GOGO - NASDAQ

Good day, and thank you for standing by. Welcome to Gogo Inc.'s fourth quarter 2025 earnings conference call. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I will now turn the call over to Will Davis, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Gogo Inc.'s fourth quarter 2025 earnings conference call. Joining me today to discuss our results are Chris North, CEO, and

Thank you, Will, and good morning. I am pleased with our product and synergy execution in 2025, as we transform Gogo Inc. from a U.S.-focused entity into a global, multi-orbit connectivity provider in the fast-growing and dynamic business and military government aviation markets. Consistent with prior earnings calls, I will focus on the continued demonstrable progress made across our compelling new product portfolio. These include Gogo Inc. 5G and Gogo Inc. Galileo, with two models, HDX and FDX, all of which are providing game-changing increases in capacity, functionality, speed, and consistency. I will also highlight our long-term growth prospects from our military and government customer base, which will further improve our revenue mix and diversification. As we look forward this year, we expect combined Galileo and 5G shipments to exceed 1,000 units. We expect that the activation of those aircraft will create a high-margin, recurring service revenue stream that sets the stage for free cash flow growth and long-term strategic value. Let us review the strong demand trends within the underpenetrated global business jet market. Industry sources indicate global business jet flights are 30% higher than pre-COVID levels, with aggregate growth from key global fractional operators even stronger at around 40%. Leading global business jet OEMs highlight strong book-to-bill ratios and backlogs necessary to support continued delivery growth. The 854 new private jets delivering in 2025 marked the highest output since the industry delivered 874 units back in 2009. These factors, along with the relatively low broadband penetration of the 41,000 global business aircraft market, create a backdrop for attractive long-term growth.

Let us review our outlook for Gogo Inc. Galileo.

