Good morning, ladies and gentlemen, and welcome to the Second Quarter 2019 Gogo Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host for today's conference, Will Davis, Vice President of Investor Relations. Mr. Davis, please proceed.

Thank you, and good morning, everyone. Welcome to Gogo's second quarter 2019 earnings conference call. Joining me today to talk about our results are Oakleigh Thorne, President and CEO; and Barry Rowan, Executive Vice President and CFO. Before we get started, I would like to take this opportunity to remind you that during the course of this call, we may make forward-looking statements regarding future events and the future financial 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 conference call. These risk factors are described in our press release filed this morning, and are more fully detailed under the caption Risk Factors in our Annual Report on Form 10-K, and 10-Q, and other documents we have filed with the SEC. In addition, please note that the date of this conference call is August 8, 2019. Any forward-looking statements that we make today are based on assumptions as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. We include a reconciliation and explanation of adjustments and other considerations of our non-GAAP measures to the most comparable GAAP measures in our second quarter earnings press release. This call is being broadcast on the Internet and available on the Investor Relations section of Gogo's Web site at ir.gogoair.com. The earnings press release is also available on the Web site. After managements' comments we will host a Q&A session with the financial community only. It is now my great pleasure to turn the call over to Oakleigh.

Thanks, Will. We're pleased to announce a very strong quarter, exceeding our own revenue, adjusted EBITDA, and cash flow expectations. Quarterly service revenue grew in all three business segments, and reached $174 million, up 9% over Q2 2018. Adjusted EBITDA exceeded our expectations and grew to $37.8 million, up 100% over the prior year period, driven mostly by service revenue and IBP-related cost savings. There were also a couple of "Good guys" that helped adjusted EBITDA in the quarter, and I'll describe those in just a minute. Free cash flow also exceeded expectations at negative $3 million in the quarter versus negative $35 million in the year-ago quarter, and negative $37 million for the first-half 2019 versus negative $144 million in the first-half a year ago. I'm very proud of my Gogo teammates for delivering such a great quarter. We've worked hard together over the past year to improve our operations and to achieve our financial goals, and we're on track with both. So thank you very much. I'm going to quickly touch on strategic developments, and then dive into the quarter. I'll leave the heavy number lifting to Barry. As I look ahead, I feel very good about where we are strategically. As I've said before, our model is to grow as demand for in-flight connectivity. And I think that demand is poised for accelerating growth as airlines increasingly look at providing free IFC to passengers, and as the aviation ecosystem looks for cheaper and faster ways to access operational data. A key enabler of about ability to scale and meet this demand on our satellite network is our open architecture asset-light operating model. And key enablers of our ability to scale in the ATG world are our proprietary spectrum and our ATG infrastructure which can provide redundancy and cost savings as we deploy Gogo 5G. Turning back to satellite, today we're up to 12 satellite providers, and use 30 satellites to create a seamless global network. Because we use multiple satellites from multiple operators and operate in the Ku band where there some 200 communication satellites, we can layer capacity where it's needed, because 80% of the world's aircraft actually flies over only 20% of the earth's surface, we can provide more redundancies in closed KA constellations, which is especially important given the increasing risks posed to satellites by space debris, and we can scale as demand grows with the provision of free in-flight Wi-Fi. Today, Gogo supports two airlines providing free Wi-Fi to passengers. In May, Delta conducted two weeks of market tests on 55 daily flights of 2K equipped aircraft. And in the quarter, we made substantial progress on our plans to ramp up operational support for airlines to provide free Wi-Fi to passengers. A key benefit of our asset light model is that we have the flexibility to move to new higher quality lower-cost technologies as they come along in the future. Towards that end, we are working with satellite partners in several new technologies. We're working with a Geo operator on a satellite specifically designed for aero mobility and more specifically for efficient utilization with our 2Ku antenna. We're working with other satellite operators on smaller more versatile software-defined satellites that could vastly enhance capacity utilization. And we're working with future LEO providers to see if we could potentially deploy their networks to enhance latency and reduce costs. Given our position as the leading provider of broadband in-flight connectivity, and given that in-flight connectivity is one of the fastest growing markets for the satellite industry, we feel we are very well positioned to partner with satellite companies as they develop these new technologies. On the ATG front, we made substantial progress on our Gogo 5G product in the quarter. We're partnering with a leading U.S. 5g solutions provider and are nearly completion of the system design phase of the project. We'll be building our network on the latest 5G technology and be able to deliver higher throughput and lower latency for a better passenger experience than other potential ATG products. We're starting to talk about 5G to airlines for their regional fleets, and talk to business aviation owners, operators, and dealers about 5G for their aircraft. And we're getting a very positive response. We remain on track to deliver this product in 2021, and are very excited about the value it could create for our company and our partners. So now, let me turn to the quarter. This was our fourth straight beat and raised quarter, and our second highest ever adjusted EBITDA quarter, which has led us to raise adjusted EBITDA guidance once again. The biggest drivers of overperformance were improving service revenue at CA-NA, continued cost improvement from our IBP plans and lower-than-anticipated sat-com expenses as a result of more efficient network management. As I mentioned before, we did have two "Good guys" in the quarter. First we have -- we've guided to a much lower second quarter adjusted EBITDA partly because we anticipated American Airlines concluding its shift to the Airline Directed Model at the end of Q1. As it turned out, that got delayed until the end of Q2, and resulted in an above forecast $7.5 million contribution to Q2 adjusted EBITDA. The second "Good guy" was associated with the renewal of our contract with American Airlines, which resulted in an additional revenue and adjusted EBITDA benefit to the quarter of $5.1 million. We'll not have the benefit of those $12.6 million in good guys going forward. Q2 was our second quarter of positive combined CA-NA and ROW segment profit, and the second profit quarter of positive service margin in CA rest of the world. We made significant progress in reducing our cash burn in the quarter, and are reiterating our guidance for at least a $100 million improvement in free cash flow for the year, despite having an extra interest payment in the year, and still expect to produce meaningful positive free cash flow in 2021. In the quarter, we also refinanced our $690 million senior note and the $162 million convertible stub which pushed the majority of our maturities out to 2024, and has improved our strategic