evaluation allowance on our deferred tax assets in the second quarter.

Speaker Change: We delivered record free cash flow of $82 7 million up 43% from $57 $8 million in 2022, due to lower Capex and lower net working capital.

Jesse Betjeman: And now I'll provide a recap of our 2023 full-year results. Gogo generated total revenue of $397.6 million, down 2% from 2022, but at the top end of our guidance range. We delivered record service revenue of $318 million, up 7% from 2022, driven by a record number of total advanced activations, including classic to advanced upgrades. Gogo's equipment revenue was $79.6 million, down 26% from 2022

Speaker Change: While revenue was well below our expectations due to the industry dynamics, we have discussed the five day delay and the resulting <unk> situation, our bottom line and free cash flow were better than expected.

Speaker Change: Increasing demand from customers for connectivity angle.

Speaker Change: <unk> business model is a testament to the strategy, we are employing for long term financial growth and success.

Speaker Change: Now, let me turn let me provide a recap of the capital allocation priorities, which are in service of our current strategic off.

Speaker Change: We are focused on first maintaining adequate liquidity.

Speaker Change: Second investing in strategic opportunities to drive competitive positioning and financial value, including <unk> in Galileo.

Jesse Betjeman: We reached adjusted EBITDA of $162.1 million. We have 7% from 2022, but above our 2023 guidance range, despite lower revenue throughout the year. Net income increased 58% year-over-year to $145.7 million, primarily driven by a $48.1 million tax benefit due to the partial release of the valuation allowance on our deferred tax assets in the second quarter.

Speaker Change: Third maintaining an appropriate level of leverage for the economic environment with a target net leverage ratio of two five to three five times and.

Speaker Change: And finally, returning capital to shareholders as appropriate in the future.

Speaker Change: As we mentioned last quarter, we were comfortable moving priority for in returning capital shareholders as our board of directors approved a share repurchase program in September with no set exploration date that grants authority to repurchase up to $50 million of shares of common stock.

Jesse Betjeman: We delivered a record free cash flow of $82.7 million, up 43% from $57.8 million in 2022 due to lower CapEx and lower net working capital. While revenue was well below our expectations due to the industry dynamics we have discussed, the 5G delay, and the resulting wait and see situation, our bottom line and free cash flow were better than expected. Increasing demand from customers for connectivity and Gogo's robust business model is a testament to the strategy we are employing for long-term financial growth. Now, let me turn. Let me provide a recap of Gogo's capital allocation priorities, which are in service of our current strategic goals. We are focused on, first, maintaining adequate liquidity and, second, investing in strategic opportunities to drive competitive positioning and financial value, including Gogo 5G and Galileo.

Speaker Change: In the fourth quarter <unk> purchased approximately 480000 shares for a total cost of approximately $4 8 million and an additional 566000 shares for a total cost of approximately $5 $2 million in January.

Speaker Change: Our confidence in the long term value Gogo and in the strength of our balance sheet.

Speaker Change: Looking ahead, we need to continue to balance the use of cash over the next year across our capital allocation priority, but believe we are well positioned to execute our investment schedule continue to evaluate further debt paydowns, especially in consideration of the upcoming hedged stepped down I previously mentioned and expect to have more opportunities to Rick.

Speaker Change: Current capital to our shareholders in the future.

Speaker Change: I will now provide an update on the expected financial impact of the FCC and reimbursement program.

Jesse Betjeman: Third, maintaining an appropriate level of leverage for the economic environment with a target net leverage ratio of 2.5 to 3.5 times, and finally, returning capital to shareholders as appropriate in the future. As you mentioned last quarter, we were comfortable moving to priority four in returning capital to shareholders, as our board of directors approved a share repurchase program in September with no set expiration date that grants authority to repurchase up to $50 million of shares of common stock. In the fourth quarter, Gogo repurchased approximately 480,000 shares for a total cost of approximately $4.8 million and an additional 566,000 shares for a total cost of approximately $5.2 million in January, thereby boosting our confidence in the long-term value of Gogo and in the strength of our balance sheet.

Speaker Change: <unk> expects to receive a $132 million from the program as it is partially funded however.

Speaker Change: However, we are a leading congress's decision on for funding, which could substantially increase our reimbursement up to the approved $334 million.

Speaker Change: As a reminder, we submitted our first claim in July grain train three which triggered the start of the one year clock to complete the program by July 21 2024.

Speaker Change: Our application, we stated that we will need to have multiple extensions to complete the program and are planning to request an extension in the near term.

Speaker Change: Doug will have incurred and will continue to incur costs of this program in three main areas.

Speaker Change: First network equipment for sulfate and data centers.

Speaker Change: Second airborne equipment for the swaps of LTE Aircard to replace EBITDA are part and parcel of rebates for customer installation costs to enable existing customer aircraft to communicate to the new network.

Speaker Change: And third operating expenses.

Jesse Betjeman: Looking ahead, we need to continue to balance the use of cash over the next year across our capital allocation priorities, but believe we are well-positioned to execute our investment schedule, continue to evaluate further debt paydowns, especially in consideration of the upcoming hedge step-down I previously mentioned, and expect to have more opportunities to return capital to our shareholders in the near future. I will now provide an update on the expected financial impact of the FCC reimbursement program. Gogo expects to receive $132 million from the program as it is partially funded.

Speaker Change: We expect that the spend will be partially offset by the FCC reimbursements.

Speaker Change: As of December 31 train train three we recorded an $18 3 million receivable from the FCC as he spent approximately $20 million of Reimbursable expenses and recouped approximately $2 million in cash reimbursement.

Speaker Change: This receivable is included in prepaid expenses and other current assets in our balance sheet with a corresponding reduction to property and equipment inventory and contract assets and with the pick up in the income statement.

Speaker Change: Since the program is currently partially funded we have some optionality on what we request reimbursement for which could impact of a grant money received will be recorded between the income statement and balance sheet.

Jesse Betjeman: However, we are awaiting Congress's decision on full funding, which could substantially increase our reimbursement up to the approved $334 million. As a reminder, we submitted our first claim in July 2023, which triggered the start of the one-year clock to complete the program by July 21st, 2024. In our application, we stated that we will need to have multiple extensions to complete the program and are planning to request an extension in the near term. Gogo has incurred and will continue to incur costs for this program in three main areas. Forest Network Equipment for Cell Sites and Data Centers.

Speaker Change: As we mentioned last quarter, we are currently seeing reimbursements coming in quicker than expected potentially changing this thing effect on free cash flow over the years. However.

Speaker Change: However, with partial funding we are forecasting that we will run out of reimbursement funds in late 2025, and we will need to continue to spend money in support of the program through 2026, which will negatively impact 2026 free cash flow.

