Gogo Inc. (GOGO) Earnings Call Transcript & Summary

Thank you. Good day and thank you for standing by. Welcome to the Q2 2026 GoGo, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question during this session, please press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today.

Green. Please go ahead. Thank you and good morning. Welcome to GOGO's second quarter 2026 earnings conference call. On the call today to discuss our results are GOGO's CEO, Chris Moore, and CFO, Zach Kottner. During this call, Zach and Chris may make forward-looking statements regarding future events and the future performance of the company. Participants are cautioned to consider the risk factors that could cause actual results to differ materially from those in forward-looking statements on this call. Those risk factors are described in the earnings release filed this morning and in a more detailed note under risk factors filed in the company's annual report on 10-K and 10-Q and other documents the company has as filed with the SEC. In addition, please note that the date of this call is August 6th, 2026. Any forward-looking statements made today are based on assumptions as of this date, and the company undertakes no obligation to update these statements as a result of more information or future events. During this call, Chris and Zach will present both GAAP and non-GAAP financial measures. A reconciliation and explanation of adjustments and other considerations of the company's non-GAAP measures to the most comparable GAAP measures is available in the earnings release. The call is being webcast and available at ir.gogoair.com. The earnings release, infographic, and associated investor presentation are also available on the website. After management comments, Chris and Zach will host a Q&A session with the financial community only. I will now turn the call over to Chris.