flexibility. We plan to supplement our liquidity with a $30 revolver, which Barry will discuss in a moment. Given our improving free cash flow trajectory and our improved maturity schedule, we do not expect to need new capital to finance or operations or our strategic investments before reaching positive free cash flow for the year and 2021. I do want to be cautious about Q3 and Q4 however, as we will not get the benefit of the good guys, as I mentioned a moment ago. We will begin to ransack comp spend as more 2Ku aircraft come online, as usage grows and as we ramp in anticipation of significantly more demand in 2020. And we expect to incur increased investments in key programs like line-fit and Gogo 5G in the second-half. I'll leave it to Barry to discuss how these trends impact the numbers. Now let me turn to the business segments, starting with some comments on the combined CA segments and then diving into rest of world and NA separately. Service revenue growth was strong in our commercial airline segment, and we are now guiding towards the high end of our prior revenue guidance for both segments. Take rates also grew in both segments over the prior year and the combined profits of the CA segments were positive and ahead of expectations for the second quarter in a row, despite de-installs. In fact, this is the first quarter since de-installs began in earn at the year ago that we had growth of aircraft online in the quarter and because of these de-installs have now been completed, we expect growth in aircraft online to continue throughout our forecast period. At the end of the quarter, we had more than 1,200 2Ku aircraft online, a net increase of 109. And we had a total fleet of 3,134 commercial aircraft online, an increase of 81 over the end of Q1. Even though we installed more than 100 aircraft in 2Ku, our backlog held steady at approximately 900 aircraft as existing airlines added to their orders. 61% of our 2K backlog is in rest of world and represents great growth potential and 39% is North America, and predominantly represents upgrades from ATG that we believe create an upper growth opportunity. We also had some positive developments in contracts in the quarter. TBOW [ph] will renew their contract for a year. And as I mentioned earlier, American Airlines renewed their 2Ku contract that was expiring in September. Now let me comment on the Boeing 737 MAX situation. We've been able to complete seven installations. We still have 12 in our installation schedule, including one line-fit. And we've removed eight from our installation schedule for this year. In total, we have a backlog of 36 Max's, which includes seven installed because we do not count new aircraft as online until it is producing revenue. The bigger impact has been the airlines holding back on other aircraft that were in our install schedule, as they need to use those aircraft to fill in for Max's that they cannot fly. Obviously, our Max installation in line-fit schedule could be at risk depending on decisions by Boeing, the FAA and the airlines, and those are out of our control. In other OEM developments, serviceable installations on the 787-9 continue at Boeing, and on the A330, A350 and A380's at Airbus. Line-fit on the A320 neo family continues on plan for our first line-fit installation mid next year. In the quarter, we had new inductions in the Alaska Airline 737-800 and the Cathay 777-300. Despite the Max, we're on track to meet our prior guidance of adding 400 to 475 2Ku aircraft online this year. But this could be at risk for my earlier comment about the impact of the Max. We're excited about the potential of our CA business for a couple reasons. First, global wireless usage trends are solid and improving and will drive demand for free Wi-Fi on the aircraft. And second, the addressable market is large and relatively untapped. It's only about 35% of the aircraft globally installed with the broadband ISP product today. We believe there'll be 18,000 new or retrofit aircraft installed with broadband over the next decade. Now let me turn to CA North America installs briefly. We had 92 gross additions, up 50% from 61 in Q1, but down 17% percent from 111 in Q2, 2018, which was an unusually strong gross addition quarter. Net additions, that is net of de-installs were up 31% for the quarter versus down 139 for Q1 and down 31 for Q2 2018. I'm going to leave the impact of those installs and revenue for Barry to cover in just a second. Now let me turn to the CA rest of world installs, where we again had a strong quarter with 50 gross additions versus 55 for Q1 this year and 47 for Q2 2018. Compared to this quarter, we expect revenue to grow above the Q3 and Q4 of this year. I'll add that I didn't give a de-install number for row because that's very minimal. We are focused on driving the profitability in or rest of world segment by installing our backlog, ramping ARPA, reducing program costs as line-fit programs are completed, and better utilizing Satcom capacity over time. Now let me turn to our Business Aviation segment. Results were not as strong as we anticipated due to lower equipment revenue, as a result of the impact of FAA ADS-B installation mandates on our dealer channel. Outside of equipment revenue, we had a very good quarter, experiencing record service revenue, record ATG ARPU and record ATG aircraft online. As a result of the equipment shortfall, we're lowering 2019 revenue guidance for BA to $290 million to $300 million from our beginning of the year guidance of $310 million to $320 million. Despite our equipment sale shortfall, DA ATG pine count grew to 5,462, up 542 aircrafts or 11% from Q2, 2018, an increase by 114 aircraft to 2% from Q1 this year. So let me dig into the equipment revenue issue in a little more detail. We shipped 186 ATG units in Q2 this year versus 281 in Q2, 2018. Some of which can be attributed to a very tough comp last year, shortly after our advanced product was launched and we had a very large backlog to fill due to pent up demand. But we also misjudged the impact of ADS-B. So let's talk about that for a moment. ADS-B stands for Automatic Dependent Surveillance Broadcast. And as an initiative, the FAA launched a decade ago to improve air traffic safety. And it requires aircraft owners to install ADS-B equipment by the end of this year. Despite the mandate being out for 10-years, many owners procrastinated and the MRO's and dealers are now packed of planes trying to complete the install by year end. These installs are both crowding budgets for VISC [ph] and also literally crowding out shop for space as dealers are booked with installations. Though aircrafts must be installed by the end of the year, under the mandate we believe that many will lapse into next year, crowding shop floors through Q2. Our view of what is happening with ADS-B installs is confirmed by other companies with exposure to the BA aftermarket. Last quarter, we also expressed some concern about the OEM channel. However, we're seeing a recover there and feel that we should be back on track by year end. In fact, so far six OEM's have initiated line-fit for our new advanced product and three more in the process of doing so. On the advance activation front, we're up to 629 L5 customers and 254 L3 customers activated in billing, 34% of those customers purchasing screening plans. We remain excited about the opportunity in business aviation. It represents a large un-penetrated market. We have an exciting new product pipeline. And it provides a resilient recurring service revenue stream with low fixed cost from our proprietary ATG network. So let me conclude my comments by saying that with the exception of the ADS-B issue, we had a very strong first-half. The half is accentuated by a few good guys. But even without those, it was very positive and positioned us well for reaccelerating growth next year. And with that, I'll turn it over to Barry to do the numbers.

