Gogo Inc. Price & Performance (GOGO)

Thank you, operator, and good morning, everyone. Welcome to Gogo's fourth quarter of twenty twenty four earnings conference call. Joining me today to talk about our results are Oakley Thorne, Executive Chairman of Gogo Chris Moore, CEO and Zach Kotner, 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 that the future 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. [indiscernible] Those risk factors are described in our earnings release filed this morning [indiscernible] and are more fully detailed under risk factors in our annual report on 10 ks and 10 Q [indiscernible] and other documents that we have filed with the SEC. In addition, please note that the date of this conference call is 03/14/2025. [indiscernible] 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. [indiscernible] 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 fourth quarter earnings release.

This call is being broadcast on the Internet and available on the Investor Relations website at ir.gogoair.com. The earnings press release is also available on the website. After management comments, we'll host a Q and A session with the financial community only. It is now my great pleasure to turn the call over to Oakley. Thanks, Will, and good morning, everyone.

Let me start by extending a highly enthusiastic welcome to Chris and Zach, As many of you will remember, seven years ago, I came in from the Gogo board to serve as CEO on an emergency basis. And ever since then, we've been looking for the right successor. I believe we found that person in Chris. As our industry becomes more competitive and more centered in the fast changing world of satellite technology, Chris's deep SATCOM and aviation knowledge and his strong leadership skills are exactly what Gogo needs at this point in its value creation journey. So with that, I'd like to set a little historical context for where we are in that journey and set the stage for how combining with SATCOM helps drive that journey. Then I'll turn it over to Chris, to review our Q4 and 2024 business progress. To give an overview of our business strategy, to provide some insight on our mill gov business and to update everyone on our progress against our strategic initiatives. Then Zach will do the numbers and finally, we'll move to our usual Q and A. Would like to start by reminding people that we operate in a market with lots of room to grow.

In a world where demand for connectivity is surging due to video conference cloud based applications, only 36% of the world's business jets boast broadband in flight connectivity. [indiscernible] only 22% if you include turboprops. And if you look outside The United States, there are 5,000 mid and small jets and 7,000 turboprops that literally have no access to an in flight broadband solution today. Meanwhile, data usage per hour continues to surge on Gogo planes, [indiscernible] in Q4, they grew 16% over prior year. And on Saccom claims it grew 18%. Over prior year. Demand for flight also continues to grow. With fractional fleets growing their fleets dramatically and OEMs generally showing book to bill ratios over one to one. This is supported by WingX data, which shows that the post COVID surge in flight demand persists. With global flight departures up 33% in February 25 versus February 2019. As for Gogo and Satcom Direct in 2024, both had solid years. Gogo standalone met or beat guidance on all financial metrics, Satcom's GO AOL grew substantially and Gogo ATG AOL rebounded in the most recent quarter. I'm also excited to announce despite a short delay due to a last minute change in FAA testing, we received PMA for the Galileo HDX low earth orbit antenna.

And are now shipping product to dealers to kick off work on their aircraft specific STCs. We expect those STCs to start rolling out in Q3 and continue rolling out into next year. Which will drive a pickup in equipment revenue starting in late Q3 and service revenue in Q1 twenty twenty six. [indiscernible] Chris and Zach will provide more details on these developments in their comments, But to summarize, this PMA delay plus a small slip in Gogo Go five gs puts a hole in our 2025 plans. And leads us to provide pretty flat revenue and EBITDA guidance for this year. Despite that bad news, this is a watershed moment for Gogo. And the beginning of our climb back to strong sustainable free cash flow growth. HDX PMA is the first deliverable from a massive three year Gogo go investment program extending our advanced platform into new satellite technologies and building a new five gs ATG network in order to one, dramatically improve the quality of our connectivity services and remain competitive in a fast changing telecom ecosystem two, grow our addressable market 60% by delivering products that are relevant outside The United States and three, extend recurring revenue customer lifetimes by aggressively driving penetration of our easily upgradable network agnostic advanced platform.

This last point is critically important. And Chris will discuss it in more detail later. But our goal is to win real estate on as many aircraft as possible with our easily upgradeable Avance hardware and software platform. So that as technology evolves, our customers can upgrade with easy hardware swaps and software upgrades instead of the delays and costs associated with removing our products and replacing them with competitive. Products. To ensure that we win as much of that real estate as possible, we run a major marketing program dubbed Galileo Catalyst. To ensure customers are aware that we are the only viable LEO alternative to Starlink. That program was highly successful and Chris will talk about how that has driven high demand for our Galileo products. However, it will impact our free cash flow to the tune of about $25,000,000 later this year. We expect several more deliverables from our multiyear investment program that should also accelerate our revenue growth. Including the delivery of our Galileo FDXLEO terminal and the completion of our five gs ATG product later this year, and the LTE upgrade of our classic ATG network next year. Our combination with ZACOM Direct not only brings critically important satellite expertise into Gogo, but also accelerates achieving the goals I just enumerated.

Their international business aviation and mill gov sales forces are primed to sell Gogo Galileo globally. And their high end business aviation and their mill gov customer bases are particularly interested in the high capacity redundancy and geographic coverage that can be achieved with combined GEOLEO Although we'll provide formal long term guidance later, we believe 2026 is setting up to be a In 2026, we should start seeing higher margin service revenue from our Galileo and five gs investments [indiscernible] growth in our mill gov business, and we should see a roughly $60,000,000 reduction in program investments. As we one, complete the major product initiatives I just described two, reduce marketing and promotional expenses associated with the Galileo Catalyst program three, synergy investments required to achieve integration synergies and four, achieve the full annual run rate benefits of synergies we've already achieved or plan to achieve later this year. On the synergy front, Chris and the team have done an amazing job And as Zach will describe in more detail, we now expect to achieve run rate synergy at the high end of the $25,000,000 to $30,000,000 range which we shared at closing. We also expect to cover much of the one time costs to achieve those synergies with the sale of SATCOM's headquarters building in Melbourne, Florida.

And finally, our 2026 free cash flow will benefit from the FCE receiving full funding for the Rip and Replace program late last year. Which Zach will discuss in more detail in a moment. Full funding of that program which helps us accelerate transition from our old EVDO network to LTE technology and remove Chinese telco equipment, will also allow us to create better incentives for our old classic customers to convert to equipment compatible with the new network. Further extending customer lifetime. Besides growth and financial benefits, the Gogo SATCOM combination has big strategic benefits. With the launch of Galileo, Gogo is uniquely positioned as the only competitor to Starlink with a LEO solution specifically designed for the BA market. Providing us with a significant competitive edge against our traditional competition. And because of our multi bearer capabilities, which Starlink does not have, we're well positioned to provide multi orbit multi band solutions that provide superior capacity redundancy and coverage to what any competitor on their own can provide. Finally, we believe that network technology will continue to evolve rapidly and that partnering with new partners will be critical. By virtue of our scale within the vertical, and our easily upgradable real estate on the aircraft, we believe we will be the partner of choice for new network and technology suppliers as they come to market.

