Gogo Inc. (GOGO) Q4 FY2025 Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to Gogo's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your speaker today, Will Davis, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Gogo's Fourth Quarter 2025 Earnings Conference Call. Joining me today to discuss our results are Chris Moore, CEO; and Zach Cotner, CFO. I would like 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 February 27th, 2026. 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've included a reconciliation and explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures in our fourth quarter earnings release. Our call is being webcast 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.

Thank you, Will, and good morning. I'm pleased with our product and synergy execution in 2025 as we transform Gogo from a U.S.-focused entity into a global multi-orbit in-flight 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 demonstratable progress made across our compelling new product portfolio. These include Gogo 5G and Gogo Galileo with 2 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 the combined Galileo and 5G shipments to exceed 1,000 units. We expect that the activation of those aircraft will create a high-margin reoccurring service revenue stream that sets the stage for free cash flow growth and long-term strategic value. Let's 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's review our outlook for Gogo Galileo, our global LEO-based service with 2 offerings, starting with HGX, which was purpose-built to fit on all 41,000 global business aircraft. It is ideal for the 12,000 midsized and smaller aircraft outside North America without broadband and the 11,000 midsized and smaller aircraft in North America that fly outside CONUS or want faster speed than 5G air to ground. By contrast, FBX 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 440 new LEO satellites, ensuring full operational continuity for its constellation into late 2030s. Given that HDX has a total addressable market over 4x that of FDX shipments and installations of HDX will naturally be much higher than FDX. The product has also been designed to fit many mid- to large cabin aircraft tails, which expands the opportunity from standard LEO fusel large mountings. The average monthly service revenue and profit for 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 broadband connectivity, 35% to 40% are large jets, 30% are medium, 25% are light and less than 5% on turboprops. Now turning to STCs. STCs are a critical part to building our global LEO business, and we continue to make solid progress. Gogo has completed 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 the first half of 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 IATA validation for the Dassault Falcon 2000. Given the installed base and growth potential, a Challenger STC is worth substantially more to us than a Learjet 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 shipped over 300 HDX and FDX antennas with 84% for named customers. By the end of 2026, we expect to have shipped nearly 900 Galileo antennas and with an expected ship-to-install time of about 3 to 6 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's 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 clear opportunity to provide Galileo service to 1,000 aircraft amongst our 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 1/3 of our Galileo shipments and AOL will be tied to our global fleet accounts. HDX 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 billion, expanding VistaJet's fleet to around 400. VistaJet announced that Gogo Galileo was a cornerstone of its digital and in-flight innovation pillar as part of the Vista 2030 growth strategy. Our largest fleet customers 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 this fleet by several hundreds over the next few years. As a reminder, the NetJets contract renewal that Gogo announced in February of 2024 is still active. Gogo has installed HDX on dozens of aircraft in the NetJets European fleet, including Challenger 350s and Phenom 300 Latitude, and we continue to expand installations. Within the NetJets North American 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 will remain a key partner to help facilitate connectivity upgrades for their global fleet in the coming years. In addition to fleet, we expect the Galileo line-fit option wins will be another critical source of long-term growth. We are a line-fit 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 the end of 2026. In our view, these wins validate Gogo 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's continue with Gogo 5G, which substantially increases the speed, performance and capacity of our air-to-ground 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 to pre-provision 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 has 5G licit deals with 5 OEMs, 2 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 an active valuable backup service on certain aircraft seeking redundancy and enhanced capacity. We recently unveiled updating 5G pricing, highlighting its positioning as a cost-effective way to increase speeds tenfold versus our current L5 solution. Monthly service pricing for unlimited data is now $5,500 and 5G equipment MSRP is now USD 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's 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. It increases network capacity and fast speed, and it accelerates our U.S. government business on the air-to-ground 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 330 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 0 sometime in Q4 2026. As of Q4, about 300 classic AOL are part of fractional or managed accounts, AKA fleets with a defined upgrade path, leaving only 800 classic aircraft not associated with a fleet account. All in, our Q4 air-to-ground 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's 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 Plain Simple Ka products 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 SDR 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 without box swaps or 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, including 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 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 2 to 3 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 Ka-band hatch mounts to C-130 aircraft with a TAM of over 1,000 airframes. A multi-orbit [ win ] to provide LEO, GEO and 5G connectivity to a division of the U.S. government and a 5-year contract with SES Space & Defense for a blanket purchase agreement for U.S. Space Force Space Systems Command with a $33 million contract ceiling value. Thank you for the continued support, and I trust that you will all see our outstanding progress transforming Gogo 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 Zach for the numbers.

