Executive Summary / Key Takeaways

• Gogo Inc. has transformed into the sole multi-orbit, multi-band connectivity provider for business and military/government aviation following the strategic acquisition of Satcom Direct.
• The company is on the cusp of launching next-generation technologies, Gogo Galileo (LEO satellite) and Gogo 5G (advanced ATG), designed to significantly enhance speed, coverage, and address new market segments globally.
• Q1 2025 results demonstrated strong performance, exceeding expectations on revenue, Adjusted EBITDA ($62.1 million), and Free Cash Flow ($30 million), driven by the Satcom Direct contribution and synergy realization.
• Integration of Satcom Direct is progressing ahead of schedule, with over 85% of targeted synergies already realized, positioning the company for higher than projected cost savings.
• Management reiterates 2025 guidance (Revenue $870M-$910M, Adjusted EBITDA $200M-$220M, FCF $60M-$90M), characterizing it as a trough year, with a significant free cash flow inflection point expected in 2026 driven by program cost reductions and full synergy benefits.

Gogo's Strategic Transformation: Building A Multi-Orbit Powerhouse

Gogo Inc., long a leader in North American air-to-ground (ATG) in-flight connectivity for business aviation, has embarked on a transformative journey. Following the strategic divestiture of its commercial aviation business and a subsequent period of focused investment, the company has repositioned itself to capture a significantly larger share of the global business and military/government aviation connectivity market. This evolution culminated in the pivotal acquisition of Satcom Direct on December 3, 2024, a move that fundamentally reshaped Gogo into the only multi-orbit, multi-band connectivity provider purpose-built for these discerning sectors.

The core of Gogo's strategy is built on a holistic approach, combining its proprietary ATG technology with access to multiple satellite constellations. This aims to deliver consistent, global, tip-to-tail connectivity across a diverse range of aircraft, from small turboprops to large cabin jets and specialized government aircraft. The Satcom Direct acquisition was instrumental in this transformation, bringing critical satellite expertise, an established international sales and service network spanning nine countries, and deep relationships within the heavy jet intercontinental and military/government segments – markets where Gogo previously had limited penetration.

This strategic pivot is a direct response to the evolving demands of the business and military aviation markets. Connectivity is no longer a luxury but a necessity, with data usage per hour surging. Yet, the market remains significantly underpenetrated; only about a third of the world's business jets and a fifth of all business aircraft globally have any connectivity, with even lower penetration outside the United States. This presents a substantial growth opportunity that Gogo is now uniquely positioned to address.

Technological Edge: Purpose-Built Connectivity Across Air And Space

Gogo's competitive moat is increasingly defined by its technological differentiation and a commitment to developing purpose-built solutions for aviation. At its foundation is the widely adopted AVANCE platform, a software-centric system that provides a cost-effective and simplified path to advanced connectivity. The strategic importance of AVANCE lies in its ability to serve as a future-proofed hub on the aircraft, enabling easier and cheaper upgrades to new technologies compared to installing entirely new systems. This is reflected in the growing penetration of AVANCE within the ATG fleet, reaching 68% by the end of Q1 2025, up from 58% a year prior, and evidenced by record upgrades from older Classic systems.

Building upon this foundation, Gogo has invested heavily in two next-generation connectivity solutions: Gogo Galileo and Gogo 5G.

Gogo Galileo: This LEO satellite-based product line leverages the Eutelsat OneWeb constellation and is designed to bring high-speed, low-latency broadband to a global market. It comprises two terminals:

• HDX: Targeted at mid-sized and smaller aircraft, particularly the estimated 12,000 aircraft outside North America currently lacking broadband. HDX is expected to deliver downlink speeds of up to 60 megabits per second, representing a 12 to 60 times improvement over current ATG offerings. The HDX antenna received FAA Parts Manufacturer Approval (PMA) ahead of schedule in March 2025, enabling commercial shipments to dealers for Supplemental Type Certificate (STC) generation. Demand has been strong, with 59 units shipped year-to-date by Q1 2025 (42 for STCs, 8 for revenue), and over 300 opportunities identified in North America alone. Passenger feedback from initial installations has been incredibly positive.
• FDX: Designed for larger business jets flying intercontinental missions. FDX is expected to deliver even higher speeds, up to 95 megabits per second (with prior targets as high as 145-195 Mbps). FDX also received PMA ahead of schedule in May 2025, with 10 STC agreements already queued for various super mid to heavy jet types.

