Q2 2024 Gogo Inc Earnings Call

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Operator: And welcome to the Gogo Inc. 2nd Quarter conference call. At this time, all participants are on listening mode.

Operator: Welcome to the GoGo, Inc. second quarter conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session, and instructions will be given at that time. As a reminder, this call may be recorded. I would now like to turn the call over to Will Davis, Vice President, Investor Relations. Please go ahead.

Operator: After the speaker's presentation, there'll be a question and an intercession. Instructions will be given at that time. As a reminder, this call may be recorded.

William Davis: I would like to turn the call over to Will Davis, Vice President and Best Relations. Please go ahead.

William Davis: Thank you, Michelle.

Will Davis: Thank you, Michelle. Good morning, everyone.

William Davis: Good morning, everyone. Welcome to Gogo's 2nd quarter of 2024 earnings conference call. Joining me today to talk about our results are Oakleigh Thorne, Chairman and CEO; Jesse Betjemann, Executive Vice President and CFO.

Will Davis: Welcome to Gogo's second quarter of 2024 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 made on this conference call.

William 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 in 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 conference call. Those risk factors are described in our earnings release about this morning and are more fully detailed under risk factors in our annual report on 10-K and 10-Q and other documents that we have filed with the SEC.

Will 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 the 10-K and 10-Q, and other documents that we have filed with the SCC. In addition, please note that the date of this conference call is August 7, 2024. Any forward-looking statements that we make today are based on assumptions as of this date, and we undertake no obligation to update these statements as a result of more information or future events.

William Davis: In addition, please note that the date of this conference call is August 7th, 2024. Any forward-looking statements that we make today are based on assumptions as of this date, and we undertake no obligation to update these statements as a result.

Will Davis: During this call, we'll present both GAAP and non-GAAP financial measures. We have included a reconciliation and explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures in our second quarter earnings release call that is being broadcast on the internet and 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's now my great pleasure to turn the call over to Oakleigh.

William Davis: During this call, we will present both gap and non-GAAP financial measures. We have included a reconciliation and explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures in our 2nd quarter earnings release call as being broadcast on the Internet and available on the investor relations website at ir.govair.com. The earnings press release is also available on the website.

Speaker Change: During this call we will present, both GAAP and non-GAAP financial measures.

Speaker Change: We have included a reconciliation and explanation of adjustments and other considerations of our non-GAAP measures to.

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

Oakleigh Thorne: It's not my great pleasure to turn the call over to Oakley. Thanks, Will. Good morning, everyone, and thanks for joining us today. GoGo's 2nd quarter performance reflects the strength of our recurring cash-generative service revenue model, even as we navigate a product life cycle transition and continue to invest in bringing out our next-generation GoGo Galileo Leo satellite product and our GoGo 5G North America near-to-ground product. GoGo is approaching an exciting inflection point in our product lineup. In the months ahead, we will have the most complete product portfolio in the business, business aviation, IFC industry, with products that offer the right performance, the right coverage, the right total cost of ownership, and with great customer support for every segment of the highly unpenetrated 40,000 plus aircraft, global business aviation market.

Oakleigh Thorne: Thanks, Will. Good morning, everyone, and thanks for joining us today.

Oakleigh Thorne: Gogo's second quarter performance reflects the strength of our recurring cash-generative service revenue model, even as we navigate a product lifecycle transition and continue to invest in bringing out our next-generation Gogo Galileo Leo satellite product and our Gogo 5G North America near-the-ground product. Gogo is approaching an exciting inflection point in our product lineup. In the months ahead... We will have the most complete product portfolio in the business aviation IFC industry, products that offer the right performance, the right coverage, the right total cost of ownership, and with great customer support for every segment of the highly unpenetrated 40,000 plus aircraft global business aviation market.

Oakleigh Thorne: We believe 5G and Galileo will accelerate our revenue growth beginning next year, as they deliver order of magnitude improvements in the speed of GoGo service, expand our total investment market by 60%, and extend customer lifestyles by providing easy and compelling upgrade paths for our advanced install base. It's worth noting that because of record upgrade activity in the 2nd quarter, advance now makes up 60% of GoGo's sleep. We consider every advanced installation a strategic win because it provides that customers are easier and cheaper past upgrades to new technologies like 5G and Leo with Gogo today and new network technologies in the future, rather than to move to another connectivity provider.

Oakleigh Thorne: We believe 5G and Galileo will accelerate our revenue growth beginning next year as they deliver order-of-magnitude improvements in the speed of Gogo's service, expand our total addressable market by 60%, and extend customer lifetimes by providing easy and compelling upgrade paths for our advanced install base. It's worth noting that because of record upgrade activity in the second quarter, Advance now makes up 60% of GoGo's fleet.

Oakleigh Thorne: We consider every advanced installation a strategic win because it provides customers with easier and cheaper paths to upgrade to new technologies, like 5G and LEO, with Gogo Today and new network technologies in the future, rather than move to another connectivity provider. As we get close to launch, we're seeing our aftermarket customers adjust their purchasing behavior in anticipation of the Gogo 5G and Galileo products. This dynamic is reflected in our second quarter equipment revenue and in our revised guidance expectations for 2021. And this customer behavior isn't unique to Gogo.

Speaker Change: We consider every advanced installation a strategic win because it provides customers with easier and cheaper pass upgrades and new technologies like <unk> and Leo with Gogo today, a new network technologies in the future rather than to move to another connectivity provider.

Oakleigh Thorne: As we get closer to launch, we're seeing our aftermarket customers adjust their purchasing behavior and anticipation of the Gogo 5G and Galileo products. This dynamic is reflected in our second quarter equipment revenue and in our revised guidance expectations for 2024. And this customer behavior isn't unique to Gogo. It's typical of what you see at other companies: they launch next generation products. Just look at Apple when it debuts the new iPhone. Sales of the older products start to slow as customers anticipate the arrival of newer, superior technologies.

Speaker Change: As we get closer to launch we are seeing our aftermarket customers adjust their purchasing behavior in anticipation of the Gogo <unk> and Galileo products.

Speaker Change: This dynamic is reflected in our second quarter equipment revenue.

Speaker Change: And in our revised guidance expectations for 2024.

Speaker Change: And this customer behavior is it you need to go though.

Oakleigh Thorne: It's typical of what you see at other companies as they launch next-generation products. Just look at Apple when it debuts a new iPhone. Sales of the older products start to slow as customers anticipate the arrival of newer, superior technologies.

Speaker Change: Typical of what you see at other companies as they launch next generation products.

Speaker Change: Look at Apple when it debuted the new iPhone sales of the older products start to slow as customers anticipate the arrival of newer superior technologies.

Oakleigh Thorne: This morning, I'm going to start by highlighting some demand trends we're seeing in the BA market that underpin our bullish outlook, then provide an overview of our Q2 results and finally dive into progress on our strategic initiatives, which are aimed at re-igniting our growth by launching products that meet the unique needs of every segment of the BA market. Guess he will then walk through the numbers and discuss our 2024 and long-term guidance. This now reflects our most current expectations for 5G launch timing. Overall demand for business aviation flights and demand for connectivity on those flights remain strong and continue to support our growth trajectory.

Oakleigh Thorne: This morning, I'm going to start by highlighting some demand trends we're seeing in the BA market that underpin our bullish outlook, then provide an overview of our Q2 results, and finally dive into progress on our strategic initiatives, which are aimed at reigniting our growth by launching products that meet the unique needs of every segment of the BA market. Jesse will then walk through the numbers and discuss our 2024 and long-term guidance, which now reflects our most current expectations for 5G launch time.

Speaker Change: This morning, I'm going to start by highlighting some demand trends, we're seeing in the VA market that underpin our bullish outlook.

Speaker Change: And then provide an overview of our Q2 results and finally dive into progress on our strategic initiatives, which are aimed at reigniting our growth by launching products that meet the unique needs of every segment of the market.

Speaker Change: Yes. He will then walk through the numbers and discuss our 2024 and long term guidance, which now reflects our most current expectations for <unk> launch timing.

Oakleigh Thorne: Overall demand for business aviation flights and demand for connectivity on those flights remains strong and continues to support our growth trajectory. Demographic trends bode well for connectivity penetration as younger flyers are coming into the market. Though all ages want better in-flight connectivity, demand for connectivity increases as the age of the flyer decreases. The good news is that Gogo has different products to satisfy all types of flyers, depending on their connectivity needs.

Speaker Change: Overall demand for business aviation flights and demand for connectivity on those slides remains strong and continues to support our growth trajectory.

Oakleigh Thorne: Demographic trends both well for connectivity penetration as younger flyers are coming into the market. Though all ages want better insight connectivity, demand for connectivity increases as the age of the flyer decreases. The good news is that GoPro has different products to satisfy all types of flyers, depending on their connectivity needs. In the second quarter, GoPro equipped BA flight counts were up slightly at 1.1 percent year over year, and more importantly, flights remain significantly elevated from pre-COVID levels with Q2 flight hours per day up 35 percent from Q2 2019. As for data demand, average megabyte consumption per day on our networks has risen 165 percent from Q2 2019, demonstrating a step change in passenger demand and average megabytes consumed per flight hour, which has risen 96 percent over that same period and ran at 17 percent annual growth in Q2.

Speaker Change: Demographic trends bode well for connectivity penetration as younger Flyers are coming into the market.

Speaker Change: All ages want better inflight connectivity demand for connectivity increases as the age of the fire decreases.

Speaker Change: The good news is at Gogo has different products to satisfy all types of flyers, depending on their connectivity needs.

Oakleigh Thorne: In the second quarter, Gogo-equipped VA flight counts were up slightly at 1.1% year-over-year, and more importantly, flights remained significantly elevated from pre-COVID levels, with Q2 flight hours per day up 35% from Q2 2019. As for data demand, average megabyte consumption per day on our networks has risen 165% from Q2 2019, demonstrating a step change in passenger demand and average megabytes consumed per flight hour, which has risen 96% over that same period and ran at 17% annual growth in Q2.

Speaker Change: In the second quarter Gogo equipped V. A flight counts were up slightly at one 1% year over year and more importantly flights remains significantly elevated from pre COVID-19 levels with Q2 flight hours per day up 35% from Q2 2019.

Speaker Change: As for data demand average megabyte consumption per day on our networks has risen to 165% from Q2 2019.

Speaker Change: Demonstrating a step change in passenger demand and average megabytes consumed per flight hour.

Speaker Change: 96% over that same period and ran at 17% annual growth in Q2.

Oakleigh Thorne: We're seeing the biggest surge in demand at the high end of the market, where cloud data storage and video conferencing are driving demand for much higher bandwidth than our traditional products are designed to provide. And we at Galileo and 5G are well positioned to meet that demand. Finally, on demand, we see OEM order books and fractional sales of aircraft looking very strong, and those trends will continue to drive growth in Gogo units online. The trend towards increasingly voracious data usage on aircraft is important to Gogo in two ways.

Oakleigh Thorne: We're seeing the biggest surge in demand at the high end of the market. We're cloud data storage and video conferencing or driving demand for much higher bandwidth than our traditional products we designed to provide, and we're going to let out in 5G our well-position to meet that demand. Finally, on demand, we see OEM order books and fractional sales of aircraft looking very strong, and those trends will continue to drive growth and go-go units online. The trend towards increasingly voracious data usage on aircraft is important to Go-Go in two ways. First, of course, it creates the strong demand tailwind for our products.

Speaker Change: We're seeing the biggest surge in demand at the high end of the market, where cloud data storage and video conferencing are driving demand for much higher bandwidth in our traditional products that are designed to provide and where it got Aldo and <unk> are well positioned to meet that demand.

Speaker Change: Finally on demand, we see OEM order books and fractional sales of aircraft looking very strong and those trends will continue to drive growth and Gogo units online.

Speaker Change: The trend towards increasingly voracious data usage on the aircraft is important to gogo in two ways.

Oakleigh Thorne: First, of course, it creates a strong demand tailwind for our products. And second, it highlights the importance of the decisions we made when we sold our commercial aviation business four years ago to invest heavily in new technologies to dramatically improve the capacity and quality of our products for our customers. With Gogo's continuous focus on future-proofing our technology and infrastructure, we're prescient, and we'll continue to remain key to our long-term success. Now, let me turn to our Q2 performance. Revenue was slightly down, about 1% year-over-year, as record service revenue was offset by a decline in equipment revenue.

Speaker Change: First of course, it creates strong demand tailwind for our products.

Oakleigh Thorne: And second, it highlights the importance of the decisions we made when we sold our commercial aviation business four years ago to invest heavily in new technologies to dramatically improve the capacity and quality of our products to our customers. Gogo's continuous focus on future-proofing our technology and infrastructure with patient and will continue to remain key to our long-term success.

Speaker Change: And second.

Speaker Change: It highlights the importance of the decisions we made when we sold our commercial aviation business four years ago to invest heavily in new technologies to dramatically improve the capacity and quality of our products for our customers.

Speaker Change: Gogo is continuous focus on future proofing, our technology and infrastructure refresh at proficient and we will continue to remain key to our long term success.

Oakleigh Thorne: Now let me turn to our Q2 performance. Revenue was slightly down, about 1% year-over-year, as record-service revenue was offset by the client and equipment revenue. On the equipment side, we saw a decrease in revenues of 17% year-over-year and 11% sequentially in the second quarter. Retribute much of this to the product life cycle dynamic I described earlier. Customers are delaying purchases and anticipation of Gogo 5G and Gogo Galileo. With that said, we still expect our second highest year for advanced shipments ever and grew total advanced units online at quarter-end 17% over the prior year to 4,215 aircraft or approximately 60% of our ATG install base.

Oakleigh Thorne: We attribute much of this to the product life cycle dynamic I described earlier. Customers are delaying purchases in anticipation of Gogo 5G and Gogo Galileo. With that said, we still expect our second-highest year for advanced shipments ever and grew total advanced units online at quarter-end 17% over the prior year to 4,215 aircraft, or approximately 60% of our ATG installments. Our advanced base will only grow faster as we incentivize our almost 3,000 Gogo Classic customers to migrate to LTE as part of our FCC Secured Networks program over the next 20 months.

Speaker Change: Now, let me turn to our Q2 performance.

Oakleigh Thorne: Our advanced base will only grow faster as we present our almost 3,000 Gogo Classic customers to migrate to LTE as part of our FCC Secure Networks program over the next 20 months. As a reminder, we also warned on our last call that our usual pattern of higher second half shipments might be reversed this year as we saw a boost in equipment orders last quarter, given by net jets call-through demand and a shift of a few OEM annual bulk shipments into Q1 from later in the year. Within service, we achieved record revenue. This is the fuel of our long-term business model, driven by advanced upgrades, even as total ATG units online and total decline, slightly due to modest net deactivations in our classic product line.

