Q3 2024 Gogo Inc Earnings Call
Good day, and thank you for standing by walking through the third quarter 2020 for Gogo, Inc. Earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session will need to press star one on your telephone you all didn't hear an automated message advising your hain does raise to Australia Your quest.
Please press Star one again, please be advised today's conference is being recorded.
Speaker Change: And I like to hand, the conference over to your Speaker Dayquil Davis. Please go ahead.
Speaker Change: Thank you Kevin and good morning, everyone welcome to <unk> third quarter of 2024 earnings Conference call.
Joining me today to talk about our results are ugly Zorn, chairman and CEO.
Jesse Petromin 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.
Speaker Change: We may make forward looking statements regarding future events and the future performance of the company.
Speaker Change: We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward looking statements on this call.
Speaker Change: Those risk factors are described in our earnings release filed this morning and are more fully detailed under risk factors.
Speaker Change: In our annual report on 10-K and 10-Q.
And other documents, we have filed with the SEC.
In addition, please note that the date of this conference call is November 5th 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.
Speaker Change: During this call will present, both GAAP and non-GAAP financial measures.
Speaker Change: We have included a reconciliation and explanation of adjustments and other considerations.
Speaker Change: Our non-GAAP measures to the most comparable GAAP measures in our third quarter earnings release.
This call is being broadcast on the Internet and available on the Investor Relations website at IR Dot Gogo are dot com.
Speaker Change: The earnings press release is also available on the website.
Speaker Change: After management comments, we'll host a Q&A session with the financial community only.
Speaker Change: It is now my great pleasure to turn the call over to Emily.
Emily: Thanks, <unk> and welcome to our Q3 2024 call.
Speaker Change: Gogo delivered improved performance in the third quarter, but far from the robust growth we've had in the past.
Speaker Change: And far from the growth, we think will drive in the near future in what remains a highly on penetrated global business aviation connectivity market.
Speaker Change: This is largely because many of our current products or late in their product life cycles.
Speaker Change: Fortunately several years ago, we began investing in a new generation of products, our Gogo Galileo low Earth orbit satellite product and I got about five G product.
Speaker Change: Will soon hit the market and based on the overwhelmingly overwhelmingly positive customer response, we have received now we're receiving now we believe we are well reaccelerate our growth.
Speaker Change: And we anticipate this acceleration will be significantly augmented by our planned acquisition of Satcom direct.
Speaker Change: Leveraging their attractive install base their strong sales and service organization outside North America and their strong position in the middle market.
Speaker Change: With such a fault and innovative pipeline and robust business combination.
Speaker Change: It's an exciting time at Gogo and Satcom direct I remain inspired by and grateful for both the outstanding Gogo and Satcom teams, we're moving quickly to build a world class competitor in an increasingly competitive industry.
Speaker Change: Combined with Satcom direct Gogo will be able to serve every segment of the market, but the very best solutions for that segment.
Speaker Change: From a proprietary air to ground networks, including Gogo five G that deliver excellent reliable and cost effective connectivity or the thousands of aircraft that fly regionally in North America to integrated multi orbit Leo Geo solutions to meet the high bandwidth high reliability and white glove service needs of the most demand.
Speaker Change: <unk> global heavy jet customer.
Speaker Change: This morning, I'm going to.
Speaker Change: Start by highlighting some demand trends, we're seeing in the VA market that underpin, our Q3 results and our future outlook.
Speaker Change: And then dive into progress on our strategic initiatives, including the Satcom direct acquisition.
Speaker Change: Jesse will then walk through the numbers and discuss our 2020 for guidance.
Speaker Change: Overall demand for business aviation flights remains strong up 2% for the quarter from prior year and up 30% from pre Covid Q3, 2000 22019.
Speaker Change: Demand for connectivity on those flights also remains strong with Q3 data usage per hour up 17% from prior year and up 106% from pre Covid Q3 2019.
Speaker Change: We're seeing the biggest surge in demand at the high end of the market for cloud data storage and video conferencing are driving demand for much higher bandwidth in our traditional products are designed to provide embark Galileo and <unk> are well positioned to meet that demand.
Speaker Change: We believe this trend also demonstrates clear market opportunity for an integrated Leo G O Gogo Satcom direct solution to support both enhanced capacity and redundancy for the most premium market segments.
Speaker Change: Finally on demand, we see OEM border order books, and fractional sales of aircrafts looking very strong which should continue to drive demand in the future.
Speaker Change: According to Honeywell's annual global business aviation outlook.
Speaker Change: Aircraft owners and operators will invest an estimated $280 billion and an estimated 8500, new business jets between now and 2033 with the fastest growth in heavy jets are part of the market, which we believe are satcom direct acquisition positions us well to serve.
Speaker Change: Now, let me turn to our Q3 performance.
Speaker Change: Revenue was up a modest 3% year over year, driven by ARPA growth and an increase in advanced units online.
Speaker Change: The equipment side for the quarter, we saw an increase in revenue of 1% year over year, and a decrease of 7% sequentially as many customers delayed purchases in anticipation of the launch of Gogo <unk> and Gogo Galileo.
Speaker Change: Advanced growth continues to be strong and we had record upgrades in the third quarter. We consider every advanced installation a strategic win because advance allows customers to upgrade to new networks or technologies with a simple software upgrade and or addition of a new antenna on the outside of the aircraft.
Speaker Change: Because these upgrades require no change in equipment inside the aircraft, they're cheaper and faster than installing a competitor's entire new system.
Speaker Change: We expect 2024 to be our second highest year of advanced shipments ever be grew total events units online in the quarter, 16% over the prior year to 4379 aircrafts, representing 62% of our atg install base.
Speaker Change: We anticipate our advanced base will only grow faster as we incent, our roughly 2600 remaining gogo classic customers to migrate to LTE over the next 14 months as part of our FCC secure networks program, which I will discuss in more detail in a few minutes.
Speaker Change: Our service revenue remained strong driven by new events installations and upgrades, even though total atg units online declined modestly.
Speaker Change: On the earnings side, Q3, EBITDA increased 14% sequentially, mostly due to lower legal fees importantly, even as we invest deeply in the <unk> in Galileo programs free cash flow remains solid.
Speaker Change: Now for our progress on strategic initiatives, which are each in support of our three pronged now next strategy.
Speaker Change: First we want to expand our addressable market globally by addressing the needs of the 14000 business aircraft outside the U S.