Thank you and good morning. This quarter we continue to execute on our transformation from a domestic provider of air-to-ground connectivity into a global provider of high-speed broadband to the penetrated business and military government aviation markets. We are pleased with the strong progress and growing momentum across our next generation portfolio, as well as the record-breaking performance of our military and government business this quarter. Consistent with the prior earnings calls, I will focus on the continued progress made across our compelling new product portfolio. These new products include GoGo Galileo with two models, HDX and FDX, both of which provide substantial improvements in capacity, functionality, speed, and global consistency alongside our rollout, legacy ATG, and existing geo offerings. The investor presentation we published on our investor relations website this quarter provides more detailed information about these products, the customers, and markets they serve. We continue to see steady progress on shipments, installations, and early activations across base 5G and GoGoGalileo during the quarter. I will also highlight the new fleet commitments we secured this quarter together with the continued progress with the rollouts we announced last quarter. Both demonstrate the expanding reach and growing adoption of our GoGoGalileo platform. I will then turn to our military and government business which delivered another record quarter. The current geopolitical backdrop continues to drive sustained demand for secure, reliable airborne connectivity and our air-to-ground network offerings are uniquely well positioned to meet that need. Let me begin with the meaningful progress we achieved with GoGoGalileo, our global low-Earth orbit, or LEO service, in the second quarter. As a reminder, GoGoGalileo has two products, HDX and FDX. HDX serves as our entry point LEO solution, purpose-built for smaller aircraft, while FDX serves as our entry point for smaller aircraft. extends that capability to mid and large cabin aircraft with enhanced connectivity performance. Together they position GOGO Galileo as a scalable full fleet solution capable of serving the breadth of our customer base globally. This quarter we shipped 108 units, bringing our cumulative LEO terminal ship to 518 units, a 17% increase from last quarter. We now have a total of 184 LEO aircraft online, up 66% from the prior quarter. We are encouraged by the accelerated generation in shipments and growing number of aircraft now operating with our LEO service. The growth in Galileo aircraft online demonstrates our ability to convert shipments into the operational deployment over time, with each installed aircraft generating recurring service revenue. Given recent competitive developments in the market, we believe our three-year secure pricing is resonating with customers who increasingly value predictive performance. flexibility alongside operational reliability. Building on this progress, I want to highlight the continued expansion of our GoGoGalileo fleet wins. The rollouts discussed last quarter with VistaJet, WheelsUp, and NetJet continue to progress well, and we added AirShare as a new fleet win this quarter. AirShare is a leading U.S.-based fractional ownership jet card. data and aircraft management operator and is equipping its fleet of Embraer Finon 300s with Galileo HDX. Notably, Airshare's decision followed a live demonstration flight during which the system transferred more than 16 gigabytes of data within a single hour across This further reflects the confidence in leading operators across fractional charter and managed fleets continue to place in the GoGoGalileo platform. We also received several notable supplemental type certificates, or STCs, during the quarter for Galileo HDX product, materially expanding its total addressable market. These included FAA STCs for the GoldString G650 and G650ER, as well as the FAA European European Union Aviation Safety Agency, or YASA, STC, for the Falcon 7X and 8X, four of the industry's most popular long-range business jets. In addition, our SD government team also received FAA STC approval to install HDX on the Pilatus PC-12, expanding the market for this product to government defense and special mission operators who can now stream mission critical data in real time from HD video and imagery to secure communications and live medical information. This exemplifies how we are extending GoGoGalileo into high-value mission profiles previously in accessible to us. More broadly, these approvals, driven directly by OEMs and their maintenance, repair, and overhaul or MRO networks, demonstrate growing industry support for GoGoGalileo and support the line fit ramp we expect during the second half of the year. While we have received numerous STCs for GoGoGalileo, there remain several key ones for us to lock in over the next few quarters. In the second quarter, we saw continued momentum across the latest ATG offerings, particularly 5G. 5G unit shipments continue to increase, with 138 units sold in Q2 compared to 52 units sold in Q1. Overall, the transition of our air-to-ground customers to our next generation products remain on track. We shipped 83 of our C1s and ended the quarter with a record 690 C1 systems online, an increase of 24% from the end of the first quarter. We now have 400 air-to-ground plastic customers. Those who have not converted to C1 are upgraded to advanced. we expect a portion of that remaining classic base to deactivate over time, and that assumption is reflected in our guidance. However, the substantial majority of our air-to-ground base now possesses hardware that is ready to migrate to LTE and ultimately 5G. Put simply, much of the conversion risk associated with the transition is behind us. Customers intending to make the transition have largely already done so. We also have 4,603 advance units online this quarter, a slight decline compared to the same time period last quarter. While reported ATG units online declined, more notably in the second quarter, that headline figure was affected by a small number of identical viable factors. These include the NetJets fleet transition previously discussed, along with a group of aircraft that deactivated ATG while upgrading to Galileo or FIRE. 5G. Adjusting for those factors, the underlying rate of ATG attrition was broadly unchanged from the first quarter. A portion of what appears as an ATG deactivation does not represent customer loss, but rather customer migrating to newer go-go products, either already reflected in our LEO base or or expected to reactivate on our 5G network in the coming quarters. Turning to the FCC reimbursement program, we continue to make strong progress toward the completion deadline of November 8, 2026. The record pace of C1 conversions achieved over the past three quarters gives us confidence that the migration will be completed on schedule. Under the FCC reimbursement program, we've allocated for a significant portion of our full approved amount of more than $300 million to cover the cost of removal and replacement of covered equipment across the U.S. network and ATG aircraft. Reimbursements continue to offset program costs as expected This transition provides every classic customer with a clear path to upgrade to a new equipment, and once the EBDO sunset is complete, GoGo will operate the only fully US-based data-sovereign ATG network. Turning to our geostationary Earth orbit or geo business, geo aircraft online was unchanged from last quarter and down 1% year over year, continuing the moderating trend observed over the past two quarters. This continues to perform ahead of our expectations. We anticipated that the broader market transition towards next generation LEO and hybrid satellite solutions would moderate activity in our geo business. Much of this shift reflects the aircraft sales cycle rather than customers actively leaving the platform. Our sales teams continue to engage actively with new owners to capture that business. Given the proven reliability and accessibility of geostationary networks, geo remains a strategically valuable component of our network. net neutral offering, particularly for customers whose mission profiles benefit from the global coverage and who operate where LEO faces regulatory constraints. Our plain simple KU band platform continues to gain traction across both commercial and military end markets. The AirX Challenger 850 upgrade program is progressing well and our US Air Force Mobility Command approval on the C-130 is opening opportunities across a fleet of more than I would now like to spend some time on our military and government end market, which delivered another record quarter. Military and government service revenue increased by 40% year over year and 20% sequentially from last quarter. We continue to see strong demand and increased utilization of our existing services during driven by the ongoing conflict in the Middle East, where the operational environment is accelerating the need for next generation communication systems across our global military customer base. This pattern is not new to us. We have experienced similar demand dynamics during previous periods of heightened geopolitical activity and remain well-positioned to to respond. Our blanket purchase agreements are already in place, enabling incremental usage converts to revenue as it occurs rather than requiring new procurement cycles. The capacity to serve this demand is already contracted and deployed. In addition, we are exploring alternative uses for both ATG and satellite networks, in support of unmanned aerial vehicles from both a technology and customer diversification perspective. While this work remains at an early stage, the progress achieved to date is encouraging and we believe it may broaden the opportunity set from our military government business over time. While the second quarter represented a particular active operating environment and may not reflect a normalized run rate going forward, governments around the world continue to make long-term commitments to modernize their secure airborne communications infrastructure, and our contract structure is designed to support those requirements. Our agreements remain in place during quieter periods and scale when demand increases. This is what makes the military and government business so valuable to GoGo. It provides a layer of durable contracted revenue that is less dependent on business aviation cycles and adds stability to our revenue base while our products transformation. As our next generation products move towards broader adoption and full contribution, military and government will continue to serve as both a stabilizing influence and an important driver of growth. Before I turn the call over to Zach, I want to highlight a few financial themes that he will discuss in greater detail. First, the ongoing evolution of our product portfolio continues to enhance the resilience and visibility of our revenue base as customers make significant capital investments to install these next generation products. The transition also diversifies our revenue across multiple connectivity solutions and mission profiles. Second, the continued expansion of our military and government business, which is characterized by longer duration contracts than those typically found in business aviation, is further enhanced with this stickiness as heightened military and government activity continues. Finally, our primary capital allocation priority in the near future. near term remains the continued reduction of our debt. I will now turn the call over to Zach to walk through the Q2 numbers.