Speaker Change: Now I'll turn to the guidance our long term targets, we announced this morning, starting with some additional color on our 2020 for projections.

Speaker Change: So the 'twenty 'twenty four projections reflect our anticipated increase in Galileo spend and the impact of the push out of <unk> spend from 2023.

Speaker Change: These investments coupled with lower shipments in the aviation industry dynamics challenging aircraft online and train train III and the delay of Gogo will constrain our 2000 22020 for performance as we've stated previously.

Jesse Betjeman: Second, airborne equipment for the swaps of LTE air cards to replace EVDO air cards and partial rebates for customer installation costs to enable existing customer aircraft to communicate to the new network, and Third, operating expenses. We expect that the spend will be partially offset by the FCC reimbursement. As of December 31, 2023, we recorded an $18.3 million receivable from the FCC, as we spent approximately $20 million of reimbursable expenses and recouped approximately $2 million in cash. This receivable is included in prepaid expenses and other current assets in our balance sheet, with corresponding reductions to property and equipment, inventory, and contract assets, and with a pick-up in the income statement. Since the program is currently partially funded, we have some discretion in what we request reimbursement for, which could impact where grant money received will be recorded between the income statement and the balance sheet.

Speaker Change: So I expect 2020 for revenue to be in the range of $410 million to $425 million.

Speaker Change: This implies 5% overall growth with equipment revenue expected to grow faster than service revenue.

Speaker Change: Service revenue growth will be slower than the growth rate in <unk> III as we project a significant number of upgrades from catheter event, driven by the FCC program and while strategically important will dampen aircraft online growth.

Speaker Change: We anticipate 2024 adjusted EBITDA in the range of $110 million to $125 million.

Speaker Change: This guidance reflects approximately.

Speaker Change: Operating expenses of approximately $40 million strategic and operational initiatives.

Speaker Change: Including approximately $8 million in expected Gogo <unk> spend.

Speaker Change: Approximately $20 million of cocoa Galileo development trend.

Speaker Change: Approximately $9 million in the LTE spend does not reimbursable by the FCC.

Jesse Betjeman: As you mentioned last quarter, we are currently seeing reimbursements coming in quicker than expected, potentially changing the swing effect on green cash flow over the years. However, with partial funding, we are forecasting that we will run out of reimbursement funds in late 2025 and will need to continue to spend money in support of the program through 2026, which will negatively impact 2026 free cash flow. Now I'll turn to the guidance and long-term targets we announced this morning, starting with some additional color on our 2024 projection. So the 2024 projections reflect our anticipated increase in Galileo spins and the impact of the push out of 5G spins from 2023. These investments, coupled with lower shipments and the aviation industry dynamics challenging aircraft delivery in 2023 and the delay of Gogo 5G, will constrain our 2024 performance, as we stated previously. Gogo expects 2024 revenue to be in the range of $410 to $425 million.

Speaker Change: And approximately $3 million and additional operational initiatives.

Speaker Change: Our adjusted EBITDA guidance also includes approximately $4 million related to legal expenses tied to the smart Sky patent litigation.

Speaker Change: We expect 2020 for capex to be approximately $45 million.

Speaker Change: Which includes approximately $25 million for the following strategic initiatives.

Speaker Change: Approximately $12 million for Gogo.

Speaker Change: And $5 million for Galileo and.

Speaker Change: And approximately $8 million for the LTE network build out related to the SEC reimbursement program.

Speaker Change: We also expect free cash flow of 20 million to $40 million, which includes approximately $56 million of expected FCC spend including non reimbursable development spend and approximately $45 million in FCC reimbursements.

Speaker Change: Now turning to our long term targets.

Speaker Change: We recently updated our long term model, which reflects the launch of buildup IGN Galileo and the fourth quarter of 2024, and the build out of the LTE network and associated customer conversion related to the SEC reimbursement program by 2020.

Speaker Change: Our long term targets are as follows.

Speaker Change: We expect revenue growth at a compound annual growth rate of approximately 15% to 17% from 2023 through 2028 with Galileo contributing to revenue beginning in 2025.

Jesse Betjeman: This implies 5% overall growth, with equipment revenue expected to grow faster than service revenue. Service revenue growth will be slower than the growth rate in 2023, as we project a significant number of upgrades from classic to advanced driven by the FCC program, which while strategically important, will dampen aircraft online growth. We anticipate 2024 adjusted EBITDA in the range of $110 to $125 million. This guidance reflects operating expenses of approximately $40 million for strategic and operational initiatives, including approximately $8 million in expected Gogo 5G spend, approximately $20 million of Gogo Galileo development spend, approximately $9 million in LTE spend that is not reimbursable by the FDA, and approximately $3 million in additional operational initiatives. Our adjusted EBITDA guidance also includes approximately $4 million related to legal expenses tied to the SmartSky patent litigation.

Speaker Change: We expect we continue to expect free cash flow in the range of $150 million to $200 million in 2025.

Speaker Change: This does not take into account the effect of the FCC program.

Speaker Change: The projected significant increase in free cash flow in 2025 is due to increased EBITDA driven by revenue growth the launch of Coca <unk> Galileo.

Speaker Change: <unk> engineering design and development Opex and lower Capex as investment in these.

Speaker Change: Strategic programs are completed.

Speaker Change: And positive networking capital driven by inventory purchases and prepayments planned in 2024 or 2025 equipment shipments.

Speaker Change: We expect annual adjusted EBITDA margin to be reaching 40% by 2028.

Speaker Change: While still projecting healthy margin it is lower than our prior expectation of mid 48% driven by the delay in <unk> launch and increased share of Galileo revenue power incremental margins compared to atg.

Speaker Change: These updates reflect our expectation to perform strongly and drive further value creation for our customers and shareholders as we execute our strategy.

Jesse Betjeman: We expect the 2024 CAP Act to be approximately $45 million, which includes approximately $25 million for the following strategic initiatives, approximately $12 million for Gogo 5G and $5 million for Galileo, and approximately $8 million for the LTE network build-out related to the FCC's reimbursement program. We also expect free cash flow of $20 million to $40 million, which includes approximately $56 million of expected FCC spend, including non-reimbursable development spend, and approximately $45 million in FCC reimbursement. Now, turning to our long-term target. We recently updated our long-term model, which reflects the launch of Gogo 5G in Galileo in the fourth quarter of 2024 and the build-out of the LTE network and associated customer conversion related to the FCC reimbursement program by 2026. Our long-term targets are as follows. We expect revenue growth at a compound annual growth rate of approximately 15 to 17 percent from 2023 through 2028, with Galileo contributing to revenue beginning in 2025. We continue to expect free cash flow in the range of $150 to $200 million in 2025. This does not take into account the effect of the FCC's program.