Thanks, Okay. Before reviewing our detailed operating results, I'd like to highlight our financial accomplishments for the quarter. Adjusted EBITDA of $37.8 million approximately matched last quarter's $38 million, the best in the company's history and was well ahead of our expectations. Each of our three business segments posted gains in service revenue for the quarter, and this revenue performance was complimented on the cost side of the business to operational execution and Satcom efficiencies. We're again raising adjusted EBITDA guidance on this call. The mid-point of our new guidance implies 55% growth in adjusted EBITDA for the year. Gogo's cashflow and therefore our cash position is also running well ahead of plan. For the first six months of 2019, un-levered free cash flow improved by $144 million versus the same period last year and was positive for the third consecutive quarter. We're projecting un-levered free cash flow to be positive for the full-year 2019 and we are on target to improve free cash flow by at least $100 million over 2018. This is a particularly important achievement considering that our net cash interest expense for the year will be $40 million higher in 2019 versus 2018 primarily due to making three interest payments on our senior secured debt during the year due to the timing of our refinancing. This improved cash flow performance is the result of the very strong adjusted EBITDA performance achieved during the first-half of the year and improvements in net working capital. While our cash position is ahead of plan, we want to ensure that we have ample buffer capital to support the business. As we previously disclosed, the indenture for our 2024 senior secured notes gives us the flexibility to enter into a $30 million revolving line of credit with an additional $30 million available based on future performance and leverage covenants. We're in the final stages of negotiating the principal terms of the $30 million asset based revolver and anticipate completing the transaction within the next few weeks. While we expect to have the facility in place by the end of the third quarter, we do not plan to draw on it at closing. Including this facility and with our cash position well ahead of plan. We are forecasting a minimum total liquidity balance of at least $100 million throughout our planning horizon and we continue to target achieving meaningfully positive annual free cash flow in 2021. Based on our current plans and projected cash flow trajectory, we do not anticipate requiring additional capital except as needed to refinance our debt maturing in 2022 and 2024. I will now turn to a discussion of our second quarter operating results beginning at the consolidated level. Total consolidated revenue was $213.7 million for the quarter down 6% from a year-ago due to lower equipment revenue. Total service revenue grew 9% to $173.7 million as we saw growth from all three business segments despite the impact of the American Airlines de-installations. Our near record adjusted EBITDA of $37.8 million was driven by strong service revenue growth, lower operating expenses and lower-than-expected Satcom costs. I'd like to provide some context for the way we see adjusted EBITDA playing out for the first and second-halves of 2019. As you know, we achieved exceptionally strong adjusted EBITDA for the first-half of this year totalling $76 million which substantially exceeded our expectations. These results include the benefit of non-recurring revenue from two different airline partners in both the first and second quarters with the accompanying adjusted EBITDA benefit of described for the second quarter. As we look to the second-half of the year, we are projecting increases in Satcom spend to support growing usage as well as planned expense increases for key programs such as line-fit and 5G. These factors contribute to our expectation of lower adjusted EBITDA for the second-half as implied by our guidance. We continue to expect the momentum we're building this year to carry into strong adjusted EBITDA and cash flow improvements in 2020. Now let's move to a discussion the business segments starting with commercial aviation. For CA-NA and CA-ROW combined aircraft online increased from 3053 to 3134 sequentially. As Oak mentioned, this represents the first increase in AOL for the combined segments since the second quarter of 2018 as net aircraft additions in both CA and CA-NA and ROW offset the plan to these installations which were completed during this quarter. With the de-installs now behind us, we expect AOL for CA-NA and CA-ROW combined to grow for the balance of this year and for at least the next couple of years as we install our backlog and achieve new airline wins. Again, on a combined basis CA-NA and CA-ROW achieved modestly positive segment profit for the second quarter in a row due to both stronger service revenue and lower non-Satcom expenses. We continue to expect to reduce our functional expenses which exclude Satcom or these two segments by approximately $45 million this year. This represents 60% of the $75 million in annual savings we expected by 2020 and we are on track to achieve this targeted cost structure. Importantly, our lower than expected Satcom expense is the result of greater network efficiencies achieved through the deployment of new technologies and our increasingly sophisticated network management capabilities. With the growth in service revenue and the benefits of operating leverage on this reducing cost structure, the combined bottom line performance of CA-NA and CA-ROW is accelerating ahead of our expectations as I've described. Turning now to CA-NA, total revenue for CA-NA in the second quarter was $105.7 million, a decline of 12% from the prior year period wholly due to lower equipment revenue. Service revenue increased to $96.4 million up 1% from the prior year period despite the American Airlines de-installations. Because the second quarter results include the benefits we've described, we are projecting CA-NA service revenue to decline and reach a flat bottom in the second-half now that de-installs are behind us. Equipment revenue of $9.3 million was up