Now let me turn it over to Chris who will go over the quarter, discuss our product strategy, provide insight on our new Millgov business and provide an update on our strategic initiatives.

Thanks, Oak, and good morning. I'm happy to join you today as CEO of GoBank.

I've spent the last two decades in the global telecoms and IT business space, joining Satcom Direct in late twenty twelve. In the years since, we have successfully expanded our global footprint to provide premium satellite connectivity solutions to aircraft across the global business aviation, and military government sectors. [indiscernible] Joining forces with Gogo an incredibly exciting opportunity. Like so many in the industry, I have long admired the Gogo team and I'm honored to lead it. As Oak noted, the synergy between the two companies is already evident. And I look forward all we can achieve together for the benefits of our customers, partners shareholders and team. Let's review our Q4 performance, which reflects the fundamental strengths of our business, driven by our strong market position, as the only multi orbit connectivity company in aviation along with durable demand trends. On a standalone basis, Gogo met or exceeded its 2024 guidance on all metrics excluding transaction expenses. And SD continued to show growth as demand for GEO solutions remains across the global business aviation and military government mobility markets. Zach will provide more detailed insights into our financial performance shortly. But I want to highlight some key areas of growth and success Oak shared the news of receiving PMA. [indiscernible] but there is other big news on the Galileo front as well.

We have added another OEM selecting Galileo HDX as a line fit option for major small mid airframe which we will announce later this year. This brings Galileo availability for customers ordering new aircraft on four major OEMs in business aviation. We also received the first YASA STC with Airbus on their A319 platform. In a few minutes, I get into our strategic initiatives, I'll provide more detail on HDX STCs and performance. All of which is positive news. For now, let me jump into how our products fared in Q4 and calendar 2024. Our GA product line has shown impressive growth, particularly in terms of aircraft online. Which grew to twelve forty nine. Increase of 65 compared to the prior quarter. As a reminder, over 74% of our GEO contracts are more than one year. This demonstrates the power of the OEM line fit as many of these systems are installed at the factory It also shows the proclivity of many buyers to take both LEO and GEO offerings in order to get the capacity, redundancy and global coverage that neither Leo or GEO can provide alone. [indiscernible] At the premium end of the business aviation sector, demand for more capacity is surging.

Due to the prevalence of cloud data storage integration of aircraft cabin networks and video conferencing. Demand for redundancy is also surging as busy and not suffer interruptions. And finally, coverage. Is critical because neither Leo or GEO are truly global. For instance, no LEO provider can provide service today over India or China. But Jio can. And only Gogo can meet that demand with a single integrated global solution with the ability to prioritize data traffic dependent on application and location. ATG product line we achieved record upgrades which are critical for the success of our LTE program. And drive easily upgradeable real estate on aircraft. Additionally, we saw record ARPU 3,500 representing a 3.4% growth compared to prior year. Furthermore, we shipped nine zero six advanced units in 2024, our second highest ever and up from eight ninety four in 2023. Gogo strategy remains focused on solidifying our position as the trusted provider in the aviation connectivity market. This involves delivering unique multi band and multi orbit capability which is particularly important for high end users who demand redundancy choice, are willing to invest in maximum global capacity. Gogo's approach to multi network open architecture platforms ensures broad mission coverage across both business aviation and military government sectors by offering dual dissimilar options such as combining air to ground with SATCOM or LEO with GEO.

The flexibility that is core to our future proofed antenna design strategy hinges on supporting multiple barriers with network agnostic modular terminals and extends across our product line including our HDX and FDX Galileo antennas. As a result, with our expanding fleet, Gogo has control over the most vital real estate on the aircraft and hardware and software that can utilize multiple bands, [indiscernible] and orbit. With the upcoming launch of multiple Ka Leo networks, Gogo can leverage our terminal and network architecture so that we remain agnostic for our customers enabling the latest developments from the satellite operators on any aircraft type. Beyond our own ATG network, over time, we will pursue revenue sharing agreements directly with operators to access new bands and orbits. Where we control retail pricing ensuring we maintain a strong market position and deliver value to our stakeholders. Our ongoing strategic initiatives are directly in support of this long term strategy. I'll provide some updates now on our key projects. Galileo, our LEO solution Gogo five gs our next gen ATG solution and the FCC program that is upgrading, sorry, are EVDO network and creating a larger base of advanced customers. [indiscernible] I'll also provide some color on the opportunity in the MillGuard vertical.

Starting with Gogo Galileo. As a reminder, Galileo comes in two versions, a smaller HDX terminal and a larger FDX terminal. The Galileo HDX terminal is our first to market all aircraft product. Designed to fit on any size of aircraft and will deliver peak speeds approaching 60 megabits per second which is 12 to 60 times Gogo's current ATG product offerings. The great news is that we have aircraft on the OneWeb network today consistently getting speeds in the 50 to 60 megabits range even better news that we expect a software upgrade in Q2 that will increase that throughput by 20% to 30%. HDX is ideal for the 12,000 midsized and smaller aircraft which fly out of side of North America and have no broadband solution today. An aircraft among the 11,000 midsized and smaller aircraft registered inside North America that often fly regionally outside of CONUS or want faster mean speeds than five gs. Provide alone. [indiscernible] Our Galileo FDX terminal is a best in class product specifically designed for larger jets. And will deliver consistent speeds approaching 200 megabits per second. [indiscernible] It is ideal for the 9,700 super mid and larger jets that undergo long range intercontinental missions or long range missions within North America.

The SDX antenna is on schedule to launch in the second half of this year with several OEMs already awarding us [indiscernible] for the FDX on all models of their aircraft. Despite a late change in FAA testing requirements in December, which caused a slight delay in obtaining PMA approval for the HDX terminal, we have just commenced shipping the HDX product to dealers to start their STC projects We've already shipped 14 HDX units this week with many more to be shipped soon. On top of that, added three more STC deals to the 27 we had last quarter and now cover more than 20,000 aircraft globally. We also have Textron cutting the HDX into line bit on the longitude in 2025. With other models to follow. Now let me turn our attention to the five gs ATG network. Which we are designing for large segments of roughly 20,000 midsized and smaller business jets and turboprop aircraft [indiscernible] They fly predominantly in North America and wants an excellent connectivity experience at more affordable price than satellite solutions. We're pleased to share that the five gs chip is in fabrication. Which is scheduled for completion in May. Gogo continues to work very closely with our vendors partners, to ensure a smooth process from fabrication through launch.