Our global LEO-based service with two offerings. Starting with HDX, which was purpose-built to fit on all 41,000 global business aircraft. It is ideal for the 12,000 midsize and smaller aircraft outside North America without broadband, and the 11,000 midsize and smaller aircraft in North America that fly outside CONUS or want faster speeds than 5G air-to-ground. By contrast, FDX is geared specifically for 10,000 large global business aircraft. Galileo operates on the Eutelsat OneWeb satellite network, and we are pleased to see the continued measures by Eutelsat to strengthen its balance sheet and access the capital needed to support its recent order for 414 new LEO satellites, ensuring full operational continuity for its constellation into the late 2030s. Given that HDX has a total addressable market over four times that of FDX, shipments and installations of HDX will naturally be much higher than FDX. The product has also been designed to fit in many mid- to large-cabin aircraft tails, which expands the opportunity from standard LEO fuselage mountings. The average monthly service revenue and profit per FDX will typically be higher than HDX. Our Galileo pipeline consists of over 1,000 aircraft, with the current weighted sales pipeline of more than 400 aircraft. We believe this aligns with our projections for growth in 2026 as we expand opportunities and close new business. We continue to see a favorable pipeline mix with a 60/40 split between U.S. and global markets. This mix is critical for our success, as we upgrade loyal customers in the U.S. market and expand to unserved markets with high-speed connectivity in the international markets for business and military and government customers. As a reminder, inclusive of all aircraft equipped with Gogo Inc. broadband connectivity, 35% to 40% are large jets, 30% are medium, 25% are light, and less than 5% are rotorcraft. Now turning to STCs. STCs are a critical part to building our global LEO business, and we continue to make solid progress: 35 HDX and FDX STCs in the U.S., Europe, Brazil, and Canada with a total addressable market of 4,000-plus aircraft covering 34 aircraft models. We continue to expect 20 more STCs to be completed in 2026. While the total number of STCs is important, not all STCs are created equal. For example, in recent weeks, we achieved FAA validation for the Bombardier Challenger models 300, 350, and 3500, and for all Global models except the 7500 and the 8000, and the EASA validation for the Dassault Falcon 2000. Given the installed base and growth potential, a Challenger STC is worth substantially more to us than a larger STC due to the operator’s budget and airframe value. However, with the versatility of our product portfolio, the Learjet has access to our 5G air-to-ground product, which is a better solution for both the aircraft mission and budget, all without compromising the need for high-speed connectivity. In 2025, Gogo Inc. shipped over 300 HDX and FDX antennas, with 84% to named customers. By 2026, we expect to have shipped nearly 900 Galileo antennas, and with an expected ship-to-install time of about three to six months, we see a potential path to 700 Galileo aircraft installed by the end of this year. If we assume a $4,000 average monthly service profit per Galileo aircraft, implying $480,000 in service profit over 10 years, if 1,000 Galileo aircraft are activated and paying, we will demonstrate the long-term growth opportunity with our LEO product portfolio and overall market position in aviation. Let us shift to our global fleet business, which we continue to expect to be a key growth driver. As highlighted on our Q3 call, we have a clear opportunity to provide Galileo service to 1,000-aircraft-and-above fleet customers, which include all major global and domestic U.S. entities. I am now even more confident about that outcome. In 2026, we estimate that one-third of our Galileo shipments and AOL will be tied to our global fleet accounts. STCs installations by VistaJet began in November and will continue to ramp through 2026. We were pleased that VistaJet recently announced a major Bombardier order for 40 Challenger 3500 business jets with options for an additional 120 more. If fully exercised, the total contract value would approach $5,000,000,000, expanding VistaJet’s fleet to around 400. VistaJet announced that Gogo Inc. Galileo was a cornerstone of its digital and in-flight innovation pillar as part of the VISTA 2030 growth strategy. Our largest fleet customer in terms of activated aircraft remains NetJets, and we expect that to remain the case for some time. NetJets is the world’s largest fleet operator with over 1,000 aircraft, including EJM, and existing orders are expected to expand its fleet by several hundreds over the next few years. As a reminder, the NSS contract renewal that Gogo Inc. announced in February 2024 is still active. Gogo Inc. has installed HDX on dozens of aircraft in the NetJets European fleet, including Challenger 350s and Phenom 300s, Latitudes, and we continue to expand installations. Within the NetJets North America fleet, we currently expect to install HDX on the Phenom 300 and the Ascend platforms. Historically, NetJets has utilized multiple connectivity sources globally, and they have confirmed that Gogo Inc. will remain a key partner to help facilitate connectivity upgrades for their global fleet in the coming years. In addition to fleets, we expect that Galileo line-fit option wins will be another critical source of long-term growth. We are aligned for option with HDX at Textron for the Ascend, Latitude, and Longitude models and will benefit once our options are available later in the year. Additionally, as announced last quarter, FDX will be a LEO line-fit option for all new Bombardier Challenger and Global business aircraft types. We expect revenue generation from this important win in early 2027. Further, I am pleased to say that we have secured another line-fit option win with a major global OEM for both HDX and FDX that will highlight the growing momentum for Galileo in the market. We would expect an official announcement before 2026. In our view, these wins validate Gogo Inc. Galileo technology and demonstrate the valuable long-term relationship we have with our global business aircraft OEM partners, along with the desire to have competition in the LEO marketplace. Let us continue with Gogo Inc. 5G. It substantially increases the speed, performance, and capacity of our ATG network. We completed the activation of our first 5G aircraft in December, and