Oakleigh Thorne: As a reminder, we also warned on our last call that our usual pattern of higher second-half shipments might be reversed this year, as we saw a boost in equipment orders last quarter driven by NetJet's pull-through demand and a shift of a few OEM annual bulk shipments into Q1 from later in the year.

Oakleigh Thorne: Within service, we achieve record revenue. This is the fuel of our long-term business model, driven by advanced upgrades, even as total ATGU and its online and total decline is likely due to modest net deactivations in our classic product line. On the earning side... Q2 EBITDA decreased 30% sequentially, mostly due to lower equipment revenues and increased operating expenses, mostly in legal fees as a result of the SmartSky litigation and a series of vendor financing issues, almost all of which will go away over the next year.

Oakleigh Thorne: On the earnings side, Q2 EBITDA decreased 30% sequentially, mostly due to lower equipment revenues and increased operating expenses, mostly in legal fees as a result of the SmartSky litigation and a series of vendor financing issues, almost all of which will go away over the next year. An opposite of note, as we invest deeply in the 5G and Galileo programs, three cash flows remain solid.

Speaker Change: Sky litigation and a series of vendor financing issues, almost all of which will go away over the next year.

Oakleigh Thorne: On a positive note, as we invest deeply in the 5G and Galileo programs, 3 cash flow remains solid. Now, for our progress on strategic initiatives. Gogo is focused on accelerating growth with a three-pronged strategy. First, we want to expand our addressable market by expanding globally and by leveraging the flexibility of our Vance platform to deliver products at prices that suit each segment of the highly unpenetrated 40,000 business aircraft global business aviation market.

Speaker Change: On a positive note as we invest deeply in the <unk> in Galileo programs free cash flow remains solid.

Oakleigh Thorne: Now, for our progress on strategic initiatives, GoGo is focused on accelerating growth with a three-pronged strategy. First, we want to expand our addressable market by expanding globally and by leveraging the flexibility of our advanced platform to deliver products at pricing that suits each segment of a highly unpenetrated 40,000 business aircraft global business aviation market. Second, we want to drive customer loyalty by continually improving our ATG networks to drive conversion of classic customers to the advanced platform, because they then have easy upgrade paths to new technology, such as 5G, KU, Band Leo networks, and other new network technologies as they emerge.

Speaker Change: Now for our progress on 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 by expanding globally and by leveraging the flexibility of our advanced platform to deliver products at pricing. It seems each segment of the highly Underpenetrated 40000 business aircraft global business aviation market.

Speaker Change: Second we want to drive customer loyalty by continually improving our atg networks to drive conversion of classic customers to the advanced platform does is they then have easy upgrade path to new technology, such as <unk> Ku band Leo networks, and other new network technologies as they emerge.

Oakleigh Thorne: And third, we're focused on offering the best products and customer support to each segment of the market at the lowest total cost of ownership. We're making great strides in our strategic initiatives to achieve these goals.

And third.

Speaker Change: 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: We're making great strides in our strategic initiatives to achieve these goals, let me start with Gogo Galileo.

Oakleigh Thorne: Second, we want to drive customer loyalty by continually improving our ATG networks to drive conversion of classic customers to the advanced platform so that they then have easy upgrade paths to new technologies such as 5G, KU Band Leo networks, and other new network technologies as they emerge. Third, we're focused on offering the best products and customer support to each segment of the market at the lowest total cost of ownership, and we make great strides in our strategic initiatives to achieve these goals. Let me start with Gogo Galileo.

Oakleigh Thorne: Let me start with GoGo Galileo. This is a very exciting time at Gogo, as we ramp up our go-to-market plan, a regulatory approval process, and production to support the Gogo LAO HDX and FDX launches. As a reminder, this product category was born out of two conclusions during a deep dive strategic planning process in 2020 and 2021 after we sold the commercial aviation division. First, the ESA antennas and Leo satellite constellations were going to change everything in business aviation connectivity. They would support lightning-fast connectivity with the extremely low latency critical of the supporting applications like video conferencing.

Oakleigh Thorne: This is a very exciting time at Gogo as we ramp up our go-to-market plan, our regulatory approval process, and production to support the Galileo HDX and FDX launch. As a reminder, this product category was born out of two conclusions during a deep-dive strategic planning process in 2020 and 2021 after we sold the Commercial Aviation Division: that ESA antennas and LEO satellite constellations were going to change everything in business aviation connectivity They would support lightning-fast connectivity with extremely low latency, critical to supporting applications like video conferencing.

Speaker Change: This is a very exciting time at Gogo as we ramp up our go to market plan, a regulatory approval process and production to support the Galileo ATX and MTX launches.

Oakleigh Thorne: They would have high capacity to support heavy data applications like cloud-based file sharing. They would enable small antennas that would fit well on all business aviation aircraft. They could be keeper and easier to install than geo antennas. They would provide truly global broadband coverage for the first time ever. They would enable service pricing; it is very competitive with geo-satellite pricing and perhaps most important, that the dramatic increase in value created by these offerings would accelerate IFC penetration dramatically in the global BA market. The second thing we anticipated in that planning process was that Starlink would become a significant competitor, which has become evident as they ramped up installations in Q2.

Oakleigh Thorne: They would have high capacity to support heavy data applications like cloud-based file sharing. They would enable small antennas that would fit well on all business aviation aircraft. They could be cheaper and easier to install than geoantennas.

Oakleigh Thorne: They would provide truly global broadband coverage for the first time ever. They would enable service pricing that is very competitive with geo-satellite pricing. And perhaps most important, the dramatic increase in value created by these offerings would accelerate IFC penetration dramatically in the global business aviation market.

Oakleigh Thorne: The second thing we anticipated in that planning process was that Starlink would become a significant competitor, which has become evident as they ramped up installations in Q2. Though we will launch a little later than Starlink, we will launch with a product that addresses much more of the market than they're offering, and they have done us a big favor. They've made the BA market aware of how much better ESA-LEO technology is for BA inflight connectivity than traditional geosatellites.

Oakleigh Thorne: Though we will launch a little later than Starlink, we will launch with a product that addresses much more of the market than they are offering, and they have done us a big favor. They have made the BA market aware of how much better ESA Leo technology is for BA in flight and activity than traditional geo-satellite solutions. Our head of sales captured it well. When he displays a picture of a fat mouse eating the cheese out of an already sprung mouse trap and observes that the second mouse gets the cheese. We feel that GoGo is incredibly well positioned to get the cheese.

Oakleigh Thorne: Our head of sales captured it well when he displayed a picture of a fat mouse eating the cheese out of an already sprung mousetrap and observed that the second mouse gets the cheese, and we feel that Gogo is incredibly well positioned to get the cheese.

Oakleigh Thorne: Business aviation customers tend to be demanding. Reliability is critical. Space on the aircraft is at a premium; ease of installation is important, and customer support is imperative. It is clear that Starlink's offering is just a repurposing of their consumer office shelf products for aviation use and does not meet those demands. And that opens the door for meaningful product differentiation on our part, centered in three areas. Our equipment is aviation grade and designed from the aircraft up and satellite down to the specific needs of the business aviation market. There's is consumer grade. You can buy it at Best Buy and is repurposed and poorly suited for aviation.

Oakleigh Thorne: Business aviation customers tend to be demanding; reliability is critical, space on the aircraft is at a premium, ease of installation is important, and customer support is imperative. It's clear that Starlink's offering is just a repurposing of their consumer off-the-shelf products for aviation use and does not meet those demands. And that opens the door for meaningful product differentiation on our part, centered on three areas. Our equipment is aviation grade and designed from the aircraft up and satellite down for the specific needs of the business aviation market. Theirs is consumer grade; you can buy it at Best Buy, and it is repurposed and poorly suited for aviation.

Speaker Change: Centered in three areas.

Speaker Change: Our equipment is aviation grade and designed from the aircraft up and satellite down to the specific needs of the business aviation market there.

Speaker Change: There is consumer grade you can buy it at best buy and is repurposed and poorly suited for aviation.

Oakleigh Thorne: Second, our business model is business aviation focused with the type of personal customer support someone who just bought an $80 million. Just spend $80 million on an aircraft; would expect from a service provider. Well, there's a web-based appointment-only chat service that does not allow customers direct access to aviation technicians. And finally, our partner OneWeb network is an enterprise-grade network designed to serve V2B customers with service-level guarantees. Well, theirs is a consumer-grade network, aimed at 5 billion global consumers and many other markets with highly variable speed levels, best efforts-only service obligation and no commitment to fix price.

Oakleigh Thorne: Second, our business model is business aviation focused, with the type of personal customer support someone who just bought an $80 million, or just spent $80 million on an aircraft would expect from a service provider. While theirs is a web-based, appointment-only chat service that does not allow customers direct access to aviation technology. And finally, our partner OneWebNetwork is an enterprise-grade network designed to serve B2B customers with service-level guarantees. But theirs is a consumer-grade network aimed at five billion global consumers and many other markets with highly variable speed levels, a best-efforts-only service obligation, and no commitment to fixed prices. Galileo comes in two versions, the smaller HDX terminal and a larger FDX terminal. But, I should add, LFDX is still dramatically smaller than the Starlin term.

Speaker Change: Second our business model is business aviation focused with the type of personal customer support someone who just bought an $80 million to spend $80 million on an aircraft would expect from a service provider.

Speaker Change: <unk> is a web based appointment only chat service that does not allow customers direct access to aviation technicians.

Speaker Change: Finally, our partner one way a network is an enterprise grade network designed to serve <unk> customers the service level guarantees.

Speaker Change: There is a consumer grade network aimed at 5 billion global consumers and many other markets with highly variable speed levels, our best efforts only service obligation and no commitment the fixed pricing.

Oakleigh Thorne: Galileo comes in two versions, a smaller HDX terminal and a larger FDX terminal. So I should add, Al FDX is still dramatically smaller than the Starland Terminal. The Galaleo FHDX terminal is our first-to-market mid-size and smaller aircraft antenna and will deliver a very consistent almost 60 megabits per second. 12 to 60 times our current product offerings. It primarily targets two market segments. The roughly 12,000 mid-size jets, small jets, and turbo props registered outside North America that have absolutely no broadband solution today. And those aircraft in the roughly 11,000 mid-size and smaller size range that domicile inside North America that often fly international missions or want faster mean ten activity speeds in the 25 megabits per second that our 5G product will provide.

Speaker Change: Galileo comes in two versions.

Speaker Change: All our HD X terminal and a larger F D ex terminal.

Speaker Change: I should add <unk> is still dramatically smaller than the Sterling terminal.

Oakleigh Thorne: The Galileo S-HDX terminal is our first-to-market mid-size and smaller aircraft antenna and will deliver a very consistent almost 60 megabits per second, 12 to 60 times our current product offer. It primarily targets two market segments.

Oakleigh Thorne: The roughly 12,000 mid-sized jets, small jets, and turboprops registered outside North America that have absolutely no broadband solution today, and those aircraft in the roughly 11,000 midsize and smaller size range that domicile inside North America that often fly international missions or want faster mean connectivity speeds than the 25 megabits per second that our 5G product will provide. The Galileo FDX terminal is our best-in-class antenna and targets the roughly 9,700 super, midsize, and larger jets that fly global missions with a product that will deliver very consistent speeds in the 145 to 195 megabits per second range. 40 to 200 times faster than our current product offer. It's a huge advantage for us that is really responding with advanced customers right now. The Yellow Lail is a simple upgrade from any advanced installed plane.

Oakleigh Thorne: The Galaleo FHDX terminal is our best-in-class antenna and targets the roughly 9700 super mid-size and larger jets that fly global missions with a product that will deliver very consistent speeds in the 145 to 195 megabits per second range. 40 to 200 times faster than our current product offerings. A huge advantage for us that is really resonating with advanced customers right now is that Galaleo is a simple upgrade from any advanced installed plane. When only need to add our HDX or FDX antenna on top of the fuselage and then run data to the already installed advanced spots on the aircraft and power cabling and power cabling from the aircraft to the Galaleo terminal and you are done.

Oakleigh Thorne: We only need to add our HDX or SDX antenna on top of the fuselage and then run data to the already installed advanced box on the aircraft and power cabling from the aircraft to the Galileo terminal, and you are done. Cutting roughly a hundred thousand dollars off the cost of a Galileo installation. Another advantage is that ADVANCE is already both a line-fit option at every OAM and an STC option on every currently produced model of aircraft in the aftermarket, rendering it relatively easy from an engineering and certification perspective for OEMs and dealers to offer Galileo.

Oakleigh Thorne: Cutting roughly a hundred thousand dollars off the cost of a Galileo installation. Another advantage is that advanced is already both a line-fick option at every OAM and an STC option on every currently produced model aircraft in the aftermarket, rendering it relatively easy from an engineering and certifications perspective for OEMs and dealers to offer Galaleo. We've already signed 8 STC agreements for our Galaleo covering 11 popular models of aircraft and have another 21 verbally committed covering another 17 unique aircraft models. Which in total these will all have a global service addressable market of 17,585 aircraft. And I should note we started taking orders from many of the dealers that have committed to developing SCCs.

Oakleigh Thorne: We've already signed eight SDC agreements throughout Galileo, covering 11 popular models of aircraft, and have another 21 verbally committed, covering another 17 unique aircraft models, which, in total, these will all have a global service addressable market of 17,585 aircraft. And I should note, we started taking orders from many of the dealers that have committed to developing them. We've already signed one OEM for line fit on four models of aircraft, and they've already set cut-in dates for three of those models next year, and those aircraft account for more than 100 deliveries a year, and we're actively engaged with several other OEMs on line fit. We remain on track to start shipping HDX terminals in Q4 and FDX terminals in the first half of 2025. We have achieved a number of exciting milestones since our last conference.

Oakleigh Thorne: We've already signed OEM to line-trip on four models of aircraft, and they've already set cut-in dates for three of those models next year, and those aircraft account for more than a hundred deliveries of a year, and we're actively engaged with several other OEMs online fit deals. We remain on track to start shipping HDX terminals in Q4 and FDX terminals in the first half in 2025.

Oakleigh Thorne: We've achieved a number of exciting milestones since our last conference call. We've announced our equipment and service pricing with a modest premium to our competitor, justified by our superior aviation grade equipment, our superior network reliability, and our superior levels of customer support. We're finishing up our go-to-market campaign and we'll launch ourselves this month focused on aggressively driving market penetration in order to capture the lifetime value of every Galileo customer and drive long-term value and drive long-term value creation. In July, we started aircraft installation on our Challenger 300 and the next big certification milestones will be engineering flight testing in August and parts of manufacturing authority or PMA in Q4.