The market still continues to respond enthusiastically to the five gs value prop By the end of the fourth quarter, we shipped four zero four pre provision kits, increase from three forty two at the end of the last quarter Out of those two thirty three kits, have already been installed on our network with an L5 LRU. These kits include the five gs MB-thirteen antennas, and an LX-five box. Which we can be easily swapped with the five gs LX5 once we receive the chip. We have 25 completed STCs end of Q4 twenty twenty four, up from 21 in Q3. We look forward to bringing this product to market later this year which will serve a core part of the Gogo customer base and extend the life of our very profitable ATG product line. Now turning briefly to the SEC securing network program. What we call Gogo Evolution. Gogo was awarded $334,000,000 grant from the FCC under the program to incentives to accelerate the removal of Chinese telecom technology from our EBDO ground network. In December, Congress passed the National Defense Authorization Act, funding bill which fully funded this program. This means that the previously anticipated shortfall of $50,000,000 to $60,000,000 has now been covered and Gogo will be reimbursed for all reimbursable expenses we now expect that only to be $10,000,000 to $15,000,000 of our expenses associated with the program will be non reimbursable.

As Oak pointed out, this fully funding strength lends our 2026 free cash flow projections from prior expectations and enables us to enhance incentives for customers to convert from classic to advanced or C1 ahead of our 2026 cutover. The upgrading of customers' hardware alongside our network investments enables us to deliver a stronger product for a large portion of our fleet. And given the ease of upgrades, within our advanced system positions us for even stickier customer relationships over longer lifetimes with systems that are future proofed for future advancements in technology. We are also pleased to announce that the Gogo C1 line replacement unit has received supplemental type certification which will enable us to quickly connect classic customers to LTE. The certification covers 70% of North America's 2,500 Gogo legacy air to ground customer aircraft. The MillGov Burds call, see tremendous opportunity for Gogo solutions be integrated with SD's GEO offerings. [indiscernible] Our current revenue mix in this segment includes significant portion of legacy narrowband services, which are expected to decline gradually over the next several years. However, the real growth will come from the transition of MilGov to broadband solutions. Today, almost all MilGov mobility aircraft still rely heavily on voice over radio and narrowband for communications is limited in bandwidth There is a significant effort underway to upgrade to new broadband satellite technologies For example, under the proliferated low earth orbit program, PLEO, Gogo is a supplier the Department of Defense recently increased its projected spending on LEO satellite services from $900,000,000 over the next ten years to $13,000,000,000 in the same period.

And the U. S. Air Force 25x25 program aims to equip 25% of its 1,100 mobility aircraft with satellite communications by the end of twenty twenty five. This still leaves 75% of the fleet without satellite connectivity which the Air Force believes must be addressed presenting a substantial opportunity for growth for Gogo. Gogo's LEO product will be an excellent complement to our GEO products in this market due to the DoD's PACE protocol which requires military programs to have primary alternate, contingent and emergency systems. [indiscernible] While there has been some delays in awards as this new administration settles in, and reviews programs, the general trend towards better communication systems for the aircraft alliance with the administration's broader goal of modernizing the military. Gogo's LEO product will be an excellent complement to Gogo's GEO product in this market space. And with these initiatives in place, the mill gov segment is very promising for Gogo's long term outlook and adds significant diversification to our portfolio. In conclusion, Gogo has a lot of work behind us that has positioned us uniquely well to capitalize on the opportunity of a new area era in flight connectivity. Though the delay in our HDX PMA will hurt financially this year, we expect strong profitable revenue growth next year in both MillGov and Business Aviation.

As HDX, FDX and five gs begin to drive service revenue, offsetting flattish geo revenue. And modest declines in older Gogo ATG products and narrowband satellite products. We expect that gross profit combined with a reduction in our net program spend reduced Galileo Catalyst marketing spend full year synergy benefits reduced synergy investments and full federal funding of the FCC Rip and Replace program will help us drive EBITDA and cash flow growth in 2026. And now I will turn to Zach for the numbers. Thanks, Chris.

Good morning, everyone. I'm excited to be leading the financial organization for the newly combined company I'm pleased to share our financial performance strategic basis. By way of a quick background, I joined STATCOM's direct as CFO in 2018 and previously held goals in private equity investment banking as well as in international aerospace and defense business. I'm looking forward to continue my journey with Gogo it's a business my colleagues and I have long admired. Through the closing of our transaction, and early months of our integration, the power of our combined organization is already apparent. In partnership with Open Chris, we are working to build a strong foundation with a focus on synergy extraction, operational execution as well as EBITDA and free cash flow discipline. I look forward to engaging with all of you in the investment community in sharing our progress today and the coming quarters. Before we get into the details, I want to clarify a few items related to our results. First, the Q4 and full year 2024 results include the impact of the Satcom Zirac acquisition, which closed on 12/03/2024. Therefore, our results include about a month of Satcom Direct results, and in case of our GAAP results about 60,000,000 transaction related payments incurred across both companies that impacted our free cash flow.

Given the timing of the closing, our results reflect limited run rate synergies that we have achieved so far and expect to realize in 2025 and beyond. Second, the combined business demonstrated strong performance across the board in the fourth quarter. Standalone Gogo only revenue was in line with 2024 guidance and standalone Gogo only cash flow and profitability metrics excluding transaction expenses, exceeded standalone Gogo's 2024 guidance. [indiscernible] And finally, our 2024 guidance reflects the Galileo HDX terminal launch in Q1 with revenue convincing in late Q3 and minimal five gs revenue starting in Q4. We also expect our free cash flow to improve in 2026 with the bulk of our strategic investments tied to these products coming to completion in 2025. I'll start by walking through Gogo's fourth quarter financial performance, which includes about one month financial contributions from SatCom Direct. Then I'll turn to the balance sheet and capital allocation priorities And finally, I'll conclude with additional context on our 2025 guidance.