true network availability started last month. Our current focus remains shipping boxes pre-provisioned for 5G customers that already have the 5G antennas and wiring installed. We are happy to report that 5G service commenced in Q1, and we expect 5G activations to significantly ramp up through 2026. Gogo Inc. has 5G line-fit deals with five OEMs, two of which are already installing the AVANCE L5 box on the production line today. These boxes will get swapped with the LX5 5G box upon 5G service activation. We continue to believe that 5G will fill a large void in the market for customers who only fly domestically in the U.S., particularly those with light and medium-sized aircraft. Further, we suspect 5G will serve as a valuable backup service on certain aircraft seeking redundancy and enhanced capacity. We recently unveiled updated 5G pricing, highlighting its positioning as a cost-effective way to increase speed tenfold versus our current L5 solution. Monthly service pricing for unlimited data is now $5,500, and 5G equipment MSRP is now $100,000, allowing for a full installation below $150,000 and making the connectivity market competitive. To that end, we expect to ship over 500 5G boxes in 2026 and expect to reach nearly 400 5G aircraft online by the end of this year. Let us shift to the LTE upgrade of our ATG network, which will be largely subsidized with FCC funding. The LTE upgrade provides multiple benefits: one, it accelerates Classic upgrades to AVANCE; two, it increases network capacity and speeds; and three, it accelerates our U.S. government business on the ATG network given enhanced network security. We shipped a record 472 air-to-ground equipment units in Q4, up 8% from 437 in Q3, split between 175 AVANCE units and 297 C1 units. We believe that our C1 strategy is working. C1 AOL increased from 101 in Q3 to 313 in Q4, and we expect to end 2026 at around 800. The C1 box swap takes only a few hours and benefits from FCC subsidies, allowing the system to activate once the LTE network is turned on. We completed 95 Classic-to-AVANCE upgrades in Q4 as AVANCE AOL grew 8% year over year to 4,956. AVANCE now represents 77% of our air-to-ground fleet and continues to grow each quarter. The combination of C1 installs and the AVANCE upgrades drove our Classic AOL at year-end to around 1,100, or only 17% of our air-to-ground fleet. We expect our Classic AOL to reach zero sometime in Q4 2026. As of Q4, about 300 Classic AOL are part of fractional or managed accounts, a.k.a. fleets, with a defined upgrade path, leaving only 800 Classic aircraft not associated with a fleet account. All in, our Q4 ATG AOL trends were the best of any quarter in 2025. The continued upgrade of our Classic fleet to both C1s and AVANCE combined with our LTE rollout and the expected ramp of 5G in 2026 is expected to ultimately moderate the downward pressure on our ATG AOL. Sustained service revenue growth continues to depend on our new product ramp, including Galileo and 5G. Let us now turn our attention to our GEO business. We ended 2025 with 1,321 GEO AOL, up 6% versus the prior year, driven by line-fit positioning. We attribute slower GEO AOL growth to deactivations from an increase in aircraft for sale, triggered by the timing of aircraft bonus depreciation. We expect our GEO investments to continue to improve speed and performance, which we will also leverage with our military and government customers. Our recent upgrades to the Plane Simple Ku product have already shown results of higher download and upload speeds. We continue to expect large business jets with long global missions to migrate over time to multi-orbit LEO and GEO solutions for increased capacity, consistency, and redundancy. Our SVR router is now on 2,500 GEO aircraft and is synchronized with AVANCE routers on another 5,000, totaling 7,500 systems available for new product upgrades with our box swaps versus expensive interior rewiring. Lastly, I will address our military and government growth opportunities over the next several years. Global defense spending is rising, and the broadband penetration of the military and government aircraft is even lower than the business jet market. Our expanded military and government sales force is in active discussions with government agencies across the globe: the U.S. Department of Defense, NATO, Brazil, the Middle East, and Southeast Asia. A recent industry report highlights a market size of 6,200 combined transport and special mission military aircraft globally, of which 1,600 are in the U.S. We believe these represent excellent opportunities for our military and government broadband solutions. As this is a very underserved market, primarily with narrowband service, global governments require diversity among their aero bandwidth suppliers and will place a premium on multi-orbit, multi-band service for redundancy and performance. We believe that Gogo Inc. is the only player who can fulfill this requirement. The reality is we are already seeing a significant transformation in our business. Our military and government aviation revenue grew 34% year over year, and our international growth was an impressive 94%. The net effect of this growth remains muted by the winding down of legacy land mobile narrowband service, a process that is expected to largely complete in 2026. The key point is that our revenue mix quality within military and government will improve substantially over time. In addition to the traditional military and government market, we are increasingly optimistic about the market potential within the UAV and ISR markets. The U.S. Department of Defense expects to order over 1,000 Class II and Class III drones in the next two to three years. While not all details of our success can be publicized due to their confidential nature, we are excited to begin delivering on our recent contracts, including receipt of U.S. Air Force mobility approval to sell Plane Simple Ku-band hatch mounts to C-130 aircraft, with a TAM of over 1,000 airframes; multi-orbit wins to provide LEO, GEO, and 5G connectivity to a division of the U.S. government; and a five-year contract with SES Space & Defense for a blanket purchase agreement through U.S. Space Force Space Systems Command, with a $33,000,000 contract ceiling value. Thank you for the continued support, and I trust that you will all see our outstanding progress transforming Gogo Inc. into a global, multi-orbit player with robust broadband growth opportunities in both the business jet and military and government markets. I will now turn the call over to