Speaker Change: Second we wanted to drive advanced penetration so Dover in aircrafts lifetime owners have upgrade paths to new networks and technologies that are cheaper and faster than moving to competitive products and third we are focused on expanding into every segment of the BCA and now 1000 Gov markets by offering the products customer support.
Speaker Change: Short and economic suited to the unique needs of that segment.
Speaker Change: We're making great strides in our strategic initiatives to achieve those goals, which I will touch on in a minute, but first let me describe the many ways that come direct is expected to accelerate all three prongs of that strategy.
Speaker Change: First the Satcom 30 person International sales force and 15 person support organization located in eight offices around the world is expected to dramatically accelerate Galileo penetration outside North America.
Speaker Change: Second with a minor development effort. The satcom direct router will joined the advance family of form factors and enabling faster and cheaper upgrades together layout, then moving to a competitive product to access Leo networks and third.
Speaker Change: Satcom will add two very attractive market segments. The Gogo has not historically had the right product mix to address the lucrative heavy jet Intercontinental segment in the fast growing 1000 Gov mobility segment.
Speaker Change: And the business Aviation segment.
Speaker Change: <unk> thousand 500 broadband customers are prime targets to add our Galileo offering to their existing Geo connectivity systems, and we look forward to launching that effort as soon as we close.
Speaker Change: And the 1000 Gov vertical we see many opportunities for Gogo Galileo integrated with Satcom Geo offerings today.
Speaker Change: 1000, Gov fleets find themselves with either no connectivity are very dated technology on their mobility aircraft and they are now rushing to catch up creating a tailwind for mill Gov connectivity suppliers.
Speaker Change: One example is the <unk> program.
Speaker Change: Under which the department of Defense recently increased its projected spending on Leo satellite service more than tenfold from $900 million over the next 10 years to $13 billion over that same 10 years.
Speaker Change: Another example is the U S Air Force's 25 by 'twenty five program.
Speaker Change: To which they are targeting to have 25% of their 1100 mobility aircraft equipped with satellite communications by the end of 2025.
Speaker Change: Still the 75%.
Speaker Change: Not have satellite connectivity and the air force delayed still must be connected.
Speaker Change: Another key driver for our Gogo Satcom 1000, Gov solutions is that we expect to be able to offer combined Leo G. O L band solutions that meet the military's dictate of having primary alternate contingency and emergency connectivity systems on every aircraft.
Speaker Change: Besides these three strategic benefits, we believe satcom also brings financial benefits.
Speaker Change: Then doubled the size of our business, which should drive scale advantages.
Speaker Change: We expect it to be immediately accretive to earnings.
Speaker Change: And it should deliver $25 million to $30 million in annual recurring synergies over the next two years.
Speaker Change: Many investors asked but this combination will bring down our operating and EBITDA margins and my answer is yes, but we believe it will significantly grow free cash flow per share and that is what ultimately should drive shareholder value.
Speaker Change: To sum it up we believe our acquisition and our acquisition of Satcom direct is a key step in accelerating our Leo strategy and achieving the global scale to compete in an increasingly competitive segment of the aviation IFC market.
Speaker Change: We look forward to closing the transaction by the end of 2024 and welcoming the talented satcom direct team to Gogo.
Speaker Change: Now, let me turn to Gogo Galileo.
Speaker Change: We believe this product line will be a game changer for the business aviation industry and.
Speaker Change: And given the strong demand, we're seeing the market seems to agree with us.
Speaker Change: In fact, the demand for Gogo Galileo HD X is greater than it was for Gogo a S. L five which launched in 2017 and quickly became the fastest selling insight connected connectivity system and business aviation history.
Speaker Change: As a reminder, Galileo comes in two versions a smaller AHD ex terminal and a larger mdx terminal.
Speaker Change: Hello, Leon <unk> terminal is our first to market all aircraft product.
Speaker Change: <unk> to fit on any size of aircraft and we will deliver peak speeds approaching 60 megabits per second that's.
Speaker Change: That's 12 times to 60 times, our current product offerings.
Speaker Change: <unk> is targeted at two segments, the 12000, midsize and smaller aircraft that fly outside North America and have no broadband solution today.
Speaker Change: And those aircraft are among the 11000 midsize and smaller aircraft registered inside North America that often fly regionally outside conus or want faster means speeds and <unk> alone can provide.
Speaker Change: The Galileo Mdx terminal as our best in class product size for larger jets and will deliver very consistent speeds approaching 200 megabits per second.
Speaker Change: 40 to 200 times faster than our current product offerings. It's targeted at the 9700, Superman and larger jets that fly long range Intercontinental missions, our long range missions inside North America.
Speaker Change: Our HD X achieved a major milestone last week when it passed FAA D O and 60 testing.
Speaker Change: Certifying that is safe for use and will operate reliably and the harsh environmental conditions encountered flight.
Speaker Change: Including temperature volatility intense vibration radio wave penetration lightning strike moisture penetration and flight dynamics among others.
Speaker Change: This approval keeps us on track to receive parts manufacturing authority in December which would authorize us to begin shipping HD X commercially the customers by year end.
Speaker Change: Since launching our Galileo catalyst marketing program in August we've seen unprecedented demand from end customers. We've had more than 1000 customers sign up for <unk> webcast. We've had unprecedented traffic on our <unk> web pages, and we had large crowds at our booth and the HD X demos.
Speaker Change: We did it the business aviation airfield during the National Business Aviation Association <unk> Convention in Las Vegas, two weeks ago.
Speaker Change: During the demos, we conducted live zoom and teams meetings between customers on the ground and our engineers in the air flying in our Challenger 300 equipped with HD X and running over the one web network. We also ran demos of mdx inside our mobile dome.
Speaker Change: Mobile demo.
Speaker Change: <unk> me mobile demo rub semi truck trailer or up to a dozen simultaneous users. We're running zoom meetings teams meetings gaming applications cloud based applications and much more with great success.
Speaker Change: I'd add that the mobile demo room semi truck departed Las Vegas and is headed for 33 stop tour business airports across the country for large numbers of aircraft owners operators flight departments management companies and others have already signed up for demonstration sessions.
Speaker Change: We've also had great success with dealers. So far we signed 27 STC agreements for HD X covering 34 popular models of aircraft and have another 12 verbally committed covering another 10 unique models of aircrafts, which brings us to a total global service addressable market of 18500.
Speaker Change: <unk>.