Thanks, Chris, and good morning, everyone. 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 our 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 the 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'll 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's total revenue in the fourth quarter was $231 million, up 3% year-over-year on a combined pro forma basis as well as sequentially. Total service revenue of $192 million increased 61% versus the prior year and increased 1% sequentially. Total ATG aircraft online at the end of Q4 was 6,402, a decline of 9% versus the prior year period and down 2% sequentially. Total advanced AOL increased 8% from the prior year period and now comprises 77% of the total ATG fleet, up from 65% a year ago. Since the end of 2022, our total advanced 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 0 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 million. Now turning to equipment revenue. Total equipment revenue in Q4 was $39 million, 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 2 years. As expected, advanced 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 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 $58.2 million, up slightly sequentially due to the ongoing litigation expense, which was $8.4 million during the quarter. Let's now turn to our major strategic initiatives, 5G, Galileo and LTE network upgrade and the FCC reimbursement program. Total 5G spend in Q4 was $1.7 million, almost all tied to CapEx. Total 5G spend in 2025 was $12.6 million, which we expect to decline by about 50% in 2026. Q4 Galileo spend was $2.6 million with 70% tied to CapEx. Galileo spending of $10 million in 2025 is expected to decline considerably in 2026 to $1.5 million 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 reach about $40 million, well below our original plan of $50 million. 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 million in FCC grant funding, bringing our program to date total to $93.9 million. As of year-end 2025, we reported a $27.8 million receivable from the FCC and incurred $35.7 million 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's adjusted EBITDA in Q4 was $37.8 million, in line with our implied 2025 guidance. Net income for the quarter was negative $10 million, but was affected by a $10 million litigation settlement accrual, a $4 million charge related to the 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 costs 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 $89.2 million in free cash flow, which was at the high end of our guidance range of $60 million to $90 million. Free cash flow was slightly negative in Q4 due to previously flagged factors, including a $17 million increase in inventory tied to our new products as well as lower EBITDA. Let's now turn to our balance sheet. Gogo ended the fourth quarter with $125.2 million in cash and short-term investments and $848 million in outstanding principal on our 2 term loans with our $122 million revolver remaining undrawn. Our Q4 net leverage ratio was 3.3x and within our target leverage ratio of 2.5 to 3.5x. Our Q4 cash interest paid net of hedge cash flow was $17 million. Our hedge agreement remained at $250 million with a strike price of 225 bps, resulting in approximately 30% of the loans being hedged. As a reminder, the hedge amount will decrease to $200 million on July 31st, 2026, and expires on July 30th, 2027. In 2025, cash interest paid net of hedge cash flow was approximately $67 million. 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 million 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 provide 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 million to $945 million, 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 million to $218 million and free cash flow in the range of $90 million to $110 million, implying 12% year-over-year growth at the midpoint. We expect approximately $30 million for strategic investments in 2026, net of any FCC reimbursement, down about 45% from our strategic spend of $56 million in 2025. The majority of our strategic investments this year are tied to fleet promotions and STCs and will flow through operating assets. Net CapEx of $20 million after $45 million in CapEx reimbursement from the FCC reimbursement program as we complete the LTE the ground network build. In addition, here are some incremental points that could aid in your modeling and provide context on how we look at the business. One, we believe that MilGov revenue in 2026 will grow faster than overall Gogo revenue. On a sequential basis, Q4 MilGov service revenue grew an impressive 14%. Two, AO 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. Three, 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. And four, our 2026 free cash flow estimate excludes an estimated $40 million earn-out payment in April, which we expect to pay from cash on. In conclusion, we have made significant progress in the past 15 months since the closing of the Satcom deal. Our 3-year 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 team for their hard work in driving our transformation and their commitment to outstanding customer service. Operator, this concludes our prepared remarks. Please open the queue for questions.

[Operator Instructions] Our first question comes from Scott Searle with ROTH Capital Partners.

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 NetJet AOL that you have online across the different types of aircraft across the different geographies? And then I had a follow-up.

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

Got you. And then as it relates to the classic transformation, we're down to about 1,000 aircraft right now. I know there's a cutover point in the middle of this year. A couple of things. It sounds like by the end of this year, that's going to be resolved at one point or another. You expect to have 0 Classics online. I'm wondering how you're seeing the conversion rate in terms of going to C1 and upgrade to AVANCE. So in other words, how many -- what's the attrition number going to look like within that base as we get to the end of this year? And last one, if I could throw in as well. Satcom growth within the MilGov space has been very, very good. It sounds like you're going to be growing this year, going to be growing that faster than the rest of the business. But I'm wondering if you could give us a framework of what that could look like by in terms of percentage of mix by the end of '26 and maybe end of '27.

