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Edited Transcript of WIFI earnings conference call or presentation 5-Nov-19 9:30pm GMT

Q3 2019 Boingo Wireless Inc Earnings Call

LOS ANGELES Nov 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Boingo Wireless Inc earnings conference call or presentation Tuesday, November 5, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Kimberly Orlando

Boingo Wireless, Inc. - Associate - Addo Communications

* Michael J. Finley

Boingo Wireless, Inc. - CEO & Director

* Peter Hovenier

Boingo Wireless, Inc. - CFO, Treasurer & Secretary

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Conference Call Participants

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* Gregory Thomas Gibas

Northland Capital Markets, Research Division - VP & Senior Research Analyst

* James Dennis Breen

William Blair & Company L.L.C., Research Division - Communication Services Analyst

* Kyle P. McNealy

Jefferies LLC, Research Division - Equity Analyst

* Mark Nicholas Argento

Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst, Founding Partner & Head of Institutional Equities

* Scott Wallace Searle

Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst

* Walter Paul Piecyk

BTIG, LLC, Research Division - Former Co-Head of Research and MD

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Presentation

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Operator [1]

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Greetings. Welcome to Boingo Wireless, Inc.'s Third Quarter 2019 Earnings Conference Call. (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Kimberly Orlando with Addo Investor Relations. Thank you, you may begin.

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Kimberly Orlando, Boingo Wireless, Inc. - Associate - Addo Communications [2]

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Thank you, and welcome to the Boingo Wireless Third Quarter 2019 Earnings Conference Call. By now, everyone should have access to the earnings press release, which was issued today at approximately 4:00 p.m. Eastern Time. In addition, an earnings supplement has been made available on the Investor Relations portion of Boingo's website at boingo.com by clicking on the Investor tab. This call is being webcast and it is available for replay.

In our remarks today, we will include statements that are considered forward-looking within the meaning of securities laws, including forward-looking statements about guidance and future results of operations, business strategies and plans, our relationships with our venue partners, new venue and other contracts and market and potential growth opportunities.

In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today, November 5, 2019, and are subject to certain risks and uncertainties that may cause the actual results to differ materially from the forward-looking statements.

A detailed discussion of such risks and uncertainties are contained in our most recent Form 10-K for the year ended December 31, 2018 filed with the SEC on March 1, 2019, Form 10-Q for the quarter ended March 31, 2019 filed with the SEC on May 10, 2019, Form 10-Q for the quarter ended June 30, 2019 filed with the SEC on August 5, 2019, and our other filings with the SEC. The company undertakes no obligation to update any forward-looking statements.

On this call, we will refer to non-GAAP measures, such as adjusted EBITDA and free cash flow that when used in combination with GAAP results, provide us with additional analytical tools to understand our operations. We have provided reconciliations to the most directly comparable GAAP financial measures in our earnings press release and which will be posted on the Investor Relations section of our website at boingo.com.

And with that, I'll hand the call over to Boingo's Chief Executive Officer, Mike Finley.

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [3]

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Thanks, Kim and thank you to everyone for joining today. It's been another great quarter for Boingo with several key announcements that I'll expand on in a moment. But first, let me begin by discussing our financial performance for the quarter.

For the third quarter 2019, revenue was $64.7 million, which was at the high end of our guidance range, and adjusted EBITDA was $21.9 million, which was also at the top end of our guidance range. This represents the 22nd quarter in a row that we have met or exceeded guidance.

These results are the result of consistent execution against our strategy to leverage the explosive growth of mobile data. We do this by acquiring long-term wireless rights at venues, building carrier-grade wireless networks at those venues, and then monetizing the networks with a unique mix of products and services.

Our 3 core revenue drivers are DAS and carrier offload, military, and multifamily. So let's take a deeper dive into each. For starters, DAS remains robust. We launched 2 new venues in the quarter, bringing our total number of DAS venues live to 71. In and, we have another 62 DAS venues in the pipeline, including major projects like the MTA Long Island Railroad and Grand Central Terminal East Side Access in New York City. These are substantial multiyear projects and construction on both projects is progressing nicely.

Speaking of new builds, construction is now complete on the brand new, Louis Armstrong New Orleans International Airport and we're very excited to be a part of the ribbon cutting ceremony today. This $1 billion project will feature a brand-new Boingo managed and operated DAS and WiFi network to improve the passenger experience and show off the spirit of New Orleans. We're very excited to be a part of it.

DAS access front-end revenue for the third quarter was up significantly, 68% year-over-year. While a portion of this increase was due to $1.8 million one-time benefit tied to an amendment and contract extension with one of our major carrier customers, even excluding this one-time benefit, DAS access fees grew 39% year-over-year.