from $4 million in the first quarter but down from $24 million a year-ago. This was due to lower total 2KU installations and a shift in the mix of installations from the airline directed model to the turnkey model as compared to the second quarter of 2018. Take rates in CA-NA increased to 12.7% versus 11.2% in the prior year, a 14% improvement. Net annualized ARPA increased to $136,000 from $113,000 a year-ago which reflects the second quarter revenue benefits we've described. Excluding these positive impacts, ARPA would have grown modestly year-over-year. Consistent with our expectations for service revenue, we expect ARPA to decline in the third quarter. CA-NA segment profit increased to $24.2 million modestly above the $23.5 million previous record achieved in the first quarter of this year and is significantly exceeding our internal expectations. The primary drivers of this outperformance include stronger service revenue, lower-than-expected Satcom expense and reduced operations expenses resulting from the IBP programs we initiated last summer. Now let's turn our attention to CA-ROW which delivered total revenue of $36.7 million up 9% year-over-year. Service revenue grew 49% to $22.6 million driven by an increase in Aircraft Online. We anticipate continuing strong service revenue growth in ROW as we install the roughly 560 planes in backlog. Equipment revenue was up modestly from the first quarter but declined 23% to $14.1 million from $18.5 million a year-ago. We completed more installations in ROW than a year-ago but the shift in mix from the airline directed model to the turnkey model resulted in lower equipment revenue being recognized. You'll recall that equipment revenue was based on the number of installations done under the airline directed model. We were particularly pleased with the increase in take-rate ROW delivered for the quarter, as it was despite the higher percentage of aircraft online from new airlines which more than doubled from 21% in Q2 2018 to 46% this quarter. Take rates for ROW grew from 13.2% to 13.5% reflecting a 16.1% take rate for seasoned airlines and an 8.6% take rate for new airlines. Importantly annualized gross ARPA grew year-over-year for both seasoned and new airlines. Gross ARPA for this quarter was $209,000 for the seasoned airlines and $85,000 for new airlines. In the aggregate, Gross ARPA was essentially flat sequentially again an achievement given the growing mix of aircraft from new airlines. Segment loss in CA-ROW improved 29% from negative $24.5 million to negative $17.3 million versus a year ago as we benefited from continuing improvement in Satcom utilization, lower OpEx from our IBP initiatives, and operating leverage Now I will turn to a discussion of our BA division. Total revenue for BA was down 4% to $71.2 million as a result of lower ATG equipment shipments. Service revenue increased to $54.8 million, up 14% from Q2 2018 while equipment revenue decreased 37% quarter-over-quarter. You will recall that BA had particularly strong equipment revenue in 2018, up 34% over the prior year on the strength of the events platform which was introduced last year. This year slowdown comes on the heels of meeting the strong pent up demand for that product which was the most successful new product launch in the BA's history. The softer performance versus expectations is largely attributable to the timing delays due to ADS-B, Oak described. We highlighted this issue last quarter and expected to continue through the first-half of next year. ATG aircraft online grew 11% over the prior year and ARPU grew over 2% year-over-year. BA segment profit decreased to $31.3 million primarily due to the decline in equipment shipments. Segment margin of 44% remains healthy despite the revenue shortfall and is in line with the expectations we have set due to a higher mix of service revenue and strong cost management by the BA team. Segment profit of $64.8 million for the first-half of the year, is down from $69 million for the first-half of last year. While we are managing the BA expenses carefully in light of this softer equipment revenue, we are continuing to invest in new products and technology including the exciting 5G network we announced in June. In spite of these investments, we expect BA segment profit to be higher in the second-half of this year than it was during the first-half based on higher expectation of the increased revenue. I will now turn to a discussion of our 2019 guidance. Total consolidated revenue in the range of $800 million to $850 million is unchanged. We expect CA-NA revenue to be at the high end of the previously provided range of $355 million to $380 million with approximately 5% from equipment revenue. We also expect CA-ROW revenue to be at the high end of the previously provided range of $135 million to $150 million. However, we expect approximately 40% of revenue to be from equipment versus the guidance of 30% we had previously provided. We are decreasing our BA revenue guidance to $290 million to $300 million versus our prior guidance of $310 million to $320 million based on the reasons we have discussed. We are raising our adjusted EBITDA guidance to a range of $105 million to $115 million. This is an increase from the $90 million to $105 million we provided on our last earnings call and up from the guidance of $75 million to $95 million we provided on our fourth quarter 2018 earnings call in February. We remain on track to achieve at least $100 million improvement in free cash flow versus 2018. Again, this is despite absorbing additional net cash interest payments of $40 million during 2019. Finally, we maintain our estimate for an increase of 400 to 475 2Ku aircraft online. As Oak mentioned, we continue to monitor the impact the 737 MAX program delays may have on our installations. Before opening the call up from Q&A, I want to take a momentum to join Oak in thanking all the team at Gogo for their talent and dedication. It's because of their relentless focus on execution that we are able to continue delivering quality service to our customers and financial results for our shareholders. Operator, we are now ready for our first question.