Fourth quarter results were largely in line with expectations, highlighted by strong equipment shipments and an increase in inventory spend in advance of our Galileo ramp this year. Additionally, our key 2025 financial results for revenue, adjusted EBITDA, and free cash flow were all at the high end of our guided ranges as aggressive cost controls and synergies balanced out product investments. As Chris discussed, we believe the ultimate activations of our Galileo and 5G equipment shipments will help drive service revenue growth longer term. On our Q3 call, I flagged a potential need for incremental working capital in 2026 to support new product shipments and our anticipation of continued ATG AOL volatility, tempered with further optimization of OpEx and CapEx. My discussion of our 2026 financial guidance later in the call will incorporate these elements. I will now provide an overview of our fourth quarter and 2025 results, then I will review the outlook to streamline our balance sheet, and lastly, I will discuss our 2026 financial guidance. Gogo Inc.’s total revenue in the fourth quarter was $231,000,000, up 3% year over year on a combined pro forma basis as well as sequentially. Total service revenue of $192,000,000 increased 61% versus the prior year and increased 1% sequentially. Total ATG aircraft online at the fourth quarter was 6,402, a decline of 9% versus the prior year period and down 2% sequentially. Total AVANCE AOL increased 8% versus the prior year period and now comprises 77% of the total ATG fleet, up from 65% a year ago. Since 2022, our total AVANCE AOL has grown by nearly 1,700 aircraft. Given the sequential increase in C1 AOL, from 101 to 330, our Classic AOL is now approximately 1,100, and our 2026 guidance assumes zero Classic AOL by year-end. Total ATG ARPU of $3,378 declined 3% year over year and 1% sequentially, largely due to the pricing reduction on several of our unlimited plans in advance of our new 5G pricing of $5,500 a month for our unlimited data plans. Total broadband GEO AOL, excluding end-of-life networks, totaled 1,321, up 6% from the prior year and down 2% sequentially. As Chris noted, many of the GEO deactivations in Q4 were triggered by an increase in aircraft sales, which is common at year-end for tax purposes. Most GEO broadband aircraft are under fixed-term contracts, which helps support revenue predictability. However, our revised GEO outlook reduced the present value of our earn-out liability by $7,000,000. Now turning to equipment revenue. Total equipment revenue in Q4 was $39,000,000, up 104% year over year and 15% sequentially. Total ATG equipment shipments of 472 were an all-time high and up 8% sequentially from the prior record of 437 in Q3. In 2025, ATG equipment shipments totaled 1,631, nearly matching the combined shipments from the prior two years. As expected, AVANCE shipments of 175 declined sequentially as market demand shifted to C1, which increased 30% sequentially to 297 to support the Classic conversions. Now moving to our margins. Gogo Inc. delivered combined service margins of 50%, which was in line with our expectations. I will provide further service margin context in the 2026 guidance discussion later in the call. The write-off of legacy equipment drove equipment margins negative in Q4 and was expected as normal business course. In addition, HDX equipment pricing remains close to cost. Now turning to operating expenses. Total Q4 operating expenses, excluding depreciation and amortization, were $58,200,000, up slightly sequentially due to the ongoing litigation expense, which was $8,400,000 during the quarter. Let us now turn to our major strategic initiatives: 5G, Galileo, and the LTE network upgrade and the FCC reimbursement program. Total 5G spend in Q4 was $1,700,000, almost all tied to CapEx. Total 5G spend in 2025 was $12,600,000, which we expect to decline by about 50% in 2026. Q4 Galileo spend was $2,600,000, with 70% tied to CapEx. Galileo spending of $10,000,000 in 2025 is expected to decline considerably in 2026 to $1,500,000 as we exit the investment phase and embark on product shipments and service activations. We expect total development costs for both HDX and FDX will be about $40,000,000, well below our original plan of $50,000,000. Given our expectation for strong long-term Galileo success, we believe that our ROI on the Galileo investment will be very attractive. And finally, our LTE network upgrade and FCC reimbursement program. In Q4, we received $34,000,000 in FCC grant funding, bringing our program-to-date total to $93,900,000. As of year-end 2025, we reported a $27,800,000 receivable from the FCC and incurred $35,700,000 in reimbursable spend in Q4. The receivable is included in prepaid expenses and other current assets on our balance sheet, with corresponding reductions to property and equipment, inventory, and contract assets with a pickup in the income statement. Moving to our bottom line, Gogo Inc.’s adjusted EBITDA in Q4 was $37,800,000, in line with our implied 2025 guidance. Net income for the quarter was negative $10,000,000 but was affected by a $10,000,000 litigation settlement accrual, a $4,000,000 charge related to a valuation adjustment on a prior investment in a supplier, and a write-down of legacy equipment that I previously mentioned. While we have removed a significant amount of cost from the combined company, particularly in headcount, we continue to identify new sources of cost reductions in various areas, including real estate, back office, software solutions, and CapEx rationalization. Moving to free cash flow. In 2025, we generated $89,200,000 in free cash flow, which was at the high end of our guidance range of $60,000,000 to $90,000,000. Free cash flow was slightly negative in Q4 due to previously flagged factors, including a $17,000,000 increase in inventory tied to our new products as well as lower EBITDA. Let us now turn to our balance sheet. Gogo Inc. ended the fourth quarter with $125,200,000 in cash and short-term investments and $848,000,000 in outstanding principal on our two term loans, with our $122,000,000 revolver remaining undrawn. Our Q4 net leverage ratio was 3.3x and within our target leverage ratio of 2.5x to 3.5x. Our Q4 cash interest paid, net of hedge cash flow, was $17,000,000. Our hedge agreement remains at $250,000,000 at a strike price of 2.25 bps, resulting in approximately 30% of the loans being hedged. As a reminder, the hedge amount will decrease to $200,000,000 on 07/31/2026 and expires on 07/30/2027. In 2025, cash interest paid, net of hedge cash flow, was approximately $67,000,000. Our immediate focus remains exploring ways to optimize and delever our balance sheet while reducing interest expense. Between cash on hand and our revolver, we have approximately $250,000,000 in liquidity, which we believe is significantly higher than our requirements to operate the business. We continue to believe our expected free cash flow over the next few years will drive excess cash to refinance the debt and ultimately return capital to shareholders. In our earnings release this morning, we provided the following 2026 financial guidance: total revenue in the range of $905,000,000 to $945,000,000, with 80% tied to service revenue and 20% to equipment revenue. This implies overall growth of about 2% at the midpoint. Adjusted EBITDA in the range of $198,000,000 to $218,000,000 and free cash flow in the range of $90,000,000 to $110,000,000, implying 12% year-over-year growth at the midpoint. We expect approximately $30,000,000 for strategic investments in 2026, net of any FCC reimbursement, down about 45% from our strategic spend of $56,000,000 in 2025. The majority of our strategic investments this year are tied to fleet promotions and STCs and will flow through operating expenses. Net CapEx of $20,000,000 after $45,000,000 in CapEx reimbursement from the FCC reimbursement program as we complete the LTE ground network build. In addition, here are some incremental points that could aid in your modeling to provide context. Mix heavily influences our overall service profit. ATG service margins are about 75%, and blended GEO margins are in the high 30s, with Galileo margins at scale in the middle of those. Equipment margins are expected to be in the mid-single digits, and service profit is anticipated to account for over 95% of total gross profit. Our 2026 free cash flow estimates exclude an estimated $40,000,000 earn-out payment in April, which we expect to pay from cash. In conclusion, we have made significant progress in the past fifteen months since the closing of the Saginaw deal. Our three-year end product investment cycle is nearing completion, and we expect to see strong benefits from the rollout of 5G, HDX, FDX, and our LTE network. I want to express my gratitude to the Gogo Inc. team for their hard work in driving our transformation and their commitment to outstanding customer service. Operator, this concludes our prepared remarks. We will now open for questions. Please open the queue for questions. To withdraw your question, please press star 11 again. Please rejoin the queue if you have any additional questions.