With over 37,000 DAS nodes live and more than 12,000 in backlog, we continue to believe that makes Boingo the largest provider of indoor DAS in the country. We further believe that our deep DAS experience, coupled with our wireless and large indoor venues, positions Boingo in a unique way, to take advantage of the coming 5G revolution.

You may have seen Verizon's announcement in August that they will be partnering with us to bring 5G ultra wideband service indoors. We are working together to architect a hyper-dense network designed for places like airports and stadiums. We were pleased to launch 5G at Soldier Field for the first NFL game and Verizon fans with 5G devices are enjoying speeds of up to 1.7 gigabytes during Chicago Bears games. This is just the beginning of our work with all the carriers to build out the 5G future with them.

Now, let's turn to wholesale WiFi, which includes carrier offload. Third quarter offload traffic was up 58.7% year-over-year and improved over the prior quarter. This is due to the unrelenting growth in mobile data traffic we see across the network as well as the fact that we now have both Sprint and AT&T live on a majority of our WiFi network.

Furthermore, Sprint and AT&T consumers are enjoying a great user experience. Through point technology, the offload to carrier-grade WiFi is seamless and secure, not to mention incredibly fast. In fact, Boingo topped the list of Ookla’s latest fastest airport WiFi report. Airports where Boingo manages and operates the WiFi service made up half of the top 40 U.S. airports with the fastest WiFi, with 4 ranking in the top 5. This includes Honolulu's International Airport, which ranked number 1 on [Ukla's] List, Chicago Midway, Nashville, and Phoenix Sky Harbor International Airport.

With speed, security, and seamless connectivity, offload provides our carrier partners the ability to drive down the traffic on their cellular network. As we've said many times in the past, we believe it's not a question of if but when every carrier is doing some level of offload.

Now, let's turn to our military. We added 2,000 new beds in the quarter, bringing our total beds deployed to 354,000. Military revenue for the quarter was up 7% year-over-year and ARPU for the quarter was up 10.9% compared to the same period last year.

Overall penetration has been a bit lower than the same period last year, and we attribute this to higher than usual troop movements. Despite this, revenue continues to outperform the prior period due to the higher ARPU we're achieving from the new packages we launched earlier in the year.

We believe military is an incredible business for us, and further, has tremendous upside potential to lay on additional lines of revenue. That's why we're very excited to announce that we just extended our contract with the Army and Air Force Exchange Service, or AAFES, that covers our Army and Air Force base deployments, for an additional 15 years, taking this contract all the way through 2038.

We anticipate the revenue from the retail portion of this contract to be worth more than $1 billion for the remainder of the term, not to mention the additional services like carrier offload, macro cell towers, and private services that we intend to layer on.

We are very proud to partner with AAFES for an additional 15 years and appreciate the conference they've placed in us to deliver for the troops serving on these military bases.

On the multifamily side of the business, we continue to make good progress. We've launched 10 new properties in the quarter and have another 15 properties under construction. While most of the multifamily properties in the Elauwit portfolio at the time of the acquisition were student-housing venues, about half of all the new venues we've signed this year are for conventional multifamily properties.

We expect these properties to deliver a better profit margin, so we will continue to focus on growing our share of conventional properties. In summary, there's a lot to be excited about. Our core business drivers of DAS and carrier offload, military, and multifamily, are performing very well.

Beyond that, we continue to be excited about what the technologies will afford us. One example of these new technologies in CBRS, which leverages licensed, unlicensed, and shared spectrum to expand wireless coverage and capacity at large venues.

In September, the FCC gave public notice of approval for the initial commercial deployment for ICD of CBRS. The ICD approval is an exciting milestone that enables Boingo to deploy private LTE and IoT networks and facilitate carrier offloading to the 3.5-gigahertz band, like we've done with our launch of CBRS at Dallas Love Field Airport.

We also showcased what we believe was the world's first LTE and WiFi 6 network, with a converged virtualized core at Mobile World Congress just last month. The virtualized platform replaces network hardware with software to efficiently power 5G use cases over unlicensed and CBRS spectrum. It will serve as a neutral host backbone for our WiFi 6, CBRS, and 5G deployments at large venues like airports and stadiums, and enable seamless, scalable roaming onto these networks.

As a result of our experience managing and operating licensed and unlicensed networks for over a decade, we believe we're in a unique position to exploit this exciting opportunity as networks converge. With that, let me turn it over to Pete, who will walk you through the quarter in more detail. Pete?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [4]

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Thanks, Mike. I will begin by reviewing our financial results and key operating metrics for the third quarter ended September 30, 2019, and will conclude with our financial outlook for the full year of 2019.