Speaker Change: On the other way on the OEM front at <unk>, We finally announced that it is textron aviation that are awarded as line fit position on three models of aircraft last year.
Speaker Change: And that those models are the latitude longitude and ascend and that they will cut those in and the line later this year.
Speaker Change: We've also signed another large OEM contract that will be announced shortly this time for line fit on all of their models.
Speaker Change: And this one is for the FDA acts antenna.
Speaker Change: And we're having a lot of successful fleet customers as wheels up announced at the MB double a convention that they'll add HD X or their entire fleet in the near future.
Speaker Change: And we're seeing pull through at the dealers is net jets starts planning their rollout of <unk> for this coming year.
Speaker Change: As a result of this demand, we recently announced that we're doubling our projections for HD X demand in 2025 and have tripled our purchase order from our partner Hughes networks.
Speaker Change: We believe the advantages of Galileo of a new market entrance is resonating in the market.
Speaker Change: Customers appreciate that our equipment is aviation grade and designed from the aircraft up and satellite down for the specific needs of the business aviation market.
Speaker Change: Our business model is business aviation focused with the type of personal customer support someone who just spent $20 million to $80 million on an aircraft would expect from a service provider.
Speaker Change: Our partner won web network is an enterprise grade network designed to serve <unk> customers with service level guarantees.
Speaker Change: And finally customers believe that we are reliable and trustworthy, we don't change pricing at the drop of a hat, we don't change business terms, nor change our focus on which parts of the market we serve.
Speaker Change: Now, let me turn to our five G Atg network, which is targeted at large segments of the roughly 21000 midsize and smaller business aircraft that fly predominantly in North America, and what an exceptional connectivity experience at a more affordable price than satellite solutions.
Speaker Change: We're pleased to share that the <unk> chip is in fabrication and we still expect to ship five G. Late in the second quarter of 2025.
Speaker Change: We're continuing to work very closely with our vendor partners to smooth the path through fabrication and into launch.
Speaker Change: We're confident that between our FPGA flights and a virtual stimulator. Our term is built that replicates our entire <unk> network, we will be able to test and validate 90% of our five <unk> functionality in network before we received the final <unk> chip.
Speaker Change: Importantly, the market continues to respond enthusiastically to the <unk> value proposition.
Speaker Change: With ongoing pre provisioning programs in a flood of STC programs that position us for a highly successful launch.
Speaker Change: At the end of Q3, we had already shipped 342 five G provision kits with envy 13, five antennas, which is up from 292 last quarter and 153 of those kids have already been installed and are flying using our <unk> network and an L. Five four <unk>.
Speaker Change: To be clear, our Alex five five G. L. R U which is what awaits the <unk> chip is the exact same form factor as the al five four G. L. R. U. So once the <unk> chip is certified those customers with five G. Envy 13 antennas and a four.
Speaker Change: <unk> Alfa Laval or you can simply swap the Lx five in for the al five and they will be on the <unk> network.
Speaker Change: We also have line fit commitments with five Oems with one already installing the MB Thirteen's line fit with the advanced L. Five for GL, our use on the assembly line today.
Speaker Change: On the certification front.
Speaker Change: We have 21 <unk> for NV Thirteen's completed with one version of events or another covering 18 unique models of aircraft and eight more in the works covering 15 unique models of aircraft and in total representing roughly 88500, North American registered aircraft.
Speaker Change: We look forward to bringing this product to market next year, which will serve a core part of the gogo customer base.
Speaker Change: Now turning briefly to the FCC secured networks program, what we call gave logo evolution.
Speaker Change: As a reminder.
Speaker Change: <unk> was awarded 334 million a $334 million grant from the FCC under this program to Incent us to accelerate the removal of Chinese telecom technology from our <unk> ground network.
Speaker Change: Because Congress is only funded 39% of this program. We currently stand to receive a $132 million of reimbursements, but believe that the federal government should fully fund at some point.
Speaker Change: As a reminder to fulfill our obligations under this grant.
Speaker Change: Gogo must replace all of our <unk> ground equipment with New American LTE equipment, and our classic customers will need to replace their airborne equipment with new LTE equipment to be compatible with that new ground network.
Speaker Change: As of quarter end, we had roughly 2600 100 customers still on our old classic product down from roughly 3000 at the beginning of the year.
Speaker Change: The 8000 of those are fleet aircraft already on track for advance upgrades.
Speaker Change: We've had conversations with almost all of the remaining customers on how they plan to convert but the vast majority, indicating that they will upgrade to one advanced product or another.
Speaker Change: We also have customer promotions in place to Incent conversion and our dealers are doing a great job configuring their operations to transition customers at scale.
Speaker Change: Finally for those customers, who delay we also introduced what I call will call a special transitional product called <unk>, one, which will house, both <unk> and LTE aircard in a form factor that is an exact replica of our classic product.
Speaker Change: Q1 will not improve service levels like upgrading to advance, but it will allow customers more time to convert to advance after the cutover.
Speaker Change: To wrap up Gogo is continuing to deliver outstanding service and solid cash flow performance as we invest in and prepare to launch Gogo <unk> in Galileo.
Speaker Change: We believe that in the months ahead, Gogo combined with Satcom direct will have the most complete product portfolio and the business aviation IFC industry with products that offer the right performance with the right coverage at the right total cost with great customer support for every segment of the highly Underpenetrated 40000.
Speaker Change: Plus aircrafts global business aviation market.
Jesse Petromin: And now I'll turn it over to Jesse to do the numbers.
Jesse Petromin: Thanks Oak and good morning, everyone.
Speaker Change: <unk> generated better than expected third quarter results across the board due to higher service revenue and a shift in timing of strategic strategic spending that led to an increase in our 2024, our financial guidance.
Speaker Change: In my remarks today I'll start by walking through the third.
Speaker Change: Third quarter financial performance, then I'll turn to our balance sheet and capital allocation priorities and finally, I'll conclude with additional context on our improved 2020 for guidance.
Speaker Change: As mentioned in our press release in light of the pending acquisition of Satcom direct we are withdrawing our multiyear long term financial targets previously provided on our second quarter earnings call.
Speaker Change: For the third quarter total revenue was $105 million up 3% year over year and a slight decrease sequentially.
Speaker Change: Gogo delivered service revenue of $81 $9 million.
Speaker Change: Up 3% over the prior year and a slight decrease over the prior quarter.