Yes. I mean the -- I'll start with the MilGov piece. The MilGov is expanding. We're seeing a lot of opportunity in Europe. Still as I mentioned in the call, we're 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're positioned now in -- with 5G, Galileo and our GEO broadband offerings that we have broadband offerings for all of our customers no matter wherever they're 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've got multiple revenue streams coming from an airframe instead of a single as well. The government part of the business, we're already seeing a lot of opportunity with UAVs. Europe is obviously doing a lot more focus on expenditure on military spending. I think we're reaping the rewards of that as well. The DoD is a very underpenetrated market, as I mentioned on the call. If you look at that, they had the 25x25 campaign a few years ago. They still haven't reached that. Our technology is a lot more deployable, cost-effective, aviation bill, aviation grade and they also don't want interdependencies on a single supplier. So I think 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 '26, '27 and beyond.

Yes. And I think from a mix standpoint, we -- like we said, we do anticipate it's going to grow faster this year than last year. And a big driver of that is obviously equipment, but we also won a pretty sizable contract kind of late Q3. That's why you saw the nice Q4 pop in the MilGov numbers, which should continue for most of the year. And the equipment side, you're going to see a lot more growth on that largely because 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 the guys are keenly focused on it.

Yes. 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've got factored into the current 2026 guidance?

Yes. So when we look at the Advanced Classic mix, the guidance does assume that there's an extension granted and so it doesn't go dark in Q2, but it's still going to decline, right? And there will be some advanced declines. There will be some C1 decline Classic, right? So long story short, our view is between Classic Advance, but then also with the addition of 5G, the total ATG portfolio will be down about 1,000 units by year-end. And then 100 or so Classics basically are assumed to not convert at year-end.

Our next question comes from Sebastiano Petti with JPMorgan.

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're seeing from an international perspective across the portfolio between the backlog on Galileo. You touched on some of the MilGov interest for DoD, but also maybe internationally. Maybe kind of start there, and then I'll have a follow-up.

Yes. 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's a significant win. But also if you look at Luxaviation, Avcon Jet, that back order on those large fleet operators outside of NetJet, specifically within Europe as well is significant and 1,000-plus aircraft, we know that we're still holding true to that number regardless of NetJet. We're still excited about the NetJets rollout in Europe as well and the feedback we've had on the product have been extremely ecstatic. If you look at our pipeline, it's 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 cloud to it. But more importantly, these guys have not had a broadband solution on a number of these aircraft, especially those that can't support the rather expensive installation costs of going into the tail or the size of that. So we expect that to expand. And we're seeing market very interesting markets pop up in Southeast Asia and other markets where popular airframes like the [indiscernible] are there, but we have 0 connectivity. And we're really the only solution that can get down to that size of airframe with a true aviation install. The MilGov market there as well a lot of that expansion in the MilGov market that we've talked about specifically mostly at this point is coming out of NATO. We can't talk about specific projects, but we're winning projects against our competitor, which is great. I think that's 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's a small platform aircraft. I think that is also giving us good dividends as well. So we expect that to grow. We've expanded the international team for the business as well. And yes, we're very hopeful and enthusiastic about where that's going.

Yes. And I would just make one other point to reiterate Chris' comments. If you look at some of our metrics we reported, you'll see we've started adding the LEO units online and more than half of those are in Europe. So I think that's really proving the point that Chris has articulated that that's a very strong market for us.

Our next question comes from Justin Lang with Morgan Stanley.

Chris, I appreciate the comments around Galileo and 5G aircraft online expectations this year. But curious if you 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? And what should we be watching for?

Yes. So I think from a -- there's obviously a lot of ins and outs to this because the ATG revenue on the existing book is going down significantly, right? That's about $40 million. And then the remainder of kind of the decline in service is from the GEO business. But we do expect a nice little uptick on the LEO, right? I'd 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's a big piece of the revenue bridge from last year.

Got it. That's helpful. And then just on a sort of cadence basis, should we expect a much stronger second half here as some of these new products dial in? Or is that a stretch? And then maybe Zach just on free cash flow cadence because I think you've suggested some unique working capital demands this year. If we could hit on that, that would be great.

Yes. So I think a couple of points. One, it does take 3 to 6 months about on the HTXs to get installed. So you're 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'll see -- you'll probably see that in Q1 as well. But then -- and that's really for the -- all the shipments, right? So we had to make sure we can deliver these orders as requested. So we're ramping up. I think the ramp should -- it will be done this quarter, and then you'll 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 3 quarters. And then was there another one? Did I get all of them?

That's helpful. If I could sneak one more in just on the MilGov topic and specifically around the C-130 opportunity you're talking about, Chris. And I think there's a mention of over 100 aircraft in the TAM. So how big of a discrete revenue opportunity is this for you? And sort of separately, 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 contribution to Golden Dome?