Total revenue for the third quarter was $64.7 million, a decrease of 0.8% year-over-year. Revenue reflected strong performance in military multifamily, which was offset by year-over-year declines in DAS, wholesale WiFi, retail, and advertising other revenue.

As a percentage of total revenue across our diversified revenue streams, compared to the prior year quarter, DAS was 37%, down from 38%. Military/multifamily was 37%, up from 33%. Wholesale WiFi was 17%, down from 18%. Retail was steady at 6% and advertising and other was 3%, down from 5%. In terms of total revenue contribution by category for the quarter, DAS revenue of $23.7 million decreased by 2.9% year-over-year. Total DAS revenue was comprised of $13.4 million of build-out project revenue and $10.3 million of access fee revenue.

Importantly, DAS access fee revenue increased 67.6% year-over-year from $6.2 million, representing our fourth consecutive quarter of double-digit growth. Included in DAS access fee revenue for the third quarter of 2019 was a one-time benefit of $1.8 million from an amendment and contract extension from one of our carrier customers.

With the re-amortization of deferred revenue balances from our customer contract extensions from venues located in the greater New York City area now behind us, we expect DAS build-out project revenue to increase sequentially from current levels.

Military/multifamily revenue increased 8.7% year-over-year to $23.6 million. Growth was primarily driven by increased military subscriber revenue from higher ARPU, following the speed and price increases we implemented in our service offering.

As Mike just highlighted, we are thrilled to have extended our contract to provide wireless connectivity solutions on Army airport bases for another 15 years. This is a major milestone, which we expect will drive long-term recurring cash flows in military through 2038.

Throughout the third quarter, we built our network to cover an additional 2,000 military beds, bringing our total footprint to 354,000 military beds as of September 30. In addition, military/multifamily revenue for the quarter benefited from a $700,000 increase in our multifamily revenue from our acquisition of Elauwit Networks last August.

On a sequential basis, military/multifamily revenue was down 3.1%, primarily due to longer than anticipated sales and deployment cycles for multifamily opportunities. Despite this recent decline, we remain optimistic on the long-term growth opportunity multifamily represents.

Wholesale WiFi revenue was $11.2 million, a decrease of 4.7% year-over-year, primarily due to lower partner usage-based fees, partially offset by an increase in managed service fees from our venue partners who pay us to install, manage, and operate network infrastructure at their venues.

As we mentioned earlier in the year, we expect [Come Boost] with Boingo will continue to decline over the next few quarters as our program with American Express is phased out. That said, we remain encouraged by our traction with carrier offload and expect wholesale WiFi will be a strong driver of recurring cash flows going forward.

Retail revenue of $3.6 million declined 10.8% year-over-year, primarily due to reduction in retail subscribers. Advertising and other revenue of $2.5 million decreased 23.2% year-over-year, primarily due to a decline in the number of premium ad units sold.

Now, turning to our quarterly costs and operating expenses. Network access costs of $29.2 million were relatively consistent with the third quarter of 2018, despite higher revenue share paid to our venue partners, offset by decreased depreciation expenses. Gross margin, which is defined as revenue less network access costs, was 54.9%, down approximately 20 basis points from prior year period.

Network operations expenses were $13.7 million, an increase of 3.2% year-over-year, primarily due to an increase in other expenses. Development and technology expenses of $8.2 million increased 2.3% for the prior year period, primarily due to higher software and hardware and maintenance expenses, offset by reduced consulting expenses.

Cellular and marketing expenses of $5.7 million were generally consistent with the prior year period. General and administrative expenses of $5 million declined 35.5% year-over-year primarily due to decreased personnel-related expenses and a $1 million reduction in the fair value of the contingent consideration related to our acquisition of Elauwit Networks.

Now, I'll turn to our profitability measures for the quarter. Net loss attributable to common stockholders was 187,000, or breakeven per diluted share, compared to a net loss of $500,000 or a loss of $0.01 per diluted share in the third quarter of 2018.

Adjusted EBITDA, a non-GAAP measure, was $21.9 million, a decrease of 6.2% year-over-year. As a percentage of total revenue, adjusted EBITDA was 33.8%, down from 35.7% of revenue in the prior year quarter.

Turning now to our key metrics. The number of DAS notes in our network for the third quarter were 37,200, up 35.8% from the prior year period and up 5.7% from the second quarter of 2019. The number of DAS nodes in backlog, which represents the number of DAS nodes under contract but not yet active as of the end of the third quarter were 12,100, up 8% from the prior year period and down 1.6% from the second quarter of 2019.