The strategic "so what" of Galileo is significant. It expands Gogo's addressable market globally, provides speeds necessary for modern applications like video conferencing and cloud access, and offers a compelling upgrade path for the large AVANCE installed base.

Gogo 5G: This next-generation ATG network is built for the North American market, targeting the roughly 21,000 mid-sized and smaller aircraft that primarily fly regionally and seek an excellent connectivity experience at a more affordable price than satellite solutions. The network infrastructure is built, and the critical 5G chip has successfully completed fabrication and is now in the packaging and bring-up phase, with launch targeted for later this year (Q4 2025). Gogo 5G is expected to achieve mean speeds around 25 megabits per second (5 to 25 times current ATG) and peak speeds of 75 to 80 megabits per second. The 5G MB13 antennas and 5G LIU have already received PMA, and 25 STCs are in place, positioning the company for a relatively straightforward rollout once the chip is ready. Market enthusiasm is reflected in 301 aircraft pre-provisioned for launch by Q1 2025.

These technological developments, combined with Gogo's multi-orbit capabilities (ATG, GEO via Satcom Direct, LEO via Galileo), provide a unique competitive advantage. Unlike competitors offering single-technology solutions, Gogo can tailor connectivity to specific aircraft types, mission profiles, and geographic needs, offering redundancy and optimized performance. This is particularly critical in the military/government sector, where the DOD's PACE protocol requires primary, alternate, contingent, and emergency systems, a need Gogo's diverse portfolio is well-suited to meet.

Competitive Landscape: Differentiating In A Dynamic Market

The aviation connectivity market is dynamic and increasingly competitive. Gogo faces rivals offering various solutions, from established satellite providers like Viasat (VSAT), EchoStar/Hughes (SATS), Globalstar (GSAT), and Iridium (IRDM) to emerging players like Starlink (SpaceX).

Gogo's strategic positioning, significantly enhanced by the Satcom Direct acquisition, is centered on being the only provider offering a comprehensive, multi-orbit, multi-band solution purpose-built for business and military/government aviation. While competitors like Viasat and EchoStar/Hughes offer global satellite coverage, Gogo differentiates through:

• Purpose-Built Aviation Grade Equipment: Gogo emphasizes that its hardware is designed specifically for the demanding aviation environment, unlike some competitors who may adapt consumer-grade technology. This is expected to translate to greater reliability and longevity.
• Business Aviation Focused Model & Support: Gogo and the acquired Satcom Direct are known for high levels of customer support tailored to the expectations of business aviation operators, a contrast to more consumer-oriented support models.
• Multi-Orbit/Multi-Band Capability: The ability to seamlessly switch or combine ATG, GEO, and LEO services provides superior redundancy, coverage (e.g., GEO coverage over areas where LEO is restricted), and capacity compared to single-technology offerings. This is a key differentiator, particularly for global and military missions.
• AVANCE Upgrade Path: The ease of upgrading existing AVANCE-equipped aircraft to Galileo or 5G provides a significant advantage in retaining customers and capturing future revenue streams without requiring costly full system replacements.

While competitors like Starlink (SpaceX) have generated significant attention with high-speed LEO offerings, Gogo highlights its aviation-grade reliability, dedicated customer support, and the strategic advantage of its multi-bearer platform. The ability to offer combined GEO/LEO solutions, for instance, addresses the need for continuous global coverage, including regions where LEO service may be restricted.

Financially, Gogo's business model, heavily reliant on high-margin recurring service revenue (standalone Gogo BA service margin is approximately 77%), provides a strong foundation. While the inclusion of Satcom Direct's business initially impacts the consolidated service margin (around 53% in Q1 2025), the expected synergies and growth in higher-margin Galileo service revenue are anticipated to expand overall profitability over time. Gogo's focus on free cash flow generation is also a key financial differentiator, particularly compared to competitors with high capital expenditures for satellite constellations.