For the fourth quarter, Gogo's total revenue was hundred and $37,800,000 up 41% year over year and 37% sequent sequentially. Total service revenue of $119,000,000 was up 47% over the prior year and 45% compared to the prior quarter. Growth in service revenue primarily reflects the addition of SatCom Direct. It is also worth noting that both ATG and GEO units online grew in the fourth quarter. We Our total ATG aircraft online was 7,059, which 43 incremental units added in Q4 while total advanced aircraft online grew to 4,608 an increase of 16% year over year and now comprises 65% of our total ATG fleet. [indiscernible] We achieved record advanced upgrades in the fourth quarter progress in driving penetration from classic to advanced on our existing ATG fleet. Converting our classic customers to advance remains a top priority. These upgrades help the sequential net increases in Advance to two twenty nine aircraft online in the fourth quarter which represented a 40% increase versus the prior quarter. Total ATG ARPU also grew to a record $3,500 a 3% year over year increase reflecting a price increase we initiated initiated in February 2024. [indiscernible] The launches of Galileo and five gs are anticipated to further expand our ARPU as well the geoservice revenue we acquired from SATCOM Direct.

Now turning to the equipment revenue. Gogo delivered fourth quarter equipment revenue of 19,000,000 up 12% year over year and 2% sequentially sequentially largely due to the December results from SD. Regarding our profitability, Gogo delivered service margins of 64% in the fourth quarter compared to 77% in the previous quarter as a result of including SD's results for one month. [indiscernible] Standalone Gogo service margins were flat excluding SD results. Equipment margins were negative 6% in the fourth quarter driven by a combination of higher E and O reserves, and certain inventory write offs. As a reminder, we expect Galileo pricing to be close to cost. Now turning to operating expenses. In the fourth quarter, combined engineering, design and development sales and marketing, and G and A expenses increased 161% year over year and increased 111% sequentially reaching $91,300,000 The year over year increase was mainly driven by $46,000,000 of transaction related expenses, which are excluded from adjusted EBITDA. [indiscernible] I will now provide some additional commentary on our strategic initiatives around five gs, Galileo and the FCC reimbursement program. In the fourth quarter, our $3,600,000 of five gs spending was comprised of $2,200,000 in OpEx and $1,400,000 in CapEx. 2024 ended with approximately $4,000,000 of five gs OpEx, $7,000,000 in CapEx.

With total five gs spend for 2024 at $11,000,000 We maintain our estimate of $100,000,000 in total external development and deployment costs for our five gs program leading up to the anticipated launch later this year. As we turn to our Galileo initiative, we recorded $2,100,000 in OpEx and $1,400,000 in CapEx in the fourth quarter. Our total 2024 expense for the project was approximately $10,000,000 in OpEx and approximately $4,000,000 in CapEx. We continue to expect total external development costs for both HTX and FTX solutions to be less than $50,000,000 of which $27,000,000 was incurred from 2022 to 2024 and approximately $12,000,000 is expected in 2025 with the remainder in 2026. [indiscernible] We also anticipate approximately 80% of Galileo's external development costs will be in OpEx.

And finally, our FCC reimbursement program. We were pleased to see the recent passage of the National Defense Authorization Act, This passage is anticipated to provide increased funding for our FCC program to support the upgrade of our ATG network to LTE and provide incentives to upgrade our classic fleet to advance.

This bill increased our expected program cash reimbursements by approximately $50,000,000 and reduced our total expected net cash outlays over the course of the program to approximately $10,000,000 This program is a major driver for our expectations of free cash flow improvement in 2026. [indiscernible] As a reminder, our free cash flow targets now include the impact of the FCC program.

In the fourth quarter, we received $10,800,000 in FCC grant funding bringing our program to date total to $41,000,000 As of 12/31/2024, recorded a $9,000,000 receivable from the FCC and incurred $6,900,000 reimbursable spend during the quarter. This receivable is included in prepay expenses and other current assets on our balance sheet, which corresponding reductions to property and equipment, inventory, and contract assets with a pickup in the income statement. And moving to our bottom line, Gogo generated $34,000,000 in adjusted EBITDA in the fourth quarter, which includes approximately $2,100,000 of operating expenses related to Galileo, $2,200,000 costs related to five gs, and excludes $46,800,000 of expenses related to the SD acquisition. A significant portion of these acquisition expenses related to contracted change of control payments for SD employees and were funded from the seller's pro [indiscernible] $34,000,000 of adjusted EBITDA is a decrease of 3% compared to Q4 twenty twenty three, and 2% on a sequential basis. Despite the addition of SD results in December we took approximately $8,000,000 of non cash impairments and write offs that accounted for the majority of the decrease in EBITDA.

In addition, we incurred a net loss of 28,200,000.0 compared to a net income of $14,200,000 in Q4 twenty twenty three and $10,600,000 in Q3 twenty twenty four. The net loss includes $46,800,000 in expenses related to the SD acquisition. I will now provide some color on our synergy progress. Driving synergies following the close of the acquisition was and continues to be a top priority for our management team. We achieved $18,000,000 of run rate synergy close and expect another $9,000,000 before the end of the first quarter of twenty twenty five. Within two years, we now expect run rate synergies to exceed our targeted range of $25,000,000 to $30,000,000 and believe the cost to achieve these synergies will be at the low end of our previously expected range $15,000,000 to $20,000,000 We plan to fund these costs with proceeds from the sale of SD Headquarters Building in Melbourne, Florida. And now moving to some free cash flow metrics. We reported negative $39,600,000 of free cash flow for the the quarter and $41,900,000 of free cash flow for the full year.

Those reported figures reflect the full $60,000,000 in transaction related payments It's important to note that $13,200,000 of these payments did not hit Gogo's P and L as they were incurred by SD prior to close As Oak mentioned, we expect 2025 to be trough of our free cash flow as we benefit from the ramp of new products, and the rolling off of related investments.

We believe that the sustained free cash flow growth minus expected future earn out payments is key to driving shareholder value will help to support the return of cash to shareholders over time.

Excluding SD and transaction expenses exceeded standalone Gogo's 2024 guidance. Now let's turn to a discussion of our balance sheet. Which reflects our use of $150,000,000 in cash to fund our acquisition of SD as well as our new $250,000,000 term loan. As we shared at closing, the interest rate on Gogo's incremental debt so far plus 6% and our annual cash interest expense will increase by an estimated $25,000,000 to $27,000,000 due to the additional financing. [indiscernible] Gogo's net leverage ratio at year end was 3.6 times which was better than our original expectation of four times. The improvement was largely due to increased operating cash flow and stronger adjusted EBITDA. Gogo ended the fourth quarter with $41,800,000 in cash and short term investments, and $850,800,000.0 in outstanding principal on our two term loans. With our $122,000,000 revolver remaining undrawn, We expect to be back within our target range of 2.5 times to three times in the next twelve to twenty four months. Our cash interest paid for the fourth quarter net of hedge cash flow $9,500,000 As we mentioned in prior quarters, we have a hedge agreement in place and at the July, the hedge stepped down to $350,000,000 with the strike rate increasing from 75 to 125 basis points.