Our military subscriber base was 137,000 subscribers at the end of the third quarter, down 3.5% both from the prior year period and the second quarter of 2019, primarily due to higher than usual troop movement. Our retail subscriber base of 85,000, at the end of the third quarter, was down 39.7% from the prior year period and down 7.6% from the second quarter of 2019.

Connects, or paid usage in our worldwide network, were approximately 89.3 million, up 18.4% from the prior year period and up 4% from the second quarter of 2019.

Moving on to discuss our balance sheet. As of September 30, 2019, cash, cash equivalents, and marketable securities totaled $86.8 million, up $16.6 million from $70.2 million at June 30, 2019. The increase in our cash balance was primarily due to the timing of receivables, as we collected cash following our record quarter for DAS venue launches in the second quarter of 2019.

Total debt was $167.7 million and we had $115 million available in our credit facility as of September 20, 2019. Capital expenditures were $27.6 million for the third quarter, which included $21 million utilized for DAS infrastructure build-out projects that are primarily reimbursed through revenue by our telecom operator partners.

Our non-reimbursed capital expenditures were driven mainly by new network builds, managed and operated network upgrades, and various infrastructure upgrades and enhancements. We are continuing to invest in our available cash and new network deployment opportunities. We have incurred costs of over $40 million through self-funding DAS network builds and the funding of initial deployments of certain key build-out projects, such as our large DAS projects with the Metropolitan Transportation Authority, or MTA in New York City.

Although the MTA project is a long-term venture that will require significant upfront cash commitments, we believe it will generate many years of high-quality recurring cash flow once the network goes live with the first phase scheduled to launch in 2020.

Free cash flow, a non-GAAP measure, was a positive $20.5 million for the third quarter, compared to $8.5 million in the third quarter of 2018. While our operations continues to generate cash, we expect to be a net consumer of free cash flow for the full year of 2019, primarily due to the aforementioned self-funding network build-out opportunities in conjunction with the magnitude of the MTA build-out project.

Under our previously announced share repurchase program, we are pleased to have repurchased 56,000 shares of our common stock at an average price of $13.24 per share for $745,000 during the third quarter of 2019. As of September 30, $19.3 million remained available for future share repurchases.

We strongly believe that the current share price is not indicative of Boingo's current or long-term intrinsic value and that these repurchases reinforce our board and management's strong confidence of Boingo's long-term prospects. We will remain opportunistic as it relates to potential future share repurchase activity.

I will now turn to our outlook. Today, we are updating or narrowing our guidance range for our guidance metrics primarily to reflect the longer than anticipated sales and deployment cycles for multifamily opportunities. Nevertheless, we remain optimistic on the long-term growth opportunities for multifamily.

For the full year, our guidance is as follows. We now expect total revenue to be in the range of $267 million to $273 million, representing year-over-year growth of approximately 7.6% at the midpoint of the range. As a reminder, the re-amortization of deferred revenue from contract extensions in 2019 discussed earlier represents a reduction equal to 7.2 points of year-over-year growth.

Net loss attributable to common stockholders is expected to be in the range of $14 million to $10 million or a loss of $0.32 and $0.23 per diluted share. Adjusted EBITDA is expected to be in the range of $80 million to $85 million, which implies an EBITDA margin of 30.6% at the midpoint of the range.

Total capital expenditures are expected to be in the range of $120 million to $135 million. Of that, we estimate $95 million to $105 million will be utilized for the deployment and upgrade of DAS networks at our managed and operated venues, and the remaining $25 million to $30 million will be used for non-DAS capital expenditures.

The majority of our non-DAS capital expenditures are to support new network builds and upgrades at our management operated venues. As a reminder, virtually all of our DAS network deployments is success-based build, means we have commitments and guaranteed payments from our carrier customers.

In addition, we estimate our annual maintenance capital requirements, which excludes our growth capital, to be approximately 3% to 5% of revenue. We will maintain our tax valuation allowance and as such, do not expect to accrue material tax benefits or tax expenses on our income statements through 2019. We will continue to expect a nominal full year tax rate as well a fully diluted shares outstanding of approximately $44 million.

In summary, we are pleased with our continued execution against our strategy of securing long-term wireless rights at prominent, large-scale venues, to deliver enhanced wireless connectivity solutions in the evolving wireless ecosystem. We believe our relationships with the carriers are instrumental in our ability to continue monetizing our robust platform of wireless technology solutions and look forward to a long runway of growth opportunities ahead of us.