Oakleigh Thorne: We've announced our equipment and service pricing with a modest premium to our competitor, justified by our superior aviation-grade equipment, our superior network reliability, and our superior levels of customer support. We're finishing up our go-to-market campaign, and we'll launch our salesforce this month focused on aggressively driving market penetration in order to capture the lifetime value of every Galileo customer and drive long-term value creation for GOAT. In July, we started aircraft installation on our Challenger 300, and the next big certification milestones will be engineering flight testing in August and the Parts Manufacturing Authority, or PMA, in Q4. To conclude on Galileo, we're very excited.

Speaker Change: Carrier levels of customer support.

Speaker Change: We're finishing up our go to market campaign and will launch our sales force. This month focused on aggressively driving market penetration in order to capture the lifetime value of every Galileo customer and drive long term value.

Speaker Change: And drive long term value creation for Gogo.

Speaker Change: In July we started aircraft installation in our challenger 300, and the next Big certification milestones will be engineering flight testing in August and parts manufacturing authority or PMA in Q4.

Oakleigh Thorne: To conclude on Galileo, we're very excited. It will be a game changer for the business aviation industry and will be a major accelerant to Gogo's growth.

Speaker Change: To conclude on Galileo, we're very excited it will be a game changer for the business aviation industry and will be a major accelerant to go those growth.

Oakleigh Thorne: It will be a game changer for the business aviation industry and will be a major accelerant for Gogo. Now, let me turn to Gogo 5G, which is targeted at segments of the 21,000 midsize and smaller business aircraft market that fly predominantly in North America and want a good connectivity experience at a more affordable price than satellite solutions. Gogo 5G should achieve mean speeds of around 25 Mbps, 5-25 times our current product lines, and peak speeds of 75-80 Mbps. On the aircraft, it consists of two belly-mounted MV-13 antennas in an internal box containing a 5G router.

Oakleigh Thorne: Now, let me turn to Gogo 5G, which is targeted at segments of the 21,000 mid-size and smaller business aircraft market that slides predominantly in North America and want a good connectivity experience at a more affordable price and satellite solutions. Gogo 5G should achieve mean speed to around 25 megabits per second, 5 to 25 times our current product lines, and peak speeds in 75 to 80 megabits per second. On the aircraft, it consists of two belly-mounted MB-13 antennas in an internal box containing a 5G aircraft. On the ground, it consists of 150 Gogo-installed 5G base stations, all that towers across the United States and Southern Canada.

Speaker Change: Now, let me turn to Gogo five G, which is targeted at segments of the 21000 midsize and smaller business aircraft market that's why.

Speaker Change: In North America, and want a good connectivity experience at a more affordable price and satellite solutions.

Speaker Change: Gogo <unk> should achieve mean speeds of around 25 Megabits per second $5 to 25 times, our current product lines and peak speeds of 75 to 80 Megabits per second.

Oakleigh Thorne: On the ground, it consists of 150 Gogo-installed 5G base stations installed at towers across the United States and southern Canada. As you all probably recall, on a Q1 call, we discussed a minor chip hardware redesign issue that would further delay our 5G launch, and we announced that we would provide guidance on the timing of our 5G launch on this call. That chip is going back into pattern and mass generation now, and we have recalibrated all of our milestones and plan to ship 5G in the second quarter of 2025. We're continuing to work very closely with our vendor partners to smooth the path towards cybercation and law.

Oakleigh Thorne: As you all probably recall, on a Q1 call, we discussed a minor chip hardware redesign issue that would further delay our 5G launch, and we announced that we would provide guidance on the timing of our 5G launch on this call. That chip is going back into pattern and mass generation now, and we have recalibrated all of our milestones in plan, shipping 5G in the second quarter of 2025. We're continuing to work very closely with our vendor partners to smooth the path towards fabrication and launch. Importantly, the market continues to respond enthusiastically to the 5G value proposition, with ongoing pre-privisioning programs and a flood of SGC programs that position us for a highly successful launch.

Oakleigh Thorne: Importantly, the market continues to respond enthusiastically to the 5G value proposition, ongoing pre-provisioning programs, and a flood of STC programs that position us for a highly successful launch. We've already shipped 292 5G pre-provisioning kits with NV13 5G antennas, which is up from 240 kits last quarter, and 105 of those kits have already been installed and are flying using our 4G network with an L5 4 We've got commitments from five OEMs, with one already installing the MV13s with the L5 line fit today.

Oakleigh Thorne: We've already shipped 292 5G pre-privission kits with MB-13 5G antennas, which is up from 240 kits last quarter, and 105 of those kits have already been installed and are flying using our 4G network with an L5 4G LRU. We've commitments from 5 OEMs, with one already installing the MB-13s with an L5 line fit today. Because the L5 is the same form factor as the LX-5, once the 5G chip is certified, those customers that have installed L5s with MB-13s can simply swap the LX-5 in for the L5, and they'll be on the 5G network. On the certification front, we have 16 STC for MB-13s completed, with one version of that will answer another, covering 18 unique models of aircraft, and 15 more in the works, covering 15 unique models of aircraft.

Oakleigh Thorne: Because the L5 is the same form factor as the LX5, once the 5G chip is certified, those customers that have installed L5s with MB13s can simply swap the LX5 in for the L5 and they'll be on 5G. On the certification front, we have 16 STCs for MV13s, completed with one version of Advance or another, covering 18 unique models of aircraft, and 16 more in the works covering 15 unique models of aircraft.

Oakleigh Thorne: And in total, all those representing 8,700 North American registered aircraft. We're confident that between our FPGA flights and a virtual simulator our team has built that replicates our entire 5G network, that we will be able to test and validate 90% of our 5G functionality network before we receive the final 5G chip.

Oakleigh Thorne: And in total, all those representing 8,700 North American registered users, we're confident that between our FPGA flights and a virtual simulator our team has built that replicates our entire 5G network, we will be able to test and validate 90% of our 5G functionality and network before we receive the final 5G. Now, turning briefly to the FCC Secured Networks Program, which we refer to as Gogo Evolution. As a reminder, Gogo was awarded a $334 million grant from the SEC under this program to incent us to accelerate the removal of Chinese telecom equipment from our 4G network.

Oakleigh Thorne: Now turning briefly to the SEC Secured Networks program, which we refer to as GOGO Evolution. As a reminder, GOGO was awarded a $334 million grant from the SEC under this program to incentives to accelerate removal of Chinese telecom equipment from our 4G network. Networking. Overall, we're making great progress upgrading our customers from the old classic product line to LTE versions of the hardware and our Advanced L3 and L5 products. This program has considerable benefits for Gogo and its customers. It will improve the speed of our 4G network, 40% for customers using our value-oriented Advanced L3 product.

Oakleigh Thorne: Overall, we're making great progress upgrading our customers from the old classic product line to LTE versions of the hardware and our advanced L3 and L5 products. This program has considerable benefits for Gogo and its customers, and it will improve the speed of our 4G network by 40% for customers using our value-oriented ADVANCE L3 product. It will double the number of aircraft that the ATG4G network can simultaneously manage, and it will accelerate the number of gogo plastic customers upgrading to a van, which has the strategic benefit of extending Gogo customer lifetimes due to the ease of upgrading to 5G and Galileo and other new technologies.

Oakleigh Thorne: It will double the number of aircraft that the ATG-4G network can simultaneously manage, and it will accelerate the number of Gogo classic customers upgrading to Advanced, which has the strategic benefit of extending Gogo customer lifetimes due to the ease of upgrade to 5G and Galileo and other new technologies. We have a little under 3,000 customers still on our old classic product line that will need to convert from EVDO to LTE versions of the hardware before a year end 2025. A little more than 900 of which are in fleets, and a little more than 2,000 of which are smaller customers.

Oakleigh Thorne: We have a little under 3,000 customers still on our old classic product line that will need to convert from EVDO to LTE versions of the hardware before year-end 2025, a little more than 900 of which are in fleets and a little more than 2,000 of which are smaller customers. We've had conversations with all but 150 of our customers about how they plan to convert.

Oakleigh Thorne: We've had conversations with all about 150 of our customers and how they plan to convert. The vast majority have already indicated they will move to one advanced product or another. We currently have customer promotions in place to implement conversions, and our dealers are doing a great job configuring their operations to transition customers at scale. We also have a special product we'll introduce later this year called C1, which will house both an EVDO and an LTE aircraft in a form factor as an exact replica of our classic product. This will not improve service levels like upgrading to Advanced, but will allow customers who delay swapping to Advanced before we cut over networks more time to convert to Advanced after the cut over.

Oakleigh Thorne: The vast majority have already indicated they will move to one advanced product or another, and currently have customer promotions in place to incent conversions. And our dealers are doing a great job configuring their operations to transition customers. We also have a special product we'll introduce later this year called C1, which will house both an EVDO and an LTE AirCard in a form factor that is an exact replica of our classic product. This will not improve service levels, like upgrading to advanced, but will allow customers who delay swapping to advance before we cut over networks more time to convert to advanced after the cutover.

Speaker Change: This will not improve service levels like upgrading to advance that will allow customers, who delay swapping to advance before we cut over networks more time to convert to advance after the cutover.

Oakleigh Thorne: As I mentioned at the outset, GOGO is continuing to deliver outstanding service and solid performance as we invest and prepare to launch GOGO 5G and Galileo. I want to thank the GOGO team that's done an incredible job getting us to this point. Our long-term outlook is supported by strong demand trends, and we're strategically, operationally, and technologically well positioned to continue to meet and exceed the needs of IFC passengers for the long-term with the most complete product portfolio on the business aviation market. GOGO has the right strategy in place to continue to capitalize on its significant opportunity in our market and deliver long-term value creation.

Oakleigh Thorne: As I mentioned at the outset, Gogo is continuing to deliver outstanding service and solid performance as we invest in and prepare to launch Gogo 5G in Galileo. I want to thank the Go! Go! team. They've done an incredible job getting us to this point. Our long-term outlook is supported by a strong demand trend, and we are strategically, operationally, and technologically well-positioned to continue to meet and exceed the needs of IFC passengers for the long term, with the most complete product portfolio in business aviation. Gogo has the right strategy in place to continue to capitalize on a significant opportunity in our market and deliver long-term value creation. Now I will turn it over to Jesse for the final

Speaker Change: As I.

Speaker Change: And at the outset Gogo is continuing to deliver outstanding service and solid performance as we invest and prepare to launch Gogo five D. In Galileo.

Speaker Change: Thanks to Gogo team they've done an incredible job getting us to this point.

Our long term outlook is supported by a strong demand trends and where strategically operationally and technologically well positioned to continue to meet and exceed the needs of IFC passengers for the long term with the most complete product portfolio and the business aviation market.

Gogo: Yoga is the right strategy in place to continue to capitalize on the significant opportunity in our market and deliver long term value creation.

Jessica Betjemann: And now I'll turn it over to Jeffy for the numbers. Service revenue and solid free cash flow in the second quarter. We believe our performance continues to demonstrate the strength of our core business fueled by recurring service revenue as we invest in our new products, GOGO 5G and Galileo. With the pull-in of OEM equipment orders and timing shift of expenses, which resulted in high-adjusted EBITDA in the first quarter, our second quarter adjusted EBITDA declined sequentially but was ahead of expectations. We continue to believe that 2024 is the trough year for our growth and profitability within our long-term planning, extending through 2028.

Gogo: And now I will turn it over to Jesse for the numbers.

Gogo: Yeah.

Jesse: Service revenue and solid free cash flow in the second quarter.

Jesse Betjemann: a solid free cash flow in the second quarter. We believe our performance continues to demonstrate the strength of our core business, fueled by recurring service revenue as we invest in our new products, Gogo 5G and Galileo. With the pull-in of OEM equipment orders and timing shift of expenses, which resulted in high adjusted EBITDA in the first quarter, our second quarter adjusted EBITDA declined sequentially, but was ahead of expectations. We continue to believe that 2024 is the trough year for our growth and profitability within our long-term plan extending through 2028.

Jesse: We believe our performance continues to demonstrate the strength of our core business fueled by recurring service revenue as we invest in our new products because of <unk> and Galileo.

Jessica Betjemann: As the majority of our current strategic investments wrapped by early 2025, we continue to target a significant acceleration in our free cash flow in 2025.

Jesse Betjemann: As the majority of our current strategic investments wrap up by early 2025, we continue to target a significant acceleration in our free cash flow in 2025. In my remarks today, I'll start by walking through Gogo's second quarter financial performance. Then I will turn to our balance sheet and capital allocation priorities.

Jessica Betjemann: In my remarks today, I'll start by walking through Gogo's second quarter financial performance. Then, I will turn to our balance sheet in capital allocation priorities, and finally, I'll conclude with additional context on our revised 2024 guidance and long-term targets, which now reflect the currently expected timing for Gogo 5G launch. For the second quarter, Gogo's total revenue was $102.1 million, a decrease of about 1% year-over-year and 2% sequentially, driven by a decline in equipment revenue. Gogo delivered records service revenue of $81.9 million, up 4% over the prior year, and just slightly higher than in the first quarter.

Jesse Betjemann: And finally, I'll conclude with additional context on our revised 2024 guidance and long-term targets, which now reflect the currently expected timing for Gogo 5G launch. For the second quarter, Gogo's total revenue was $102.1 million, a decrease of about 1% year-over-year and 2% sequentially, driven by a decline in equipment revenue. Gogo delivered record service revenue of $81.9 million, up 4% over the prior year and just slightly higher than in the first quarter. Our ATG aircraft count was 7,031, a 0.5% decline year-over-year and down 1% sequentially.

Jesse Betjemann: The quarterly decline was driven by higher classic deactivations and lower new activations due to, as Oak mentioned, the product lifecycle dynamic we are experiencing as customers defer purchases in anticipation of the launch of Gogo 5G in Galileo. Total Advanced Aircraft Online grew to 4,215, an increase of 17% year-over-year and 3% sequentially, and now comprises 60% of our total fleet. Our progress driving advanced penetration reflects the record upgrade activity in the second quarter from classic to advanced within our existing program.

Jessica Betjemann: Our ATG aircraft online was 7,031, a 0.5% decline year-over-year and down 1% sequentially. The quarterly decline was driven by higher classic deactivations and lower new activations, due to, as Oak mentioned, the product lifecycle dynamic we are experiencing as customers defer purchases and anticipation of the launch of Gogo 5G in Galileo. Total advance aircraft online grew to 4,215, and increased the 17% year-over-year and 3% sequentially, and now comprises 60% of our total fleet. Our progress driving advanced penetration reflects the record upgrade activity in the second quarter from classic to advance within our existing fleet. Advanced Aircraft Online has doubled in less than three years.