Thank you. [Operator Instructions] Our first question comes from the line of Ric Prentiss with Raymond James. Your line is now open.

Thanks. Good morning, guys.

Good morning. How are you doing?

Good. Thanks. Obviously encouraging new on the take rates, both CA-NA and CA-ROW, where do you think that heads? Obviously previously you had what we thought was pretty conservative expectations on take rates, but I know you also mentioned two airlines on free, Delta did their trial, but what are your thoughts on how we should view the demand side of this equation kind of on the take rate side?

Yes, I mean obviously the move to free will drive take rates up dramatically. Our take rate today has blends of both paid browsing sessions, streaming sessions, and free messaging in it. If the things go free, free messaging kind of goes away, and we expect a very large jump in the browse sessions, and potentially jump in streaming sessions. So it's an order of magnitude larger, Ric. We see 30% take rates on free fleets in Asia right now. And they could be higher in North America where there are longer routes.

Yes, and I think -- yes, go ahead.

I was just going to kind of do a double-click on that, Ric. If you look at take rates under the steady state model with 2Ku being installed it's a little bit different in North America versus ROW, as we described a bit. In North America, as 2Ku gets more fully installed we do expect to see those take rates improving over time as that capacity grows and it's not constrained. In ROW, there is this kind of combination effect of seasoned airlines and new airlines. And as I mentioned, there's quite a disparity, almost 2X between the current take rates for the new airlines versus the seasoned airlines. But we do expect those take rates for the new airlines to grow pretty significantly as they get seasoned to approximate what we're seeing for the take rates overall in that part of the world.

That makes sense. And then on the cost side, we were obviously pleasantly surprised by the sat-com costs. You've called it out a couple of times on the call, but how should we think about modeling that. It's probably one of the hardest ones I've found to model for you guys, and as we think about the take rates going up how you manage that cost side. So how should we think about the sat-com cost going forward besides just what you mentioned for the second-half of '19?

Yes, so I think there's -- first, it's important to kind of underscore what's going on structurally here. We are seeing the benefits of the technologies in the network management that we're putting in place that does drive less sat-com requirement than we had previously expected, so that's a good thing. We see that continuing. In terms of how to model going forward, clearly sat-com expense will grow as usage grows. There are a couple of drivers of that. One is that we do see absolute levels of pricing per megahertz coming down around the world. That has been true historically, and we expect that to be the case, and as we also see ourselves getting better utilization in sat-com, particularly in rest of world. As you know, we have it as both a coverage requirement and then a capacity requirement for sat-com, so we do have worldwide coverage. And as we put more planes flying in that network we will see, as we have already, a significant benefit in improved sat-com utilization. But as those planes get added then you'll add capacity as it comes along. So I think the way to think about that is that we see data margins generally north of 50% in North America, the costs in rest of the world continue to be higher, but we'll see efficiencies over time from that, but those data margins will only grow as we see that better efficiency and the reducing cost, but not to that level in the short-term that North America is seeing.