Resulting in 41% of the loans currently hedged. The cash interest paid for 2024 net of hedge cash flow was approximately $33,000,000 As the New Go Go capital allocation priorities remain consistent with prior quarters. We are focused on executing across the following four priorities in order. First, maintaining adequate liquidity Second, continuing to invest in our strategic opportunities to drive competitive positioning and financial value primarily through Galileo and five gs, Third, maintaining an appropriate level of leverage for the economic environment with a target net leverage ratio of 2.5 to 3.5 times and finally returning capital to shareholders. In fiscal twenty twenty four, we executed across all of these priorities. We repurchased approximately $4,000,000 of shares at a total cost of $33,200,000 including about $2,400,000 in buybacks in the fourth quarter. Gogo has approximately $12,000,000 remaining $50,000,000 repurchase authorization our Board approved in September 2023. [indiscernible] Looking ahead, have committed that we will not pursue any further share repurchases until our net leverage ratio returns to our target range.

We believe our expected free cash flow growth over the next few years will provide ample excess cash to pay down debt reduce our interest expense and ultimately return capital to shareholders. Now I'll turn to the guidance we announced this morning. For 2025, we expect total revenue in the range $870,000,000 to $910,000,000 dollars reflecting our HDX launch in Q1 and '5 gs generating modest revenue in Q4. Adjusted EBITDA in the range of $200,000,000 to $220,000,000 reflecting operating expenses of approximately $25,000,000 for strategic and operational initiatives including five gs and Galileo.

And free cash flow in the range of $60,000,000 to $90,000,000 We expect 2025 to be a trough of our free cash flow reaching an inflection point in 2026. Our combined Gogo SD business expands and accelerates our growth platform by leveraging SD's strong sales and service organization outside North America and their position in the Melcoev market. And finally, we expect capital expenditures of approximately $60,000,000 containing $45,000,000 for strategic initiatives including five gs Galileo and LTE network build out. The CapEx guidance excludes $20,000,000 of reimbursement from the FCC. [indiscernible] Directionally, we are seeing our first quarter of twenty twenty five play out and in line with our outlook particularly on the free cash flow front. We are still working on our long term model, but in the interim, we remind you that preliminary targets for the combined company assumed 10% long term revenue growth and adjusted EBITDA margins in the mid-20s. In summary, Gogo's performance in the fourth quarter and throughout the year demonstrates our dedication to strategic investments and prudent financial management. During this critical phase of our product lifestyle, we're concentrating on investments that will drive long term growth and value particularly through our key initiatives of Galileo and five gs.

The acquisition of SATCOM Direct has already positively impacted our business and we are confident in our market position and long term value creation strategies. Before we open the floor for questions, I want to express my gratitude to the entire Gogo team for their hard work commitment to our business and dedication to providing exceptional service to our customers. Operator, this concludes our prepared remarks and we're now ready to take our first question.

Thank you. Our first question comes from the line of Rick Prentiss from Raymond James and Associates.

Good.

Welcome, Chris and Zach. Good to chat with you guys.

Want to start, Chris, since this is your first call out there, You touched on some of it, but clearly the elephant in the room is the competitive landscape. Walk us through kind of how you see the competitive landscape playing out and Gogo's position in particular?

Yes.

Well, first of all, it's nice to speak to you, Rick. Yes, when I look at it, I think we're in a really strong position. And I think that really goes to the remarks we've made around multi orbit capability. When I look at business aviation customers in particular, especially the high end ones with mid to long range aircraft, The fact that those aircraft fly globally and they fly into areas in the world that currently don't have LEO connectivity. Gogo can provide not only LEO, but also GEO connectivity. For instance, we obviously do flight deck communications as well. And there were 400 flights last month inside of India. That we tracked. And we can provide connectivity for all of those 400 flights with our Gogo licensing within country. LEO currently isn't able to have communications within that territory. Because of regulatory So really quite important to kind of clarify that need for multi orbit with that mid to long range customer base and it has a really good similarity as well with military government.

Where they will not fly, they could kind of go to operations anywhere in the world. So therefore having multi networks, multi capability is an essential need for not only the DoD, but overseas governments in Europe as well.

So see the competitive landscape Obviously, with the launch of Galileo HDX, we're in a prime position to take on competition We're actually the only competitor for Starlink And the difference is we're not just selling one service. We have that multiple capability of selling multiple services to customers. So we actually believe that really going to set us apart. And then also we have multiple opportunities for different revenue streams coming off the aircraft as well. Does that answer your question?

It does. And one of the things we've been hearing certainly in the last couple of months and certainly in the last couple of weeks has been seems to be an international brewing pushback. Against Starlink. Any thoughts on what you're hearing out there in the global space? Yes.

I think it's kind of an interesting time at the moment. People. I think we're going to see more of a push towards kind of like how do sovereign based communication networks work.

And that need for differentiating services I mentioned before between Leo and GEO, I think that's going to play really well for Gogo. And the fact that we're regulatory compliant globally and we have differentiation of service think that's going to be really attractive to a lot of sovereign nations who are currently looking at mission critical infrastructure and also high net worth individuals as well. So I actually think kind of the opportunity for us is really great. So I'm really excited about the launch of HDX and to follow FDX I think it's a really great time for our business. I would just add one thing, Chris, which is the whole notion of being upgradable to new technology. If you buy StarLink, you're stuck with StarLink. And today they serve their customers as a Ku network for instance. Ka networks are going to come along that are going to be faster. They're not going to want to upgrade customers and customers are starting to get that that they're kind of going to be trapped in the Starlink ecosystem if they don't go with us and into something that's highly flexible and upgradable. The other big thing, of course, Chris, also is support and SatCom directs famous for its levels of customer support And that's something that people really value.

You spend $80,000,000 on a jet, the less you want is not to be able to get somebody to answer the phone if you have an issue. So both Gogo and Starlink are very good at that.

And as a result, a very loyal customer basis and so that's another big big differentiation.

Yes. I think the big differentiation to us to any competitor is if something goes wrong in an aircraft, we can get somebody in under twenty four hours to that airplane. Anywhere in the world.

Great. That's good. And then one for Zach. Nice to meet you as well.

Great. Clearly, a lot of work going on. You mentioned that you're still working on the long term modeling. What should we think? What is exactly that you need? When should we expect some more long term financial targets to be restored out there? Yes. So we're kind of trying to decide if we're going to do it on the Q1 call and or have like an Investor Day because there's a lot of moving pieces with this.