Jesse Betjemann: The number of Advanced Aircraft Online has doubled in less than three years. Converting our classic base to advanced remains a priority, and we expect these conversions to accelerate in 2025. We continue to maintain a conservative view on improvements in the maintenance cycle times that have slowed installation.

Jessica Betjemann: Converting our classic based to advance remains a priority, and we expect these conversions to accelerate in 2020-20. We continue to maintain a conservative view on improvements in the maintenance cycle times that have slowed installation. Every upgrade to advance is a strategic win for Gogo, as it prolongs customer retention by providing a seamless upgrade path to Gogo 5G and Galileo once launched. However, as previously mentioned, the upgrade process and product lifecycle dynamic will continue to put pressure on ATG aircraft online over the coming quarters. Total ATG output grew 3% year-over-year to $3,460, and 0.3% growth sequentially, reflecting the price increase we initiated in the first quarter.

Jesse Betjemann: Every upgrade to Advance is a strategic win for Gogo, as it prolongs customer retention by providing a seamless upgrade path to Gogo 5G and Galileo once launched. However, as previously mentioned, the upgrade process and product lifecycle dynamics will continue to put pressure on ATG Aircraft Online over the coming quarters. Total ATGR food grew 3% year-over-year to $3,468 and 0.3% growth sequentially, reflecting the price increase we initiated in the first quarter.

Jessica Betjemann: The launches of Gogo 5G and Galileo are anticipated to further expand our output growth opportunity over time. Moving to equipment revenue, Gogo delivered second quarter equipment revenue of $20.1 million with 231 advance shipments. Equipment revenue was in line with expectations and declined 17% year-over-year and 11% sequentially, which we attribute to a combination of the pull-forward OEM shipments in the first quarter and our overall place in the product lifecycle. Gogo's equipment revenue typically ramps toward the back half of the year, but given the strong first quarter shipments and the product lifecycle dynamic in the channel, we expect that trend to reverse for 2024.

Jesse Betjemann: The launches of Gogo 5G in Galileo are anticipated to further expand our off-road growth opportunity over time. Moving to Equipment Revenue. Gogo delivered second quarter equipment revenue of $20.1 million with 231 advanced shipments. Equipment revenue was in line with expectations and declined 17% year-over-year and 11% sequentially, which we attribute to a combination of the pull-forward OEM shipments in the first quarter and our overall position in the product lifecycle.

Jesse Betjemann: Gogo's equipment revenue typically ramps toward the back half of the year, but given the strong first quarter shipments and the product lifecycle dynamic in the channel, we expect that trend to reverse for 2024. Returning to profitability, Gogo delivered service margins of 77% in the second quarter, higher than our expectations due to lower network and data center costs. We continue to expect service margins to be in the 75% range this year, with a slight decrease in future years as Gogo Galileo service revenue increases as a percentage of the max.

Jessica Betjemann: Training of profitability, Gogo delivered service margins of 77% in the second quarter, higher than our expectations due to lower network and data center costs. We continue to expect service margins to be in a 75% range this year, with a slight decrease in future years as Gogo Galileo service revenue increases as a percentage of the next. Service revenue and service profit margin are the primary leverage for free cash flow generation and long-term value creation. Equipment margins are 18% in the second quarter, in line with expectations and lower than prior year and prior quarter periods, primarily as a function of lower revenue due to lower shipments.

Jesse Betjemann: Service revenue and Service Profit Margin are the primary levers for free cash flow generation and long-term value creation. Equipment margins were 18% in the second quarter, in line with expectations and lower than the prior year and prior quarter periods, primarily as a function of lower revenue due to lower shipments.

Jessica Betjemann: We expect equipment margins to decline in the back half of 2024 due to lower shipments, largely due to the product life cycle dynamics.

Jesse Betjemann: We expect equipment margins to decline in the back half of 2024 due to lower shipments, largely due to the product lifecycle dynamic. Now on to operating expenses. Second quarter combined engineering, design, and development, sales, and marketing, and general and administrative expenses increased 36% year over year and increased 28% sequentially to $41.2 million. The year-over-year increase is mainly driven by legal expenses. External legal expenses in the second quarter comprised $9.5 million out of the total general and administrative spend of $22 million, driven by litigation matters.

Jessica Betjemann: Now on to operating expenses. Second quarter combined engineering design and development sell the marketing and general and administrative expenses increased 36% year-over-year and increased 28% sequentially to $41.2 million. The year-over-year increase was mainly driven by legal expenses. External legal expenses in the second quarter comprised $9.5 million out of the total general and administrative spend of $22 million. Driven by litigation matters, support for vending vendor financing issues, and global expansion efforts. As we have discussed, 2024 is a significant investment year as we continue to invest in our global 5G and Galileo programs. Our free cash flow target in 2025 assumes that many of these costs roll off as we head into next year.

Jesse Betjemann: Support for Vendor Financing Issues and Global Expansion Efforts. As we have discussed, 2024 is a significant investment year as we continue to invest in our Gogo 5G and Galileo programs. Our free cash flow target in 2025 assumes that many of these costs roll off as we head into next year. We expect that these product investments will support revenue growth acceleration and significant free cash flow growth in 2025 and beyond.

Jessica Betjemann: We expect that these product investments will support revenue growth at Celebration and significant free cash flow growth in 2025 and beyond. In terms of the global 5G in the second quarter are with $3.2 million of 5G spending, with comprised of $1 million in OPEX and $2.2 million in CAPEX. We now expect 2024 will include approximately $5 million of OPEX and approximately $8 million in CAPEX, with total 5G spend for 2024 at approximately $13 million. This is a shift from our previously mentioned $6 million of 5G OPEX and $14 million in CAPEX. This adjustment reflects the push of global 5G timing to the second quarter of 2025, as well as a more vision allocation of resources and the timing of expected milestone payments to our vendor partner.

Jesse Betjemann: In terms of Gogo 5G, in the second quarter, our $3.2 million of 5G spending was comprised of $1 million in OPEX and $2.2 million in CAPEX. We now expect 2024 to include approximately $5 million of OPEX and approximately $8 million in CapEx, with total 5G spend for 2024 at approximately $13 million. This is a shift from our previously mentioned $6 million of 5G OPEX and $14 million in CapEx. This adjustment reflects the push of Gogo's 5G timing to the second quarter of 2025, as well as a more efficient allocation of resources and the timing of expected milestone payments to our vendor partner.

Jessica Betjemann: 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 most recent delay.

Jesse Betjemann: 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 most recent delay. Moving on to our Gogo Galileo initiative.

Jessica Betjemann: Moving on to our Google Galileo initiative. In the second quarter, Google recorded $2.2 million in OPEX and $1.1 million in CAPEX related to Google Galileo. We now expect 2024 will include approximately $15 million of Google Galileo OPEX due to a shift of expense to 2025 and approximately $4 million in CAPEX. We continue to expect external development costs for both the HDX and FDX solutions to be less than $50 million in total, of which $13 million was incurred in 2022 and 2023. $19 million is projected in 2024, and the remainder is expected in 2025. Additionally, we anticipate approximately 90% of Google Galileo's external development costs will be in OPEX.

Jesse Betjemann: In the second quarter, Gogo recorded $2.2 million in OPEX and $1 million in CAPEX related to Gogo Galileo. We now expect 2024 will include approximately $15 million of Gogo Galileo OPEX due to a shift of expense to 2025 and approximately $4 million in CAPEX. We continue to expect external development costs for both the HDX and FDX solutions to be less than $50 million in total, of which $13 million was incurred in 2022 and 2023, $19 million is projected in 2024, and the remainder is expected in 2025.

Jesse: To 2025, and approximately $4 million in Capex.

We continue to expect external development cost for both the HD X and <unk> solutions to be less than $50 million in total of which $13 million was incurred in 2022 and 2023 $19 million is projected in 2024 and the remainder is expected in 2025.

Jesse Betjemann: Additionally, we anticipate approximately 90% of Gogo Galileo's external development costs will be in OPEC. Moving on to our bottom line, Gogo delivered $30.4 million in adjusted EBITDA in the second quarter, a 31% decrease year-over-year and a 30% decrease sequentially. The decrease was primarily driven by lower equipment revenue and increased operating expenses, as anticipated. Net income of $0.8 million in the second quarter decreased 99% year-over-year and 97% sequentially.

Jesse: Additionally, we anticipate approximately 90% of Gogo Galileo's external development cost will be in Opex.

Jessica Betjemann: Moving on to our bottom line, Google delivers $30.4 million in adjusted EBITDA in the second quarter. A 31% decrease year over year and 30% decrease sequentially. The decrease was primarily driven by lower equipment revenue and increased operating expenses, as anticipated. Net income of $0.8 million in the second quarter decreased 99% year-to-year and 97% sequentially. The decline was primarily due to an $11 million after-tax unrealized loss related to a fair market value adjustment to the convertible note investment we made in our key chipset supplier to support continued progress on our 5G chip that we called out on our first quarter earnings call.

Jesse: Moving on to our Bottomline Gogo.

Jesse: <unk> delivered $34 million and adjusted EBITDA in the second quarter, a 31% decrease year over year and 30% decrease sequentially.

Jesse: The decrease was primarily driven by lower equipment revenue and increased operating expenses as anticipated.

Jesse: Net income of <unk> 8 million in the second quarter decreased 99% year over year and 97% sequentially. The decline was primarily due to an $11 million after tax unrealized loss related to a fair market value adjustment to the convertible note investment we made in our key chipset supplier to <unk>.

Jesse Betjemann: The decline was primarily due to an $11 million after-tax unrealized loss related to a fair market value adjustment to the convertible note investment we made in our key chipset supplier to support continued progress on our 5G chip that we called out on our first quarter earnings call. Potential future share price volatility will continue to affect our net income as we account for mark-to-market adjustments to the fair value of this investment. Based on our substantial net operating loss balances at the end of 2023, including $446 million in federal net operating losses and $377 million in state net operating losses, we had a net deferred income tax asset of $207 million at the end of the quarter. We do not expect to pay meaningful cash taxes through our five-year planning horizon.

Jesse: Support continued progress on our <unk> chip that we called out on our first quarter earnings call.

Jessica Betjemann: Potential future share price volatility will continue to affect our net income as we account for mock-to-market adjustments to the fair value of this investment. Based on our substantial net operating losses lost balances at the end of 2023, including $446 million in federal net operating losses and $377 million in state net operating losses, we had a net deferred income tax asset of $207 million at the end of the quarter. We did not expect to pay meaningful cash taxes through our five-year planning horizon.

Jesse: Potential future share price volatility will continue to affect our net income as we account for mark to market adjustments to the fair value of this investment.

Jessica Betjemann: I will now provide a status update on our FCC Reimbursement program. In the second quarter, we received a $5.7 million in FCC grant funding, and our program to date total received is $19.2 million. As of June 30 of 2024, we recorded a $17.5 million receivable from the FCC, and we incurred $8 million in reimbursement spend during the quarter. This receivable is included in prepaid expenses and other current assets in our balance sheet, with corresponding reductions to property and equipment in Metorian contract assets with a pickup in the income statement. In line with the plan submitted to the FCC, we were granted our first six months' extension last quarter, pushing the program completion deadline to January 21, 2025.

Jesse Betjemann: I will now provide a status update on our FCC reimbursement program. In the second quarter, we received $5.7 million in FCC grant funding, and our program-to-date total received is $19.2 million. As of June 30, 2024, we recorded a $17.5 million receivable from the FCC, and we incurred $8 million in reimbursable spend during the quarter. 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.

Jesse Betjemann: In line with the plan we submitted to the FCC, we were granted our first six-month extension last quarter, pushing the program completion deadline to January 21, 2025. In our application, we stated that we would need to have multiple extensions to complete the program and are planning to request the next extension in the fourth quarter.

Jessica Betjemann: In our application, we say that we will need to have multiple extensions to complete the program and are planning to request the next extension in the fourth quarter. As a reminder, with partial funding of the program, we are forecasting that we will run out of reimbursement funds in late 2025 and will need to continue to spend money and support the program through 2026, which is expected to negatively impact 2025 and 2026 recast flow.

Jesse Betjemann: As a reminder, with partial funding of the program, 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 is expected to negatively impact 2025 and 2026 free cash flow. Now, on to free cash flow. In the second quarter, we generated a solid $24.9 million in free cash flow, an increase from $13.3 million in the year-ago period, driven by lower cash interest and improved net working capital.

Jessica Betjemann: On to free cash flow. In the second quarter, we generated a solid $24.9 million in free cash flow, an increase from $13.3 million in the year-ago period, driven by lower cash interest and improved network and capital. Free cash flow decreased from $32.1 million last quarter, primarily due to lower EBITDA and the timing of the FCC reimbursement from our RIP and replace programs to support her.

Jesse Betjemann: Free cash flow decreased from $32.1 million last quarter, primarily due to lower EBITDA and the timing of the SEC reimbursement from our RIP and Replace program this quarter. Now I'll turn to a discussion of our balance sheet. Gogo ended the quarter with $161.6 million in cash and short-term investments and $603 million in outstanding principal on our term loan, with our $100 million revolver remaining undrawn. Gogo's net leverage of 2.9 times remains in line with our target range of 2.5 to 3.5 times. Our cash interest paid for the second quarter, net of hedge cash flow, was $7.8 million.

Jessica Betjemann: Now I'll turn to a discussion of our balance sheet. Google ended the quarter with $161.6 million in cash and short-term investments, and $603 million in outstanding principal on our term loan, with our $100 million revolver remaining undrawn. Google's net leverage of 2.9 times remains in line with our target range of two and a half to three and a half times. Our cash interest paid for the second quarter net of hedge cash flow with $7.8 million. As we previously mentioned in prior quarters, we have a hedge agreement in place and had 87% of our loaned hedge.

Jesse Betjemann: As we previously mentioned in prior quarters, we have a hedge agreement in place and had 87% of our loan hedged. At the end of July, the hedge stepped down to $350 million, with the strike rate increasing from 0.75% to 1.25%, resulting in 58% of the loan currently hedged. Starting in the fourth quarter, the hedge cash flow is expected to decline approximately $3 million per quarter.

Jessica Betjemann: At the end of July, the hedge stepped down to $350 million with a strike rate increasing from 0.75% to 1.25%. Resulting in 58% of the loan currently hedged.

Jessica Betjemann: College. Starting in the fourth quarter, the hedge cash flow is expected to decline approximately $3 million per quarter. Assuming no further debt pay down, the cash interest paid for 2024 net of hedge cash flow is expected to be approximately $34 million.

Jesse Betjemann: Assuming no further debt paydowns, the cash interest paid for 2024 net of hedge cash flow is expected to be approximately $34 million. Now, let me provide a recap of Gogo's capital allocation priorities. First, maintaining adequate liquidity.

