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Edited Transcript of WIFI earnings conference call or presentation 27-Feb-19 9:30pm GMT

Q4 2018 Boingo Wireless Inc Earnings Call

LOS ANGELES Apr 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Boingo Wireless Inc earnings conference call or presentation Wednesday, February 27, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David Hagan

Boingo Wireless, Inc. - Chairman & CEO

* Peter Hovenier

Boingo Wireless, Inc. - CFO & Secretary

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Conference Call Participants

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* Anthony Joseph Stoss

Craig-Hallum Capital Group LLC, Research Division - Managing Partner & Senior Research Analyst

* Gregory Thomas Gibas

Northland Capital Markets, Research Division - Analyst

* James Dennis Breen

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

* Kyle P. McNealy

Jefferies LLC, Research Division - Equity Associate

* Mark Nicholas Argento

Lake Street Capital Markets, LLC, Research Division - Head of Capital Markets & Senior Research Analyst

* Timothy Kelly Horan

Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst

* Walter Paul Piecyk

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

* Ariel Papermaster

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Presentation

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Operator [1]

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Greetings, and welcome to the Boingo Wireless Fourth Quarter and Full Year 2018 Earnings Conference Call (Operator Instructions) As a reminder, this conference is being recorded.

I'll now turn the conference over to your host, Ariel Papermaster. Thank you. You may begin.

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Ariel Papermaster, [2]

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Thank you, and welcome to the Boingo Wireless Fourth Quarter and Full Year 2018 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 www.boingo.com by clicking on the Investor tab. This call is being webcast and 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 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, February 27, 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, 2017, filed with the SEC on March 12, 2018; Form 10-Q for the quarter ended March 31, 2018, filed with the SEC on May 8, 2018; Form 10-Q for the quarter ended June, 30, 2018, filed with the SEC on August 6, 2018; our Form 10-Q for the quarter ended September 30, 2018, filed with the SEC on November 5, 2018; 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, which will be posted on the Investor Relations section of our website at www.boingo.com.

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

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [3]

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Thanks, Ari, and thanks, everyone, for joining us on the call today. 2018 was an incredible year for Boingo. We delivered our best results ever with an all-time high of revenue of $250.8 million. This represents a 22.7% increase over 2017, and exceeded the high-end of our guidance range please. This is our fifth consecutive year of double-digit revenue growth. Our strong top line growth drove growth in adjusted EBITDA as well, which came in at $91.8 million, an increase of 33.2% over 2017. This also exceeded the high-end of our guidance range.

We're pleased with these operating results for 2018, and yet based on the macro trends driving the wireless industry today, like the incredible growth of mobile data and the march to 5G, we believe that the best is yet to come.

With that, let me dive in a little deeper into what we expect for the year ahead and why we remain confident that Boingo is in the right place at the right time with the right strategy to continue delivering great results.

To begin with, the most fundamental macro trend that we're solving for is the growth of mobile data usage. Cisco projects that mobile data will grow 7x from 2017 through 2022. This will put incredible strain on traditional macro network. The solution to this growth is densification, moving the wireless networks closer to the end consumer. We do this with WiFi and DAS today, and as I'll share in a bit, we have continued to win a large share of business for which we compete.

Recently, Boingo was awarded 2 significant projects with the MTA in New York City. Individually, the East Side Access project and the Long Island Rail Road project are among the largest projects we've ever been awarded, and collectively, they represent the largest network deal in the history of the company.

We're honored and humbled the MTA selected Boingo to manage and operate the wireless networks at such important and high profile venues. They also represent the kind of Boingo-funded network deals that we can aggressively pursue given the cash on our balance, which resulted from our fourth quarter convertible debt offering. Self-funding network builds allows us to increase our share of ongoing and recurring cash flow from each venue while getting networks built more rapidly.

The second macro trend we're solving for is convergence, and in particular, 5G. 5G is the next generation of wireless technologies that exceeds 4G, and will vastly improve connectivity between people and things. It will deliver higher throughput, lower latency and larger bandwidth, and will move radios closer to the edge via smaller cells.

Although, the technical specifications for 5G NR continues to be sorted through by the GSMA/GTP working group, what is clear is that 5G is not a one size fits all approach. Each carrier will deploy its own 5G strategy that leverages variant technologies. We expect to see 5G deployments across multiple swathes of spectrum, licensed, unlicensed and shared, as well as high, mid and low frequency band. Today, Boingo is working with carriers and venues to deploy 5G networks coast-to-coast. Based on our CBRS deployment at Dallas Love Field, we received interest from multiple carriers to launch CBRS at many of our venues. This demonstrates the attractiveness of shared spectrum, and a 3.5 band for carriers' 5G strategy.