Speaker Change: Our atg aircraft online over 7016% to 2% decrease year over year and a slight decline sequentially.
Speaker Change: This exceeded our internal expectations as a result of more new activations and fewer classic the activations than we had anticipated at this stage in our product lifecycle.
Speaker Change: Total advanced aircraft online grew to 4379, an increase of 16% year over year, and 4% sequentially and now comprised of 62% of our total fleet.
Speaker Change: We saw record advanced upgrades in the third quarter, reflecting our progress in driving penetration from classic to advance within our existing fleet.
Speaker Change: Converting our classic base to advance remains a priority and we expect these conversions to accelerate in 2025.
Speaker Change: This helped drive the sequential net increase in third quarter advanced aircraft online to 164 up 50% versus the 105% sequential increase in the second quarter.
Speaker Change: As previously mentioned, we anticipate the upgrade process and product lifecycle dynamic we will continue to put pressure on atg aircraft online over the coming quarters.
Speaker Change: The launch of Gogo Galileo this quarter and <unk> late in the second quarter of 2025.
Speaker Change: Total atg ARPA grew to a record $3497, a 4% year over year increase and 1% sequentially, reflecting the price increase.
Speaker Change: She aided in the first quarter.
Speaker Change: The launches that Gogo, Galileo and <unk> are anticipated to further expand our ARPA growth opportunity over time.
Speaker Change: Moving now to equipment revenue Gogo delivered third quarter equipment revenue.
Speaker Change: $18 $7 million with 214 advanced shipments, which increased 11% year over year and down 7% sequentially.
Speaker Change: We continue to expect that equipment revenue in the second half of the year will decline versus the first half driven by lower advanced shipments due to the pull forward effect of OEM shipments in the first quarter. The continued impact of our product lifecycle dynamic and also a timing shift at Textron orders as a result of the short lift textron strike that we don't.
Speaker Change: I expect to be pulled back in this year.
Speaker Change: Turning to profitability delivered service margins of 77% in the third quarter consistent with the prior quarter, we expect service margins to be slightly above 75%. This year as year to date margins are higher than expected. However, we continue to expect a slight decrease in future years for Gogo <unk>.
Speaker Change: And alone service margins as the contribution of <unk> service revenue to our overall revenue mix increases.
Speaker Change: Service revenue and service profit margin are the primary levers for free cash flow generation and long term value creation.
Speaker Change: Equipment margins were 19% in the third quarter largely in line with the prior quarter and 14% lower than the prior year period.
Speaker Change: The year over year decline was primarily due to a catch up accrual benefit in Q3, two three for SEC reimbursement of costs incurred to replace a large number of E video Aircard and advance equipped aircraft with dual modem aircard.
Speaker Change: And also in <unk>.
Speaker Change: And also an increase in production costs as a percentage of revenue this quarter.
Speaker Change: We expect equivalent margins to decline in the fourth quarter, largely due to product mix and an increase in production costs as a percentage of revenues revenue decline.
Speaker Change: Now onto operating expenses.
Speaker Change: In the third quarter, combined engineering design and development sales and marketing and general and administrative expenses increased 47% year over year and increased 5% sequentially, reaching $43 2 million.
Speaker Change: This year over year increase was mainly driven by G&A expense.
Speaker Change: <unk> $6 $7 million in transaction costs related to the satcom direct pending acquisition, which are excluded from adjusted EBITDA.
Speaker Change: And and also had $3 2 million and higher legal expenses.
Speaker Change: In terms of <unk> in the third quarter or $3 1 million or <unk> spending was comprised of <unk>.
Speaker Change: <unk> $6 million in Opex and $2 $5 million in Capex.
Speaker Change: We now expect 2024 will include approximately $3 million or <unk>, opex and approximately $8 million in Capex with total <unk> spend for 2024 at approximately $11 million.
Speaker Change: This reflects a decrease from our previously stated $5 million of 50 Opex due to timing.
Speaker Change: As Eric mentioned, our <unk> chip is now on fabrication and we continue to expect.
Speaker Change: To launch late in the second quarter of 2025.
Speaker Change: We maintain our estimate of $100 million in total external development and deployment costs for our total fiber program.
Speaker Change: Now onto critical Galileo.
Speaker Change: In the third quarter <unk> recorded $2 6 million in Opex and $1 1 million in Capex related to Gogo Galileo.
Speaker Change: We now expect 2024 to include approximately $30 million of Galileo Opex and approximately $3 million in capex shifting $2 million of Opex and $1 million of Capex 2025.
Speaker Change: 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.
Speaker Change: <unk> $16 million is projected in 2024 and the remainder is expected in 2025.
Speaker Change: Additionally, we continue to anticipate approximately 90% of Google Galileo's external development cost will be in Opex.
Speaker Change: Moving onto our Bottomline Gogo delivered $34 8 million and adjusted EBITDA in the third quarter, and 19% decrease year over year and 14% increase sequentially.
Speaker Change: The sequential increase was primarily driven by lower legal fees. However, the year over year decrease is attributed to legal expenses related to smart sky and the FCC reimbursement accrual benefit recorded in the third quarter of 2023 as I previously stated.
Speaker Change: As mentioned to $6 $7 million in Satcom direct acquisition related costs, we incurred in the third quarter are excluded from adjusted EBITDA.
Speaker Change: Net income of $10 $6 million in the third quarter decreased $10 $3 million year over year and increased $9 $8 million sequentially.
Speaker Change: As mentioned in the prior quarter, our second quarter net income included an $11 million after tax unrealized loss.
Speaker Change: Weighted to a fair market value adjustment of the convertible note investment we made in the first quarter and our key chipset supplier to support continued progress on RFID chip.
Speaker Change: This quarter, we recorded $1 $3 million gain in fair value, which nets to a $1 $2 million year to date fair value loss.
Speaker Change: 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.
Speaker Change: Based on our substantial net operating loss balances at the end of 2023, including $446 million in federal net operating losses three.
Speaker Change: $377 million and state net operating losses, and interest carryforward of $292 million, we had a net deferred income tax asset of $209 million at the end of the quarter.
Speaker Change: We do not expect to pay meaningful cash taxes through 2028 for the Gogo Standalone business.
Speaker Change: I will now provide a status update of our FCC reimbursement program.
Speaker Change: In the third quarter, we received $11 $1 million and FCC Grant funding, bringing our program to date total to $33 million.