Our first question comes from Scott Wallace Searle with ROTH Capital Partners.

Good morning. Thanks for taking the questions. Thank you for the detailed outlook. Very helpful in terms of going through the numbers and the analysis. Maybe to start just real quickly, Chris, in terms of NetJets, this has been, I guess, a lightning rod for the company in the last several months. What is your expectation in terms of your growth with NetJets? Will you ultimately be adding to the absolute number of NetJets AOL that you have online across the different types of aircraft across the different geographies? And then I had a follow-up.

Yeah. I think the big thing is that NetJets remains a customer, and we are expanding the customer base with them, especially with the European fleet. We are in a technical transformation with the services that we provide them. So if you look at most of the opportunity that we have, it is on our Galileo service, and we are continuing to roll that out. And they still remain a very important part of our future in business and a customer of ours.

Gotcha. Then, as it relates to the Classic transformation, we are down to about 1,000 aircraft right now. I know there is a cutover point in the middle of this year. A couple of things: It sounds like by the end of this year, that is going to be resolved at one point or another. You expect to have zero Classics online. I am wondering how you are seeing the conversion rate in terms of going to C1 and upgrade to AVANCE? So in other words, what is the number going to look like within that base as we get to the end of this year? And last one I could throw in as well. You know, Satcom growth within the MilGov space has been very, very good. It sounds like you are going to be growing this year, going to be growing that faster than the rest of the business. But I am wondering if you could give us a framework of what that could look like in terms of percentage of mix by the end of 2026 and maybe 2027? Thanks.

Yeah. I mean, I will start with the MilGov piece. The MilGov is, we are seeing a lot of opportunity in Europe. Still, as I mentioned in the call, we are also transforming that business and removing the narrowband exposure in that business to broadband. I think the exciting thing really on the product portfolio is we are positioned now with 5G, Galileo, and our GEO broadband offerings that we have broadband offerings for all of our customers no matter whether they are in business aviation or government. And they have a true broadband offering or multiple broadband offerings, which is pretty exciting because then all of a sudden, you have multiple revenue streams coming from an airframe instead of a single as well. The government part of the business, we are already seeing a lot of opportunity with UAVs. Europe is obviously doing a lot more focus on expenditure on military spending. I think we are reaping the rewards of that as well. The DOD is a very underpenetrated market, as I mentioned on the call. You look at that, you know, they had the 25 by 25 campaign a few years ago. They still have not reached that. Our technology is a lot more deployable, cost-effective, aviation-built, aviation-grade, and they also do not want interdependencies on a single supplier. So I think, you know, as we see that mix, it will take a long time for that to be the same levels as business aviation, but we just see that as continuing to grow between 2026, 2027, and beyond.

Yeah. And I think from a mix standpoint, you know, like we said, we do anticipate it is going to grow faster this year than last year. And, you know, a big driver of that is obviously equipment, but we also won a pretty sizable contract kind of late Q3. That is why you saw the nice Q4 pop in the MilGov numbers, which should continue for most of the year. And, you know, on the equipment side, you are going to see a lot more growth on that, largely because, you know, if you think of the aircraft those go on, those are obviously quite a bit different than business aviation. So it just takes a little bit longer to get those put on the aircraft, and, you know, the guys are keenly focused on it.

Yeah. And the mix of Classic, or what you expect to be the outcome of those remaining 1,000 Classics in terms of conversion to C1 versus upgrades to AVANCE and kind of what you have got factored into the current 2026 guidance? Thanks.

Yeah. So, you know, when we look at the AVANCE/Classic mix, you know, the guidance does assume that there is an extension granted, and so it does not go dark in Q2. It is still going to decline, and, you know, there will be some AVANCE declines. There will be some C1 decline, Classic. Right? So, but long story short, our view is between Classic, AVANCE, then also with the addition of 5G, the total ATG portfolio will be down about 1,000 units by year-end, and then the Classics basically are assumed to not convert at year-end.

Great. Thank you.