We believe Boingo is uniquely positioned as a neutral host provider to manage the challenge of various 5G technologies in the same venue. We know the technologies and the challenges of each, because we have deployed neutral hosts, multi-carrier, licensed and unlicensed networks for nearly 20 years. We believe we have more experience doing this than any of our competitors, and is only going to get more important in the 5G era.

These 2 macro trends, mobile data growth and 5G, represent incredible winds at our back. Our job is to take advantage of these favorable winds by executing against our key growth drivers.

As you heard earlier from our operating results, we believe we are doing just that. So now, let's take a deeper dive into our primary revenue growth drivers, DAS; wholesale WiFi, which includes carrier offload; military and multifamily.

For starters, DAS remains incredibly robust. We are coming off a solid venue acquisition year with 12 new DAS venues signed for a total of 130 venues under contract, and 29,900 DAS nodes live. As I mentioned earlier, one of the wins we recently announced is the MTA deal, which will be our largest DAS deployment in company history. To give you some color on this project, it's one of the largest current transit infrastructure projects in the U.S. in one of the busiest rail hubs nationwide. These 2 projects represents the equivalent of more than 20 of our average DAS deal size, and that's how large and complex they are. In addition to the MTA deal, we were awarded DAS agreement for the Vista Tower project in Chicago. Vista Tower will be the third tallest skyscraper in Chicago, and will include 406 high-end condominiums, plus the five-star Wanda Vista Hotel.

Our venue pipeline remains healthy, and we expect the 2019 -- we expect that 2019 will be another good year for DAS venue acquisition. As a reminder, we have 72 DAS venues under contract that are yet to be deployed, which is more than the 58 we have live. So we have a lot of DAS runway ahead of us.

2018 was also an excellent carrier leasing year with $132 million in carrier contracts signed, up dramatically from the $72.8 million in 2017.

So now let�s discuss carrier offload. We had a record number of connects through WiFi offload in 2018, and growth is progressing in line with our expectation. As we announced last week, AT&T is now live on over 80 venues, including our military bases, which represents the vast majority of our WiFi network. This expanded use of offload is part of the AT&T's strategic network management initiative to help accommodate rising mobile data traffic.

As we discussed on our last call, we believe smart routing capability will make WiFi offload more strategic and on net from a carrier's perspective. But actively managing traffic throughout the day, they can optimize the use of WiFi capacity on their DAS network and macro networks.

We now have 2 carriers on the vast majority of our offload footprint, and we're talking to the other carriers as well. We believe that with continued mobile data growth, all carriers will need to utilize WiFi, which is less expensive on a cost per bit basis compared to licensed spectrum, to drive down the traffic on their cellular networks. As we said many times in the past, we believe it's not a question of if, but when.

Turning now to our military product. We've now deployed 344,000 military beds, up from our 2017 year in total of 330,000. We expect to deploy another 5,000-or-so beds in 2019.

We improved subscriber penetration at year-end of 40.1%, a slight increase for the same period of 2017.

As we've said in the past, when you take occupancy into account, we believe that we're very well penetrated, so our focus has been on growing ARPU. We did quite well in that regard in 2018, increasing ARPU throughout the year. We'll continue to grow military ARPU in 2019 as we are raising both speeds and prices in Q1. Our basic tariff service will increase from $29.95 per month to $34.95 per month and will double in speed from 5 megs to 10 megs per second. Our fastest -- excuse me, our faster and most popular tariff service will increase from $49.95 per month to $54.95 per month and will jump from 30 megs to 50 megs per second. These speed and price increases affect about 80% of beds we cover, so the vast majority of our military customers will see the new rates in Q1 of 2019.

Our military experience over the last 5 years has prepared us well to expand into the multifamily space. We are incredibly excited about this vertical and its growth potential. The multifamily market is highly fragmented and underserved. Based on our research, we believe REIT developers and property management companies are largely unhappy with existing wireless providers, as they're typically either a cable company, which doesn't provide nationwide service and has the reputation for poor customer service, or they are smaller operators, which tend to be underfunded with less than cutting edge technology.

Boingo represents a quality oriented, well-capitalized wireless operator entering the multifamily market. We provide service coast-to-coast and globally, which is an important attribute for the larger builders and property managers. We are also a proven technology leader they can rely upon to help future-proof their wireless solutions. Based on our military experience, we also know how to provide excellent service to Millennial and Gen Z customers who are connected 24/7.