Speaker Change: As of September 32024, we recorded $12 9 million receivable from the FCC and incurred $6 $6 million in reimbursable spend during the quarter.
Speaker Change: This receivable is included in prepaid expenses and other current assets on our balance sheet with corresponding reduction to property and equipment inventory and contract assets and with the pick up in the income statement.
Speaker Change: As previously disclosed we submitted ammo granted our first six month extension to the FCC pushing the program completion deadline to January 21, two.
Speaker Change: <unk> 2025 and.
Speaker Change: In our application we stated that we will need to have multiple extensions to complete the program and are planning to request. The next extension this month.
Speaker Change: As a reminder, with partial funding of the program. We are forecasting that our spending will exceed our level 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.
Speaker Change: Moving onto free cash flow in the third quarter, we generated $24 6 million and free cash flow up $3 $6 million versus prior year, primarily due to higher SEC reimbursement free.
Speaker Change: Free cash flow slightly decreased from $24 9 million in the previous quarter.
Speaker Change: Looking ahead, and reflecting reflected in our 2024 guidance, we anticipate free cash flow in the fourth quarter to swing negative as a result of higher networking capital and continued investments in our strategic initiatives.
Speaker Change: The higher net working capital is due to the planned ramp in inventory at the end of the year for the anticipated Gogo, Galileo and <unk> product launches and advance upgrades in 2025 and also a decrease in accounts payable.
Speaker Change: Now I will turn to a discussion of our balance sheet.
Speaker Change: <unk> ended the quarter with $176 $7 million in cash and short term investments and 600 around $1 million in outstanding principal on our term loan with our $100 million revolver remaining undrawn.
Speaker Change: Cause us net leverage of 3.0 times remains in line with our target range of two 5% to three five times.
Speaker Change: Our cash interest paid for the third quarter net of hedge cash flow was $8 million.
Speaker Change: As we previously mentioned in prior quarters, we have a hedge agreement in place and at the end of July the hedge stepped down to $350 million with the strike rate increasing from <unk>, 75% to one 5%, resulting in 58% of the loan currently hedged.
Speaker Change: Starting in the fourth quarter of this year the hedge cash flow is expected to decline approximately $3 million.
Speaker Change: Per quarter until the next step down in July 2026.
Speaker Change: The cash interest paid for 2024 net of hedge cash flow is expected to be approximately $34 million.
Speaker Change: Now, let me provide a recap of capital allocation priorities have not changed.
Speaker Change: First maintaining adequate liquidity.
Speaker Change: Second continuing to invest in strategic opportunities to drive competitive positioning and financial value, including <unk> and Galileo.
Speaker Change: Third maintaining an appropriate level of leverage for the economic environment with a target net leverage ratio of two 5% to three five times and.
Speaker Change: And finally, returning capital to shareholders.
Speaker Change: We have executed across all priorities in the third quarter, we repurchased approximately 1 million shares at a total cost of seven $6 million.
Speaker Change: In October we completed the last <unk>, one share repurchase plan with a total cost of $38 million and $4 5 million shares repurchased since November 2023.
Speaker Change: Because that was approximately $12 million remaining of $50 million repurchase authorization. Our board approved in September 2023.
Speaker Change: With the pending Satcom direct acquisition that we expect to close by the end of this year, we have obtained a fully committed financing as previously disclosed.
Speaker Change: Having further progress the financing process, we now expect to borrow approximately $250 million of term loan and used an additional $25 million of cash on our balance sheet compared to the $275 million of term loan contemplated at signing.
Speaker Change: While the recent news at the United Airlines deal at Starling May have put pressure on the financing process. This is the right financing mix for Gogo at this time, we are confident that our financing structure will serve gogo needs for this transaction and enable us to deliver on the value of this combination with satcom direct.
Speaker Change: We expect this transaction will increase our net leverage ratio temporarily to approximately four times at closing.
Speaker Change: We have committed that we will not pursue more share share repurchases until our net leverage ratio gets back into our target range of two 5% to three five times, which we expect will occur in one to two years post closing of the acquisition.
Speaker Change: Yeah.
Speaker Change: Now I'll turn to our financial outlook.
Speaker Change: We have updated our trailing 24, our financial guidance and now anticipate 2024 adjusted EBITDA in the range of a $120 million to $130 million versus at the top end of the previous range of $110 million to $125 million.
Speaker Change: The increase is primarily attributed to a timing shift in spending a certain strategic and operational initiatives, including Gogo Biogen Galileo from $26 million previously to approximately $20 million.
Speaker Change: We now expect 2020 for capex to be approximately $30 million versus our prior guidance of $35 million.
Speaker Change: Our revised target includes approximately $20 million for strategic initiatives, including Gogo <unk>, Galileo and the LTE network build out.
Speaker Change: We anticipate 2024 of free cash flow to be in the range of $55 million to $65 million.
Speaker Change: Which is an increase from our prior guidance at 35% to $55 million.
Speaker Change: This includes approximately $40 million of expected FCC spend including non Reimbursable development spend.
Speaker Change: And approximately $35 million of FCC Grant reimbursements received.
Speaker Change: The decrease in FCC reimbursements and spend compared to prior expectations as a result of timing shifts within the program.
Speaker Change: The increase in our free cash flow guidance is reflective of the higher adjusted EBITDA and lower expected capex.
Speaker Change: As I mentioned earlier, we expect negative free cash flow in the fourth quarter due to a large swing in net working capital and lower adjusted EBITDA.
Speaker Change: In addition, we continue to maintain a target of 2020 for revenue in the range of $400 million to $410 million.
Speaker Change: As mentioned at the top of my prepared remarks, we are withdrawing our multiyear long term financial targets previously provided in our second quarter earnings call due to the pending acquisition of Satcom direct which we expect to close by the end of this year.
Speaker Change: We announced last month that we expect the transition will meaningfully change the financial profile of our business by immediately doubling our scale and our marketing between $25 million to $30 million in annual run rate synergies over two years.
Speaker Change: The pro forma combined company is anticipated to generate 2020 for revenue of approximately $890 million.
Speaker Change: With approximately 24% adjusted EBITDA margins and more than $100 million in free cash flow. We expect our combined business will be able to swiftly delever. The debt. We're taking on to fund. This acquisition continue to invest for the future and return cash to shareholders.
Speaker Change: Over the long term with the anticipated launch and generation of service revenues from Gogo, Galileo and Gogo <unk>, we expect the combined company's long term annual revenue growth to be in the 10% range with adjusted EBITDA margins in the mid 20% range.