Jessica Betjemann: Now let me provide a recap of Gogo's capital allocation priorities. First, maintaining adequate liquidity. Second, continuing to invest in strategic opportunities to drive competitive positioning and financial value, including Gogo 5G and Galileo. 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. We have executed across all priorities. In over 3.1 million shares for approximately $28 million in the last three quarters. Gogo has approximately $22 million remaining of the $50 million repurchase authorization our board approved in September 2023.

Jesse Betjemann: Second, continuing to invest in strategic opportunities to drive competitive positioning and financial value, including Gogo 5G and Galileo. 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. We have executed across all priorities.

Jessica Betjemann: We believe we are well positioned to execute our product investment requirements, evaluate further debt paydowns, and opportunistically repurchase shares. Our flexibility to pay down further debt and return capital to our shareholders is expected to increase as our free cash flow ramps up in 2025.

Jesse Betjemann: In the second quarter, we repurchased approximately 1.5 million shares at a total cost of $13 million, and over 3.1 million shares for approximately $28 million in the last three quarters. Gogo has approximately $22 million remaining of the $50 million repurchase authorization our board approved in September 2023. We believe we are well positioned to execute our product investment requirements, evaluate further debt paydowns, and opportunistically repurchase shares. Our flexibility to pay down further debt and return capital to our shareholders is expected to increase as our re-cash flow ramps up in 2025.

Jessica Betjemann: Now a turn to our financial outlook. We have updated our 2024 financial guidance and our long-term targets to reflect two changes. First, for the Gogo 5G launch timing that is now expected to occur in Q2 2025. And second, for the lower aircraft online at the end of 2024, then originally projected. However, note that we have not completed a full bottoms-up long-term plan at this time, as we normally do that annually in the January timeframe. For our 2024 fiscal year, we now anticipate 2024 revenue in the range of $400 to $410 million. First is our prior guidance of $410 to $425 million.

Jesse Betjemann: Now I'll turn to our financial outlook. We have updated our 2024 financial guidance and our long-term targets to reflect two changes. First, for the Gogo 5G launch timing that is now expected to occur in Q2 2025. And second, for the lower number of aircraft online at the end of 2024 than originally projected. However, note that we have not completed a full bottoms-up long-term plan at this time, as we normally do that annually in the January timeframe.

Jesse Betjemann: For our 2024 fiscal year, we now anticipate 2024 revenue in the range of $400 to $410 million versus our prior guidance of $410 to $425 million. The reduction is primarily tied to lower equipment revenue in the second half of the year due to the product lifecycle dynamic in the channel ahead of the launches of Gogo 5G in Galileo. Additionally, lower-than-expected aircraft availability is anticipated to reduce our service revenue growth.

Jessica Betjemann: The reduction is primarily tied to lower equipment revenue in the second half of the year due to the product life of a dynamic in the channel ahead of the launches of the Gogo 5G and Galileo. Secondarily, lower than expected aircraft online is anticipated to reduce our service revenue growth. Now I expect 2024 CAPEX to be approximately $35 million versus our prior guidance of $45 million. Our revised target includes approximately $20 million for strategic initiatives including Gogo 5G, Galileo, and the LTE network buildout, and is a decrease compared to the $30 million for these initiatives stated in the prior quarter.

Jesse Betjemann: We now expect 2024 CapEx to be approximately $35 million versus a prior guidance of $45 million. Our revised target includes approximately $20 million for strategic initiatives including Gogo 5G, Galileo, and the LTE network build-out, which is a decrease compared to the $30 million for these initiatives stated in the prior quarter. The reduction in strategic spending is primarily due to the $6 million shift in 5G spend to 2025, the LTE spend shift to 2025, and also some cost savings.

Jessica Betjemann: The reduction in strategic spending is primarily due to the $6 million shift in 5G spend to 2025, LTE spend shift to 2025, and also some cost savings. We anticipate 2024 free cash flow in the range of $35 to $55 million, which is an increase from our prior guidance of $20 to $40 million. This includes approximately $45 million of expected FCC spend, including non-reimbursable development spend, and approximately $40 million of FCC grant reimbursements perceived. The decrease in FCC reimbursement spend compared to prior expectations is a result of a timing shift within the program. The increase in our free cash flow guidance is reflective of the lower expected CAPEX and lower expected net FEC programs. In addition, we continue to target adjusted EBITDA at the high end of the previously guided range of $110 million to $125 million.

Jesse Betjemann: We anticipate 2024 free cash flow in the range of $35 to $55 million, which is an increase from our prior guidance of $20 to $40 million. This includes approximately $45 million of expected FCC spend, including non-reimbursable development spend, and approximately $40 million of FCC grant reimbursement. The decrease in FCC reimbursements and spend compared to prior expectations is a result of timing shifts within the program. The increase in our free cash flow guidance is reflective of the lower expected CapEx and lower expected net FCC program spend.

Jesse: Our expectations as a result of timing shifts within the program.

Jesse: The increase in our free cash flow guidance is reflective of the lower expected capex and lower expected net SEC program spend.

Jesse Betjemann: In addition, we continue to target adjusted EBITDA at the high end of the previously guided range of $110 million to $125 million. However, we now expect operating expenses for strategic and operational initiatives, including Gogo 5G and Galileo, to reduce to approximately $26 million, compared to $33 million previously. Despite lower revenue, we are maintaining adjusted EBITDA guidance, reflecting the shift in spend to 2025 for strategic initiatives, offset by an increase in legal expenses incurred to date and expected to continue for the rest of the year. Operator, this concludes our prepared remarks. We are now ready to take our first question.

Jesse: In addition, we continue to target adjusted EBITDA at the high end of the previously guided range of $110 million to $125 million.

Jessica Betjemann: However, we now expect operating expenses for strategic and operational initiatives, including Gogo 5G and Galileo, to reduce to approximately $26 million compared to $33 million previously. Despite lower revenue, we are maintaining adjusted EBITDA guidance, reflecting the shift in spend to 2025 for strategic initiatives, offset by an increase in legal expenses incurred to date and expected to continue the rest of the year. For our long-term targets, we are now targeting free cash flow of $150 million in 2025, excluding the effect of the FEC program, versus our prior target of a range of $150 to $200 million.

Jesse: However, we now expect operating expenses for strategic and operational initiatives, including Gogo, <unk> and Galileo to reduce to approximately $26 million.

Jesse: Compared to $33 million previously.

Jesse: Despite lower revenue, we are maintaining adjusted EBITDA guidance, reflecting the shift in spend to 2025 for strategic initiatives offset by an increase in legal expenses incurred to date and expected to continue the rest of the year.

Jesse: For our long term target.

Jesse: We're now targeting free cash flow of $150 million in 2025, excluding the effect of the FCC program versus our prior target of a range of $150 million to $200 million.

Jessica Betjemann: The change from prior guidance is tied to top and bottom line impacts of the latest timing of Gogo 5G launch to Q2 2025 and lower the expected aircraft online at the end of 2024. Over the long term, we reiterate that we expect revenue growth at a compound annual growth rate of approximately 15 to 17% from 2023 through 2028, with Gogo Galileo materially contributing to revenue beginning in 2025. We continue to expect annual adjusted EBITDA margin to be reaching 40% by 2028.

Jesse: The change from prior guidance is tied to top and bottom line impact of the latest timing of Gogo <unk> launch to Q2, 2025 and lower than expected aircraft online at the end of 2024.

Jessica Betjemann: In summary, in this challenging period in our product life cycle, Gogo's outlook underscores the significant value creation potential for our customers and shareholders that we expect to unlock by executing our strategy and investing in key initiatives that we believe will drive and sustain long-term growth.

William Davis: Before we open the floor for questions, I want to echo Oak sentiments and express my gratitude to the entire Gogo team for their hard work and commitment to our business, as well as their dedication to delivering exceptional service to our customers.

Operator: Operators, this concludes our prepared remarks. We are now ready to take our first question. Thank you.

Operator: If you'd like to ask a question, please press Star 11. If your question has an answer and you'd like to remove yourself from the queue, please press star 11 again.

Sebastiano Petti: Our first question comes from Sebastiano Petty with JP Morgan. Your line is open.

Sebastiano Petti: Hi, thank you for taking the question. I hope you could help us maybe think about expected arpus or price points as relates to Galileo.

Operator: I thank you for taking the question. I was hoping you could help us maybe think about, um, expect.

Sebastiano Petti: And then maybe kind of stepping back and 5G being a bit delayed here, but more broadly, any help on helping us think about the 5G pricing strategy. We should be thinking about as it pertains to next year in the long-term revenue guidance. Thank you.

Jessica Betjemann: Sorry, everybody. I was on mute. So generally, 5G Arpus would be about $2,000 on average higher than our current Arpoot, and then the HDX and the FDX would be priced at higher price points, and I don't know that we've shared the average Arpoot yet, but you can actually see the pricing on our website now.

Will Davis: And I don't know that we've shared the average ARPU yet, but you can actually see the pricing on our website now. So, you know, they were reflecting greater coverage around the world and higher bandwidth. HDX and FTX are priced at premiums to 5G.

Jessica Betjemann: Okay, and if I can, we just, oh, sorry. Jesse, yeah, Jesse, I don't know if you want to go into any more detail in terms of the exact arc we're projecting to those. Well, obviously, it depends upon a range, depending upon the plan that we're, we would be providing, but we are expecting an increase in Arpoot as Galileo starts to take off. As a reminder, though, I mean, in 2025, we won't necessarily see that much impact with regards to the service revenue. It would be more of the equipment revenue, and then you'll see the service revenue really start to take off more in 2026.

Jesse Betjemann: Yeah, Jesse, I don't know if you want to go into any more detail in terms of the exact arc we're projecting for those.

Sebastiano Petti: Got it. Thank you.

Sebastiano Petti: And a quick follow-up just thinking about, you know, Abon, you know, can you help us think about the new planes online, you know, between maybe a migration perspective or net new customer standpoint, just trying to think about the drivers there behind the nice increases. Thank you.

Jessica Betjemann: Jesse, do you want to go into the activations? Yeah, I mean, so this year, we have been in this quarter. We noted, you know, we are units online was impacted by lower new activations than what we were expecting. And that is due to the product life cycle dynamic that we talked about. We also had the higher deactivation. And I think that, you know, our expectation for the rest of the year is that will, you know, continue.

Jesse Betjemann: Yeah, I mean, this year we have been, and this quarter we noted that our units online were impacted by lower new activations than what we were expecting, and that is due to the product lifecycle dynamic that we talked about. We also had higher deactivations, and I think that, you know, our expectation for the rest of the year is that it will continue. But then, come next year, we would expect, obviously, with the launch of these two products, that our new activations would accelerate, as well as be able to kind of neutralize our net deactivation.

Jessica Betjemann: But then come next year, you know, we would expect, obviously, with the launch of these two products that are new activations, you know, would accelerate as well as being able to kind of neutralize our net deactivation rate.

Rick Prentice: Our next question comes from Rick Prentice with Raymond James. Your line is open.

Rick Prentice: Thanks.

Rick Prentice: Good morning, everybody. A couple of questions. Obviously, we've called out a couple of times to the customer behavior while they pause for the new stuff to come in. How many aircraft are you expecting, ATG aircraft, are you expecting as you look through the rest of this year into, let's say, second quarter next year? Jesse can get into more precise names. I think we expect a little bit more degradation in the total, you know, is online count until we get our new products launched. That's right. So, if you add 105 aircraft, net on 2Q, that same kind of magnitude of 100, each quarter does it accelerate from there?

Operator: Hey, a couple questions. Obviously, you've called out a couple of times the customer behavior while they pause for the new stuff to come in. How many aircraft are you expecting, APG aircraft, are you expecting as you look through the rest of this year into, let's say, the second quarter next year?

Oakleigh Thorne: Jesse can get into more precise numbers, but I think we expect a little bit more degradation in the total units online count until we get our new products launched.

Operator: So, if you had 105 aircraft net on 2Q, that same kind of magnitude, 100 each quarter? Yeah. Or does it accelerate from there?

Rick Prentice: No, we're not anticipating it to reach hopefully reach those levels, but there will be some deterioration, but not necessarily, you know, up to the 100. Okay, so more coming off at maybe now at the pace you saw in 2Q. That's right.

Jessica Betjemann: We had that unique situation in Q1 with the hourly deactivation. Okay, you've called out a couple of times, I think, the vendor financing hitting some cost site. Give us a little color on that. What's happening there, and what kind of costs are being heard? Yeah, so in general, the legal expenses were very high in the quarter, so I wanted to highlight that, inflating our GNA expense. But with regards to the vendor financing issues, as noted, we had an investment in a convertible note in Q1 and Q2, and so the activity for that, the legal support of that, which is not a normal business, that was one area. And then also in our 10Q, you'll see a disclosure around the supporting a revolver commitment for Airspan. That is not necessarily effective until Airspan emerges from bankruptcy, but we have partnered with Fortress to support a revolver, and there's legal support for that as well.

Jesse Betjemann: Yeah, so in general, you know, the legal expenses were very high in the quarter, so I wanted to highlight that as inflating our G&A expense. But with regard to the vendor financing issues, you know, as noted, we had an investment in a convertible note in Q1 and, you know, Q1 and Q2, and so the activity for that, the legal support of that, which is not, you know, normal business, that was one area.

Jesse Betjemann: And then also in our ChangQ, you'll see a disclosure around the supporting a revolver commitment for Airspan that is not, you know, necessarily effective until Airspan emerges from bankruptcy, but we have partnered with Fortress to support a revolver, and there's legal support for that as well. So we're really supporting our vendors in this, in this unusual activity, so we wanted to kind of call out that unique expense.

Jesse: The revolver commitment for air span.

Jesse: That is not.

Jesse: Necessarily effective until air spend emerges from bankruptcy, but we have partnered with fortress too.

Jesse: Support.

Jesse: Our revolver and there's legal support for that as well so we're really supporting our vendors.

Jessica Betjemann: So we're really supporting our vendors in this, and it's unusual activity, so we wanted to kind of call out that unique spend. That's right. Okay. In case of air span, they went through a pre-package bankruptcy. Of course, when that happens, you have to spend money making sure that you defend your existing rights and your contracts, etc. So it was both that we helped in terms of helping them with some financing to get through it all, but we also had to protect ourselves. Okay.

Jesse: This is unusual activities, we wanted to kind of call out that unique spend.

Speaker Change: Got you okay.

Jesse: Okay.

Jason: And Jason <unk>, they went through a pre packaged bankruptcy of course.

When that happens you also have to spend money, making sure that you defend your.

Your existing rights and your contracts et cetera. So.

Jason: We helped in terms of helping them with some financing to get through it all but we also have to protect ourselves.