Our next question comes from Sebastiano Petti with J.P. Morgan.

Hi. Thank you for taking the question. I guess, Chris, just following up, I think you talked about specifically the NetJets expanding their fleet there in Europe. Overall, can you maybe give us a little bit of color on what you are seeing from an international perspective across the portfolio between the backlog on Galileo? You touched on some of the MilGov interest, you know, for DOD but also maybe internationally. Maybe kind of start there, then I will have a follow-up. Thank you.

Yeah. I think the big opportunity that we announced back on the Q3 call was the fact that we won VistaJet, and I talked about that today as well. That is a significant win, but also if you look at Luxaviation, Avcon Jet, you know, that backorder on those large fleet operators outside of NetJets, specifically within Europe as well, is significant and a thousand-plus aircraft. We know that we are still holding true to that number regardless of NetJets. We are still excited about the NetJets rollout in Europe as well, and the feedback we have had on the product, they have been extremely ecstatic. If you look at our pipeline, it is around, still maintains a 60/40 split with international. I think the sentiment is definitely from our international customers. I think the fact that Eutelsat OneWeb is also a European operator, I think that has some clout to it, but more importantly, these guys have not had a broadband solution on a number of these aircraft, especially those that cannot support the rather expensive installation costs going into the tail or the size of that. So we expect that to expand, and we are seeing very interesting markets pop up in Southeast Asia and other markets where, you know, popular airframes like the Phenom are there, but we have zero connectivity. And we are really the only solution that can get down to that size of airframe with a true aviation install. The MilGov market as well, a lot of that expansion in the MilGov market that we have talked about specifically, mostly is at this point coming out of NATO. We cannot talk about specific projects, but we are winning projects against our competitor, which is great. I think that is a really important point to make as well. So we are not the only bid when we are winning these. And I think that pivot towards our technology just shows its versatility from going into anything from a UAV to something that is a small platform aircraft. I think that is also giving us good dividends as well. So we expect that to grow. We have expanded the international team for the business as well, and, yeah, we are very hopeful and enthusiastic about where that is going.

Yeah. And I would just make one other point to reiterate Chris’s comments. You know, if you look at some of our metrics we reported, you will see we have started adding the LEO units online, and more than half of those are in Europe. So I think that is really proving the point that Chris has articulated, that that is a very strong market for us. Thank you.

Our next question comes from Justin Lang with Morgan Stanley.

Hi, good morning. Thanks for taking the questions. Chris, appreciate the comments around Galileo and 5G aircraft online expectations this year. But curious if we could provide a little more color on what level of service revenues from the new products are factored into the guide currently? And just on the top-line range, what factors might push you to the high end versus the low end this year? What should we be watching for? Thanks.

Yeah. So I think from a, there is obviously a lot of ins and outs to this because the ATG revenue on the existing book is going down significantly. Right? That is about $40,000,000. And then the remainder of kind of the decline in service is from the GEO business. But, you know, we do expect a nice little uptick on the LEO. I would say the LEO service revenue is offsetting not quite half, but almost half of the decline in the legacy products. And then, obviously, the equipment mix, that is a big piece of the revenue bridge from last year.

Got it. That is helpful. And then just, sort of cadence basis, should we expect a much stronger second half this year as some of these new products dial in? Or is that a stretch? And then maybe,

Yeah. So I think a couple points. One, it does take three to six months, about, on the HDXs to get installed, so you are right. It is going to take a little bit of time to see the service revenue. From a free cash flow perspective, like we said in Q4, you saw kind of an inventory build. You will probably see that in Q1 as well, and that is really for all the shipments. Right? So we have to make sure we can deliver these orders as requested, so we are ramping up. I think the ramp will be done this quarter, and then you will see more and more flows out in Q2 and Q3. So I think from a cash flow perspective, you will see better cash flow in the other three quarters. Then, was there another one? Did I get all—okay. That is helpful. I think I—

I will sneak one more in just on the MilGov topic. It is strictly around the C-130 opportunity you are talking about? Chris, and I think there is a mention of over 1,000 aircraft in the TAM. So how big of a discrete revenue opportunity is this for you? And, sort of secondly, I think we saw you won a seat on the MDA SHIELD IDIQ a little while ago. So how should we think about potential Gogo Inc. contribution to Golden Dome? Thanks.