Speaker Change: Keep in mind that these long term figures are often anticipated revenue base more than two times, what we have today to drive significantly greater absolute dollars and both adjusted EBITDA and free cash flow.
Speaker Change: Yes.
Speaker Change: In conclusion.
Speaker Change: <unk> third quarter performance reflects our commitment to strategic investments and our disciplined financial management through this anticipatory period of our product life cycle. We are focused on investing to support long term growth and value through our key initiatives, including the upcoming launches that Gogo Galileo and E <unk>.
Speaker Change: Additionally, we expect the pending acquisition of Satcom direct will be accretive on day, one strengthen our market position and enhance our long term value creation.
Speaker Change: Before we open the door that floor for questions I want to express my gratitude to the entire Gogo team for their hard work commitment to our business and dedication to providing exceptional service to our customers.
Speaker Change: Operator. This concludes our prepared remarks, we are now ready to take our first question.
Speaker Change: Thank you ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone if your questions have been answered who wish to move yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.
Speaker Change: Sure.
Speaker Change: Our first question comes from Sebastiano Petti with Jpmorgan. Your line is open.
Speaker Change: Okay.
Speaker Change: Hey, everybody.
Sebastiano Petti: Well you have withdrawn the longer term kind of guidance because you've just kind of touched on just maybe a housekeeping question. I mean is there any reason to think that.
Speaker Change: Okay. So maybe said differently. So the transaction will be accretive kind of day one in your previous guidance on a standalone basis was call it $150 million of free cash flow for next year I mean.
Speaker Change: Is there anything any reason or any maybe timing related items that might shift that pro forma free cash flow number one way or another and just trying to I'm trying to unpack as to maybe why that might not necessarily still be.
Speaker Change: Good target as we think about next year and then another question.
Speaker Change:
Speaker Change: Yeah, I think the.
Speaker Change: Taking a step back just thinking about <unk> strategic.
Speaker Change: Strategic fit in avionics longer term, particularly in the stack in the light of the Satcom direct acquisition.
Speaker Change: I mean help us think through maybe again the rationale there I mean satcom direct deal, particularly as you think about the competitive positioning from Geo.
Speaker Change: Geo offerings and with that.
Speaker Change: Specifically.
Speaker Change: Gogo is moving into new segments.
Speaker Change: Leo base, but it seems but you're also kind of now confronting competitors.
Speaker Change: Maybe not necessarily had to deal within the past some of the more established Geo guys. I mean does that impact how you're thinking about the pricing and margin levers of the business on a longer term basis.
Speaker Change: So.
Speaker Change: Jesse you answered the first part of your question and I'll take the second.
Speaker Change: Okay.
Speaker Change: Couple of things, especially I think that is going to be changing for 2025 free cash flow from the Q2 that the targeting $150 million next year, so for Gogo Standalone, well I'd actually for the combination.
Speaker Change: A few things are going on so one.
Speaker Change: Through this acquisition are due to this acquisition we are taking on more debt so that will be increasing the.
Speaker Change: The interest expense impacting our free cash flow.
Speaker Change: So that's due to the combination, but with regards to Gogo Standalone a few things are going on so we will have more equipment revenue.
Speaker Change: Next year and with the demand of HD X that we're seeing that's probably going to increase even more and thats going to have just equipment revenue in general is going to have lower margin.
Speaker Change: We also.
Speaker Change: I was going to be very competitive in terms of our equipment pricing and have introduced some incentive programs as well and that's going to be impacting the free cash flow next year.
Speaker Change: And then.
Speaker Change: As we go through and some of the timing shifts with regards to FCC that also impacts next year and then as mentioned some of the benefit we're seeing this year with Opex and Capex pushing out for our programs into 2025 that also will have a negative impact into 2025 next year.
Speaker Change: But as the companies come together, obviously, we will have to work through integrated business plan and work through what our impacts are expected with regards to 2025.
Speaker Change: Thanks Jess.
Speaker Change: I guess, especially auto and answering your question Ironically I would say this deal for US is all about Leo Nat Geo.
Speaker Change: And you'd say well, yeah, but their geo company, but what you have to look at is their distribution channel and the verticals they serve and how that plays into Leo connectivity. So.
Speaker Change: The first of all the 1300.
Speaker Change: Customers they have today and their ability to provide the right kind of service to the.
Speaker Change: Large jet 7000 Intercontinental kind of jets that are very lucrative.
Speaker Change: Customers.
Speaker Change: We think gives us ability to actually upgrade those <unk> hundred <unk>.
Speaker Change: By adding Leo we think many will keep geo because of the kind of expense they have in their demand for connectivity. They wanted to add both capacity that that Leo and Geo together can provide as well as to have the redundancy. The geo can provide but for us. It's all about adding that Leo sale on top of those 1300 and expanding that within that segment, which are.
Speaker Change: Satcom knows how to serve really very well second the 1000 Gov market.
Speaker Change: Where they are really growing quickly right now.
Speaker Change: We think that our layout product again is a great add on to the G. O and then the military is really going to be there really isn't a desire to have both because of the whole pace concept, which is that you needed a primary alternative contingency and emergency connectivity.
Speaker Change: So.
Speaker Change: Again.
Speaker Change: As we look at this and build our business case, it wasn't really around keeping the <unk> hundred is G. O customers. It was about moving those to Leo and if we didn't keep any on jail. The business case closed, but we think we will actually have the opportunity to keep a lot of them on there.
Speaker Change: Beyond that.
Speaker Change: G O connectivity is.
Speaker Change: Is improving rapidly and over the next year or two no G O.
Speaker Change: <unk> will achieve 100 megabits per second.
Speaker Change: You'll still have the latency issues, but that's going to be a pretty good backup system in a really nice way to augment.
Speaker Change: Leo connectivity service.
Speaker Change: So we do think that a lot of people would like to keep it.
Speaker Change: No.
Speaker Change: I don't know if that answers your question in terms of the competition, but it's how we looked at the deal and again I'd say, it's primarily about driving growth of our Leo products and keeping them keeping the geo as a nice to have it's sort of an incremental benefit.
Speaker Change: That's helpful. Just a quick follow up just on the equipment pricing.
Speaker Change: And just going back to the free cash flow pieces.
Speaker Change: And so in regards to the demand <unk> and just thinking.