With that, I'll turn it back over to Mike for closing remarks.

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [5]

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Thanks, Pete. In summary, we're pleased with our third quarter results, marked by solid financial performance and strong operational execution. With that, let's open it up for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Mark Argento with Lake Street Capital Markets.

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Mark Nicholas Argento, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst, Founding Partner & Head of Institutional Equities [2]

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Just a couple quick ones. First off, on the extension, congrats on that. Looks like a nice long-term extension there. In terms of -- is that an exclusive deal you guys have with the Army Air Force? And then also wanted to get an update on if you've had any ongoing conversations with the Navy as well.

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [3]

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I'll start. Pete can follow-up. First of all, thanks. Yes, we're very excited about the extension, obviously for multiple reasons. But it does highlight I think the job that we're doing on the bases and for the men and women of the military. It is not exclusive and it has not been. So that's not a change from that. And yes, I mean we're talking to and working with the other military branches as well.

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Mark Nicholas Argento, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst, Founding Partner & Head of Institutional Equities [4]

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Great. Then in terms of getting a better understanding of kind of the recurring nature of your business, obviously, you build a lot of the infrastructure out and you get paid to do that. But kind of the recurring access fee part of the model, can you talk a little bit more of where the recurring piece is when it comes to some of the DAS revenue line in particular and where you see that going over time in terms of more of the recurring piece versus the initial build-out component?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [5]

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I'll take that, Mark. Thanks for the question. So as we talked about in our prepared comments that we had a great quarter with DAS access fee growth. And while there was a $1.8 million one-time benefit and access fees, our access fees year-over-year still grew almost 40%. And it's something we've been saying. We've been saying it's a key focus of our s to drive ongoing access fee revenue. And we think it's ultimately going to be very important for driving long-term shareholder value.

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Operator [6]

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Our next question comes from Greg Gibas with Northland Capital.

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Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [7]

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First, with Sprint and AT&T being live on the majority of your network for carrier offloading, would it be possible to break out the percentage that each carrier is on the network that's live right now and get a better sense of how much runway there is there? And second, I guess it comes with Boingo program or offerings still declining. What do you expect to be the offsetting drivers in growth in that segment? And lastly, just is there any update with carriers 3 or 4 since the last quarter?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [8]

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I'll take these, Greg. So we cannot break out the revenue by customer for offload. It's actually something that is highly confidential for our carrier customers in particular. So we think it's something we can't do.

What we have said in the past is that offloading tends to be the majority of the wholesale WiFi category. Comes with Boingo has absolutely put some pressure as the American Express program starts to phase out. It is important to note that while American Express has been phasing out and we ultimately expect that contract to go away, we have seen growth from MasterCard. It does not offset what we're seeing from American Express. But overall, we are seeing at least it moderates some of the decline we've experienced with MasterCard -- excuse me, American Express.

And just finally, we're pleased with what we continue to see for offloading. So wholesale WiFi for the quarter grew almost 5% sequentially and that growth was directly attributable to wholesale carrier offloading. So that's an important piece to take away.

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Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [9]

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And then are you still expecting the 20 DAS venues to go live this year and does that change at all now that there's 13 year to date? And I think last quarter, you guys were talking about there were several deployments that were kind of right on the line of Q3, Q4. Can you maybe give us a little update there to see where those went.

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [10]

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Absolutely. And as we talked about, the capital we've invested year to date as well as at the quarter, this quarter, the past quarter we invested about $21 million in DAS build-out projects, which is where this comes in. And we're building and building rapidly. So we still are targeting our 20.

As we expect, it tends to be usually towards the middle of the year and towards the end of the year. And that's coming together exactly as we anticipated. And for that point, we're very comfortable with our 20.

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Operator [11]

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Our next question comes from James Breen with William Blair.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [12]

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Just one, just a clarification. Of the sort of 354,000 beds you have in military, how much is the Army and Air Force of that total, just to get an idea of what you locked up?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [13]

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I'll take this, Jim. Army Air Force is a little more than 60% of the beds that we have covered. And so I mean, fundamentally, and I know this is being very simplistic, but we have 3 divisions with military. You can almost think of them as a third each in terms of bed covered. Seems a little simplistic but it's pretty close.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [14]

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Okay. And then just from a numbers perspective on the quarter, on a year-over-year basis, do you have just an estimate of what the reamortization of the New York contract had from an impact? Because I know it was more heavily weighted this quarter than the last two.