Speaker Change: So those business continues to perform well our outlook underscores the value creation potential for our customers and shareholders and we expect to unlock as we execute our strategy and invest in the strategic initiatives that are anticipated to extend and enhance our long term growth.

Speaker Change: Before we open the call up for questions I would like to join Oak in thanking the entire gogo team for their hard work and dedication to our business, providing unparalleled service to our customer.

Speaker Change: Operator. This concludes our prepared remarks, we're now ready for our first question.

Speaker Change: Thank you, ladies and gentlemen to ask a question you will need to press star one on your telephone and wait for your name to be announced so withdraw your question simply press Star One again, please standby, while we compile the Q&A roster.

Speaker Change: And our first question coming from the line of Simon Flannery from Morgan Stanley. Your line is now open.

Simon Flannery: Great. Thank you very much good morning, thanks for all the detail if I could turn to Galileo.

Simon Flannery: There has been.

Simon Flannery: <unk> about some delays on the one web constellation, particularly around ground stations.

Simon Flannery: You didn't really reference any delay concerns around that I wonder if you could just help us understand what's fee.

Galileo: So for your understanding with with one weapon.

Simon Flannery: The risk of some further delays because they could.

Simon Flannery: To delayed commercial launch.

Jesse Betjeman: The projected significant increase in free cash flow in 2025 is due to increased EBITDA driven by revenue growth at the launch of Gogo 5G in Galileo, reduced engineering design and development op-ecs, and lower cap-ecs as investment in these projects continues, and strategic programs are completed. A positive net working capital driven by inventory purchases and prepayments planned for 2024 or 2025 equipment shipments. We expect the annual adjusted EBITDA margin to reach 40% by 2028.

Simon Flannery: And then on Starlink you talked about small antennas can you just help us understand what you're assuming in terms of Sterling <unk> ability to address your <unk>.

Simon Flannery: Existing fleet is got small antennas are going to be competitive with the HD X on Turner.

Simon Flannery: Just on the kind of cost.

Simon Flannery: Both of install in a service that youre seeing from.

Simon Flannery: These.

Simon Flannery: Satellite.

Simon Flannery: Services versus your existing atg. Thank you.

Speaker Change: Sure so.

Speaker Change: We believe Starlink I'm, sorry, one lab will have.

Jesse Betjeman: While still projecting healthy margins, it is lower than our prior expectations of mid 40%, driven by the delay in the 5G launch and increased share of Galileo revenue with lower incremental margins compared to ATG. These updates reflect our expectations to perform strongly and drive further value creation for our customers and shareholders as we execute our strategy. Gogo's business continues to perform well.

Speaker Change: The ground network complete.

Speaker Change: Our satisfaction by the time, we launch.

Speaker Change: We don't anticipate.

Speaker Change: Operating in the Soviet Union.

Speaker Change: China or.

Speaker Change: North Korea, and places like that people always need because it totally global although not really and I can be able to fly our replaces you might get shut down, but but generally we think that they will be there'll be there'll be done in time for us. So we're pleased about that.

Jesse Betjeman: Our outlook underscores the value creation potential for our customers and shareholders that we expect to unlock as we execute our strategy and invest in the strategic initiatives that are anticipated to extend and enhance our long-term growth. Before we open the call to questions, I would like to join Oak in thanking the entire Gogo team for their hard work and dedication to our business and for providing unparalleled service to our customers. Operator, this concludes our prepared remarks. We're now ready for our first question. Thank you. Ladies and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1-1 again.

Simon Flannery: Your second question was about I believe the Starlink small antenna.

Simon Flannery: Yes, right now.

Simon Flannery: The pricing around Sterling versus your air to ground.

Simon Flannery: So while we don't they haven't announced a small antenna so just for planning purposes.

Simon Flannery: We've assumed that they will.

Speaker Change: We don't know that they will.

Speaker Change: That's their decision not ours. So we don't we don't know what it is they have got various applications.

Speaker Change: At the SEC for a wide variety of antennas or various different sizes, mostly for our consumer market.

Speaker Change: But then they could re package one of the smaller versions of those four for aviation that's difficult to do we're not sure that those really are kind of the aviation grade in the long run and have the reliability and durability of our equipment.

Speaker Change: Designed from the ground up for aviation, but so you have to ask Sterling.

Operator: Please stand by while we compile the Q&A roster. And our first question coming from the lineup, Simon Flannery from Morgan Stanley. Your line is open. Great, thank you very much. Good morning.

Sterling: That question about what they might launch in terms of a small antenna for us. It was just a planning assumption okay.

Speaker Change: Understood and then I think your last your last question was about <unk>.

Simon Flannery: Thanks for all the detail. If I could turn to Galileo, there's been concern about some delays in the OneWeb constellation, particularly around ground stations. You didn't really reference any delay concerns around that. I wonder if you could just help us understand what the status of your understanding with OneWeb is and then any risk of some further delays because they continue to delay commercial launch.

Speaker Change: Install costs all in yes.

Speaker Change: Just one youre talking about people looking at <unk> versus <unk> or are you going to have a dual system, where people use calender year over water and use ITG domestically.

Speaker Change: How do those sorry, you dramatically cheaper than a.

Speaker Change: Satellite solution.

Speaker Change: Yes, I mean today.

Speaker Change: Cost about $700000 to install a geo satellite solution.

Speaker Change: Sure.

Speaker Change: We're much cheaper today than that I think we will be less than half that cost in terms of the equipment sale plus installation.

Oakleigh B. Thorne: And then on Starlink, you talked about small antennas. Can you just help us understand what you're assuming in terms of Starlink's ability to address your existing fleet? Is that small antenna going to be competitive with the HDX antenna?

Speaker Change: And that's for a new installation of course, if you have events that will be a lot cheaper because you won't have to do anything really inside the aircraft you just have to add the antenna.

Oakleigh B. Thorne: And just on the kind of cost both of installation and of service that you're seeing from these satellite services versus your existing one. Yeah, so. We believe Starlink, I mean, I'm sorry, OneWeb will have the ground network complete to our satisfaction by the time we launch. You know, we don't anticipate operating in the Soviet Union or China or, you know, North Korea, places like that, so people always need to go, oh, is it totally global? Well, no, not really.

Speaker Change: And then two cables power in power.

Speaker Change: Power out in the data in.

Speaker Change: So.

Speaker Change: We're considerably cheaper will be considerably cheaper on service as well.

Speaker Change: As we will starlink.

Speaker Change: Will you just use their recently announced $10000.

Speaker Change: Months.

Speaker Change: Unlimited plan.

