Good day, and thank you for standing by. Welcome to the Q2 2025 Gogo Earnings Conference Call. [Operator Instructions] Please be advised that this conference is being recorded. I would now like to turn the conference over to your first speaker today, Will Davis, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Gogo's Second Quarter 2025 Earnings Conference Call. Joining me today to talk about our results are Chris Moore, CEO; and Zach Cotner, our CFO. Before we get started, I would like to take this opportunity to remind you that during the course of this call, we may make forward- looking statements regarding future events and the future performance of the company. We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements on this call. Those risk factors are described in our earnings release filed this morning and in a more fully detailed note under Risk Factors filed in our annual report on 10-K and 10-Q and other documents that we have filed with the SEC. In addition, please note that the date of this conference call is August 7, 2025. 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. During this call, we'll present both GAAP and non-GAAP financial measures. We have included a reconciliation and explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures in our second quarter earnings release. This call is being webcasted and available at ir.gogoair.com. The earnings release is also available on the website. After management comments, we'll host a Q&A session with the financial community only. It is now my great pleasure to turn the call over to Chris.

Thanks, Will, and good morning, everyone. We believe our Q2 performance reflects the fundamental strengths and capabilities of our business to revolutionize in-flight connectivity by leveraging our strong market position as the only independent global multi-orbit, multiband connectivity company in aviation. With LEO, GEO and ATG Broadband, we are strongly positioned to support durable demand trends. In Q2, the business continued to show growth as demand for our GEO solutions remained strong across the global business aviation and military government mobility markets as we see increased advanced shipments and continued rollout of Gogo Galileo's STCs. Zach will provide more details on our financial performance shortly, but I first want to highlight some key areas of growth and success. Starting with ATG, we reached several significant milestones in the quarter. It gives our team great pride that we announced an important industry first as we completed the initial end-to-end call using the Gogo 5G chip. We now have the first 5G aircards in hand and are progressing with the remaining development, integration and testing that will prepare us for our expected Q4 launch this year on the already deployed and operational 5G terrestrial infrastructure. We also have positive news regarding our FCC rip and replace program, which now provides a $35,000 incentive for C1 installations completed before December 31, 2025. The C1 incentive enables upgrades for over 40 aircraft models to our LTE network. This funding and certification allows classic customers to seamlessly upgrade in advance of the May 8, 2026, classic network cutover. We also had significant announcements for Gogo Galileo with the 2 OEM wins. Embraer announced it will offer Gogo Galileo HDX as an aftermarket option for the popular been on 300 light jets, which has over 800 aircraft in operation. Textron also announced that the HD-X will…

Thanks, Chris, and good morning, everyone. Like last quarter, I'm pleased to report the second quarter results were ahead of expectations for revenue, adjusted EBITDA and free cash flow. Our integration is progressing well. Cost controls are taking root and the demand for our new products continues to ramp. As our product investments roll off, we continue to expect solid free cash flow growth in '26 combined with further deleveraging. Strong first half results led to improvements across the board in our '25 financial guidance, which I'll discuss later in my remarks. Our 2025 guidance continues to reflect limited new product revenue given most HDX shipments are STC focused and our 5G network is anticipated to launch in Q4. 2025 remains an investment year, priming the pump for new product service revenue in 2026 and beyond. I'll now provide an overview of Gogo's second quarter financial performance, then I will turn to our capital allocation priorities and our positive outlook regarding the potential refinancing over the coming quarters. And finally, I'll conclude with additional context on our raised 2025 financial guidance. On a combined pro forma basis, Gogo's total revenue in the second quarter was $226 million, up 1% year-over-year and down about 2% sequentially. On a stand-alone basis, Satcom Direct's Q2 revenue grew approximately 1% from the prior year. Total service revenue of $194 million increased 137% over the prior year and declined 2% compared to the prior quarter. At the end of Q2, total ATG aircraft online were 6,730 or a decline of approximately 4% versus the prior year period and down 2.5% sequentially. Despite the pressure on total ATG AOL, AVANCE AOL grew nearly 14% from the prior year period and now comprises more than 71% of the total ATG fleet, up from 60% in Q2 2024.…

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

Just maybe to jump in on the ATG front, down 170 this quarter. I know there are a lot of moving parts in terms of 5G transitions, reimbursement programs that are ongoing and there have been longer maintenance events. I'm wondering, can you take us through a time line of when you expect to see a return to growth in ATG and what the ultimate opportunity and penetration opportunity is for ATG when you look at aircraft within North America. I think there's a lot of different issues out there in terms of how much is ATG versus the Galileo potential. I'd love to kind of understand of stabilization time lines, which seem like it should be coinciding now with 5G commercialization, but how that growth should ramp up into '26 and beyond with 5G and with C1.