Okay. And glad to hear you're making progress on the 5G next-gen ATG by picking a U.S. provider. You mentioned a couple of times that there'd be some higher costs. How should we think about the cost of that 5G impacting '19 and '20, both on OpEx and CapEx?

Yes, on the spend starts, it started now a bit. It's in the order of a few million dollars for the back-end of this year. If the spend ramps during the course of next year it is comprehended in the guidance that we have given. In terms of the CapEx side, it's comparable to on an aggregate basis to what we have laid out before for the LTE based network.

Okay. Thanks, guys.

Thank you. Our next question comes from the line of Phil Cusick with JPMorgan. Your line is now open.

Yes, a couple of follow-ups there from Ric's questions. First, you said Gogo 5G, you have a solutions provider. Is that the vendor you'll use, and how many sites you envision at kickoff?

Yes, the -- in our business we -- it's a fairly specialized business, so when we develop a new network we can't buy things off the shelf, we have to actually design the equipment with our vendor. So we are partnered with an American, United States-based 5G, I would call them, an infrastructure company, in designing and developing the radios and antennas, et cetera, for the new system. So like we've been partnered with ZT [ph] in the past, we now have an American vendor in that role. In terms of towers, I'm trying to remember if we've got 200, Barry?

Yes, 150 to 200 at rollout.

Yes, 150 to 200, yes, when we rollout.

And then grow as required from there.

Yes. And a lot of those towers will probably be same as we use today for ATG network, so we'll get some synergies there because we've already got sheds, and generators, and things like that. Obviously we will be paying more rent at those towers because we'll be taking more space. But there are some cost synergies in the network rollout.

Good. Can you give us any sort of results from the Delta Unlimited trials, how did speeds hold up, what did you see in terms of capacity issues?

Well, the trial was really aimed at market acceptance of free, it wasn't meant to test our system. Going to full free we obviously have things we need to grow, like our satellite capacity and other things to be able to really provision that. So in terms of how the tests went from a market perspective I think that's a question Delta should answer. It's their role to announce what they're doing with the free Wi-Fi, and it's our job to support them operationally. So, I'll leave it at that.

Okay. And then lastly, any update, Oak, on how you think about the strategic and competitive ecosystem for in-flight broadband globally? What are you seeing in terms of both demand, and then what are you seeing come from your competitors? Thanks.

In terms of demand, we see the trend of free Wi-Fi will drive a tremendous amount of demand. And I think that will actually be good for our industry. Our industry has been kind of the dog everybody likes to kick for a couple of years, but with demand growing I think you will have a lot of growth industry wide. There's been always a lot of speculation about some consolidation in our industry. I think that that speculation continues. Most recently, you have Inmarsat going private, which I think, in partnering with Panasonic; I think that's an indicator of a type of consolidation. And I think we expect that there will be more consolidation or there may be, so we want to be in a very strong position to play a role in that if it happens.

Just to clarify, anything happing on the RFP side, we've seen kind of a freeze on new airlines for quite a while.

Yes, there are lots of RFPs, there aren't many awards. Yes, so we are seeing a lot RFP and we're deep into some processes that we've literally been working on since I got here or before I got here. So we hope to be able to conclude those, but nothing to report at this time.

Okay. Thanks very much.

Thank you. Our next question comes from the line of Simon Flannery with Morgan Stanley. Your line is now open.

Thank you. This is Ryan Park [ph] on for Simon. Just wanted to touch back on the Delta free trials, are you able to comment on any sense of a timeline there for an ultimate decision or any future trials that have already been set? And then secondarily, can you comment on any ongoing strategic discussions around potential investments or transactions on that front?

We're -- I'll start with the second question. Right now, we're really focused on operationally supporting airlines that want to go free, and we're going to be focused on that, I think, for a while, so not very focused on strategic transactions at this particular moment. In terms of timeline for Delta, you really have to talk to Delta about that. I think, you got to understand what your role is in world and our role is not to be commenting what Delta is doing with IFC.

All right. Thank you very much.

Thank you. Our next question comes from the line of Louie DiPalma with William Blair. Your line is open.

Good morning. Oh, Barry, and Will.

How are you Louie?

Not bad. What are the engineering challenges for Gogo's 2Ku system to offer free Wi-Fi at such a large scale that has never been done before with 98% availability and are there necessary hardware modifications? Or is the formula as simple as increasing capacity via purchasing more bandwidth from your partners, SCS and Intelsat?