Oakleigh B. Thorne: You're not going to be able to fly over places you might get shot down. But generally, we think that they will be, and they'll be done in time for us, so we're pleased about that. Your second question was about, I believe, the small Starlink antenna. Yes, exactly, and the pricing around Starlink versus your air technology. Yeah, so well, we don't know they haven't announced a small antenna. So, just for planning purposes. You know, we've assumed that they will, but we don't know that they will. That's, you know, that's their decision, not ours. So we don't, you know, we don't know what it is.

Speaker Change: Today, you pay $30 $40, a month to the geostationary satellite provider for.

Speaker Change: Unlimited global plan so.

Speaker Change: They're either going to have to cut their pricing a lot to compete or which will be a big hit to them in terms of their cash flow.

Speaker Change: Or.

Speaker Change: Our lubes business, that's a pretty tough choice I think.

Speaker Change: Periodically of Rio over Geo is substantial and we use both.

Speaker Change: I mean, it's just it's in.

Speaker Change: Order of magnitude improvement when you go to Leo the latency is obviously much faster and then the capacity is also greater so it's.

Oakleigh B. Thorne: They've got, you know, various applications at the FCC for a wide variety of antennas of various different sizes, mostly for the consumer market. But then they could, you know, repackage, you know, one of the smaller versions of those for aviation; it's difficult to do. We're not sure that they really are going to be aviation grade in the long run and have the reliability and durability of our equipment, you know, designed from the ground up for aviation. But so you have to ask Starlink that question about what they might launch in terms of a small antenna. For us, it was just a planning assumption, okay? And then I think your last question was about installation costs, all in. Yeah, just when you're talking about people looking at Geo versus Leo, are you going to have a dual system where people use Galileo over water and use ATG domestically? How do those compare, are you dramatically cheaper than a?

Speaker Change: It's a much better experience. So when you combine the fact that it's going to be much cheaper to install.

Speaker Change: It's going to be much cheaper to operate and the performance is much better.

Speaker Change: We think that if sterling keeps coming into the market that they will impact that.

Speaker Change: The big impact on the GL players and our Gale Galileo products will do the same and we think we have a few advantages or youre getting in some parts of that heavy jet market, which are that we do have <unk> hundred jets on advanced already for them. It's a very easy upgrade to add our products. So.

Speaker Change:

Speaker Change: As I said in my script I think we see.

Speaker Change: Sterling, if they enter and us both.

Speaker Change: Having a pretty significant impact on the Geo satellite players.

Speaker Change: Great and just one last one on <unk>.

Speaker Change: Smart Sky you referenced some of the litigation expense any updates there on.

Speaker Change: They're kind of presence in the marketplace.

Oakleigh B. Thorne: Satellites. Yeah, I mean, today, it costs about $700,000 to install a geosatellite solution. You know, we're much cheaper today than that. I think, you know, we will be less than half that cost in terms of equipment sale plus installation. And that's for a new installation. Of course, if you have a Vance, that'll be a lot cheaper because you won't have to do anything really inside the aircraft. You just have to add the antenna, and the two cables will power in and power out and data in.

Speaker Change: No.

Speaker Change: Not really we don't see any.

Speaker Change: Progress by them in terms of installing aircrafts.

Speaker Change: Great. Thanks, a lot.

Speaker Change: Thanks, Tom.

Speaker Change: Thank you.

Speaker Change: And our next question coming from the line up.

Speaker Change: Michael <unk> with Raymond James Your line is open.

Michael: Thanks, Good morning, everybody.

Speaker Change: Alright.

Speaker Change: Okay.

Michael: Couple of questions follow on Simon's questions or two.

Michael: So as you think about the addressable market.

Oakleigh B. Thorne: So we're considerably cheaper; we'll be considerably cheaper on service as well, as will Starlink. And we just used their recently announced $10,000 a month, you know, unlimited plan. You know, today you pay $30,000, $40,000 a month to the geostationary satellite provider for, you know, an unlimited global plan. You know, they're either going to have to cut their pricing a lot to compete, which will be a big hit to them in terms of their cash flow, or, or, you know, or lose business. That's a pretty tough choice.

Michael: How are you taking a shot at what you think your market share will be as we look over say the next decade.

Michael: And then who do you.

Michael: Sure that market with Spacex Starlink is it other Leo operators that youre, starting to keep an eye on as well, but just help us understand kind of your base.

Michael: <unk> hit those free cash flow targets.

Michael: Revenue CAGR targets about what the addressable market split up share might be.

Speaker Change: Yes so.

Speaker Change: I can't give you a 10 year because they didn't do that we just did five so that'll do.

Oakleigh B. Thorne: I think that, having used both, the superiority of LEO over GEO is substantial. I mean, it's just an order of magnitude improvement when you go to Leo. The latency is, you know, obviously much faster, and then, you know, the capacity is also greater. So it's a much better experience.

Speaker Change: Okay. So this is all part of our <unk>.

Speaker Change: Annual long term model update that creates.

Speaker Change: <unk> the guidance and everything else. So yes, we build it from the bottom up.

Speaker Change: We go.

Speaker Change: Both North America with by the World in North America, and rest of World.

Speaker Change: We divided into different segments of Jets and then we.

Oakleigh B. Thorne: So when you combine the fact that it's gonna be much cheaper to install, it's going to be much cheaper to operate, and the performance is much better, You know, we think that if Starlink keeps coming into the market, they will have a big impact on the Geo players, and our Galileo products will do the same. And we think we have a few advantages to getting into some parts of that heavy jet market, which is that we do have 1300 jets in advance already. For them, it's a very easy upgrade to add our product.

Speaker Change: Look at everybody's value proposition, and where we think they're going to be going in terms of <unk>.

Speaker Change: Pricing product et cetera, and then.

Speaker Change: No build the numbers up from there. So obviously we've got a.

Speaker Change: Big head start over everybody in the small mid sized jet market, we actually have the largest share of the heavy jet market today.

Speaker Change: Don't realize you've got <unk>.

Speaker Change: <unk> thousand 200, Heavies and I think the next biggest player has about 1800 so.

Speaker Change: <unk>.

Speaker Change: We have our we add our product rollout plans to that in terms of what we think we're going to be.

Oakleigh B. Thorne: So, as I said in my script, I think we see Starlink, if they enter, and us both having a pretty significant impact on the geosatellite players. Great. And just one last one.

Speaker Change: Getting in terms of upgrades.

Speaker Change: New wins et cetera, we looked at.

Speaker Change: Our OEM positions and what the Oems are going to be producing and what our attachment rate is at those Oems.

Speaker Change: We go through the dealer channel and we look at everything Thats being sold there and estimate what our share is going to be so we built it really it's very granular bottom up approach I think I shared the numbers.

Simon Flannery: On Smart Sky, you referenced some of the litigation expenses. Any updates there on their presence in the marketplace? Um, no. Not really. They, we don't see any progress by them in terms of installing aircraft. Thanks a lot.

