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Global Eagle Entertainment (ENT) Q1 2019 Earnings Call Transcript

Our Aviation Connectivity revenue in the first quarter was $45.3 million, an increase of $8.4 million versus prior year. Of this $45.3 million, $31.2 million was services and $14.1 million was equipment. Notably, quarterly in-flight connectivity revenue is up about 30% since our ramp-up of equipment shipments and instillation started in mid-2018. We activated 22 aircraft with Southwest and Air France during the first quarter with an additional 15 aircraft that were installed and are now awaiting activation.

Air France continues on track. Year-to-date installations are keeping pace with our expectations. We target over 60 Air France aircraft to be installed by year-end and the remainder are expected to be installed through early 2021. We continue to see excellent passenger take rates.

Our Airconnect Global Ku system, with our new three-axis antenna is showing continued reliability in service. Airconnect Global Ku is capable of 500 megabits per aircraft and we expect to launch live television service on Air France this summer and also introduce premium packages with streaming performance alongside our free messaging services. Turning to our gross margin for Aviation Connectivity services. We indicated that our Connectivity service margins would drop in the fourth quarter of 2018.

This was the case. Our Aviation Connectivity gross margin recovered this quarter to 18.5%. There are four key reasons driving this recovery. First, we’re increasing network utilization as our fleets grow.

We expect to activate more than 100 additional aircraft in North America and Europe during the remainder of 2019. Our network investments from the second half of 2018 support this growth, so activations bring high incremental gross margins. Second, last year, we built out North

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