Speaker Change: That mean, maybe the working capital tailwind that from the buildup of inventory. This year because demand is so great that there's less of a tailwind next year.
Speaker Change: Or is it more of a maybe there's a little bit of just.
Speaker Change: Given your competitive.
Speaker Change: Maybe that's kind of what you are inferring in terms of it.
Speaker Change: Yes, that's right I was talking about the competitive pricing. So we think while our demand.
Speaker Change: Increased revenue and you'll have that benefit and that it won't necessarily flow through to the bottom line for EBITDA and free cash flow.
Speaker Change: Due to the pricing Super helpful. Thank you guys.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Yes.
Speaker Change: Our next question comes from Ric Prentiss with Raymond James Your line is open.
Ric Prentiss: Thanks, Good morning, everybody.
Speaker Change: Hey, Rick how are you doing.
Ric Prentiss: Okay. Thanks.
Ric Prentiss: Well I'll follow up.
Ric Prentiss: John's questions.
Ric Prentiss: First.
Ric Prentiss: Timeframe to closing Youre, saying year, and obviously, it's a fast once a private company, but walk us through long hauls and the time to get it done as of year end closing is that earlier. We also started to take and when should we think of this deal getting close.
Speaker Change: Yes, we're hoping for having it closed at the beginning of December could obviously anything it could drag longer.
Ric Prentiss: A couple of different tracks, obviously theres the commercial consent track all the required significant commercial consents have been obtained in terms of filings. We don't have a lot in this deal obviously, we have got Doj.
Ric Prentiss: We filed we just re filed a few days ago. So there is a new 30 day ticker that started.
Ric Prentiss: Last week some time.
Ric Prentiss: If we get through in another 30 days, we should be able to close at the beginning of December.
Ric Prentiss: CMA in UK.
Ric Prentiss: They've asked a few questions, but so far that looks like it's moving along reasonably well and that would actually.
Ric Prentiss: On the current timeline would.
Ric Prentiss: Be cleared before the Doj would we've got a foreign direct investment filing in Canada.
Ric Prentiss: So far we haven't heard from Canada that expires November if we don't hear from them and then we've got a filing in Saudi Arabia, which we think.
Ric Prentiss: Probably also done by the end of November at this stage. So those are the regulatory.
Ric Prentiss: Hurdles financing is done that's complete so we are committed financing. So that's closed and then.
Ric Prentiss: We're working very hard on integration. So that we can hit the ground running day, one got 11 integration teams working on different functional areas of the company.
Ric Prentiss: And.
Ric Prentiss: We think.
Ric Prentiss: So a lot of work to be done, but we're gonna be ready to go when we close.
Speaker Change: Okay. Thanks.
Ric Prentiss: Obviously, the margins are less a reseller. So they don't have their own network. So no surprise at margins that are left are driving for better revenues excuse me and cash flows.
Speaker Change: But it does seem like and I get the law of large numbers impact, but the previous guidance for Standalone Gogo was 15% to 17% revenue growth and now the combined company is 10% how should we think about was that just the large numbers was that green.
Ric Prentiss: Satcom direct and it pulls it down and help us kind of unpack kind of what causes that standalone 15th of 2017 to go down to 10% longer term.
Speaker Change: Actually yes.
Speaker Change: Then on Gogo still at 15% to 17%.
Speaker Change: And.
Ric Prentiss: So that's bringing us down is that just I think being cautious about what's going to happen with geo connectivity.
Ric Prentiss: And.
Ric Prentiss: We haven't.
Ric Prentiss: Not yet combined combined company. So we can't go through all the detailed planning that we'd like to before we step out with revised guidance.
Ric Prentiss: We'll do that after we close and.
Ric Prentiss: And we'll update people at that time.
Speaker Change: Alright so.
Speaker Change: Are we thinking that if we do get to December closing, where it could be revised guidance in the month of December before we get into the.
Speaker Change: Earnings cycle.
Speaker Change: No I wouldn't think it's going to be that quick and I'll tell you Rick.
Ric Prentiss: Are we going through a very.
Ric Prentiss: Deliberate and organized integration planning process.
Ric Prentiss: And.
Ric Prentiss: So we're actually going to get the planning done before we do the number so that we actually are planning something that's real.
Ric Prentiss: So we'll.
Ric Prentiss: We'll probably provide that guidance more likely in our Q4 earnings call and then that'll be 25 guidance and then shortly thereafter, we'll come out with revised long term guidance.
Ric Prentiss: Okay.
Ric Prentiss: Sure.
Speaker Change: And then Jesse I think you mentioned.
Ric Prentiss: Obviously, the financing of the deal is a little different 259 times 25 million cash on hand.
Speaker Change: Now you mentioned the space an extraordinary denials, one was that pressuring the debt markets or maybe elaborate a little bit more on on the change in the financing of the transaction.
Jesse Petromin: Yes. So we previously stated that and let me just to be clear because it's not just it's not $25 million of cash obviously, its $25 million more in cash.
Jesse Petromin: To be able to correct yes.
Jesse Petromin: But.
Jesse Petromin: We were targeting.
Jesse Petromin: 275, initially and as mentioned the.
Jesse Petromin: Right at the time that we were kind of going into the market when the United Airlines and Starlink announcement came out that they put pressure you see where our second our current loan is trading.
Jesse Petromin: Down so it really was the right mix for us to be able to put more cash because we have the ability to do that in our balance sheet to put more cash.
Jesse Petromin: Upfront and have less on the debt markets. It allows us to have better financial terms for the deal than what we thought we would have gotten so that was the best way to proceed.
Speaker Change: I just wanted to add.
Speaker Change: So Eric let me just add you know we were trading at par.
Jesse Petromin: And then United Startling gets announced which is if anything benefits our revenue.
Jesse Petromin: <unk>.
Jesse Petromin: Our bond trades up to $94, which is crazy first of all.
Jesse Petromin: We do supply Intelsat with atg connectivity for the regional Jets at United However, in our models, we have taken all of that regional jet revenue that we received down to zero and all the guidance we've given over the last several years. It goes to zero in 2026, and we've never counted on that revenue. So.
Jesse Petromin: Frankly.
Jesse Petromin: The announcement of that deal will probably not get United's jets regional Jets moved in 2025, and we may have United revenue actually in 2026, so it would actually improve our numbers.