Have it wrapped up in the next four to six weeks and we're just trying to figure out the best way to disseminate that information Obviously, there's a lot of moving pieces with kind of the geo market, The mill gov new to the combined business and there's a lot of variables that people to understand So we'll keep you guys abreast of the plan, but it's all forthcoming.

That'd be great. And the last one for me is a lot of buzz on direct to device, right? So satellite connectivity to smartphones, a lot of different satellite companies playing in the space, carriers playing in the space, people get asked us the question then why couldn't people just use their smartphone in a plane if they're truly able to get not just emergency connectivity, but some of the operators and plans for direct to device or broadband. So maybe just a little touch on that. What does direct to device mean in the future here?

Yes. I think direct to device when we're looking at that with some of the announcements really kind of voice text capability Whereas really what's driving our mission, if you look at it, is true broadband capability within the aircraft. So therefore things like video conferencing, the ability to be actually on your corporate network, full cybersecurity, is a lot more advanced. So I think kind of if you look at that office in the sky concept, also from a military point of view, it's about mission critical communications. So it's really interesting technology. But obviously, we've kind of over the years moved away from that kind of voice to text and really we're a true broadband capable business. And driving broadband services across those connections. So we see kind of like the video conferencing high resolution, streaming straight to the bulkhead monitors within the aircraft, HD capable systems watching over the top applications like Netflix, has really kind of the business aviation community. And the government then has its own requirements as well. [indiscernible] device through an airplane fuselage as well, which is not critical.

Yes. And I think that's the other bit as well. When you flying at 500 miles an hour. [indiscernible] kind of prospect on that, I know you touched on the service and the quality as well. Is making sure that you can fly anywhere in the welding. You have So these type of customers have a consistent service globally. So it's interesting, but not really in our space.

Cool.

Great. Thanks so much guys.

Thank you. Thank you for your questions.

Thank you. One moment for our next question. Our next question comes from the line of Simon Flannery from Morgan Stanley.

Great. Thanks very much. Good morning and nice to connect as well of luck with it. Just following up on Rick's questions. Could you talk a little bit more about FDX Is that like six months behind HDX? When do you expect to see service revenues coming from that? And what's been the reception from investors? And then Zach, just help us with the Satcom direct revenue model, if you could. I see $23,900,000 revenues for the stub quarter I see twelve forty nine aircraft. You didn't give us an ARPU Presumably, there's other stuff in your satellite broadband revenues like MilGov and so forth. So So is ARPU 10,000 a month? What's the trend in that ARPU? Any color if you have around how we think about that as we build our models going forward? Thank you.

Yes.

Thanks, Simon. I'll handle the FDX question first. So we're pretty excited. We've already got FDX antennas in our headquarters in Broomfield working great. The big thing is making sure that the antennas are airworthy parts. We've learned a lot from the HDX PMA So we're very confident we can launch that product in the summer. And we'll then start developing STCs little bit of probably modest revenue before the end of the year, but that's really kind of we see the revenue on that kind of picking up in kind of Q1 twenty twenty six. So super excited about that because that gives us That's equipment revenue, is it? [indiscernible] No service revenue.

And obviously, need to sell the equipment anyway to get the service. So it'd be a mixture of both.

But that gives us then the full portfolio between HDX and FDX. [indiscernible] Regarding the revenue, I get it's a little bit hard to follow because of the stub period and all that, but just to remind folks, it was December 3, right? So it wasn't a full month, almost a month. The full months are been trending in the low $40,000,000 and that's on a combined basis, right? And then when you think about that $40,000,000 about 20% has been, mill gov. Right? The rest is business aviation connectivity and piece of equipment, right.

And we're not releasing ARPU yet for the Jio product, but I will say like the vast majority of that is our JX product, which is which is within Marsat, right, and that's grown very nicely. Over the past few years. And we anticipate that to continue to grow modestly this year, but obviously, we will see some pressure on the ARPA as well as the units online just because of natural attrition. But regarding the guidance, we think it's it's pretty reasonable. We try to be as mathematical and thoughtful about the degradation and the ARPA ARPU. So that's kind of high level the revenue model, if that's helpful.

That's great. And back to Rick's question on [indiscernible] changes in industry pricing in the last few months here?

No, no. Actually, it's not seeing any changes in pricing or additional pressures within the last few months.

Thanks so much.

Simon. Thank you. One moment for our next question. Our next question comes from the line of Louis DePalma from William Blair. Hey, Louis. Chris and Zach good morning and congrats on your new roles and also congrats on closing the the monumental merger. [indiscernible] For everyone, in the prepared remarks, you mentioned revenue sharing arrangements with your satellite operators and this seems to be a potentially new economic model Could revenue sharing arrangements potentially enable you to maintain your margins with multi orbit offerings such that if you're putting both the OneWeb connectivity and the Inmarsat JX connectivity the same aircraft. Can you potentially maintain the same margins? Thanks.

Yes. So it's a good question, Louis. So we've moved all kind of our main arrangements are all now with rev shares with the operators, which actually I think mutually beneficial for them and for us. Because it's high [indiscernible] sector when you look at both business aviation and military. And then the opportunity with the multi orbit really is with that [indiscernible] there is a level of consistency across those revenue shares. They vary a little bit differently. But that enables us greater flexibility in service pricing, and capability for the customer, which we're pretty excited about.

Great. And another one following up on the competitive environment questions, are the expectations that [indiscernible] continue to achieve positive net additions for the JX product in 2025, I think you reported strong net additions in the fourth quarter, but should that momentum continue in 2025 as Starlink has also continued to gain traction?

Yes. Like we said, we think it will we're anticipating modest improvement, not the same kind of growth that we've seen in years past. And I think just a big driver of that to remind folks is the JX has historically not been .com direct equipment.

We've been a service provider, right? And that's line fit on a lot of aircraft, especially Gulfstream. So it's going to keep getting delivered still getting turned on, just not as much the cliff it was before. Because if you think about it, if you if you buy a new jet typically you're not going to put it down and spend another $600.700000 to put a different antenna on. And like we said, we've seen the ARPA hold up pretty well It's honestly held up better the last eighteen months than we've anticipated.

And largely that's because the switching cost is is a nuisance, right? And it's been working. Quite well.