Speaker Change: My script.

Speaker Change: Today, if you look at the global market and we include turbo props in our markets. Okay.

Oakleigh B. Thorne: Thanks, Sam. Thank you. And our next question comes from the line-up: Ric Prentiss, Whit Clayman, James Yolanis, Elpin. Thanks. Good morning, everybody. Warren Redrick.

Speaker Change: We have.

Speaker Change: Of the installed planes, we're in the low 70% of the global market.

Speaker Change: Sort of low <unk> in the U S market, which is by far the largest.

Speaker Change: And even though theres going to be a shift over the next five years, we kind of just maintain those market share levels.

Ric Prentiss: A couple questions follow on Simon's questions there too. So as you think about the addressable market, how are you taking a shot at what you think your market share will be as we look over, say, the next decade? And then who do you share that market with? Is it SpaceX, or Starlink?

Speaker Change: The overall market penetration.

Speaker Change: Globally today, only about 24% I think of aircrafts business aircrafts have inflight connectivity installed and I think we see that going up.

Oakleigh B. Thorne: Is it other LEO operators that you're starting to keep an eye on as well? But just help us understand kind of your base. It's my assumption that those free cashflow targets and the revenue CAGR targets about what the addressable market split up share my Yeah, so, um... I can't give you a 10-year projection because we didn't do that.

Speaker Change: Almost a 50% 60% over the next five years to the.

Speaker Change: The mid Thirty's.

Speaker Change: <unk>.

Speaker Change: The reason, we can kind of maintain share while others are also winning planes is that of course that the overall market is growing quite a bit in terms of installed aircrafts.

Speaker Change: We start like in our for planning purposes, and we don't know what Sterling is going to do or if theyre going to succeed, but we we take sort of a worst case view of the world and so.

Oakleigh B. Thorne: We just did five. I hope that'll do. Okay, so this is all part of our, you know, annual long-term model update that, you know, creates the guidance and everything else. So, yeah, we build it from the bottom up. We go both North America and we divide the world into North America and the rest of the world.

Speaker Change: We plan on they're succeeding.

Speaker Change: On their FTC schedule as they published it.

Speaker Change: And then we make this or bold assumption that theyre, probably want to add a second intend at some point.

Speaker Change: And so based on that.

Oakleigh B. Thorne: And we divide it into different segments of jets. And then we, you know, look at everybody's value proposition and where we think they're going to be going in terms of pricing, product, etc. And then I'll build the numbers up from there. So, you know, obviously, we've got a big head start over everybody in the small mid-sized jet market. We actually have the largest share of the heavy jet market today. A lot of people don't realize we've got 2200 heavies. I think the next biggest player has about 1800.

Speaker Change: They and we have about an equal penetration of the heavy jets outside the U S.

Speaker Change: And I think we get to 20% of that market. So I think they would get to something similar.

Speaker Change: And our projections and.

Speaker Change: We think that.

Speaker Change: Given those assumptions they have a relatively strong start Mike I'll give out the exact numbers, where we think they are five years, but it would be a very very successful program.

Speaker Change: Compared to.

Oakleigh B. Thorne: So, you know, we add our project rollout plans to that in terms of what we think we're going to be getting in terms of upgrades, New Winds, etc. We looked at our OEM positions and what OEMs are going to be producing, and what our attachment rate is at those OEMs. We went through the dealer channel, and we looked at everything that's being sold there, and estimated what our share is going to be. So we build it really, it's a very granular and bottom-up approach. I think, you know, I shared the numbers in my script.

Speaker Change: The launch of Geo satellite products for instance, in the mid <unk> around $25 $15 16.

Speaker Change: They got up to.

Speaker Change: 500, something like that jets in about five or six years, and I think you'll see something similar for Sterling.

Speaker Change: Okay, that's very helpful and very granular like you said thank you.

Speaker Change: We'll come back to the 24 free cash flow guidance.

Speaker Change: Can you walk us through how can we.

Speaker Change: Get from EBIT.

Speaker Change: Taking into account no cash taxes, you talked about cash is just help us walk through sort of the EBITDA of about $110 million to $125 million. How do we end up at 20 to 40 on free cash flow, obviously, theres a lot of FCC stuff going on there theres working cap, but just kind of help us bridge that EBITDA, all the way down to <unk>.

Oakleigh B. Thorne: Today, if you look at the global market, and we include turboprops in our market, okay? We have, of the installed planes, we're in the low 70% of the global market. We're in the sort of low 80s in the U.S. market, which is by far the largest. And even though there's going to be a shift over the next five years, we kind of just maintain those market share levels. The overall market penetration Globally today, only about 24%, I think, of aircraft, business aircraft, have in-flight connectivity installed, and I think we see that going up, almost 50-60% over the next five years to the mid-30s.

Speaker Change: Vessel employment.

Speaker Change: Yes.

Speaker Change: So exactly that our adjusted EBITDA range is 110 to 125.

Speaker Change: Our capex is projected to be at 45, and then we do have.

Speaker Change: Networking capital So just kind of the main part of the difference and there is.

Speaker Change: Lot of buildup of inventory.

Speaker Change: That we're doing in 2024 in anticipation of train four and 'twenty five shipments.

Oakleigh B. Thorne: So, the reason we can kind of maintain our share while others are also winning planes is, of course, that the overall market is growing quite a bit in terms of installed aircraft. We, you know, Starlink in our, for planning purposes, and we don't know what Starlink is going to do or if they're going to succeed, but we take sort of a worst-case view of the world. And so we plan on their succeeding on their FTC schedule as they've published it. And then we make the bold assumption that they'll probably want to add a second antenna at some point. And so, you know, based on that. They and we have about an equal penetration of the heavy jets outside the U.S., and I think we can get to 20% of that market.

Speaker Change: Thank you.

Speaker Change: And then of course, we also have the net interest that we have as well included in there too.

Speaker Change: Okay. So it really is the working capital and inventory buildup of probably the bigger swings in working capital net working capital and interest.

Speaker Change: Yes, okay.

Speaker Change: Okay.

Speaker Change: Then just I think you mentioned.

Speaker Change: Under the current funding for or as we call it rip and replace their spending.

Speaker Change: We will continue but reimbursement would be played out lets say increase it you mentioned that there could be a 26 free cash flow hit can you put a kind.

Speaker Change: Kind of a fence post around that let us know kind of what the current program funding and your current thoughts would be as far as the hidden 26 free cash flow from the program.

Speaker Change: So.

Speaker Change: As <unk> mentioned, we we don't anticipate as.

Oakleigh B. Thorne: So I think they would get to something similar in our projections. And, you know, we, you know, we think that. Given those assumptions, they have a relatively strong start. I'm not going to give out the exact numbers where we think they will be in five years, but it would be a very, very successful program compared to the launch of geosatellite products, for instance, in the mid-1990s, around 25, 15, 16. They got up to, you know, 1500, something like those jets in about five or six years, and I think, you know, you can see something similar for Starlin.