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [15]

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Yes, it was very meaningful. It was a step down of almost $4 million of revenue throughout the quarter. So as you think about growing DAS build-out fee revenue, this $13.4 million that we recognized in the quarter, that really should be where we build off of.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [16]

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And then you touched a little bit of military. Subs were down again a little bit this quarter. Is that a trend that you see flattening or have you seen a reverse at all this quarter?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [17]

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Yes, we've already started to see some of this come back. We did see a larger than anticipated what we call troop movements and it really fits when soldiers will go out and not be in their home base and go on some sort of deployment type mission.

And when that happens, they typically do not have connectivity. But what we also see is when they come back, it turns on right away, and we're seeing this -- starting to see some turn back on. So we're encouraged by what we're seeing but it is something we're watching very, very closely.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [18]

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And then just from a cash flow perspective, you were $20.5 million this quarter. I think you had burned $41 million to date through the first half. So you're sort of, call it $20 million you've burned year to date. Do you still sort of expect to be in that $20 million to $30 million range for the full year? And then can you give some color into just the CapEx around that? How much do you expect to be from the large MTA contract in New York?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [19]

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Sure. So you're absolutely right. We are still projecting that we will be a consumer of between $20 million to $30 million of free cash flow in 2019. And that's right in line with our expectations. We were pleased with the inflows that we had coming in Q2, excuse me, in Q3, and a lot of those really from the receivables we had in Q2. And you saw our AR balance go down accordingly.

In terms of CapEx, as we said in our guidance range, we expect that DAS CapEx will be between $95 million and $105 million. So call $100 million at the midpoint. Between self-funding and MTA, we're looking at over $40 million cumulatively. But when we think about for the full year, your question on MTA specifically. It's somewhere between $20 million to $30 million of capital for the MTA in this year, call it $25 million at the midpoint.

And that's something that we are highly, highly optimistic about and believe that it's going to be a great driver. But it's taking capital today for a contract that is -- there's 2 separate contracts. One is 10-year plus extensions. The other one is 15 years plus extensions. So we're looking at many, many years of recurring cash flow. But it is taking near term investment.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [20]

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So excluding that large MTA contract, which is obviously -- doesn't go live for a year for one part of it and further than that for another part. Are you basically just trying to run the business at cash flow breakeven?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [21]

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That's a great way to say it, Jim. It's something that we're focused in on is overall cash generation and we're being, I would say, very thoughtful when we do what we call self-funding and deploy networks on behalf of the carriers in exchange for higher access fees. We're trying to do that with our available cash from operations.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [22]

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Great. And just one last question. In terms of the venues you've got live now and the ones in backlog, on the press release you've got 37 plus nodes lives and then 12 in backlog. Is there something different about the ones that are in backlog? Are they smaller venues and there's just less nodes per venue? Or how does that break out?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [23]

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The nodes that are in backlog are indicative of what we anticipate to be the nodes at the launch of a venue. And so if you look at the nodes that are live today on the venues that we have covered, many of them have been live for many years. And so they have high carrier penetration. So on average, we average 3.5 carriers per location one the venue has been live longer than 3 years. So you've got more nodes from high carrier penetration. Plus, many of these venues have gone through 2G, 3G, 4G, and now just starting to experience 5G upgrades. And when upgrades happen, you see more nodes.

So ultimately, I think the venues that we have in backlog are going to mirror what we have live. But it's going to take a multiyear process on a venue-by-venue basis to get there.

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Operator [24]

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Our next question comes from Scott Searle with Roth Capital.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [25]

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Nice quarter. Just to quickly dive in on the DAS access fee front, even adjusted for the one-time, $1.8 million impact this quarter, it still seems like it was a little better than expected. Can you just kind of take us through some of the dynamics there in terms of what customers want? Are we going to push more to an access fee side from build-out revenue?

Is there some major change that's going on? And maybe if you could kind of couple that into the guidance, EBITDA guidance for the year, kind of implies flattish to down a little bit. But given the revenue bump that you would expect to see, build revenues coming back, what's the dynamic that's moving that around?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [26]

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It's a handful of things, Scott. So first and foremost, you've heard us talk about we're deploying capital today to get increased access fees over time. So that is absolutely happening and that's a major reason for all the acceleration in access fee growth.