Jesse Petromin: So I just think the market is confused we don't serve commercial airlines anymore, or we don't have anything to do with it and the trade our bonds off from 194, just seems insane, but it happened and it's too bad so that's going to be a little more expensive than we wanted it to be.
Speaker Change: Got you and last one for me is purely selfish, obviously from a modeling standpoint.
Speaker Change: Backlog conversion was a private company how should we think about getting historical quarterly information to help with the modeling better as we look for 25 to be a year of them in the numbers as well as Standalone Gogo.
Speaker Change: Well when the deal closes.
Speaker Change: The SEC requirements there will be.
Speaker Change: Financial provided in terms of their standalone financials for that will be disclosed as part of our normal state requirement.
Speaker Change: And we did.
Jesse Petromin: Historical very very high level a historical.
Jesse Petromin: Joining us on our Investor Relations website.
Jesse Petromin: We are going through the.
Jesse Petromin: The financing process as well, so we disclosed that information as well.
Jesse Petromin: Okay, alright, thanks, everybody.
Jesse Petromin: Sure.
Speaker Change: Our next question.
Jesse Petromin: Our next question comes from Scott Searle with Roth Capital Partners. Your line is open.
Jesse Petromin: Hey, Scott Good morning, Thanks for taking the questions Hey, good morning, Okay, you're doing thank you.
Scott Searle: He just just quickly on the <unk>.
Scott Searle: Well number.
Jesse Petromin: Some comments.
Jesse Petromin: Sounds like <unk> was down as much as expected and you're starting to see some reactivation as customers have gone into suspension is I'm wondering if you could comment on that or are we through kind of the worst of it I'll call. It the organic suspension cycle.
Jesse Petromin: And also on the Galileo front.
Jesse Petromin: <unk> had some comments about your expectations doubling in 2025 look with satcom direct with the dealer channel that you've been building with the FTC's now I think addressing 18000 aircrafts could you calibrate us in terms of what that doubling is kind of your expectations in 'twenty, five and what kind of constitutes success for <unk>.
Speaker Change: In Fts in 25% to 26, and I had one follow up.
Speaker Change: Sure Let me take the first one Scott so on the <unk>, yes.
Speaker Change: Game.
Speaker Change: The decline was better than what we anticipated we did have higher new activations for the quarter than we had expected which is good obviously not back to the levels that we had last year, but still.
Speaker Change: Better than last quarter, and and then the classic D. Activations came in lower than we expected as well. So it was a good quarter for us. The reactivation is has been fairly steady.
Jesse Petromin: <unk> seen too much too much change in that thats been fairly steady in all year long.
Jesse Petromin: For next quarter I mean in terms of just our own forecasting we're more conservative we kind of look at the last six months average so we're expecting that.
Jesse Petromin: Won't be necessarily as good it's hard for us to predict obviously, we would hope that it continues on the same path as Q3 and that would be.
Jesse Petromin: Good upside for us.
Jesse Petromin: Current projections would have have good quarter half bad quarter.
Jesse Petromin: It's kind of a more in depth of our current projection with only from how we do that modeling.
Jesse Petromin: So and then on the Gallo Lola piece, Yes, I think we shared at some point, we expected about 200 shipments in 2025.
Jesse Petromin: And.
Jesse Petromin: I think we're looking at probably more than that.
Jesse Petromin: Well, we're doubling that in terms of our projections right now for 25 and remember that's shipments not units online.
Speaker Change: Uh huh.
Jesse Petromin: What happens is we will start shipping to dealers right at the end of December the STC dealers.
Jesse Petromin: Develop S. Tcs they will they will start taking more orders as they are developing their stc's for the models that are developing stc's for.
Jesse Petromin: And.
Jesse Petromin: That will ramp over the year.
Jesse Petromin: But the demand is unbelievable I think the market is so happy to have the all the talk with Darling for quite a while in the Leo World and all of a sudden theres a home team player Gogo.
Jesse Petromin: With the Leo product, that's real and it's coming out and they've been able to taste. It.
Jesse Petromin: And experience it and the response has just been overwhelming so where we're very very positive about.
Jesse Petromin: Where that's going to go and frankly, we see some vectors that could drive that 400 up so.
Jesse Petromin: More to come in.
Speaker Change: Lastly, lastly, if I could just on satcom direct demand youre talking about the overlap with Leo and Geo I'm wondering does does that extend beyond the existing satcom direct install base today of G O.
Speaker Change: Customers are you guys are unique in that youre going to be the only.
Jesse Petromin: Provider out there with with the <unk> solution. So is that just within the existing base or does that extend to a number of larger than that.
Speaker Change: I think it extends the number larger than that satcom.
Jesse Petromin: Developed.
Jesse Petromin: <unk> <unk>.
Jesse Petromin: Light terminals, a K a version of Ku version.
Jesse Petromin: One is just coming out in the Ku has been out about a year and a half.
Jesse Petromin: They are a tenant.
Jesse Petromin: Technologically superior to any other geo.
Jesse Petromin: Turner.
Jesse Petromin: I can tell you they have been.
Jesse Petromin: Last week were awarded contract for line fit at a very large OEM.
Jesse Petromin: And we think that that.
Jesse Petromin: At.
Jesse Petromin: We'll provide a steady stream of units online you are buying an $80 million jet.
Jesse Petromin: What which which IFC system do you want to have.
Jesse Petromin: Tom the answer is going to be yes, they'll take them all and.
Jesse Petromin: So.
Jesse Petromin: We think that will drive continued geo growth actually we will see you know obviously the deterioration of the Laoh base driven by moving to Leo but there will also be the steady drumbeat of units online coming off of line fit at Oems that will drive the number up so we think it will be around for quite a long time, yes.
Jesse Petromin: It'll it'll grow beyond the 3500, the other thing that you know that.
Jesse Petromin: Their presence in that large jet segment does it just gives us a incredible number of relationships tools there.
Jesse Petromin: Our software platform everything else thats sort of tailored to that market segment and you know we can package that with our Leo product.
Jesse Petromin: And they can sell the hell out of that and the heavy jet market. So again I think it's it's getting us a whole segment beyond the 3500.
Jesse Petromin: Thank you.
Speaker Change: And I'm not showing any further questions Tom I'll turn the call back over to will for any closing remarks.
Speaker Change: This concludes the Gogo third quarter of 2024 conference call. Thank you for your participation and look forward to speaking with you soon you may disconnect.
Speaker Change: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
Speaker Change: Okay.
Jesse Petromin: Hum.