Recent Performance And Outlook: A Trough Before The Inflection

Gogo's first quarter 2025 results provide the first glimpse of the combined entity's financial profile and strategic momentum. Total revenue reached $230.3 million, a significant increase driven by the inclusion of Satcom Direct. Service revenue, the core of Gogo's long-term value proposition, stood at $198.6 million. Standalone Satcom Direct revenue grew 10% year-over-year in Q1 2025, primarily fueled by GEO broadband growth, with GEO aircraft online increasing to 1,280. Gogo BA's service revenue saw a modest decrease due to a decline in ATG units online, attributed partly to maintenance suspensions on older aircraft, although AVANCE penetration continued its strong upward trend.

Adjusted EBITDA for the quarter was $62.1 million, exceeding expectations due to strong service revenues and earlier than anticipated synergy realization. Free Cash Flow was solid at $30 million.

Management reiterates its full-year 2025 guidance, projecting total revenue between $870 million and $910 million, Adjusted EBITDA between $200 million and $220 million, and Free Cash Flow between $60 million and $90 million. This guidance includes an estimated modest impact of approximately $5 million from current and proposed tariffs.

Crucially, 2025 is characterized as a trough year for free cash flow, reflecting continued strategic investments (approximately $70 million net of FCC reimbursement, including $60 million in CapEx for 5G, Galileo, and LTE network build) and the product lifecycle transition impacting equipment sales.

However, management paints a clear picture of a significant free cash flow inflection point expected in 2026. This anticipated acceleration will be driven by several factors:

• Reduced Program Spend: An expected approximately $60 million reduction in net program spend as major development initiatives like Galileo and Esgrand conclude and integration synergy investments finalize.
• Full Synergy Realization: The full-year impact of realized cost synergies from the Satcom Direct acquisition, which are tracking ahead of the initial $25 million to $30 million target range.
• FCC Program Funding: The full funding of the FCC Rip and Replace program (totaling $334 million), which substantially reduces Gogo's net cash outlays for upgrading its ATG network and incentivizing Classic customer migration.
• Ramping Service Revenue: Higher margin service revenue from the new Galileo and 5G products is expected to begin ramping up, particularly Galileo HDX service revenue in Q1 2026.

The company's balance sheet reflects the Satcom Direct acquisition, with $70.3 million in cash and cash equivalents as of March 31, 2025, and $850 million in outstanding principal on its term loans.

The net leverage ratio stood at 3.4 times at the end of Q1 2025, expected to remain relatively flat through the year.

Management's capital allocation priorities are clear: maintaining liquidity, investing in strategic growth, managing leverage (targeting 2.5x-3.5x), and eventually returning capital to shareholders once leverage is reduced. Share repurchases are currently paused to prioritize deleveraging.

Risks And Challenges

Despite the promising outlook, Gogo faces several risks. The successful launch and market adoption of Galileo and 5G are critical, and delays in chipset fabrication or regulatory approvals could impact the timeline and financial projections. The integration of Satcom Direct, while progressing well, carries inherent complexities, including potential challenges in fully realizing anticipated synergies or integrating disparate systems (as highlighted by the identified material weakness in internal controls related to the acquisition).

Competition remains intense, particularly from players like Starlink (SpaceX), which could impact pricing or market share capture, especially if Gogo's technological or service differentiators do not resonate sufficiently with customers. The ongoing SmartSky litigation poses a potential financial and operational risk, although Gogo is vigorously defending its position. Macroeconomic conditions affecting business aviation flight activity could also impact demand for connectivity services. Finally, the company's substantial variable rate debt exposes it to interest rate risk, although hedges are in place to mitigate some of this exposure.

Conclusion

Gogo Inc. stands at a pivotal juncture, having strategically transformed itself into a multi-orbit, multi-band connectivity provider for the business and military/government aviation markets through the acquisition of Satcom Direct and significant investments in next-generation technologies. While 2025 represents a period of continued investment and product transition, the company's strong Q1 performance, ahead-of-schedule synergy realization, and the impending launches of Gogo Galileo and Gogo 5G underscore the potential for accelerated growth. The fully funded FCC program and expected reduction in program spending position Gogo for a clear and significant free cash flow inflection point in 2026. Despite competitive pressures and execution risks, Gogo's unique technological portfolio, expanded market reach, and focus on high-margin recurring revenue lay the groundwork for long-term value creation for investors. The story now shifts from investment and transition to execution and the realization of the combined entity's full potential.