Speaker Change: Meeting the entire $334 million.

Speaker Change:

Speaker Change: And are the reimbursements will and around <unk>.

Speaker Change: Towards late 2025, so there'll be some impact in 2025 bear greater impact in 2026.

Speaker Change: <unk>.

Speaker Change: It's probably going to be somewhere in the range of <unk>.

Speaker Change: $30 million to $40 million.

Speaker Change: In 2026.

Speaker Change: And the 25 long term guidance of 150 to 200.

Speaker Change: Excludes any effect from the FCC would that be a negative effect in 25 number as well from the FCC program I know, it's pretty complicated and a lot of moving pieces, we do see but.

Speaker Change: Wondering is auto.

Speaker Change: <unk>.

Speaker Change: 25 from that.

Speaker Change: Was that a 150 to 200.

Ric Prentiss: It's very helpful and very granular, like you said. I want to come back to the 24 free cash flow guidance. Can you walk us through it?

Speaker Change: So we.

Speaker Change: And why we have been saying it excludes our guidance excludes that as to be able to do the comparison to when we originally provided that target. So that's why we wanted to on an apples to apples comparison.

Jesse Betjeman: get from EBITDA, taking into account no cash taxes; you talked about cash interest. Help us walk through the start of the EBITDA of about 110 to 125 million. How do we end up at 20 to 40 on pre-cash flow? Obviously, there's a lot of FCC stuff going on there. There's working capital. It just kind of helps us bridge that EBITDA all the way down to pre-cash flow employment. Yeah, so, um...

Speaker Change: There is going to be a small impact in 2025, it's not as big a 2026.

Speaker Change: But.

Speaker Change: <unk>.

Speaker Change: Yes.

Speaker Change: We believe we still ended up in the range.

Speaker Change: Do believe that was the range even with the FCC in 2020, obviously, depending upon training, but what we're seeing now on the timing of the reimbursements, we expect that.

Jesse Betjeman: So exactly, our adjusted EBITDA range is 110 to 125. Our CAPEX is projected to be at 45. And then we do have negative networking capital. So it's kind of the main part of the difference.

Speaker Change: We will be in the range, both with and without SUV. Okay.

Speaker Change: Okay.

Speaker Change: And then last one for me I think you mentioned Youre getting your first shoes antenna coming.

Speaker Change: And sir trailing in the summer.

Speaker Change: First of all I hear that correctly and second what is kind of the thoughts that are being able to ramp that up falling behind Simons question about Huawei nickel, one web obviously with the ground over there before launch but.

Jesse Betjeman: And there is a lot of buildup of inventory that we're doing in 2024, in anticipation of 24 and 25 shipments, and then, of course, we also have the net interest that we have as well included in there too. So it really is the Working Capital and the Inventory Build-up. Networking Capital, Networking Capital, and Interest.

Speaker Change: He is and what's the kind of a ramp as far as getting antennas from dues.

Speaker Change: No we're right on schedule to launch this product in mid mid fourth quarter. So.

Speaker Change: Thats the update in this.

Speaker Change: Shoes has performed exceptionally well so far in this intent arrived right on time.

Ric Prentiss: Okay, and then, Jesse, I think you mentioned that under the current funding for, as we call it, Rip and Replace, their spending will continue, but reimbursement would be played out unless they increase it. You mentioned that there could be a $26 free cash flow hit. Can you put a fence post around that and let us know what the current program funding and your current thoughts would be as far as the hit and $26 free cash flow from the program? So, as Oak mentioned, we don't anticipate needing the entire $334 million, and the reimbursements will end around late 2025, so there will be some impact in 2025, but a greater impact in 2026. You know, it's probably going to be somewhere in the range of 30 to 40 million in 2026, and the 25 long-term guidance of 150 to 200. This excludes any effect from FCC. Would that be a negative effect on 25 members as well from the FCC program? I know it's pretty complicated and there are a lot of moving pieces in DC. This one is a negative hit that would hit 25, versus the 150 to 200.

Speaker Change: As called for in the project plan and.

Speaker Change: And as testing well so we're very pleased with the progress there and remain on track.

Speaker Change: Okay. Thanks, everyone.

Speaker Change: Thanks, Rick.

Speaker Change: Thank you.

Speaker Change: And our next question coming from the line of Louis Dipalma with William Blair. Your line is now open.

Louie Dipalma: Hey, Louie.

Louie Dipalma: Good morning, Jess in NOL.

Speaker Change: John a question on.

Louie Dipalma: Hardware equipment costs, one of the main.

Louie Dipalma: And our value propositions.

Louie Dipalma: And expensive and.

Louie Dipalma: Easier upgrade two five G and and the Galileo networks and I was wondering in general.

Louie Dipalma: What would you estimate is the difference.

Louie Dipalma: Equipment costs.

Louie Dipalma: For a customer to to upgrade to.

Louie Dipalma: Hypothetically five G versus if they order rip and replace.

Louie Dipalma: I'll try to go to a competitor like Leo satellite solution.

Louie Dipalma: It all depends where you start right.

Jesse Betjeman: So we, I mean, the reason why we've been saying it excludes, our guidance excludes it, is to be able to do the comparison to when we originally provided the target. So that's why we want to do an apples-to-apples comparison. There is going to be a small impact in 2025. It's not as big as 2026, but yeah.

Louie Dipalma: So if you've got.

Louie Dipalma: <unk> installed in the DDA antennas.

Speaker Change: Yes, it's going to be yes, it's going to probably be about.

Louie Dipalma: That's going to be probably two thirds the cost for equipment and installation that going to a competitor satellite product would be.

Louie Dipalma: Okay.

Louie Dipalma: That makes sense.

Speaker Change: Thanks for that.

Oakleigh B. Thorne: I think that we believe we'd still end up in the range even with the FCC in 2025. Obviously, depending upon timing, but as of what we're seeing now and the timing of the reimbursements, we expect that we will be in the range both with and without the FCC. That's helpful. And then last one for me, I think you mentioned you're getting your first fuse antenna coming in to start trialing in the summer. First, did I hear that correctly?

Louie Dipalma: Secondly, oak you referenced the.

Louie Dipalma: The FPGA five gene testing.

Louie Dipalma: When should we know it.

Louie Dipalma: And when the new five gene chip is ready for production.

Louie Dipalma: Well.

Louie Dipalma: Right now it's actually.

Speaker Change: Thank you.

Louie Dipalma: These are very technical in terms of production and chip World means you are in mass production and they are not there yet obviously, but they are in production in the in our sense Theyre in.