Thanks Chris and good morning everyone. Our second quarter performance met our profitability expectations as we continued executing on our strategic priorities in a dynamic operating environment. While we continue to navigate the expected decline in legacy ATG service revenue, demand for secure, high-performance connectivity across both business aviation and military government markets remained healthy. Sequential service revenue growth was driven by continued expansion in our military and government business, accelerating adoption of Galileo on our 5G platform, as well as disciplined operational execution. Together, these strengths helped offset the anticipated pressure in our legacy ATG business. GoGo's total revenue for the quarter was $222.8 million, down 1% compared to Q2 2025 and 2% compared to Q1 2026. Service revenue totaled $191.3 million, down 1% year-over-year and up 2% sequentially. Military and government service revenue increased 40% compared to Q2 2025 and 20% sequentially, reflecting high demand and increased usage of related services. This performance continues to validate our strategy of diversifying the business beyond traditional business aviation connectivity while expanding our exposure to mission-critical government communications. Equipment revenue totaled $31.5 million, down 2% year-over-year and 18% sequentially due to the decline in advance in C1 shipments. This is partially offset by the strong adoption of our next generation products. During the quarter, Galileo equipment shipments increased 17% sequentially to 108 units, bringing cumulative Galileo shipments to 518. We also sold 138 GoGo 5G units compared to 52, up 165% from the first quarter, reflecting continued adoption of our 5G ready advanced LX5 platform. Turning to our aircraft online metrics, total ATG aircraft online into the quarter at 5,731, down 15% year-over-year and 6% sequentially, consistent with the customer transitions from our legacy ATG platform and the expected deactivation discussed in the prior quarter. LA Aircraft Online increased 66% sequentially to 184 aircraft, reflecting continued customer adoption as additional supplemental type certificates come online. Broadband geo aircraft online remains stable at 1,306. Turning to profitability, our results continue to reflect the ongoing evolution of our business mix. Growth in military and government revenue helped offset the expected decline in legacy ATG service revenue, while equipment revenue normalized following the exceptionally strong first quarter. Below gross profit, we continue to exercise disciplined expense management, which helps support profitability during the quarter. margin for the quarter was 42% compared to 41% in the first quarter. Moving to our bottom line, the net loss for the quarter was negative 2 million compared to 12.8 million in the second quarter of 2025 and 13.1 million in the first quarter of 2026. In the second quarter, results reflected a $7.2 million non-cash increase in the fair value of the SATCOM direct earn-out liability. Adjusted EBITDA was $53.7 million, down 13% compared to Q2 2025 and up 1% sequentially. Strong Q2 EBITDA reflects disciplined operating execution, partially offset by lower equipment revenue following a strong first quarter. Adjusted EBITDA for the quarter also includes $3.2 million of ongoing litigation expense compared to $6.1 million in the first quarter. Turning to capital allocation, reducing leverage remains our highest priority. In April, we made a $21.1 million principal payment on our HPS term loan facility through the excess cash flow sweep mechanism. We also funded the previously announced $40 million SATCOM direct earn out payment while continuing to prioritize debt reduction and balance sheet flexibility. Our net leverage ratio for the quarter was 3.8 times, increasing due to the SATCOM route I just mentioned. While we expect leverage to fluctuate modestly over the balance of the year, we remain committed to reducing leverage over time and continue to view debt reduction as our highest capital allocation priority, targeting 2.5 to 3.5 times. Turning to free cash flow on the balance sheet, net cash provided by operating activities totaled $32.3 million compared to negative $7.2 million in the first quarter. Free cash flow was $21.6 million compared to negative $19.2 million in the prior quarter, reflecting improved working capital performance and stronger operating cash generation. We ended the quarter with $63.1 million in cash and cash equivalents after funding both the SATCOM direct earn-out and our debt repayment. In our earnings release this morning, we revised our full year 2026 financial guidance. We now project total revenue in the range of $870 to $895 million with approximately 84% generated from service revenue and 16% from equipment revenue. This revision is driven primarily by the timing of Galileo and 5G equipment shipments in the Our full year service revenue expectation is essentially unchanged as the GEO and MilGov revenue lines are mitigating softness in the ATG service revenue. We now expect adjusted EBITDA on the range of $175 to $185 million, including approximately $5 million of strategic investments and $22 million of ongoing litigation expense. litigation expense accounts for roughly half of the change with the remainder reflecting product mix within service revenue. We continue to expect net capital expenditures of approximately $20 million, assuming $45 million in FCC reimbursement. Finally, we've revised our free cash flow expectations for the year and is now expected to be in the range of 65 to 85 million. This change primarily reflects the revised adjusted EBITDA outlook as our capital spending plans are unchanged. Our guidance continues to include $30 million slated for strategic investments, none of any FCC reimbursements. Overall, our second quarter results reflect our ongoing focus on execution as we advance GoGo's transformation into a global multi-network connectivity platform. We are successfully managing the transition of our legacy ATG business while continuing to build momentum across Galileo, our sovereign 5G network, and our military and government revenue. At the same time, we remain disciplined in how we allocate capital, strengthening our balance sheet while investing in products and capabilities. We believe the balanced approach positions us well to lower increasing shareholder value over time. I also want to thank the entire GoGo team for their continued hard work and commitment to serving our customers as we execute on this transformation. Operator, this concludes our prepared remarks. Please open the line for questions.