Thanks, Zach. That makes sense. And my my question was mostly focused on the the service revenue and the net additions just because don't think investors care as much about the equipment revenue because it's one time and Gulfstream I think two months ago put out a press release regarding how they're going to promote like Starlink like factory installations. So I was just wondering has that impacted your backlog? And do you expect a continued positive net adds for JX? And it seems like you do. [indiscernible] we put it down as like modest. But I think the the benefit is with our GX services and also plain simple Ku within South South Services, if I just particularly look at Goldstream, but the GX Services in some instances are type certified into the airframes on some airframes, which makes them particularly sticky. And then going back to that multi orbit position, [indiscernible] buying G600 or a G700 or a G800, these are global mission aircraft. So having that need for multi orbit capability we believe even if the customers putting on a competitive product we're still there as well because also remember sell the cabin routing environment as well.

So having that kind of seamless connectivity experience no matter where they fly globally is really important. To those type of customers. And I think Gulfstream believes in that too.

I mean, if you're spending $80,000,000 on a jet, and they say to you, okay, you want Starlink, do you still want the geo? Starlink doesn't cover China, India, etcetera.

Has some other blank spots Do you want continuous coverage or not? And most people say, especially corporations, yes, we do. And so they're going to want it as a backup. And for those people, more capacity is better and the more they can get, the better. So if you look at StarLink giving you 200, but then GEO starting to provide 100 megabits per second more in a year or two, why not add it?

Excellent. Thanks. Thanks, Chris, Zach and Oak. Thanks, Louie.

Thanks, Lily.

Thank you.

One moment for our next question. Our next question comes from the line of Sibas Pettit from JPMorgan.

Hi.

Welcome, Chris and Zach. And Oak, it's hard to believe it's been seven years.

Just maybe some housekeeping questions perhaps. As we're thinking about five gs in fabrication, now, are we out of the woods here given some of these slips that we saw in 2024? I mean, what is the confidence that maybe that that product is indeed continues to progress from here as anticipated, I guess maybe how you're thinking about that and maybe the timeline and the next milestones there? And then second maybe for Zach, the press release also talks about you're going to exceed the high end of the $25,000,000 to $30,000,000 range. You're going to be at at $27,000,000 exiting the first quarter. Help us [indiscernible] more information. Help us maybe triangulate where are you in terms of what other cost initiatives may be coming out of that? And how high could those synergies be? And just maybe triangulate are you just running ahead or is there more just latent opportunity there? And then lastly, just on the capital allocation. In the press release, you talked about evaluating return of capital to shareholders once leverage falls below 3.5%. But on the in your prepared remarks, I believe Zach is well, you also did talk about getting to your leverage range, I think, within the next twelve to twenty four months.

So you can help us try to square those two even if you do go below 3.5 and you're not [indiscernible] would evaluate shareholder returns in some capacity? Thank you. All right. That's a lot of questions, Sebastiano. So we'll start with the five gs. There was a bit of a slippage in GPT schedule, but there's still scheduled to come out of fabrication in the second quarter. And I would say that that is the one critical item remaining in terms of getting the five gs product done. I mean, the networks built, all the equipment's frankly already FCC'd and PMA'd, There are planes flying with the equipment installed today. We'll just need a box swap for a box that has a five gs chip instead of a four gs chip. So we're really pretty well primed to deliver And I think the only risk is around the bring up on the chip. This chip has been looked at so many ways by so many smart companies and people at this point that we feel like the risk of it failing on bringing up is pretty low. But that risk is always obviously still there. So we can't tell you that that risk has gone to zero because it has not.

I think the market, especially sort of light, mid sized jets that fly mostly in North America, and are relatively more price sensitive than people who go for satellite. It's the big market.

A big opportunity for us We don't have a lot of competition in that space either. So we're still very optimistic about the prospects for that product.

The next question is the $60,000,000 net save. Zach, you want to jump on that?

Yes.

Just more the not only the $60,000,000 net saves, but just the synergy run rate already being at the you're already almost at the high end here ex exiting the first quarter, you talked about that being a multiyear thing. And just trying to maybe size the savings there. And thus perhaps in the context of the $60,000,000 but sorry about that.

Yes. So I'll start with the synergy.

So So obviously, these companies were of a similar size, right?

And as we all know, naturally, there's a lot of labor pieces to this just because of redundancies. [indiscernible] the positive thing is that the vast majority, 75% have been labor related, right? So these aren't tie in the sky sort of go get, so to speak.

Chris and I have only been here for about three months, so we haven't been able to get into a lot of the other kind of operational type synergies like software expenses for one, There's a lot of redundancies on those that we have to go through In addition, I don't know if you publicly said it, but we're moving manufacturing Broomfield.

So that should be some incremental savings, but I think the positive thing is, we originally kind of talked about up to twenty four months, but the almost all of these will be executed this year, right? So we'll be in a good spot. But and I get it, could you guys want to figure out how to model this?

That's what's tricky because there are offsetting costs, right? That we have to kind of think about And so that's why when you see the flattish EBITDA, it's like where the synergy is going.

And really you have to think about we have a little bit of compression on the JX and [indiscernible] as well as there's some compression on the ATG service margin and revenue. So a lot of this is is kind of sucked up by some of the top line margin pressures. So I know that's a little bit hard to model, but like that's kind of the way you have think about it. Is the service and equipment margins are kind of offsetting some of the synergies.

That makes sense.

Yes. And then on the capital allocation, I'll I'll try to address that best we can. So So obviously, this is a Board approved allocation We haven't really refreshed it yet. I've worked in quite a few levered businesses and as CFO, my priority is really getting leverage down, interest rate down, especially [indiscernible] return on capital, right? What's the best use of our cash? So we're going to explore that with [indiscernible] looking at the the different return profiles of returning cash to shareholders versus sort of delevering initiatives over the next twelve months. We do believe that we'll be below the the target leverage at year end.

I'd be pretty conservatively.

So I would just say stay tuned over the next quarter or two as we kind of refine capital allocation strategy.

Yes, I mean, it's a little bit, Zach, to make sure our credit goes where credit is due. I mean, today, totally achieved synergies of $27,000,000 run rate have already been achieved. There's no debating that. Those changes have been made the savings are real. There's more already in the works for later this year and I think that Chris and Zach will continue to upgrade the Street on where those synergies are going. I would say that this is a highly organized effort There's 36 value streams that are under analysis and teams that are working on taking the best of both companies and integrating them into single processes There's going to be a lot of synergy realized in that. And I think that that will help you guys add over the years or two to that that synergy achievement. So it's really been a great effort and a very highly organized effort. So So congrats and hats off to you guys. [indiscernible] One moment for our next question.

Our last question comes from the line of Scott Searle from ROTH Capital.