Okay. There's a lot there. So let me -- I'll start with kind of market opportunity and where we kind of see that, and I'll let Zach chip in with the numbers and kind of how we see that playing out. But I think if you look at the suspensions and deactivations over that period of time in the quarter, obviously, it's a little bit more than previous. But I think if you look at the AVANCE shipments, the real reason for that is upgrades. So you can already see there's strong pull in that and the AVANCE numbers are obviously extremely strong. So we're not concerned with the suspensions, although obviously, they're a little bit higher than previous. I think also now we're building the strong backlog in Galileo product portfolio, we're feeling pretty confident that those customers are looking at the product portfolio as well and then with the announcement of 5G. So we're not concerned -- or any concerns at this point that we can't migrate customers and then also with the FCC funding with the C1 that now those customers have really got a good path. And we've only just got that done at 0 cost of upgrading themselves to the new LTE network as well. So we think we're going to kind of keep customers. Also, they're not just leaving the network. There are a number of suspensions in there. We see that with kind of seasonal behavior, maintenance. We logged that pretty well. So at this point, we think we've got a strong growth path. We've got multiple products in the portfolio for customers to go to, and we're seeing strong performance with the AVANCE shipments. So I think we're in a good spot. I don't know if Zach, do you want to add anything to that on the number side?

Yes. I mean I think the -- like we've said in the guidance, it's -- we still assume that the net ATG numbers are going to be down this year, but we're hopeful that next year with the C1 and the 5G launch, like you said, that will start to pick back up. The other thing that's interesting is when we look at deactivation reasoning, it's -- the highest drivers are consistent with what we've seen in other quarters, which are like to Chris' point, sold aircraft or management changes, right? So I think we also mentioned on the last call, we're kind of ramping up our inside sales team to really focus on these customers. It's early days, like we said, because it just kind of started in Q2, but they had a little bit of progress, but we got to get more focused on it.

Great. Very helpful. And just to clarify, Chris, on that front, it's -- these are not competitive losses to Starlink. This is suspensions, and this is the normal transition that we see in the ATG business now ahead of 2 major product cycles.

Yes. We're not seeing a mass level of loss to competition, no. It's -- like Zach said, it's the same reasons. We have really comprehensive deactivation process. So we're not seeing kind of like mass losses to competition in the deactivation.

Got you. And lastly, if I could, and then I'll get back in the queue. On the GEO front, you guys, I think, continue to outperform the early expectations, both in terms of aircraft and I think pricing. I'm wondering if you could just give us some longer-term thoughts in that market because I think at the time of the acquisition, there was some concern around the ARPAs related to the GEO market opportunity. It doesn't really seem like that's materializing at least not as fast. So I'm wondering if you could just give some updated thoughts on that opportunity and how you see GEO progressing over the next couple of years.

I'll cover the business side, but do you want to cover the ARPA piece?

Yes. I think as we said before, we anticipated even last year before the deal that we were going to see more ARPA contraction. But I think the nice thing that's happened is like we said, a lot of times, this stuff is very expensive to swap out, right? And if it's good enough for a lot of folks, they're not going to spend $500,000, $600,000 if it's satisfying their needs. I think our view is longer term, it's going to have to come down slightly. It's just the rate at which it does is it's kind of anybody's guess. But like I said, we're working on our long-term model, and it will assume modest degradation over the next few years.