Operator: Okay, and the last one for me, following on Mr. Basiano's question, obviously you've got the pricing on the website for Galileo. Oak, you make a point about, you know, your network, your bandwidth, but your customer service and customer support. What kind of anecdotal or outright detail do you have as far as how are customers valuing price versus coverage versus customer service?

Rick Prentice: And last one for me, following up with Sebastian on this question, obviously, got the pricing on the website for the Galileo. Okay, you make a point about, you know, your network, your bandwidth, your customer service, and customer support. What kind of anecdote are outright detailed you have as far as how are customers valuing price versus coverage versus customer service? You mean on a relative basis to each other? Yeah. I mean, I think that, you know, customers do value having a relationship with somebody that they can trust who they've been doing business with for a long time, who has a very responsive customer support.

Jason: Okay.

Sebastiao: Last one for me if I am Sebastiao those question obviously.

Speaker Change: Obviously, you've got the pricing on the website for the Galileo.

Speaker Change: You make a point about <unk>.

Speaker Change: Network your bandwidth, but your customer service and customer support.

Speaker Change: What kind of anecdotal or outright.

Speaker Change: <unk> do you have as far as power customers valuing price versus coverage versus customer service.

Oakleigh Thorne: Do you mean on a relative basis? Yeah, I mean, I think that, you know, customers do value having a relationship with somebody that they can trust, who they've been doing business with for a long time, who has very responsive customer support, you know, has been very consistent in terms of how they price, and the customer feels that they can count on. I think that's probably the highest value of anything.

Speaker Change: You mean on a relative basis.

Speaker Change: To each other.

Speaker Change: Yes.

Speaker Change: I think that customers do value, having a relationship with somebody that they can trust or they've been doing business with for a long time was very responsive customer support.

Oakleigh Thorne: You know, it's been very consistent in terms of how they price, and, you know, the customer feels that you count on. And he asks, that's probably the highest value of anything. When you look at the products themselves, you know, our network and our network will perform about the same as starlings, frankly, and I think ours will be more stable and reliable in terms of being pinned to a higher mean connectivity rate. So I think that will be valued by customers. And then the equipment side, you know, we manufacture equipment that can be put anywhere in the aircraft, inside the pressure vessel, outside the pressure vessel, doesn't require any maintenance, et cetera, et cetera.

Speaker Change: It's been very consistent in terms of how they price.

Speaker Change: The customer feels that they can count on and I think that that's.

Speaker Change: That's probably the highest value of anything when you look at the products themselves.

Oakleigh Thorne: I mean, you look at the products themselves, you know, our network and our network will perform about the same as Starlink, frankly, and I think ours will be more stable and reliable in terms of being pinned to a higher mean connectivity rate, so I think that'll be valued by customers. And then on the equipment side, you know, we manufacture equipment that can be put anywhere in the aircraft, inside the pressure vessel, outside the pressure vessel, doesn't require any maintenance, et cetera, et cetera, and, you know, Starlink's is consumer grade. It's what you would have in your home.

Speaker Change: Our network and our.

Speaker Change: Our network will perform about the same as starlings, frankly, and I think ours will be more stable and reliable in terms of being pinned to a higher mean connectivity right. So I think that'll be valued by customers.

Speaker Change: And then the equipment side, we manufacturer of equipment that can be put anywhere in the aircrafts inside the pressure vessel outside the pressure vessel doesn't require any maintenance.

Oakleigh Thorne: But, you know, starlings is consumer grade; it's what you would have in your home. That's not going to work for a while, but it's going to be a question about, you know, how long it's really going to be reliable, and how long it can withstand the rigors of business aviation in terms of planes that go from, you know, 130 degrees inside the cabin before the passengers arrive to, you know, minus 60 at 40,000 feet. So, you know, there's reasons we build equipment aviation grade, and they really, they haven't done that. So, yeah, I think there's a million little things that are kind of wrong about how they're going at things, but right now people that have had it installed are using it, and they're liking it a lot because it's a much better experience than any of the current IFC products out there.

Speaker Change: Et cetera, et cetera, Sterling says.

Speaker Change: Tumor grade its what you have in your home.

Oakleigh Thorne: That, you know, it's not going to, it's going to work for a while, but it's going to be a question about, you know, how long it's really going to be reliable and how long it can withstand the rigors of business aviation in terms of planes that go from, you know, 130 degrees inside the cabin before the passengers arrive to, you know, minus 60 at 40,000 feet. So, you know, there are reasons we build equipment aviation grade, and they really haven't done that.

It's going to work for a while but it's only a question about how long, it's really going to be reliable and how long it can withstand the rigors of.

Speaker Change: Business aviation in terms of claims that go from 130 degrees inside the cabin before the passengers arrive to.

Speaker Change: Minus 60 at 40000 feet.

Speaker Change: There's reasons rebuild equipment aviation grade.

Speaker Change: And they really they haven't done that so yeah.

Oakleigh Thorne: So, you know, I think there are a million little things that are kind of wrong about how they're going at things, but right now, people that have had it installed are using it, and they're liking it a lot because it's a much better experience than any of the current IFC products out there. In a way, that kind of helps us. We don't have to be...

Speaker Change: I think there's a million little things that are kind of wrong about how theyre going out things, but right now.

Speaker Change: People that have had it installed are using it and they're liking it a lot because it's a much better.

Speaker Change: Experience than any of the current IFC product out there in a way that kind of helps us we don't have to be.

Oakleigh Thorne: In a way that kind of helps us, we don't have to be... I don't think we have to be crusaders for Leo. I think people are the markets already seeing that Leo's a real improvement. So I think in the end that kind of helps us. And I think then we'll win with all those little differentiators around service, aviation grade, or aviation focus that will sway a lot of the market towards our products.

Speaker Change: I don't think we have to be Crusaders for Leo I think people in the market is already seeing that Leo is a real improvement.

Speaker Change: So I think in the end that kind of helps us and I think then we'll win with all those little differentiators around.

Speaker Change: Around service aviation grade our aviation focus that.

Speaker Change: Sway sway.

Speaker Change: A lot of the market towards our products.

Oakleigh Thorne: The last one for me is the 5G launch, now 2Q. Are we thinking early 2Q, mid-2Q25, late-2Q25, and what else might cause that to be at risk?

Rick Prentice: Last one for me is the 5G launch now 2Q.

Speaker Change: Alright, great and last one for me is the five G launch now <unk> are we think in early to mid <unk> 25, late <unk>, 'twenty and what else might cause us to be at risk.

Oakleigh Thorne: Are we thinking early 2Q, mid 2Q, 25, late 2Q, 25, then what else might cause that to be at risk? Well, I would say mid 2Q right now. A lot of the risk we will be able to retire or have been retiring, frankly, in two ways. One is our FPGA flights where we've got all the chip software loaded on an FPGA that we're flying with. That's done a couple things. First of all, it was one of the ways that we identified some of the issues that our chip provider has to provide. So we've got to those early before they cause problems after coming out of fabrication a year down the line or whatever.

Oakleigh Thorne: Well, I would say mid-2Q right now. A lot of the risk, we will be able to retire or have been retiring, frankly, in two ways. One is our FPGA flights where we've got all the chip software loaded on an FPGA that we're flying with. That's done a couple of things. First of all, it was one of the ways that we identified some of the issues that our chip provider has to provide.

Speaker Change: Well I would say mid <unk> right now.

Speaker Change: The.

Speaker Change: A lot of the risk we will be able to retire.

Speaker Change: Has been retiring frankly in two ways. One is our FPGA slides, where we've got all the chips software loaded on an FPGA that we're flying with.

Speaker Change: It's been a couple of things first of all it was one of the ways that we identified some of the issues that are chip provider has to provide.

Oakleigh Thorne: So we got to those early before they caused problems after coming out of fabrication a year down the line or whatever. And second of all, that allowed us to validate our own software model of our network.

We've got to those early before they cause problems after coming out of fabrication a year down the line or whatever and second of all that allowed us to validate our own software model of our network.

Oakleigh Thorne: And, second of all, that allowed us to validate our own software model of our network, which means that we can actually continue to test virtually now. And we are, and that will identify a lot of issues inside the network as well before we ever even get the chip. So those two things help a great deal. There's still some risk around the actual chip fabrication, which is a lot of the begin early in September. And you know, when it comes out, there will be some bring up risk. But with the amount of scrutiny that's been paid to this chip at this point, I'd be shocked if there was a problem when it came out.

Speaker Change: Which means that we can actually continue to test virtually.

Speaker Change: Now and we are in that will identify a lot of issues inside the network as well before we ever even get the chips. So those two things help a great deal.

Speaker Change: There's still some risk around the actual chip fabrication, which is slated to begin early in September.

Speaker Change: And.

When it comes out there will be some bring up risk, but with the amount of scrutiny. That's been paid to the strip at this point I'd be shocked if there was a problem when it came out.

Rick Prentice: Great. Thanks, everybody. Thank you.

Speaker Change: Great. Thanks, everybody.

Rick: Thanks, Rick.

Rick Prentice: Thank you, Rick.

Speaker Change: Thank you Rick.

Scott Ciro: Our next question comes from Scott Ciro with Roth's Capital Partners.

Our next question comes from Scott Searle with Roth Capital Partners. Your line is open.

Scott Ciro: Your line is open. Thank you very much.

Operator: Thanks for taking the questions. Hey, good morning, Oak. Hey, quick clarification for Jesse.

Scott Searle: Hey, good morning, Thanks for taking my questions Hey, good morning, guys.

Scott Ciro: Hey, quick clarification: for Jesse, legal expenses were relatively high this quarter. I'm wondering what you're thinking about and factoring into your expectations in the second half of this year. And if you could remind us what they were in the first quarter.

Scott Searle: Quick clarification for Jesse legal expenses were relatively high this quarter I'm wondering what youre thinking about and factoring into your expectations in the second half of this year and if you could remind us what they were in the first quarter and then to follow up on.

Operator: Legal expenses were relatively high this quarter. I'm wondering what you're thinking about and factoring into your expectations for the second half of this year, and if you could remind us what they were in the first quarter. And then, Oak, to follow up on Rick's question around 5G.

Scott Ciro: And then to call upon Rick's question around 5G. It seems like your comfort level of this launching in mid-second quarter is a lot higher than we had in prior conversations. I'm wondering if you could walk us through the steps of the milestones here. It sounds like now you're expecting chip delivery in September. Is there a new spin on that chip?

Speaker Change: Brooks question around <unk>.

Speaker Change: It seems like your comfort level.

Speaker Change: This launching in mid second quarter is a lot higher than we've had in prior conversations I'm wondering if you could walk us through the steps and the milestones here. It sounds like now you're expecting chip delivery in September is there a new spin on the chip I was wonder if you could just kind of lay out some of the milestones that we should expect over the next couple of quarters.

Scott Ciro: I was wondering if you could just kind of lay out some of the milestones that we should expect over the next couple of quarters.

Jessica Betjemann: Yes, I can take the first one. The legal expenses; it was $9.5 million. And that was across litigation expenses as well as the vendor financing we spoke about.

Jesse Betjemann: I can take the first one. The legal expenses were $9.5 million, and that was across, you know, litigation expenses as well as the vendor financing we spoke about, and also global expansion just cut our normal efforts that we're doing for global expansion. We do expect that to decrease, so there was a bit of a high point in Q2, so we won't be at that level of magnitude going forward in Q3.

Speaker Change: Yes, I can take a look at that one.

Speaker Change: Our legal expenses, so this $9 $5 million.

Speaker Change: And that was across litigation expenses as well as the vendor financing.

Jessica Betjemann: And also global expansions just cut out normal efforts that were doing for global expansion. We do expect that to decrease, so that there was a bit of a high point in Q2. So it will not be at that level of magnitude going forward.

Speaker Change: We spoke about and also global expansion at our normal efforts that we're doing for global expansion.

Speaker Change: We do expect that to decrease that there was a bit of a high point in Q2, so it will not be at that level of magnitude.

Scott Ciro: Thank you.

Speaker Change: Going forward in Q3 and Q4.

Oakleigh Thorne: Okay, and then Scott for milestones. I think that I didn't say the chip would be delivered in September. It says it starts fabrication in September. So that's one milestone. Then coming out of fabrications, another bring up is a third when they complete bring up and then chip chips to us. And so the rival chips with us would be another milestone. Now, obviously, we will install it and start flight testing with it right away. And then it really gets the PMA and FTC, which are regulatory, and PMA is regulatory and the FTC in terms of approval for aircraft getting done.

Scott Searle: Okay, and then Scott.

Scott Searle: Sure.

Scott Searle: Milestones I think.

Scott Searle: I didn't say that chip will be delivered in September I said it starts fabrication in September.

Speaker Change: So that's one milestone and then coming out of fabrications. Another bring up is a third when they complete bring up and then shipped chips to us and so the arrival of chips with us would be another milestone obviously, we will install it and start flight testing with it right away and then it really gets it.

Speaker Change: And FTC, which are regulatory and.

Speaker Change: PMA is regulatory in the FCC in terms of approvals for aircraft getting done.

Oakleigh Thorne: I think those are the main. The main milestones going forward.

Speaker Change: I think those are the main.

Speaker Change: The main milestones going forward.

Scott Ciro: Good, great.

Scott Ciro: And lastly, if I could, in terms of the competitive landscape, I was wondering if you could just give us an update on that front. We don't hear a lot about Smart Sky. I'm wondering where they fit into the equation. And then specifically on Starlink, while they will be a competitor going forward, given their presence, given their network, there's been a lot of talk recently about the many kind of factory and somehow into the equation. I'm wondering if you could address specifically that issue in terms of FAA regulatory issues around something like that, you know, in terms of that creeping into the market and/or impacting price index.

Speaker Change: Okay, Great and lastly, if I could.

Speaker Change: In terms of the competitive landscape.

Speaker Change: I was wondering if you could just give us an update on that front, we don't hear a lot about smart sky I'm wondering where they fit into the equation and then specifically on store link.

Speaker Change: While there will be a competitor going forward given their presence given their network. There's been a lot of talk recently about the many kind of factoring in somehow into the equation I'm wondering if you could address specifically that issue in terms of FAA regulatory issues.

Speaker Change: <unk> something like that.

Speaker Change: In terms of that creeping into the market <unk> impacting pricing.

Speaker Change: Sure.

Oakleigh Thorne: Well, Smart Sky is really not a factor in the market at this point there. Well, I'll just put this way. I don't think they have any revenue-generating customers. In terms of the litigation with us, we think that that case, in many ways, is basically over at this point. As you might recall, Scott, there were two sets of patents: one set that expired in the 2030s and one that expires, one set of patents that expires in August of this year. In discovery, and one of the reasons our legal expenses are so high is that discovery ended up being quite extensive.

Speaker Change: Well smart Guy is really not a not a factor in the market at this point there.