Well, we've actually got 12 partners, but yes, that's it, Louis. I mean, the good news about to 2Ku is that we saw that as future proof, and it really is future proof. So the ramp up on the aircraft for a 2Ku aircraft is very minimal. On the satellite capacity in satellite capacity yes, we have to ramp up satellite capacity, that's for sure. The other good thing about the 2Ku antenna, we talked about being future proof. And, we think that it is very conducive to future technologies, like Leo's et cetera. So, as those kinds of technologies come online we will be well-positioned to serve our airlines with lower latency, lower costs, et cetera.

So you don't see any, like technology impediments, or it's just a question of like you spending more money, it's just a money question. And if the money is better than you can offer the free Wi-Fi at scale.

Yes, that's basically right. We are making some software improvements. In terms of portals and things like that, that all has to change when you go to free. I mean, you don't need to get a guy's -- person's credit card number anymore, things like that. So there's some software development involved, but that's relatively minimal.

Okay, and on the business jet side. You've talked a lot about the ADSP creating a constraint. Would you expect ATG antenna shipments to be up next year relative to this depressed 2019 number? Or is it too early to say right now?

Well, I think we expect there to be some crowding of the aftermarket channel through second quarter. We've looked at the numbers of jets, they're still not installed with a ADSP. We expect some of those will never be installed, they'll just be retired. But we do expect a set of those to still come in next year to get installed and that we think in talking to the dealers and MROs and they expect to still be installing a fair amount of ADSP equipment through Q1 and Q2. So, I think that will still impact our equipment sales going into the year, but we expect it will pick up again in the second-half.

Yes, and then in total for the year, Louie, we do expect the equipment revenue to kind of be the crop this year relative to 2018 and then pick it back up again in 2020.

Got you. And a more broader question on Gogo shares traded down sharply by over 30% from like $6 over the past two months going into this earnings report, you guys probably noticed, we think there was concern that your record first quarter EBITDA performance was a fluke. And with your leverage, it would magnify weak second quarter results, instead you doubled the EBITDA consensus expectations. But can you talk about like after the strong first-half of the year, how your improved visibility like may or may not allow you to invest into what I would refer to as discretionary projects such as like the 5G and like flat panel phase there is with Fazor [Ph] and like it's been speculated you're working on like a tail mounted business shed antenna with a lot and like do you feel comfortable in your liquidity to do these discretionary projects now, despite the fact that the stock market seems to be doubting you?

Yes, the stock market hates us, we know that but our projections include our strategic investments like 5G phased array antennas. Yes, we made an investment in Fazor that, we believe in the ESA at some point, we're not talking about the timing of those. We have not officially announced a tail mount antenna for the BA market. But we have a vendor who seems to have announce that prematurely, we hope that means that they will deliver the product prematurely. The -- So yes, those are all contemplated in our current cash flow guidance. And I'll turn it over to Barry to get a little more detail in the numbers.

Yes, so we're, keeping the pedal to metal on 5G. And those other initiatives, as I said, are continuing to make those investments, we think it's important to maintaining this market position and ultimate financial performance. So we are still pressing forward on those, we're very pleased to see the first-half. Obviously, come in with the level of EBITDA than it is, but we're also just being cautious as we provide guidance for next year, there are some known things we talked about. So these good guys in the first-half of the year on the revenue side that translates into the EBITDA benefit. Those will not persist. We are planning on ramping some of these expenses, like we talked about in Satcom and in OpEx to cover these strategic investments. But having said that, we think, the guidance that we have of $105 million to $150 million is solid EBITDA performance a 55% growth again at the midpoint and we see that momentum continuing into 2020. I think that's the important point here and we realized that we've had to dig ourselves out of a hole in the last 15 months or so on the heels of the icing crisis. And as we talked about on the last call, we could knock those off one-by-one. And we're in a much, much different place now. And we think have the foundation laid, and it's showing up in the financial form of performance that gives us confidence about really being able to deliver on the kinds of increases in EBITDA that we've talked about.

Sounds good. Thanks, guys.

Thank you.

Thank you. Our next question comes from the line of Greg Davis with Nottingham [Ph] Securities. Your line is now open.

Good morning, guys. Thanks for taking my questions and congratulations on the quarter. First, in the past, you've talked about using beam forming technologies to more efficiently utilized capacity, really allowing you to reduce kind of like leasing cost quite a bit. Could you provide some additional color on the timing of when we might see those occur, given expenses, their Satcom expenses are expected to grow in the near-term?

Yes, well, obviously, there's a couple of types of beam forming technologies. We are more and more moving to high throughput satellites, which are Ku satellites with spot beams as opposed to wide beams, and that is helping our efficiency. Now, we've also talked about software defined beams and more dynamically programmable satellites. Those are out there; I would say in 2023 and beyond. That's technology that will did is pretty well designed, but it needs to actually be manufactured and launched and there are some technological hurdles that need to be overcome in terms of modem technology and other things for that to become meaningful. And then the third type of beam forming technology we talked about is in our 5G product. And on the -- in the ATG world, where that will use beam forming technology to the antennas will point more directly at an aircraft as opposed to broadcasting a large funnel like our current ATG product does and that will roll out in 2021.