Yes. I'll just add to -- I think customers have been waiting for Galileo. So I think that's a good testament to customers believing in Gogo, which is great. We've just got to get, obviously, the products out to them, which we're now executing on, which is fantastic. The other piece would be GEO business. We also launched our own products within that within the last few years, which actually really enhanced the performance of those networks with the Plane Simple range. And then I think also just like what I said in the script, it's just kind of like earlier on, it's a testament to having line-fit positions, which we're very lucky to have really, and we've worked hard to get. And you can see that kind of working through the OEMs as well as the MROs. But those products are predominantly really strong OEM products. So I think with that mix, like Zach said, that business is holding up really, really well.

I'll get back in the queue. Really exciting to see what's going on with 5G and the traction that you're seeing with Galileo.

[Operator Instructions] I am showing no further questions at this time. I will now turn it over to Will Davis for close. One moment.

I think somebody just came in.

We have Scott Searle from ROTH Capital Partners.

I apologize. If no one else is going to hop on, I'll pepper you with a few more. Chris, it sounds like there's some interesting opportunities percolating with 5G private network opportunities. I think you referenced some military applications potentially in North America. I'm wondering if there's any additional color on that front. And also, I'm not sure if there were some 5G metrics that you provided in terms of the number of 5G-ready aircraft at this point in time as we start to get to that 4G launch time period.

Yes. I mean, I'll cover the government piece, and then I'll let Zach to stick to the numbers, so they're nice and accurate. With that military business, I mean, it's really new to Gogo, but not from the SD point of view from the business. So we've been in the government business pretty much for over 20 years. So looking at the 5G piece and the opportunity of those increased speeds and then looking at the U.S. DoD, we really do think there's some opportunity there of giving kind of broadband resilience with pace planning. The other thing we're looking at is the potential with UAVs, which I mentioned on a previous call as well, we've started looking at that with HDX as well on the fact that we see that market growing massively from the military markets, not only from a domestic point of view, but from a global point of view for Galileo. Then actually 5G could be a really interesting alternative for conus. And we're pursuing those opportunities at the moment. It's very early days. But the fact that we're starting to talk to the customers about that, we're actually getting some level of interest on exploring that. Now we've got the product. So our government team is really in tune with the DoD and the different aspects of government within the U.S. So actually, we kind of -- we see that as being a potential new market. So we're just exploring it early days, but pretty excited. And then on the backlog, it's...

I think it's a little over 300, pre-provisioned.

Yes, they're all pre-provisioned. So the network is there. I mean it's all rolled out. The towers are done, as I said before. It's just kind of getting these 5G cards in those boxes and converting those customers really quick. And those customers have been fantastic, really patient. So we're really motivated on getting those guys over really, really quickly.

Our next question comes from Justin Lane from Morgan Stanley.

A few quick ones for me. Maybe can you just provide a little more color on the CapEx guidance change? I understand the net number doesn't change, but just maybe the underlying drivers of the difference in the guide.

Yes, it's all related to the reimbursement for the Rip and Replace Program. Basically, we've accelerated some stuff that would have hit next year. It's really to make sure in advance of the cutover date that we're totally buttoned up. So it's just pulling in from next year. And then like I said, it's all reimbursed. So basically, everything else is pretty similar.

Okay. Great. And then maybe just on the HDX shipments in the quarter, it looks like they might have stepped down sequentially. Is there anything to call out? I mean, was that a dynamic that was sort of anticipated or anything to call out there?

Yes, that was anticipated. At the moment, we're rolling out those STCs. And really, I mean, at the moment, this is all just preparation work for 2026. So the -- from an FTC point of view, we've pretty much on the HDX got them all shipped out to our MRO partners. So we've got great traction there. We do have customers now starting to deploy, which is great. But that aviation cycles, unfortunately, I mean, it's good and it's a bad thing. It's a difficult market to get into from a competitor point of view, which kind of gives us good moats around the business. But equally, you've got to get the products ready. You've got to go through the FAA. You've got all of those aspects. So as we've said previously on calls, 2025 for us is really a build year on making sure that we've got those STCs. So this is all kind of anticipated. We don't see any slowdown in ramp on the profit.