Oakleigh B. Thorne: And second, what is the kind of thought, then, of being able to ramp that up, following behind Simon's question about the way to go one web, obviously, to get the ground all the way there before launch? Where are you on Hughes and what's the kind of ramp as far as getting antennas from? I know we're right on schedule to launch this product in mid-fourth quarter, so that's the update. And this, you know, Hughes has performed exceptionally well so far, and this antenna arrived right on time, as called for in the project plan, and is testing well.

Louie Dipalma: Pattern mass generation phase right now and Thats, what happens right before you start fabrication of.

Louie Dipalma: The chip silicon layer by layer. So that's that's where we are.

Louie Dipalma: Okay.

Speaker Change: When should we know if the new chip works in terms of like the five components in the non G.

Speaker Change: The non <unk> component in order to clear the hurdle that.

Speaker Change: Werent cleared last year, yes, well, so the FPGA will lead us.

Oakleigh B. Thorne: So, you know, we're very pleased with the progress there and remain on track. Thanks, everyone. Thanks for watching!

Speaker Change: Test, whether the software side of the chip works because thats what it is it's sort of a.

Louie Dipalma: And our next question, coming from the line of Louie DiPalma with William Blair. Your line is open. Good morning, Oak, Jesse, and Will.

Speaker Change: A big very big box I would spend some time with it yesterday.

Speaker Change: But it emulates the physical structure of the FPGA and you can run the <unk>.

Oakleigh B. Thorne: I have a general question on hardware equipment costs. One of the main, you know, value propositions of Avon is the inexpensive and, you know, easier upgrade to 5G and the Galileo networks. And I was wondering, in general, what would you estimate is the difference?

Speaker Change: The <unk> chip and you can run the actual five new chip software on it. So you get all the software testing out of the way.

Oakleigh B. Thorne: and Equipment Plus, for a customer to upgrade to hypothetically 5G versus if they were to rip and replace, and try to go to a competitor's like Leo satellite. It all depends where you start, right? So if you've got, you know, L5 installed on the DDA antennas.., yeah it's going to be yeah it's going to probably be about, That's going to be probably two-thirds the cost for equipment and installation that going to a competitor's satellite product would be. Okay, that makes sense. Thanks for that. Secondly, Oak, you referenced the FPGA 5G testing, and when the new 5G chip is ready for production. Well, Right now, it's actually.., you know these are very technical terms so production in in chip world means you're in mass production and they're not there yet obviously but they are in production in the in our sense they're in the uh the pattern mass generation phase right now and that's what happens right before you start fabrication of the you know the chip silicon layer by layer so that's uh that's where we are, Okay, but when when should we know if if the new chip works in terms of like the 5g components and the non G?

Speaker Change: In the FPGA stage, which is sort of novel and is giving us the ability to really accelerate the program. So.

Speaker Change: I would say, we will know whether that is all going well in the April may timeframe.

Speaker Change: A lot of test, it's very complicated we've got <unk>.

Speaker Change: <unk> thousand 14 layers of the chip that have are.

Speaker Change: That are unique to us and run our software and it's all about this.

Speaker Change: Yes, accommodating things like how fast radio waves moves at the speed of light.

Speaker Change: Doppler effect and signal strength, and it's massively complicated, but we've got lab here in.

Speaker Change: In Chicago that emulates all of that and that's what we're doing now doing that testing.

Speaker Change: You'll know.

Speaker Change: We think April may is that software is all doing well and then it will probably be we don't have that.

Speaker Change: The fabrication masking just started.

Speaker Change: And.

Speaker Change: Probably be several weeks before we understand exactly how long it will take to lay each layer silicon.

Speaker Change: And then once we know that pace will know when the ship will come out of the fab and then.

Oakleigh B. Thorne: the non-5G components in order to clear the hurdles that weren't cleared from last year? Yeah, well, so the FPGA will let us test whether the software side of the chip works because that's what it is. It's sort of a big box. It's a very big box. I spent some time with it yesterday, but it emulates the physical structure of the FPGA, and you can run the, I mean, the 5G chip, and you can run the actual 5G chip software on it.

Speaker Change: And then you have to go to bring up.

Speaker Change: Test it make sure it's all working so well probably update people on that in the second quarter call or if we have any milestones between now and then that we can announce publicly.

Speaker Change: Great Thanks and for <unk>.

Speaker Change: Jesse.

Speaker Change: As it relates to the 2025 free cash flow guidance.

Speaker Change: You mentioned, how it does not include the FCC reimbursement program and you also discussed I think for this year you have an $18 million receivable such that the cash inflows seem too.

Oakleigh B. Thorne: So you get all the software testing out of the way in the FPGA stage, which is sort of novel and is giving us the ability to really accelerate the program. So, you know, I would say we'll know whether that is all going well in the April-May timeframe. There are a lot of tests.

Speaker Change: Leg.

Speaker Change: Your your cash outflows.

Speaker Change: So is the FTC program is expected to be negative for free cash flow in 2025 and is there any way to frame that.

Oakleigh B. Thorne: It's very complicated. You know, we've got 14 layers of the chip that are unique to us and run our software. And it's all about, you know, accommodating things like how fast radio waves move at the speed of light, the Doppler effect, and signal strength, and it's massively complicated.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Answering rec before that there is going to be a small negative impact of $3 25 for two reasons. One is to continue to get a little bit of that lag.

Speaker Change: Thanks, Ron.

Oakleigh B. Thorne: But we've got a lab here in Chicago that emulates all that, and that's what we're doing now, doing that testing. So you'll know, we think, April or May, if that software is all doing well. And then it'll probably, we don't have, the fabrication masking has just started, and, you know, it'll probably be several weeks before we understand exactly how long it'll take to lay each layer of silicon. And then once we know that pace, we'll know when the chip will come out of the fab. And then, you know, you have to go through bring up to actually test it to make sure it's all working.

Speaker Change: An hour in late 2025, but as mentioned in terms of the guidance. We provided we feel that even with that of course, the timing of things change with the SEC reimbursement cycle, then that potentially can change things but.

Speaker Change: Regardless, we do feel that we will still be within that range with FCC.

Speaker Change: Yes.

Speaker Change: But it is slightly negative in 2025.

Speaker Change: Great.

Speaker Change: Final one you referenced the potential for.

Speaker Change: For debt Paydown.

Speaker Change: <unk>.

Speaker Change: Is there any.

Oakleigh B. Thorne: So, you know, we'll probably update people on that on the second quarter quarterly call, or if we have any milestones between now and then that we can announce publicly. Great, thanks. And for Jesse, as it relates to the 2025 free cash flow guidance, you mentioned how it does not include the FCC reimbursement program, and you also discussed, I think, how this year you have an $18 million receivable, such that the cash inflows seem to lag your cash outflows. And so is the FCC program expected to be negative for free cash flow in 2025, and is there any way to frame that? Yeah, as I was answering Rick before, there is going to be a small negative impact in 2025 for two reasons.