Speaker Change: Yeah.

Oakleigh Thorne: They haven't, well, I'll just put it this way: I don't think they have any revenue-generating customers. In terms of the litigation with us, we think that... That case, in many ways, is basically over at this point. As you might recall, Scott, there were two sets of patents. One set that expired in the 2030s, and one that expires in August of this year. In discovery, and one of the reasons our legal expenses are so high is that discovery ended up being quite extensive. We had, you know, four times as many documents to review as we had anticipated in initially budgeting for discovery.

Speaker Change: They haven't just put it this way I don't think they have any revenue generating customers.

Speaker Change: In terms of the litigation with us.

Speaker Change: We think that.

Speaker Change: That case in many ways is basically over at this point.

Scott Searle: As you might recall Scott there were two sets of patents one set that expired in 2000 and then the 2030.

Scott Searle: One that expires one set of patent that expires in August of this year.

Scott Searle: In discovery in one of the reasons our legal expenses are so high is it discovery ended up being quite extensive.

Oakleigh Thorne: We had, you know, four times as many documents to review as we had anticipated and initially budgeting for discovery. However, in that discovery, it was discovered that Smart Sky knew about prior art to the patents that are expiring in 2030 and that they did not reveal that prior art to the Patent Trademark Office. So that it has raised a very significant equitable conduct issue for them and, you know, most likely lead to those patents being determined to be invalid. And you might recall that we have often said that we thought they didn't have any valid patents that we have mentioned on, and this is the reason why.

Scott Searle: Four times as many documents to review as we anticipated and initially budgeting for discovery.

Oakleigh Thorne: However, in that Discovery, it was discovered that SmartSky knew about prior art to the patents that are expiring in 2030 and that they did not reveal that prior art to the Patent and Trademark Office. So that's SmartSky. The Mini, you know, look, there's all kinds of little toys people use in business aviation, or I mean, sorry, general aviation to get connectivity. There are people that fly low with their cell phones on, but, you know, that's not typically what people do in business aviation.

Scott Searle: However in that discovery.

Scott Searle: Was discovered that.

Scott Searle: Smart Sky knew about prior art to the patents that were.

Scott Searle: That are expiring in 2030 and that they did not.

Scott Searle: Reveal that prior art to the patent and trademark office.

Scott Searle: So that it has raised the very significant equitable conduct.

Issue for them and most likely lead to those patents being.

Scott Searle: Determined to be invalid, and you might recall that we have often said that we thought they didn't have any valid patents that we infringed on this is the reason why.

Oakleigh Thorne: So that, I think, eliminates frankly the risk of those long term patents being an issue. And then the short term one, you know, we have always did not entrench our patents. We think we will win on that. However, even if by some miracle, we were to lose 5G's, not coming out to May, now in those patents expire in August. So there's not going to be a whole lot of damages in terms of; there would not be a whole lot of damages in terms of the impacts on us.

Speaker Change: So that I think.

Scott Searle: Eliminates.

Scott Searle: Frankly, the risk of those long term patents.

Scott Searle: Being an issue and then the short term one.

Scott Searle: We are always did not infringe our patents, we think we will win on that however, even if by some miracle we were to lose.

Scott Searle: <unk> is not coming out to May know and.

Scott Searle: And those patents expire in August so theres not going to be a whole lot of damages.

Speaker Change: In terms of who would not be a whole lot of damages in terms of.

Speaker Change: On the impacts on us.

Oakleigh Thorne: So that's Smart Sky. The many, you know, look, there's all kinds of little toys people use in business aviation. I mean, sorry, general aviation to get connectivity. There are people that fly low with their cell phones on, but you know, that's not typically what people do in business aviation. And you'll see a lot of guys goofing around who I would consider general aviation flyers, not business aviation flyers trying to put the many in the windshield and the life. You know, that is not going to be a solution that's going to satisfy business aviation flyers for a couple of reasons.

Speaker Change: So that's smart sky. The many you know look there's all kinds of little toys people use in business aviation I mean, sorry.

Speaker Change: Sorry General aviation to get connectivity there are people that fly low with their cell phones on.

Speaker Change: But that's not typically what people do in business aviation.

Oakleigh Thorne: And you'll see a lot of guys, you know, goofing around who I would consider general aviation flyers, not business aviation flyers, trying to put the Mini in the windshield and the like. But that is not going to be a solution that's going to satisfy business aviation flyers for a couple of reasons. I mean, for instance, you're not really going to get the speed through the fuselage of the aircraft. In other words, the radio waves aren't going to penetrate the fuselage of the aircraft and hit the Mini fitting inside the aircraft. So you have to put it in the windshield, essentially, on the dashboard, if you will.

Speaker Change: You'll see a lot of guys goofing around.

Speaker Change: I would consider general aviation Flyers not business aviation players trying to put the many in the windshield and and the like.

Speaker Change: That is not going to be a solution, that's going to satisfy business aviation flight.

Oakleigh Thorne: I mean, for instance, you really, you're not going to get the speed through the fuselage of the aircraft. In other words, the radio waves aren't going to penetrate the fuselage of the aircraft and hit the many sitting inside the aircraft. So you have to put it in the windshield, essentially, on the dashboard, if you will. These satellites are coming from flying at a very high speed, and you've got to pick up one after another at a very high rate. And that will work okay if you're flying in the direction the satellites are coming from, but if you're not flying in that direction, your minis are not looking the right way; you're not going to have reception.

Speaker Change: So a couple of reasons I mean for instance, you really you're not going.

Speaker Change: Trying to get.

Speaker Change: Speed through the fuselage of the aircrafts, okay in other words, the radio waves aren't going to penetrate that.

Speaker Change: The fuselage of the aircraft and hit the many fitting inside.

Speaker Change: The aircraft that you have to put it in the in the.

Speaker Change: The windshield essentially on the on the on.

Speaker Change: The dashboard if you will.

Speaker Change: These satellites are coming from.

Speaker Change: Flying at a very high speed and <unk> got a good pick up one after another.

Speaker Change: In a very high rate and that'll work, Okay. If you're flying you are playing in the direction of the satellites are coming from but if youre not flying in that direction.

Speaker Change: You have many is not looking the right way.

Oakleigh Thorne: So it's going to lead to very unreliable connectivity, and that's fine for some people, but it's not fine for the bulk of the business aviation market. There are also safety concerns, and having an antenna fly around if there's a start banking or something like that doesn't make the FAA happy. The FAA will kind of have to catch you on the runway doing it, and they probably wouldn't like that very much, but it's pretty unlikely that that would happen. And frankly, the last thing is that Starling doesn't want to sell you that price, and so when they detect that you're flying, they turn you off.

Speaker Change: Youre not going to have reception. So it is going to lead to very unreliable connectivity and that's fine for some people.

Speaker Change: But it's not fine for the bulk of the business aviation market. There are also safety concerns.

Speaker Change: <unk>.

Speaker Change: Having an antenna fly around if there was a sharp banking or something like that that doesn't make the FAA happy.

Speaker Change: Yes.

Speaker Change: The.

Speaker Change: The FAA would kind of have to catch you on the runway doing it and they probably wouldn't like that very much but it's pretty unlikely frankly that that would happen.

Speaker Change: And frankly, the last thing is the Starlink doesn't want to sell you.

Speaker Change: At that price and so when they detect that you're flying they turn you off.

Oakleigh Thorne: So, you know, that's the business model question. Maybe Starling will do something about it, but at all end, it's not going to be a very satisfactory performance. It could have safety implications, and right now you're not supposed to be able to do it from the vendor.

Speaker Change: That's the business model question, maybe Salt Lake will do something about but but all.

Speaker Change: All in it's not going to be a very satisfactory performance could have safety implications and right now you're not supposed to be able to do it.

Scott Ciro: So, very helpful.

Speaker Change: The vendor.

Operator: Great. Very helpful. Thanks, Oak.

Scott Ciro: Thanks so. Thank you.

Speaker Change: Great very helpful. Thanks.

Operator: Thank you. Our next question comes from Simon Flannery with Morgan Stanley. Your line is open.

Simon Flannery: Our next question comes from Simon Flannery with Morgan Stanley. Your line is open.

Speaker Change: Thank you.

Speaker Change: Next question comes from Simon Flannery with Morgan Stanley. Your line is open.

Simon Flannery: Great. Thanks a lot.

Speaker Change: Great.

Simon Flannery: Good morning. To start off, just on the churn or the DX. I think in the past we've had them waiting for maintenance upgrades and so forth. Are any of these customers churning to competitors, or where are these aircraft going? We have seen a little bit of churn to competitors. Simon, we had 11 that left us for a K.A. solution. Like if I said, or something. Yeah, and then we had 10 that we think left us for Starling that told us they left us for Starling. So, so there's a bit of that, you know, on the margin there.

Simon Flannery: Thanks, a lot and good morning to start off just on the churn or the Dr. Sam I think in the past we've had them waiting for maintenance upgrades and so forth are any of these customers churning to competitors or where are these aircraft going.

Simon: We have seen a little bit of churn to competitors Simon.

Speaker Change: We had 11 the left us for a K a solution.

Speaker Change: Microphone or something.

Speaker Change: And then we had 10, we think left us for Starlink.

Speaker Change: <unk> told us they left dressers challenge so.

Speaker Change: So theres a bit of that.

Speaker Change: On the margin there.

Operator: Okay, and you'd expect that to continue through the balance of the year until we get these products out.

Oakleigh Thorne: Okay, and you'd expect that to continue through the balance of the year until we get these products up. I would, yeah, I think that that will. I think it's, you know, the good news behind those numbers is that it's happening because people have tremendous demand for connectivity. And I think as I talked to flight departments and the like, especially for larger companies, the issue is that now, with all the file sharing going on and everybody's spreadsheets living in the cloud. They don't live on their PC. It's just putting a huge strain on, on older products like our older product and frankly a lot of the older geo products as well.

Speaker Change: Okay, and you would expect that to continue through the balance of the year until we get these products out.

Speaker Change: I would yes, I think that that will I think.

Speaker Change: The good news behind those numbers is that.

Speaker Change: It's happening because people have tremendous demand for connectivity and I think as I talked to flight departments and the like.

Speaker Change: Especially for larger companies. The issue is that now with all the file sharing going on and everybody's spreadsheets live in the cloud they don't live on their PC.

Speaker Change: Putting a huge strain on an older products like our older product and frankly, a lot of the older Geo products as well and then you've got multiple video conferences going on in the aircraft at the same time so.

Oakleigh Thorne: And then you've got multiple video conferences going on on the aircraft at the same time. So, you know, that's all; those are all applications that Leo is going to support really well. And so we, I think we're fortunate that we're going to be well positioned to serve those, and I think we'll be very competitive. But, you know, Starling, they're first with a solution, and so they're getting a lot of attention at the high end of the market right now. So, I think we'll see some pressure there until we get our FDX antenna out.

Speaker Change: All those are all applications that Leo is going to support really well.

Speaker Change: So I think we're fortunate that we're going to be well positioned to serve those and I think it will.

Speaker Change: I'll be very competitive, but starlink, there first with the solution and so they're getting a lot of a lot of attention at the high end of the market right now.

Speaker Change: We will see some pressure there until we get our fts antenna.

Operator: Okay, and you talked before about Starlink having a smaller antenna. Do you think the Mini is that antenna, or do you think they're working on another smaller antenna that's going to be more suited to business aviation?

Oakleigh Thorne: Okay. And you talked before about Starling having a smaller antenna. Do you think the Mini is that antenna, or do you think they're working on another smaller antenna that's going to be more suited to business aviation? I'm not sure the many is that solution, but I also don't get the impression right now they're working on a smaller one for business aviation. I think they feel like they can fit this colossal antenna they've got on smaller aircraft, and they're going to try and FTC them on those air breaths. And you know you can put an antenna on anything, but you know it looks like an A-Wax and it you know you have a smaller antenna so you've got to move a lot of other stuff on top of the aircraft when you install it, which drives up installation costs.

Speaker Change: Okay.

Speaker Change: Talk before about Starlink, having a smaller antenna do you think the mini is that antenna or do you think they are working on another.

Speaker Change: More around kind of it's going to be more suited to business aviation.

Speaker Change: I'm not sure of the many that solution, but I also don't get the impression right now they are working on a smaller one for business aviation I think they feel like they can fit this colossal encana they've got on smaller aircraft and they're going to try and FTC them on those aircrafts.

Oakleigh Thorne: You can put an antenna on anything, but, you know, it looks like an AWACS, and it, you know, you have a smaller antenna, so you have to move a lot of other stuff on top of the aircraft when you install it, which drives up installation costs. There's a lot of inconveniences to it, so we think that our... FDX, in particular, which is the antenna that will compete with Starlink, it's our, you know, our larger antenna, still much longer, much smaller than theirs.

Speaker Change: You can put.

Speaker Change: Ken on anything, but it looks like in a wax and it.

Speaker Change: Do you have a smaller antenna you got to move a lot of other stuff on top of the aircraft when you install it which drives up installation cost. There's a lot of inconvenience is do it. So we think that our <unk>.

Oakleigh Thorne: There's a lot of inconveniences to it, so we think that our FGX in particular, which is the antenna that we'll compete with Starlink, it's our, you know, our larger antenna, so much smaller than their antenna, it's going to be suitable for a lot more aircraft than in their very large one. And, but my point there was only that I think that they may think they're okay with just the big one right now.

Speaker Change: <unk> in particular, which is the antenna that will compete with starlink.

Speaker Change: Our larger antenna still much longer much smaller than their antenna, it's going to be suitable for a lot more aircrafts and then they're very large one.

Oakleigh Thorne: It's going to be suitable for a lot more aircraft than their very large one. And I, but I, my point there was only that I think that they may think they're okay with just the big one.

Speaker Change: But.

Speaker Change: My point, there was only that I think that they may think they are okay with just the big one right now.

Operator: Got it. And then, maybe you could talk a little bit about OneWeb. I think they've faced some delays before any updates on, you know, their network status in terms of being able to support your timeline on Galileo later this year. And I think it'd be really helpful just to understand more about your contract with them and how the pricing works on your bandwidth consumption. Is it all sort of variable rate bit consumption, any volume discounts, things like that, any color on margins, and so forth to help us think about what happens at the bottom line from the revenue flow through?

Oakleigh Thorne: Got it, and then maybe you could talk a little bit about OneWeb. I think they'd face some delays before any updates on, you know, their network status in terms of being able to support your timeline on Galileo later this year. I think it'll be really helpful just to understand more about your contracts with them and how the pricing works on your bandwidth consumption. Is it all sort of variable rate bit consumption? Any volume discounts, things like that? Any color on margins and so forth to help us think about what happens at the bottom line from the revenue flow through.