At the end of the day, we look at this and say carriers are going to ultimately pay what they're going to pay for a venue. But we have the ability to move monies in certain buckets at times, depending on the deal we can structure with the carriers. And that's exactly what you're seeing with more monies coming from access fees in lieu of build-out project revenue. It does consume capital in the near term and free cash flow in the near term. But we think it drivers overall long-term shareholder value.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [27]

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And then looking out to the fourth quarter in terms of the implied guidance from an EBITDA standpoint, can you take us through some of the dynamics there?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [28]

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If you look at the implied guide just on a summary, it's implied guide of $17 million to $22 million for the quarter, which is actually -- 22 is effectively where we are this current quarter. We're very comfortable with where we are in terms of the guidance range. We expect Q4 on the revenue side to accelerate and we expect a good portion of that revenue acceleration to actually flow through to adjusted EBITDA. And even more importantly, really being EBITDA that's not generated from build revenue deferrals.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [29]

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And if I could, a couple follow-ups quickly. Mike, on the 5G front, starting to become much more real. You guys are featured in a lot of key venues that customers like Verizon like to talk about. Can you take us through a little bit, looking at those 71 venues that are deployed, the 60 plus that are in backlog, how much dialogue today is 5G getting pulled into those venues? I mean is there an idea or magnitude in terms of how quickly we're going to see 5G deployed across those key properties? And kind of maybe what the economics look like to the extent possible. Help us understand cash investment required on your part versus what that's going to do to your revenue per venue.

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [30]

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Great question. Thanks, Scott. So I mean to a large degree, I would say every one of the venues, we're having a discussion about. The reality of it is we'll parallel really the same path that operators, as they launch markets. So there's a number of markets now launched by all of the operators. A lot of them overlap each other.

So where we have venues in those locations, we're absolutely not only talking about 5G, but in many cases, deploying it. So for the other venues and for the new ones that we're building, everything really going forward would be what I would call 5G ready. So as we're wiring them and doing the design, we'll have a lot of that in place.

So it's happening. I don't want to overhype 5G. It is kind of the first inning of that, if you forgive my baseball analogy. And the carriers are visibly building it out and obviously, we're doing that with them. So very excited about that. And as far as how that benefits us, it's really the same kind of model that we've had. It's the build -- as we build it out on their behalf. And then the ongoing revenue that comes from the DAS or the recurring revenue fees. We'll participate in that as well.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [31]

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And lastly, if I could, I don't know if there's such a thing as a quick question on CBRS, but I'll try. Very exciting opportunity. A lot of different models and different ways to approach it. Can you give us an idea how your dialogue with customers and venues is going? Do you think it's more neutral hosts or will it look more like 5G? Or will those be bands that some of the existing operators are going to use to deploy 5G.

A lot of different ways you can go. Very exciting. I know next year is still embryonic but if you could help us understand how the thought process is evolving right now. Thanks.

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [32]

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Thanks, Scott. It is still early on that. And I think probably the best way to answer it is, it is a little bit of both or all of the above. It does have a lot of kind of unlicensed type capabilities and it will also have some types of licensed type execution as well.

The other piece of it is, really anywhere, where we have the rights, the wireless rights, we can deploying that. And it's moving probably a little faster than you think, meaning equipment is starting to come forward. I think the fact that the latest iPhone came out with CBRS obviously really ignites the ecosystem as well. So those types of things get things going.

So we're very busy with it and it does, as you say, create new opportunities as well, some that we're exploring, some that are new, and some we'll probably create.

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Operator [33]

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Our next question comes from Walt Piecyk with LightShed Partners.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Former Co-Head of Research and MD [34]

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Pete, the G&A was down $2 million sequentially. Was there some type of one-time credit in there? Because I haven't seen that as a seasonal pattern before.

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [35]

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So there's a couple things. So some of it is ongoing, which is stock-based comp was down. That's a good portion of it. But the other piece, which I called out in our prepared comments, was as we assessed the earn-out with Elauwit, we booked some continued consideration. And we came to the conclusion this quarter that there will be no earn-out payment. And as a result, we took into income that contingent consideration.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Former Co-Head of Research and MD [36]

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The stock comp -- was it the stock-comp that was down? Because I thought that was flat. No, you're right. No, stock comp, wasn't that kind of flattish at around a little under $1 million?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [37]

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It's flat sequentially. Year-over-year it's down.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Former Co-Head of Research and MD [38]

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Right. I'm sorry. I was just looking at that sequential move and I guess it was some of these other things.