Thank you, Zach. At this time, we will conduct the Q&A session. As a reminder, to ask a question, you need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. To keep the queue moving efficiently, we ask that you only present one question and, if needed, one follow-up. Please stand by while we compile the Q&A roster. Our first question will be from the line of Scott Serrell with Roth Capital Partners. Scott, your line is open.

Hey, good morning, thanks for taking the questions. Hey, I'm not sure if I heard on the call, but Just wanted a quick update in terms of the outlook for Galileo units to be AOL by the end of this year. I think the number previously was 600, and I think in the past as well, you talked about a pipeline of 500 plus aircraft for 5G. Wonder if you could just update on that front. And then Chris, just a little bit more color on the MilGov opportunity. It's nice to see it starting to expand. I'm wondering if you could address a little bit about where you think that could be as we get into 27 in terms of absolute dollars and percentage of the mix. It seems like a lot of it now is being driven by utilization as opposed to new aircraft coming online. I'm wondering what the opportunities and thoughts are in terms of incremental AR.

well. In near term, high demand and increased usage has been obviously driven by the Middle East. However, longer term, governments are modernizing their secure airborne communications. We think that's opportunities global. It's not just MOD in the UK or DOD in the US. We see that as a global opportunity. What we've said on previous calls as well is, I think, I think what's nice about the Galileo product is we're taking in a commercial-based product and we're putting that into the military. So, you know, we can get to different cost structures, which these guys are not used to. We've already started seeing good opportunities, which we've mentioned before in the past, and we're closing out new business, which is great. And then we do think, and it's early days, we're starting to see good traction around the UAB market, which obviously expands the TAM quite significantly for the government opportunity. But most of these fleets are definitely unmodernized. So we see this as a good growth vector for the business. On terms of percentages, we think that will grow into the mix. It's too early to say at this point on what that will be, but we're extremely encouraged.

enthusiastic about the market. Yes, hey, Morgan Scott. And then I think the other point you had was just on the Galileo units online. So the model assumes kind of at the high end, we're in the mid-500s for total Galileo.

Great, thank you. And if I could for a follow-up, Zach, I just wanted to get my hands around normalized op-ex going forward. A lot of the increase in the second half here seems like it's related to litigation, which I think is $14 million above your prior expectations. I'm wondering how you see that rolling out over the course of 26. Does it extend into 27? And I'm assuming this is related to SmartSky. But what would be the peak non-GAAP OpEx in 26 on a quarterly basis? And what will that look like as we start to pull some of that litigation out into 27? Thanks.

Yes, so I think, Scott, as we talked before, we look at it like sort of the normalized run weight, kind of in the mid to high 40s. obviously excluding DNA. You'll see, you know, sales and marketing should be flat. There will be a little bit of a pop in engineering because of some milestone payments that got pushed from Q2. And then obviously in the G&A side, you know, that is the litigation expense associated with SmartSky.

Great, thanks. I'll hop back in the queue. Thanks, Scott.

Thank you, Scott. Our next question is with Justin Ling from Morgan Stanley. Justin, your line is open.

Hi, good morning, thanks for taking the questions. Zach, I just wanted to start with you. Maybe you could put a finer point on sort of the drivers of the updated guidance. You called out lower equipment sales expectations and some service product mix headwinds, but maybe you could just impact those a little bit further and a little more color.