And I think, Greg, to your question on the increase in Satcom expense. Yes, we, of course are projecting increases in Satcom expense, but that's driven by a significant increase in usage as we add more planes and take rates increase that we've described. The level of growth in that expense is muted by the kinds of things we're talking about, high throughput satellites, raw bandwidth costs coming down, a better utilization through the kinds of network management capabilities we have.

Right, okay. That's helpful. And then second, as we think about ARPA in the rest of world segment and you talked about how the percentage of aircraft online that are in new fleets is expected to grow from maybe now till year-end? You talked about new fleets being a little bit more reluctant to market their ISC until the entire fleet is installed. Does that kind of mean we should expect ARPU in the rest of world to slide lower till yearend?

Yes, you have certainly the concept right which is that you have this kind of blended ARPU that is result of the difference that's more than 2X between the seasoned aircraft and the new aircraft. If you look at that over time, over the last couple of years that gross ARPU has seen that impact. What's happening more recently is that if you look at this year versus last year for example, we are seeing improvement in blended ARPU overall, but we see that kind of staying relatively flattish as you go forward. We see it coming up in the back half of this year. But it wouldn't count on big improvements in that blended rate of ARPU until we get these newer planes installed.

Fleets.

Excuse me, newer fleets and seasoned for the new airlines. But then, you really see the benefit of that.

Got it. That makes sense. And last quick one from me. Why do we see take rates decline sequentially in CA-NA and on the rest of the world side?

That's seasonal and relatively typical.

Okay, fair enough. Thank you.

Thank you. Our next question comes from the line of Lance Vitanza with Cowen. Your line is now open.

Hi. Thanks guys. Nice quarter. Just to pick up where we left off the last question on the ARPU being flat sequentially, as the new planes are coming online and is offsetting the growth in the planes that are already seasoned-in, what would you say though is the underlying ARPU trend here if we think about on a like-for-like basis for those seasoned planes? I mean is it up low single digits, mid single digits, high single digits?

For the seasoned plane?

Yes.

Yes. So I mean it's up in the second quarter. As I mentioned was 16.1%. In the year ago quarter, it was 14.5%. So that's seen then. And so we see that -- seen that trend grow, so.

I am sorry. In the rest of world segment, those were the numbers there?

Correct. Wasn't that you were asking about I think?

Yes, yes. No, that's great.

Were you asking about take rates?

No, no, that's right. Thank you. But speaking of take rates, given the trend toward airline directed and free, I am not sure take rates are enough to really measure the progress. And I am wondering how you think about that. Seems like we should be thinking also about I don't duration or -- duration of usage or megs per flight or something like that. Do you have any thoughts there? What are the metrics are you looking at to gauge usage and what can you share with us?

Yes, I agree with you. The take rates compared to today are going to be kind of meaningless. They are going to be a lot higher. And the way we look at this in very simple terms is volume is going to we think explode with free. Unit cost will come down. Pricing rather will come down obviously. But, will be more than offset by the growth in volume and produce solid revenue for growth for us and value for us.

Okay. So on the satcom cost side and I apologize if I missed this too, but I heard, Barry, obviously that unit costs are falling. But could we -- what would you say is going on with the rate of that decline? I mean are cost declines accelerating or decelerating today? And given your outlook for increased global capacity what do you expect over the next few years?

Yes. I mean we are doing deals right now at continually declining cost on the Satcom side. And we see them on the forward as we look -- so the forward market if you will falling pretty dramatically over the next couple of years. There is a lot of supply coming on in the 23-24 timeframe which we think will further depress pricing. So, I think the long-term trend in Satcom is going to be continually decline in pricing. And at our side will be focused much more on continuing to make efficient use of megahertz appropriately and brining our capacity utilization up. So, all those trends will be on unit basis driving Satcom cost down.

Thanks very much guys.

Thanks Lance. Okay, that's it.

All right. Well, thank you very much for attending our Q2 2019 earnings call. And I would like to leave you with a couple of thoughts before we go. First, we have a very strong cash flow generating business in BA. Not only does it have unique competitive advantage by virtue of our spectrum ownership, but it also has ample runway for growth because the BA market is relatively un-penetrated. Second, rest of world is growing. It's also an extremely large un-penetrated market. And with our global 2Ku platform, our progress on line fit and our strong backlog, we are well-positioned to win our share of that attractive market. Third, CA North America will bottom out in the second-half of this year as the impact of American Airlines de-installs and their conversion to the airline directed model will finally be behind us. Fourth, we strengthened our balance sheet and given ourselves strategic flexibility by financing our $162 million convertible sub and our $690 million senior notes and pushing those maturities till 2024. And finally by virtue of our industry leading market share and our asset light operating model, we are well positioned to take advantage of opportunities that I just described. We look forward to demonstrating this you in future quarters, and thank you for your time this morning for joining us for our quarterly phoning. Thanks again.

Thanks very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.