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [39]

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The other piece then is also just comp in general was down and G&A is a bigger part of comp. So it's still comp less stock-based comp sequentially. But the biggest piece of the sequential decline has to do with contingent consideration.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Former Co-Head of Research and MD [40]

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And then wholesale, I know you got kind of the issues with the credit card benefit programs and what have you. But for the wireless carriers, are you seeing data usage there? And I guess more specifically for AT&T, since they're the more recent one, are you kind of in all of the locations? I recall you had started some location and you were going to expand to more. Are you in all of the locations? It's now more of a matter of usage growth at the existing customers? Or are you still lighting up new locations for those AT&T customers?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [41]

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It's more of the former. So they're effectively live in the locations we expect them to be live, which is really the majority of our footprint. In fact, the vast majority of the Passpoint enabled WiFi locations. And so the growth there is really going to be based upon the total usage by each consumer.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Former Co-Head of Research and MD [42]

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So assuming that you digest American Express in 2019 and you're looking in 2020, obviously, there's kind of volume discounts and things like that. Is the ability to grow wholesale basically dependent on getting Verizon on board as an incremental customer? Or is there enough growth from just the -- I mean because AT&T's subscriber base, I guess, is flat to declining. Sprint is obviously declining. Maybe you pick up T-Mobile, assuming if that deal happens. But is the revenue growth in wholesale just kind of dependent on Verizon as a new potential offloader?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [43]

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I wouldn't say it's dependent upon Verizon. Obviously, winning a Verizon deal would be very important and would be a key growth driver and something that we're highly focused in on. But because this is usage-based, we actually anticipate that there will be growth in carrier offload driven by increased usage.

Now, you highlighted, we expect as usage goes up, price per unit will come down. Not to the same extent but we do have tiered volume pricing and that would come into play. But we expect growth to happen by volume and then something like a Verizon or a T-Mobile joining the network would drive growth at an outpaced rate.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Former Co-Head of Research and MD [44]

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And then just last question. Can you just give a mix on the cap -- the cash CapEx, what's self-funded versus operator funded?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [45]

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So on a year to date basis, it's about 25% has been what we call Boingo funded. So call that $25 million for the year.

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Operator [46]

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(Operator Instructions) Our next question comes from Kyle McNealy with Jefferies.

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Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [47]

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So first one, real quick. Did I hear you mention the Boingo multifamily revenue and what it was in the quarter?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [48]

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So multifamily revenue for the quarter was $5.7 million and $3.9 million was recurring, and $1.8 million was construction.

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Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [49]

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Okay. Great. And you mentioned that year to date, a good portion of the multifamily contracts you've signed have been for conventional. Just curious, are any of those signed conventional deals with the same REITs that you're also currently pursuing a framework agreement with? And does that give you any more confidence in an eventual framework deal?

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [50]

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This is Mike. Great question, Kyle. Yes, it is. We do a lot of work with a lot of the big REITs and the conventional side is starting to shift a little more and starting to get going. And that is essentially with the same entities that we're working pretty diligently to have a broader agreement with.

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Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [51]

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And then switching gears to the military and the 15-year extension that you guys just struck. You mentioned there's other revenue opportunities outside of your traditional military beds business. Can you explain what some of those look like and how we can relate them to some of your other segments and monetization opportunities? Like do these look like carrier offload? Are they going to be kind of a general managed service? Or is it going to be kind of a set of DAS venues? Anything you can add would help there.

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [52]

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So I'll start and if Pete wants to add. Certainly, on the offload, it is something that is opportunity there. The kind of we'll call tenant services or other services on the bases is part of it. Also, towers, which was a key part of this extension is something that now will enable us to work a little more on the military side on that type of stuff.

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Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [53]

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So when you say towers, would that be kind of guest services related, like build project? Or would it also be -- would it look like a DAS opportunity or offload opportunity?

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [54]

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It would be just like a traditional tower. So we would build the tower just like a tower company would and then we would charge the carriers for the nodes that they would put onto a tower. So it would predominantly be a rental model and something actually we're very excited about. It's in the early stages but it's an exciting opportunity.

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Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [55]

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And one last one. You've said in the past that upgrades can take place within the quarter. They don't always hit node backlog. So is there anything you can add to kind of give us a sense for the pace or momentum of upgrade activity, whether it's the 5G or 4G?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [56]

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(inaudible) happen. It's not -- it wasn't as much I'd say in Q3 as it has been in some prior quarters. We are seeing alto of demand on 5G upgrades and we are doing some 5G upgrades. But in terms of what launches and what we recognize revenue on, and what ultimately goes into the backlog, we didn't see as much of that in Q3. But we expect (inaudible).

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Operator [57]

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We have reached the end of the question and answer session. at this time, I'd like to turn the call back to Mike Finley for closing comments.

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [58]

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Thanks, operator and thanks everyone for the questions. As a reminder, we have a very active investor relations schedule coming here in the fourth quarter and we look forward to seeing many of you there. So thanks for joining us and have a great day.

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Operator [59]

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This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.