Speaker Change: Got it and then maybe you could talk a little bit about one way up I think they had faced some delays before any updates on.

Speaker Change: They're they're in network status in terms of being able to support your timeline on gallons.

Speaker Change: Later this year.

Speaker Change: Thank you.

Speaker Change: It would be really helpful. Just to understand more about your contracts with them and how the.

Speaker Change: Pricing works on your bandwidth consumption is it all sort of variable rate bit consumption.

Speaker Change: Volume discounts and things like that any color on margins and so forth to help us think about what happens with the bottom line from the revenue flow through.

Oakleigh Thorne: Yeah, so we have said before that... So that's number one. The first part of your question again, Simon?

Oakleigh Thorne: Yeah, so we've said before that we have, I guess, traded off lowest price per megabyte for flexibility because we need to be able to react quickly to pricing changes in the market, and we can't be in a position where we've got a, you know, a fuller price on an aircraft or something like that that would, you know, cause us to not be able to have a margin on whatever we sell. So we haven't gotten into much more detail than that, but I'm supposed to put it that way that, you know, no matter what we end up selling the product or we're going to have margin on it. So that's number one. Number the first part of your question again, Simon, you're just about their network and their operational readiness to support Galileo. Yeah, their network, you know, they're still rolling out some of their ground stations, but we feel good about where they're going to be when we launch the end of this year, and so we feel good about that. They've also, they're almost complete with so upgrading the software and their network and to handle aviation, so that that's also in good shape. So we feel good about, okay, and that allows you to give kind of QoS guarantees to your customers off their network? Yeah, yeah, it does, Simon. Just one thing to add, you know, with regards to the margins, so we, you know, did indicate obviously that the margins will be slightly lower than the very healthy strong margins we have in ATG. However, when you look at our long-term model through 2028, we do still expect our service margins to start with a seven-handle even with the mix of Galileo. Great, thank you. Thank you.

Speaker Change: Yes, so we.

Speaker Change: I've said before that.

Speaker Change: We have.

Speaker Change: Trade it off lowest price per megabit for flexibility.

Speaker Change: We need to be able to react quickly to pricing changes in the market.

Speaker Change: And we can't be in a position where we've got a.

Speaker Change: Our floor price on an aircraft or something like that that would.

Speaker Change: Cause us to not be able to have a margin on on whatever we sell so we.

Speaker Change: We haven't gone into much more detail than that but I'm, just sort of put it that way no matter. What we ended up selling your product or we're going to have margin on it.

Speaker Change: So that's number one number the first part of your question again Simon.

Operator: Yeah, just about their network and their operational readiness to support Galileo.

Simon Flannery: Yes, just about their network and their operational readiness to support Galileo.

Oakleigh Thorne: Yeah, their network, you know, they're still rolling out some of their ground stations, but we feel good about where they're going to be when we launch at the end of this year, and so we feel good about that. They've also, they're almost complete with upgrading the software in their network to handle aviation, so that's also in good shape, so we feel good about that.

Speaker Change: Their network.

Speaker Change: Still rolling out some of their ground stations, but we feel.

Speaker Change: Good about where theyre going to be when we launch at the end of this year.

Speaker Change: And so we feel good about that they've also there are almost complete with it to upgrading the software in their network.

Speaker Change: To handle aviation.

Speaker Change: That's also in good shape, so we feel good about.

Operator: Okay, and that allows you to give some kind of QoS guarantees to your customers off their network.

Speaker Change: Yeah.

Speaker Change: Okay and that allows you to give kind of qos guarantees to your customers over their network.

Jesse Betjemann: Yeah, yeah it does. Simon, just one thing to add.

Speaker Change: Yes, it does.

Jesse Betjemann: And just one thing to add, you know, with regard to the margins, so we did indicate, obviously, that the margins would be slightly lower than the very healthy, strong margins we have in ATG. However, when you look at our long-term model through 2028, we do still expect our service margins to start with a seven handle, even with the mix of Galileo.

Speaker Change: Simon just one thing to add.

Speaker Change: With regards to the margins. So we did indicate obviously then the margins will be slightly lower than the very healthy strong margins. We have in atg. However, when you look at our long term model through 2028, we do still expect our service margins to start with a seven handle.

Speaker Change: Even with the Mexicali.

Speaker Change: Great. Thank you.

Operator: Thank you. And our last question comes from Louis DiPalma with William Blair. Your line is open.

Louis Dipalma: And our last question comes from Louis DiPalma with William Blair. Your line is open.

Speaker Change: Thank you and our last question comes from Louie Dipalma with William Blair. Your line is open.

Louis Dipalma: Hello, Jesse and Will. Good morning. How you doing? Doing okay.

Operator: Jesse and Will, good morning. Good morning, how are you doing? I'm doing okay.

Louie: Hey, Louie Jessie and good morning.

Louie: Good morning, how are you doing.

Operator: The launch of HDX is a pivotal milestone for Gogo in this dynamic market. You mentioned your expectation to receive the Galileo HDX PMA in the fourth quarter. When do you expect to receive the STCs and for the first customers to begin generating Galileo service revenue?

Louie: Yes.

Louis Dipalma: The launch of HDX is a pivotal milestone for Gogo in this dynamic market. You mentioned your expectation to receive the Galileo HDX PMA in the fourth quarter. When do you expect to receive the STCs and for the first customers to begin generating Galileo service revenues? They'll start coming in first quarter, Louis. Great.

Louie Dipalma: Doing okay, the launch of HD X.

Speaker Change: A pivotal milestone for Gogo.

Speaker Change: Dynamic market you mentioned your expectation to receive.

Speaker Change: Galileo <unk> PMA in the fourth quarter.

Speaker Change: When do you expect to receive the FTC's and for the first customers to begin generating Galileo service revenue.

Speaker Change: And then they'll start coming in first quarter.

Oakleigh Thorne: And those STCs and the PMA, that's a regulatory hurdle. Your Twitter account recently blogged how you had, I think, successful motion table testing with the HDX antenna. What are the major technical hurdles that remain that could potentially delay receiving the PMA or just the general functionality of the antenna? You know, there's not a lot of technical risk with this technology because it, this is not like 5G; there's a whole new 5G chip being developed, which is where the risk has been and it's caused all of our issues. Right now, Hughes is already using different form factors of this antenna in, in Arrow.

Speaker Change: Great and.

Speaker Change:

Speaker Change: Uh huh.

Speaker Change: <unk> and the PMA.

Speaker Change: Regulatory hurdle.

Speaker Change: Your your Twitter account recently Blogged, how you had I think successful motion table testing with the HD X. The antenna what are the major technical hurdles that remain that.

Speaker Change: Could potentially delay.

Speaker Change: Receiving the PMA or just the general.

Speaker Change: Functionality of antenna.

Oakleigh Thorne: You know, there's not a lot of technical risk with this technology because it is not like 5G. There's a whole new 5G chip being developed, which is where the risk has been, and it's caused all of our issues.

Speaker Change: You know theres not a lot of technical risk.

Speaker Change: With this technology because it this.

Speaker Change: This is not like <unk>.

There's a whole new <unk> chip being developed which is where the risk has been.

Speaker Change: It's caused all of our issues.

Speaker Change: Right now he used is already using.

Speaker Change: Different form factors of this antenna in Aero.

Oakleigh Thorne: And so, you know, it's not unproven technology. So the next step is, you know, we finished installing our challenge or 300, which is happening right as we speak. Started in July. It should be done very shortly. Then we'll go into flight testing. You know, the process starts when you start developing a system. So, you know, you've been in constant dialogue with the FAA for, in our case, you know, a year plus and this. And what they're trying to do in that is validate the offense authenticity of all the pieces and parts that go in there because to make sure that they're all aviation grade as you originally stated they would be.

Speaker Change: And so.

Speaker Change: It's not unproven technology. So the next step as we finish installing challenger 300.

Speaker Change: Which is happening right as we speak it started in July and it should be done very shortly and we'll go on to flight testing.

Speaker Change: Uh huh.

Speaker Change: The process starts when you start developing a system. So you've been in constant dialogue with the FAA for in our case, you know a year plus in this.

Speaker Change: In.

Speaker Change: But they are trying to do and that is.

Speaker Change: As validate the upfront authenticity of all the pieces and parts that go in there because to make sure that theyre all.

Speaker Change: Aviation grade as you originally stated they would be.

Oakleigh Thorne: So, that is, you know, something that I don't think has a lot of risk around it. At this point, you know, we're, you know, in touch with the FAA and improving them that it's got the parts that we said it was going to have in that. So I don't, I don't think that that's going to be a huge risk. And then on the SDC side, you know, once we start flying on the challenge, or I think, you know, we'd be able to show you can put it on the plane, you can fly it and it works.

Speaker Change: That is.

Speaker Change: You know something that.

Speaker Change: I don't think has a lot of risk around it.

Speaker Change: At this point.

Speaker Change: Sure.

Oakleigh Thorne: I don't think there's a lot of risk around it at this point, you know. We're, we're, you know, in touch with the FAA and proving to them that it's got the parts that we said it was going to have in it. So I don't, I don't think that that's going to be a huge risk. And then on the SDC side, you know, once we start flying on the Challenger, I think, you know, we'll be able to show you can put it on the plane, you can fly it, and it works. So I, you know, I don't think there's a ton of risk there, to be honest.

Speaker Change: Where are.

Operator: Great, and how far behind should the launch of the FDX be relative to the HDX in terms of launch?

Speaker Change: In touch with the FAA and proving to them that it's got the parks that we said it was going to have in that so I don't I don't think that that's going to be a huge risk and then on the FCC side.

Speaker Change: Once we start flying in the Challenger I think.

Speaker Change: We'd be able to show you can put it on the plane you can fly it.

Speaker Change: Works.

Louis Dipalma: So I, you know, I don't think there's a ton of risk there, to be honest. Great.

Speaker Change: Okay.

Speaker Change: I don't think Theres, a ton of risk there to be honest.

Louis Dipalma: And how far behind should the launch of the SDX be relative to the HDX in terms of the launch? Well, the FDX is, as we said, first half next year, and we're going to leave it at that on this call, and we'll give more details, probably on the next call.

Speaker Change: Great.

Speaker Change: Barb behind should the launch of the F. D X b relative to the HD X in terms of the launch.

Speaker Change: Well the FDA is we as we said first half next year.

Speaker Change: I'll leave it at that on this call and we'll give more details probably on the next call.

Jessica Betjemann: Great, and one final one for Jesse: if rip and replace funding is increased to cover your full $334 million, what would be the significance to your free cash flow generation in 2025 and 2026 potentially? Right now, we've indicated that one, we've mentioned that our current plans would not be to deliver all the way up to the $324 million. That was based off of our original application, so the total value has decreased a bit. But it would cover the negative hit that we're expecting in 25 and 26, but not all of it, because mainly there's probably going to be around $10 million or so that we would still need to spend in 25.

Operator: Great, and one final one for Jesse. If the rip and replace funding is increased to cover your full $334 million, what would the significance be to your free cashflow generation in 2025 and 2026, potentially?

Jesse: Great and one final one for Jesse.

Speaker Change: A rip and replace funding has increased to cover your full $334 million what would be the.

Jesse: The significant to your free cash flow generation in 2025 and 2026 potentially.

Jesse: Yes, so right now we've indicated that.

Speaker Change: One we've mentioned that.

Speaker Change: Our current plans would not be to deliver all the way up to the $324 million.

Speaker Change: That was based off of our original applications at the total value has decreased a bit.

Speaker Change: But.

Speaker Change: It would cover the negative hit that we're expecting in 2025 and 26, but not all of it because.

Speaker Change: Mainly there is probably going to be around $10 million or so that we would still need to spend in 'twenty five that's not reimbursable.

Jessica Betjemann: That's not reimbursable, so that piece we was still needing to cover, but then in 2026, it would fully cover everything that we would need to do there for the most part.

Speaker Change: So that piece of the studying to cover but then 2026 it would fully.

Speaker Change: Cover everything that we would need to do there for the most part.

Jessica Betjemann: Great, and one final one: should service revenue, say, flatish, even as aircraft online trend lower over the next year, should, like you've recently had ARPA slightly take up, should that offset the decrease in aircraft online, or how should we think about that? Yeah, so I think that's the expectation through next year, because again, we won't necessarily see an uplift from the new products coming in yet on service revenue. So there'll be the flatish too, very modest growth next year.

Speaker Change: Great and one final one should.

Speaker Change: Should service revenue.

Speaker Change: Yes.

Speaker Change: Radish, even as aircrafts online trend lower over the next year should.

Speaker Change: Like that.

Speaker Change: You've recently had.

Speaker Change: Slightly pick up should that offset the decrease in aircraft online or how should we think about that.

Speaker Change: Yeah, So I think that.

Speaker Change: That's the expectation through next year.

Speaker Change: Because again, we wont necessarily see.

Speaker Change: Uplift from the new products coming in yet on service revenue.

Jesse Betjemann: So they'll be, you know, either flattish or, you know, very modest growth next year.

Speaker Change: So there'll be.

Speaker Change: Either flattish to very modest growth next year.

Operator: Awesome. Thanks, everyone. We'll be looking forward to the update for the HTX on the Challenger as we do the flight testing over the next month.

Louis Dipalma: Awesome, thanks everyone, and we'll be looking forward to the update for the HDX on the Challenger, as you do the play testing over the next one. Oh yeah, you bet; you bet. Thanks, Link.

Speaker Change: Awesome.

Speaker Change: Thanks, everyone and.

Speaker Change: We will be looking forward to update or the HD X on the challenger MTG with flight testing over the next months alright.

Operator: You bet. You bet. Thanks, Luke.

Lee: You bet. Thanks Lee.

William Davis: Thank you.

Will Davis: Thank you. There are no further questions. I'd like to turn the call back over to Will Davis. Close your mark.

Speaker Change: Thank you.

William Davis: Thank you. There are no further questions. I'd like to turn the call back over to Will Davis to close your remarks.

Speaker Change: Thank you Sir no further questions I'd like to turn the call back over to will Davis for closing remarks.

Operator: Thank you everyone for joining our second quarter earnings conference call. We look forward to talking with you soon.

Operator: Thank you, everyone, for joining our second quarter earnings conference call. We look forward to talking with you soon. Thank you, MantisConnect.

Will Davis: Thank you everyone for joining our second quarter earnings.

Speaker Change: Call, we look forward to talking with you soon thank.

Speaker Change: You may disconnect.

Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.

Operator: Thank you for your participation. This does include the program; you may now disconnect.

Speaker Change: Thank you for your participation. This does conclude the program you may now disconnect everyone have a great day.

Operator: Everyone, have a great day.

Speaker Change: Yeah.

Speaker Change: [music].