Yeah. I think if you look at the TAM for the C-130, it is 1,000. So that is pretty significant, and getting that hatch mount, which is a really important product for those guys because it is very low-cost installation again. I think that has been one of the prohibiting points for the military, actually fitting communications onto the aircraft. I think, you know, the wins that we are having with the DOD around things like Golden Dome, we will see how that pans out over time, but I think our approach is really kind of pushing in the adaptable, really easy, low-cost install. We are moving away from the thousand-dollar hammer, or them having to fund our business whereby hundreds of millions of dollars—we do not need that. We are really very specifically focused towards our military customers to get them quick, expandable technology that can be upgradable very easily in the future as technology changes. I think that is really resonating with the military. And then if you look at the overseas military outside of the DOD, which is a huge opportunity—obviously, the DOD does the largest spend globally on military spending—aviation is becoming so much more important. Border patrol and also head of state. And we have had wins in the last twelve months around anything from surveillance aircraft right through to significant heads of state wins, and so it is a really versatile portfolio. We believe that it is a really underserved market, very much like the business aviation market with broadband connectivity. So we just see that being a very positive outcome for the business. And the nice thing is, as well, we really do not have to put a lot of CapEx in adapting the technology either. It is really kind of off-the-shelf commercial aviation technology that we have kind of developed for business—purpose-built for business aviation. We are actually able to take that and put that into those markets. And I think the C-130 is just one platform that is obviously utilized globally, but there are other airframes there like the A400M, which is very popular in Europe. So we are really going after that part. We have really boosted up the sales team. We put that under new leadership, and we are seeing significant kind of uptick from that. So we are really excited about it.

Great color. Thank you.

Our next question comes from Alexander Phipps with OHA.

Guys, thanks for the call today. Overall, congrats on the quarter. Seems like it is starting to stabilize a bit. How should we think about, I guess, I understand the concept of people getting a backup with GEO to supplement their LEO. But how should we think about where ARPU should stabilize on the GEO business longer term if someone is just using it as a backup solution.

I think the big thing is if you look at total revenue by the airframe. Right? So I think that is going to change over time. So where we have had a traditional single kind of source coming from the airframe as a primary communication method, whether it is GEO or ATG within CONUS with the U.S. market, now with Galileo, and obviously the demand that we are seeing for LEO, which is brilliant, I think the big thing is for those global operators having continuity of service globally is so critically important. I think the way we are looking at it is kind of a blended offer for those larger aircraft, which is similar to what we probably get from GEO today, but we will see that more as a blended offer from connectivity forms. So that is the way we are kind of looking at it right now.

Got it. And then on the online fitting, so it is good to hear that you guys are going to be getting a bunch of new line fits for the HDX. Do you know what percentage of, I guess, what percentage of planes on the GEO side, let us say, that are line-fit with a Satcom Direct solution are also currently line-fit with a Starlink solution? And, I guess, how exactly does that work? Does the tail of the plane—and then the customer—need to keep the GEO solution and then get the Starlink solution installed at an MRO after the fact, or can they actually opt just to get Starlink and not have the SD solution put in the tail?

I will answer in a couple of different ways. So at this point in time, I think we have set ourselves up that when you buy an aircraft across any airframe over the next twelve months, we are in a position that ultimately you will either choose the competitor or us when it comes to LEO. That is a really important point to make. GEO is still line-fit across those OEMs which can actually fit it into the tail. And we are seeing the fact that customers do want an alternative. If at the moment they are not installing our solution as the LEO solution, they are still seeing the need for GEO. The reason for that is when you look at the larger airframe manufacturers, you know, these aircraft fly fourteen hours. They are flying all around the world. And there are large portions of the LEO network, from a regulatory perspective, that are still not connecting today. So you really need that assurance of that GEO backup. The other thing which we are also seeing is a lot of our customers like that assurance because we provide a lot of different things that other people do not provide as well, such as cybersecurity, continuity of service, and a number of value adds. And also, having that connectivity allows our support, which is global—you know, we have got human beings who can answer the phones, but we have also put a lot of technology into our back end so we can filter through where really the issues are with the aircraft and fix issues for customers really before they even know about them or are reporting them back to us. So I think that GEO position as a backup, but also from a continuity of service providing bandwidth, we are seeing that customers are also still utilizing the service even if they have LEO onboard because we are also pushing off a lot of information and synchronizing those with other OEMs such as engine manufacturers, operations, tracking the aircraft. So it is a lot more nuanced than just providing connectivity. So we are seeing that, but I think the really exciting thing just to reiterate is we will be in a position over this year that, you know, we are a genuine choice for a customer no matter the size of the airframe. But all of our customers now have a true broadband solution whether it is kind of 5G as an entry service and then LEO service as a, like, a primary LEO low-latency, high-bandwidth product at an enterprise-level communication method as well. So it is a really exciting time for the company.

Yeah. And I would just kind of dovetail on that. I think it is a critical point on the line fit. When you look at the GEO adds we have had this year, those are almost all exclusively line fit. Right? And that was kind of the old Satcom way that we were able to grow that business so well, because, you know, like you said, you had to pick a provider, and that is where we will be at the end of this year and the beginning of next year. Whereas this year, it is a lot of aftermarket, and you have got to slot guys into maintenance times, and it is a bigger sales lift until you get line fit.

Yeah. And I think now, at least, we have also got both ends of the market. We have got a really strong MRO base. We have got amazing MRO partners. And we have also got amazing OEM partners. And we have a direct sales team who are going out to customers when they are specifying their airframe or they are maintaining their airframe, whether it is in the aftermarket. They can actually walk customers through what connectivity solutions are needed for the size of airframe and the mission that they actually have for that aircraft as well. So, you know, I think we are going to the market in a kind of multipronged way anyway.