Speaker Change: Framing in terms of how much debt Paydown would.

Speaker Change: <unk> been looking for like potentially to camp like the cash interest expense.

Speaker Change: At that same up $33 million annual run rate and is that what you are looking to do.

Speaker Change: No I mean, I think that when we look at this we want to make sure that we kind of balance the use of our cash between debt Paydown and.

Speaker Change: Potential additional returning returning of capital to shareholders. So we'll look at both and kind of a SaaS. We also need to see where our interest rate is going to be going.

Speaker Change: But with all that we do need to consider the hedge stepping down so we haven't necessarily identify the exact target of 1 billion of share but.

Jesse Betjeman: One is that we continue to get a little bit of that lag, but then the funds do run out in late 2025. But as mentioned, in terms of the guidance we provided, we feel that, even with that, of course, if the timing of things changes with the SEC reimbursement cycle, then that potentially could change things. But regardless, we do feel that we will still be within that range with SEC, but it is slightly negative in 2025. Great, and on my final one, you referenced the potential for debt pay-down. Is there any, I'm framing in terms of how much like debt paydown you'll be looking for, like, potentially to keep, like, the cash interest expense, you know, at that same, like, $33 million, like, annual run rate, and is that what you're looking to do?

Speaker Change: Okay keep all of these different factors in mind, the other major factors share price and with the share price down where it is.

Speaker Change: Returning capital to shareholders becomes more attractive relative to paying down debt then.

Speaker Change: Then if the share price were higher.

Speaker Change: So.

Speaker Change: The board of.

Speaker Change: We're in active conversations with our board on our plan as you know we spent $10 million on share buybacks.

Speaker Change: Q4, and Q1, so far.

Speaker Change: And we can't trade today.

Speaker Change: It will be in conversation with the board denied about what we're going to do.

Speaker Change: Excellent.

Speaker Change: I think you're implying something else. Thanks.

Speaker Change: Thanks, a lot everyone.

Speaker Change: Thanks, Matt.

Speaker Change: Right.

Speaker Change: Thank you.

Speaker Change: And our last question coming from the line of surrogate Pesky with Gamco Investors Inc. Your line is now open.

Oakleigh B. Thorne: Now, I think that when we look at this, we want to kind of balance the use of our cash between debt pay down and, you know, potential additional returns, returning of capital shareholders. So we'll look at both and, you know, kind of assess. We also need to see where our interest rate's going to be going. But, you know, with all of this, we do need to consider the hedge stepping down. So we haven't necessarily identified an exact target yet that we're willing to share, but we'll, you know, keep all of these different factors in mind. Well, and the other major factor is the share price, and with the share price down where it is, returning capital to shareholders becomes more attractive relative to paying down debt than... than if the share price were higher.

Surrogate Pesky: Good morning, Thank you for taking the questions.

Surrogate Pesky: My first question is on <unk>.

Pesky: As you launch that.

Pesky: Product what markets around market segments would you prioritize and your push to sell global broadband over the next two or three years.

Pesky: Yeah.

Speaker Change: I think youre asking about margins, we would prioritize.

Speaker Change: All our geography, yes.

Speaker Change: Well.

Speaker Change: Bill.

Bill: Yes, so I'll start with the most attractive market.

Surrogate Pesky: So does that does it.

Surrogate Pesky: Probably Europe Middle East India.

Surrogate Pesky: We'll be early in the list.

Surrogate Pesky: But south America is very attractive markets as well, so we will be paying attention down there.

Louie Dipalma: The board of, you know, We're going to have active conversations with our board about our plan, and as you know, we spent 10 million dollars on shared buybacks in Q4 and Q1 so far, and we can't trade today, so we'll be in conversation with the board tonight about what we're going to do. Excellent. I... I think you're implying something, Oak.

Surrogate Pesky: And then probably Asia after that.

Surrogate Pesky: Rough order of.

Surrogate Pesky: Vince.

Vince: Got it.

Speaker Change: And my second question.

Surrogate Pesky: Alright.

Surrogate Pesky: Where the company is today significant organic growth opportunity. How do you guys think about M&A and maybe if you could remind us your M&A philosophy.

Louie Dipalma: Thanks. Thanks a lot, everyone. Thanks, all right. Thank you. And our last question coming from the lineup, Sergei Tseltsky with Gamco Investors Inc., Yelena Sokolovskaya. Good morning. Thank you for taking the questions. My first question is about Galileo.

Surrogate Pesky: What makes sense for gogo over medium charm Zip code.

Surrogate Pesky: Accelerated amortization of your corn strategy or just.

Surrogate Pesky: So we're all shareholder values in general.

Speaker Change: Yes, I think our view is that our organic.

Sergei Tseltsky: As you launch that product, what markets or market segments would you prioritize in your push to sell global broadband over the next two or three years? I think you're asking what markets we would prioritize. Geography. Oh, geography.

Speaker Change: Growth is the right place for us to invest capital to grow the company.

Speaker Change: We see really nice returns on that and we also feel that that is less risky than M&A. So we don't have an active M&A program right now just based on that.

Speaker Change: Got it thank you.

Oakleigh B. Thorne: Yeah. Well, I guess I always start with the most attractive market. So those are probably Europe, the Middle East, and India will be early on the list.

Speaker Change: Thank you thanks Roger.

Speaker Change: Okay.

Speaker Change: Thank you and I will now turn the call back over to will.

Oakleigh B. Thorne: South America is a very attractive market as well, so we will be paying attention down there, and then probably Asia after that, in that rough order of, Yeah. And my second question, given where the company is today and the significant organic growth opportunity, how do you guys think about M&A? Maybe if you could remind us your M&A philosophy and what makes sense for Gogo over the medium term that could accelerate the utilization of your current strategy or just enhance overall shareholder value in general? Yeah, I think our view is that our organic growth is the right place for us to invest capital to grow the company. And we see really nice returns on that, and we also feel that it is less risky than M&A.

Will: Hello. This concludes our fourth quarter earnings call. Thank you for your participation you may now disconnect.

Speaker Change: Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

Speaker Change: When we get down to $8.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Mhm.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.

Oakleigh B. Thorne: So we don't have an active M&A program right now, just based on that. Got it. Thank you. Thank you. Thanks, Charger. Thank you, and I will now turn the call back. Hello, this concludes our fourth quarter earnings call. Thank you for your participation. You may now disconnect. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect. It's down to eight of us. Thanks for watching!

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Sure.

Speaker Change: So.

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Speaker Change: Okay.

Speaker Change: Yeah.