Yes. I think if you look at the TAM for the C-130, it's 1,000. So that's pretty significant and getting that hatch mount, which is a really important product for those guys because it's a very low-cost installation again. I think that has been one of the prohibiting points for the military is actually fitting communications onto the aircraft. I think the wins that we're having with the DoD around things like Golden Dome, we'll 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're moving away from the 1,000 [ on a hammer ] or them having to fund our business by hundreds of millions of dollars. We don't need that. We're 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's 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've had wins in the last 12 months around anything from surveillance aircraft right through to significant heads of state wins. And so it's a really versatile portfolio. We believe it's 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 don't have to put a lot of CapEx in adapting the technology either. It's really kind of off-the-shelf commercial aviation technology that we've kind of developed for business -- purpose-built for business aviation, we're actually able to take that and put that into those markets. And I think the C-130, just kind of that's one platform that's obviously utilized globally, but there's other airframes there like the A400M, which is very popular in Europe. So we're really going after that part. We've really boosted up the sales team. We put that under new leadership, and we're seeing significant kind of uptick from that. So we're really excited about it.

[Operator Instructions] Our next question comes from Alexander Phipps with OHA.

Overall, congrats on the quarter. It seems like it's 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's going to change over time to where we've had a traditional single kind of source coming from the airframe as a primary communication method, whether it's GEO or air-to-ground within CONUS with the U.S. market. Now with Galileo and obviously, the demand that we're 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're looking at it is kind of a blended ARPA for those larger aircraft, which is similar to what we probably get from GEO today. And -- but we'll see that more as a blended ARPA from multiple connectivity forms. So that's the way we're kind of looking at it right now.

Got it. And then on line fitting, so it's 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's say, that are line-fit with a Satcom Direct solution are also currently line-fit with the Starlink solution? And I guess, how exactly does that work? Does the customer need to keep the GEO solution in the tail of the plane 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'll 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 12 months, we're in a position that ultimately, you'll either choose the competitor or when it comes to LEO. That's a really important point to make. GEO is still line-fit across those OEMs, which can actually fitted into the tail. And we're seeing the fact that customers do want an alternative if at the moment, they are not installing our solution as the LEO solution, and they are still seeing the need for GEO. And the reason for that is when you look at the larger airframe manufacturers, these aircraft fly 14 hours. They're 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're also seeing is a lot of our customers like that assurance because we provide a lot of different things that other people don't 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 we've got human beings who can answer the phones, but we've 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 reporting them back to us. So I think that GEO position as a backup, but also from a continuity of service, providing bandwidth, we're seeing that customers are also still utilizing the service even if they have LEO on board because we're also pushing off a lot of information and synchronizing those with other OEMs such as engine manufacturers, operations, tracking the aircraft. So it's a lot more nuanced than just providing connectivity. So we're seeing that. But I think the really exciting thing just to reiterate is we will be in a position over this year that 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's kind of 5G as an entry service and then LEO service as like a primary LEO, low latency, high-bandwidth product at an enterprise-level communication method as well. So it's a really exciting time for the company.

Yes. And I would just kind of to dovetail on that. It's -- I think it's a critical point on the line-fit. When you look at the GEO adds we've 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 is because like you said, you had to pick a provider, and that's where we'll be at the end of this year and the beginning of next year, whereas this year, it's a lot of aftermarket and you got to slot guys in the maintenance times, and it's a bigger sales lift until you get line to it.

Yes. And I think now, at least, we've also got like both ends of the market. We've got a really strong MRO base. We've got amazing MRO partners, and we've also got amazing OEM partners, and we have a direct sales team who are going out to customers when they're specifying their airframe or they're maintaining their airframe, whether it's in the aftermarket, that 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 I think we're going to the market in a kind of multipronged way anyway.

Yes, that's super helpful. I guess just 2 quick follow-ups on that. I guess on the point where customers are going to still use -- they'll have the GEO as a -- I guess just to my earlier point, like they have the GEO as a backup, but they're 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's still an ashtray in the bathroom, and that's not because they think someone is going to smoke in it, it's because the door to the bathroom got an STC back in 1960 with an ashtray in it. Like do you -- do planes have to -- like if they get -- 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 like just get Starlink and not have that in the tail of the plane?

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

Yes, that's super helpful. Just I promise one more quick one, and then I'll shut up. The -- if I [gun] to your head just to help conceptualize what the white space looks like because to me, it seems like there's a lot of white space. Like what -- excluding MilGov just is a like what do you think the mix will be 5 years down the line in terms of composition of your fleet -- like North America or, let's say, Americas, EMEA and APAC?

On types of service, I think.

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's going to be the mix longer term? Do you think it's going to be like 50% of your LEO fleet is non-U.S. and 50% is domestic? Or is that just right now?

I think -- no, I think we're seeing the demand -- we've 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've got at the moment, North America is obviously the biggest market. We believe we will hold good percentage in that. And I think having that kind of 60-40 split is a good way that we're kind of thinking of it long term as the international market grows, and we'll 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, they'll 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're thinking about it for the business over kind of the next few years.

That concludes today's question-and-answer session. I'd 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.

This concludes today's conference call. Thank you for participating, and have a great day.