Okay. Great. And maybe just last one on the MilGov business. Chris, I think you mentioned in your prepared remarks some delays in awards. Just curious if you could elaborate there. I mean, is that trend holding steady? Or does that look like it might reverse? And then just because we got the President's budget and the one Big Beautiful Bill Act, just from a MilGov perspective, is there anything above or below expectations in either of those?

Yes. Just kind of -- things are moving a little bit slower than expected. So -- and then there's just the nature of the government business really. Awards come, you try and influence as much as you can. The budget cycles, they operate a little bit differently as well. So we're hoping kind of we start seeing a little bit more movement in Q4 where you typically -- from a trend point of view, we've seen that. So fiscal year... Fiscal year starts. I think it's October, I would say. So I think, hopefully, we start seeing things through. But I would say there's definitely an acknowledgment with the administration on the need for the technology refresh. We've had a lot of interest on demonstrations, technology, the CIPR awards, the research grant awards are really strong. We're looking at it kind of next year rolling out our software within the Air Force, which is a really kind of good point for us. I mean they've been a great partner with us as well, the U.S. Air Force on developing that software platform with them. So I think things will start picking up, but it's a really difficult thing to predict. So -- and then the one piece of it, what we've seen, right, it's small business, but it's exceptional growth this year has actually been the international market. And I think that kind of step- up of NATO, people looking at their budgets. We're starting to see a lot of interest being generated from overseas clients, and that team has been growing quite a lot. And the way they contract is quite different to the DoD as well, and the fiscal cycle is a little bit different. So we're very optimistic. Team is working really hard, doing a really good job. So yes, we'll kind of wait and see. But the technology is there, which is the exciting piece. It's not like we're now waiting for the technology to come. I think with the expansive product portfolio and delivering on the product portfolio, I think we've now got something really interesting for the military.

Our last question comes from Louie DiPalma from William Blair.

Do you remain confident in, I think, approximately the $65 million in cost for 2025 coming out in 2026 as it relates to the different synergies and milestone payments for 5G, HDX and FDX, and how should we think of like the costs in 2025 versus 2026?

Yes. I think we still feel like the vast majority of that will go away. Like you said, we get the full year of synergies. And then obviously, we're kind of working on our R&D road map. I don't know that we're ready to release what projects are we working on. So some of that will get backfilled, but the vast majority will be pulled out.

Great. And one final one. From a high level, as you and customers have done more testing of HDX and FDX, just in general, how does it compare with Starlink in the market. Even though there are many less OneWeb satellites than Starlink, it appears that the OneWeb constellation is far less utilized. So how has the performance and testing been for the different solutions? And also, I missed the first part of the call, but what is the timing for flight test of 5G?

Yes, I'll handle the 5G thing first, Louie. So yes, we've got the customers ready to go, really got FTCs and things flying. So from a network point of view, I think rollout in Q4 is planned and migrating those customers over. There's no hold up there. So the 5G thing is pretty straightforward. Now we've got the chip. On the performance on Galileo, we're seeing great performance metrics. I think the nice thing is we're not seeing people do futile speed tests in the cabin because they can do what they want to do in that low latency snappy product feel is that they've got. We've got aircraft now flying around, capturing a lot of data. We're seeing very consistent service, happy customers. I think the fact that we've truly designed an aviation-grade product. And more importantly, we've got the support because things do happen from networks point of view that we make that seamless for customers. We can get an engineer. We advertise under 24 hours on an aircraft anywhere in the world. The reality is we don't really go beyond 12 hours and having that human touch if we need it. But the team has been great. Customers have been fantastic. Some big anchor clients who we've announced before in the past. And they're moving ahead and very, very happy with the service. So we're very enthusiastic. And we're seeing great performance on the FDX as well. And we're just wrapping up the FTCs on that. So yes, it's -- I think it's -- I think this is a bit where everybody kind of looks at satellite networks and speed tests, whereas having consistent performance in flights and you can fly anywhere in the world with our services, whether you're using dual-purpose service or you're not. So you're using multi-networks or a single network. I mean our aim is to have consistent service anywhere a client flies anywhere in the world. And I think we can safely say that we can do that.

The question-and-answer session is now closed. I will now turn it over to Will Davis for closing remarks.

Thank you all for your participation in our second quarter earnings call. You may disconnect.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.