Hey, good morning. Thanks for taking my questions. Oak, Zach, Chris, congrats on getting the deal done. Zac and Chris, nice to meet you over the conference call here. Maybe just to quickly dive in again on the five gs front, So kind of piggybacking on the last set of questions, Spent a lot of time at Mobile World Congress with different guys within the ecosystem. It sounds like the silicon is increasingly confident that we're at that point Could you just two things, take us through the timeline in terms of getting that to commercialization in your product from a firmware and a testing standpoint, on your end? And then kind of curious, we've had a lot of discussion today about multi orbit. But ATG seems like it's taken a smaller position in the dialogue today. How important is five gs to growth Is eight gs still a real growth category as you're looking out over the next several years given the penetration rates in North America?

Yes. So like why don't I just kind of cover the multi orbit piece. When I talk about multi orbit, it's obviously it's a little bit of an interesting one with five gs is in obviously it's coming from the ground, but we see that as a key part of the multi orbit capability. On the fact that not only could you be using satellite communications within North America for but you can also augment certain services over the five gs service and the fact that five gs is moving to a true broadband service. So we actually see obviously the kind of revenue for it probably is going to be a little bit less as a primary.

However, it makes a really good backup service and also an alternative means service. For people like the crew and allowing that capacity for a product like HDX or FDX to be a primary communications for the principal or the team in the back of the aircraft if it's a military aircraft. So we can actually start doing some really cool prioritization of service via our access or SDR range of routers as well. So we do see it as a primary product And then if you go downstream into the small jet market, really just become very, very cost effective for aircraft not leaving North America. You then have a true broadband solution And it's obviously the Gogo team has done a great job of making that very upgradable. In the current air to ground ecosystem So there's two aspects to us really small jet customers who we've got great enthusiasm from our MRO partners who are installing the hardware Still a lot of interest from those small jet customers. And then going into the mid large jet and military aircraft, there's a real high potential there of having this as a backup solution and an alternative means for communication.

And it becomes really interesting as well with removing the Chinese equipment out of there from a cybersecurity posture point of view which is something really serious and the traditional SD business has already done very well on that because of our military government heritage as well. So really do see a lot of future with the products. The way it's kind of adopted by customers might change a little bit. But it's a great pairing solution with our LEO strategy.

Yes. Then the five gs piece, I think Scott, familiar with the when that chip is coming out of fabrication, obviously, we have to it has to go through a series of testing There's GCT and Samsung's testing, then it gets the Airspan and they do some testing and then we're trying to run as much in parallel as we can. But then there are certain things we have to test before we can start putting that in boxes and shipping it. So So we expect that we will be getting that into boxes late Q3 shipping and starting to produce revenue in Q4. There are some people that will go to service revenue fairly quickly because they already have all they've got to do is swap an LX five for an L5 with a four gs chip. That will be a regular relatively easy conversion for those that already are pre provisioned. So those people will get to service revenue relatively quickly. So I think you'll see sort of a mix of service and equipment revenue in Q4.

Great. Thank you. Very helpful. And then lastly, if I could to just kind of wrap up on some housecleaning. I apologize I've been going in and out of coverage if this was covered. Can you calibrate us in terms of what non GAAP OpEx is going to look like in the first quarter? Then as we get to the end of this year, it sounds like you're well ahead from a cost reduction standpoint. But there are some additional one time costs in terms of being able to get the Galileo customers and channel up and running. Could you remind us then how much is going to come out of one time [indiscernible] in 2025 then as we go into 2026 to think about what that cost structure really looks like? And maybe one other calibration question. On Saccom Direct. What has the growth rate been in the last couple of quarters, specifically in the fourth quarter in that core business? How has that been progressing? Maybe if you could just update us on the gross margin profile there? Thank you. [indiscernible] That's a lot. We're Yes.

We got to break your question down a little bit, Scott. We're not we haven't provided specific guidance for Q1 and I don't think we will. So there's that piece. SatCom growth fourth quarter over prior year, fourth quarter was strong. I don't know if you have it handy, but [indiscernible] from a legacy perspective, the the business aviation growth has been growing at low double digits to mid double digits for the last five years. And that's largely because of that JX business. Like I said, I joined yes, FlexExec is another one we're doing with Intelsat. But I joined Satcom six years ago and we would consistently add 120 to 140 tails associated with JX and they're very sticky, right, as Chris mentioned, they're their annual long term contracts and typically [indiscernible] the net tail growth has increased every single year. Because like I mentioned, people don't want to put the aircraft down to kind of swap and it's and it's [indiscernible] Reasonably well. I don't have quite the OpEx [indiscernible] you're asking for, but what I will say is that the EBITDA guidance we've provided is pretty steady throughout the year. It's modest increases in Q3 and Q4.

So it's not like a P and L hockey stick to hit this guidance. Obviously, some of the revenue is coming in Q3, Q4 with the the once HDX starts generating revenue because these initial shipments are STCs and the catalyst program. So there's no real revenue associated with that. And then like I mentioned on the five gs front, it's it's minimal revenue because like you said, there's risk there, right? And we're trying not to [indiscernible] to be overly aggressive because we are dependent on other parties to get that done. And that's in Q4. And I think was there another question we had?

I think there was a question around the shift from '25 to '26. I think Right, right. The things that come off are investments in five gs and GBB largely. Also on a net basis the FCC program improves in terms of cash flow There's some SATCOM product development that also matures in this year and will go down quite a bit next year. [indiscernible] $25,000,000 that will hit cash flow this year will be largely behind us next year. Let's see. The cost to achieve synergies would be largely behind us. We guided, I think that that was $13,000,000 to $15,000,000 something along those lines. I think about $13,000,000 of that will be this year, so it'll be pretty minimal next year. And then we have you probably are familiar with our Airspan revolver. We think we may need that we're counting on having to maybe lend them some money this year. That would not repeat next year. So you get all that stuff comes off then that gets offset by additional product investment we're going to make in some other places. It won't be anywhere near as large as what we've been doing. And that's how you kind of get to a net reduction of roughly $60,000,000 which I alluded to in my in my script.

In terms of investment dollars, both CapEx and OpEx.

Great.

Thanks so much guys.

Yes, I really appreciate it. Nice talking to you. Thanks, Scott.

Thank you. At this time, I would now like to turn the conference back over to Oakley for closing remarks.

Thank you very much, everybody. This will actually be the last Gogo conference call that I lead and I'm turning the call over to Chris who will be leading the next call I just wanted to say a quick word to the sell side guys who've been following us for all these years. And the investors who followed us and it's been a real pleasure dealing with you all every quarter on these calls. And thank you for your smart questions and hard work on understanding Gogo. And paying attention to our story. [indiscernible] thank you very much.