That is super helpful. I guess just two quick follow-ups on that. On the point where customers are going to still use—they will have the GEO as a backup, but they are going to be using a LEO high-bandwidth solution—like, where should ARPU shake out? Is it half of where it is now for the GEO solution? Is it, like, a quarter? Just any comments on that. And then I guess on the line fit, like, just to kind of say it a different way, like, I mean, if you go on a commercial airplane right now, there is still an ashtray in the bathroom, and that is not because they think someone is going to smoke in it. It is because the door to the bathroom got an STC back in 1960 with the ashtray in it. Like, do planes have to—if they have an STC with an SD solution in the tail—will it be rolled out? Like, will that plane always be delivered with that in the tail, or will customers have the option to just get Starlink and not have that in the tail of the plane.

Well, I think the big point is on communications, it is always choice. So outside of safety services, the OEMs always enable choice on what connectivity solutions that you have, and that is also then dependent on the STC. So you absolutely have choice on not specifying different connectivity. However, it is very different to commercial aviation where kind of utilizing the connectivity service onboard is a chargeable event and kind of the attrition for the airlines is quite—it is a really different model. For a business jet, it is a necessity and a need. And then also, it really depends on the utilization, who is using it, and therefore, whether it is primary or backup. We have seen that this is not a new thing for us. If we look at our narrowband service to when GX came in as a service, that did not just go away. We are still activating narrowband services with our OEMs today. So I get your point on kind of, like, the analogy with the ashtray. I think this is more kind of really—yeah, the STC has been invested in. It is also very difficult to get things on airplanes, to your point. So these things linger around for a while. But we are seeing utilization on the GEO service even if another service is on board, as we do with narrowband services that are being utilized with GEO onboard as well. So we have got a lot of experience in this, and that is the bit where we do feel that it will be a multipoint approach with a lot of customers with the larger aircraft. Obviously, on the smaller aircraft, that is a little bit different. We usually see a single source of communications as the primary communications method. However, the nice thing is with the HDX, it can really get down to those smaller airframes where actually our competition antenna is quite large. So I think that is the bit where, you know, we feel really quite strong about different sizes of the market. And then with 5G coming in as a revolutionary service for these Classic customers or people going to C1s, you know, really this is going to true broadband. So again, you know, we are seeing OEMs investing in 5G for the line as well. But I think the choice for the customer has always been there, and there is nothing new with that. I think that is the biggest takeaway from my perspective. And then on the numbers side, really on the ARPU, the ARPU will really settle—you know, that is a really tough one to navigate at this point because we are still seeing strong offers from GEO because of the necessity of having that backup. But at some point, we truly do believe that it is going to blend together, whereas where we really see the true blended rates, we see that being around what we get from GEO today on the kind of higher end because they are ultimately getting multiple services. The nice thing with Gogo Inc., we are the only company who provides all of those services, and we can send the customer an integrated bill so they are not looking at—it is almost like utilizing your mobile phone. You know, you are not looking at how much network utilization you took off AT&T versus Verizon. You will be looking at this from us as a blended bill from Gogo Inc., very simple, but ultimately knowing you have got the assurance of backup on your data as well. Hope that makes sense.

Yeah. That is super helpful. I promise one more quick one, and then I will shut up. It is, like, gun to your head, just to help conceptualize what the white space looks like because, to me, it seems like there is a lot of white space. Like, excluding MilGov, just BizAv, like, what do you think the mix will be five years down the line in terms of composition of your fleet—North America or, let us say, EMEA and APAC—on types of service? I think—well, just like AOL. Just like AOL. Like, I mean, obviously, right now, the AOLs are—like you said, half of the LEO that came online are Europe, if I recall correctly. Like, do you think that that is going to be the mix longer term? Do you think it is going to be, like, 50% of your LEO fleet is non-U.S. and 50% domestic? Or is that just right now?

I think we are seeing the demand. We have always been seeing the utilization of business aircraft outside of North America is growing at a rapid rate. So therefore, I think it would be a logical assumption that the splits that we have got at the moment—you know, North America is obviously the biggest market. We believe we will hold a good percentage in that. And I think having that kind of 60/40 split is a good way of thinking of it long term. And as the international market grows, and we will grow into that, we also have offices all around the world, so we can really kind of support those customers. But also those customers over a period of time, you know, they will be taking aircraft from the OEM. And the nice thing now is they can actually spec it at the OEM with our services. So I think that will naturally grow as well, but I think that kind of 60/40 split is the kind of way we are thinking about it for the business over the next few years.

Super, super helpful. And thanks so much, guys.

Yeah. No. It is—

That concludes today’s question-and-answer session. I would like to turn the call back to Will Davis for closing remarks.

Thank you, everyone, for your participation in our fourth quarter earnings call.

You may disconnect.