Beyond that, we're one of the only wireless operators with experience delivering both unlicensed and licensed solutions. So we can help property owners provide their residents with an outstanding connectivity experience whether it's WiFi or cellular or both.

A great example of that is the Wanda Vista project I mentioned a few minutes ago. This is a multifamily, mixed-used project that will provide both licensed and unlicensed connectivity to residents. We believe our ability and experience with both kinds of spectrum make us really unique in the space.

We believe, there is potential for this vertical on its own to reach the size of Boingo today, and we're optimistic for its ability to serve the growth engine going forward.

In summary, our business remains extremely robust, and we anticipate double-digit revenue growth in 2019.

Pete will walk you through our outlook as well as our fourth quarter results. Let me turn it over to Pete now. Pete?

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

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Thanks, Dave. I will begin by reviewing our financial results and key operating metrics for the fourth quarter ended December 31, 2018 and will conclude with our financial outlook for the full year and first quarter of 2019.

Total revenue for the fourth quarter was a record $67.8 million, an increase of 18.2% over the prior year period. Revenue growth reflected strong performance in military/multifamily, wholesale WiFi, DAS, advertising and other, partially offset by a year-over-year decline in retail revenue.

As a percentage of revenue across our diversified revenue streams as compared to the prior year quarter, DAS represented 37% of revenue, down from 42%; military/multifamily was 35%, up from 26%; wholesale WiFi represented 16%, unchanged from the prior year quarter; advertising and other accounted for 7% of revenue, up from 6%; and retail was 5%, down from 10%.

In terms of total revenue contribution by category for the quarter, DAS revenue was $25.3 million, representing a 5.4% increase over the comparable period last year. Total DAS revenue comprised of $18.1 million of build-out project revenue and a $7.2 million of access fee revenue. The year-over-year improvement in total DAS revenue was primarily related to increased access fees from our telecom operator partners and increased revenue from new DAS build-out projects.

Military/multifamily revenue was $23.4 million, representing an increase of 54.9% versus the prior year period. Growth was driven primarily by $6.1 million of multifamily revenue from our acquisition of Elauwit Networks as well as increases in average monthly revenue per subscriber and total military subscribers. During the quarter, we built out the network to cover an additional 4,000 beds, bringing our total footprint to 344,000 military beds as of December 31.

Wholesale WiFi revenue was $11.1 million, representing a 21.6% increase over the prior year period, primarily due to higher partner usage-based fees, driven by a 34% increase in carrier offloading and an increase in managed service fees from our venue partners who pay us to install, manage and operate network infrastructure at their venues.

Advertising and other revenue was $4.4 million, representing a 36.2% increase over the prior year period, due primarily to an increase in the number of premium ad units sold during the quarter as compared to the prior year period.

Retail revenue was $3.7 million, representing a 38.1% decline over the prior year period, primarily, due to reduced retail subscribers and decreased retail single-use revenue.

Now turning to our quarterly costs and operating expenses. Network access costs totaled $33.6 million, a 29.2% increase over the fourth quarter of 2017, primarily related to increased direct cost of sales, which includes the cost of equipment installed on multifamily deployments, depreciation of our DAS build-out projects and higher revenue share paid to our venue partners.

Gross margin, which is defined as revenue less network access cost, was 50.4%, down 420 basis points from the prior year period. The decline in our gross margin largely reflects the shift in our diversified revenue streams, driven primarily by the increase of our lower-margin multifamily and DAS build revenue, partially offset by increases in the higher-margin military and wholesale WiFi revenues. Excluding the impact in gross margin resulting from our acquisition Elauwit, the year-over-year decline in gross margin for the fourth quarter of 2018 was 70 basis points.

Network operations expenses totaled $13.4 million, an increase of 2.5% from the comparable 2017 quarter, primarily due to higher depreciation, personnel-related and other expenses.

Development and technology expenses were $8.5 million, an increase of 22.3% from the prior year period, due to increases in depreciation, personnel-related, maintenance and consulting expenses.

Selling and marketing expenses were $6.2 million, an increase of 7.2% from the comparable 2017 quarter, due primarily to higher personnel-related expenses.

General and administrative expenses were $8.1 million, a 1.4% decrease from the comparable 2017 quarter, due to decrease in bad debt expense.

Now turning to our profitability measures for the quarter. Net income attributable to common stockholders was $400,000 or $0.01 per diluted share versus a net loss of $1 million or $0.02 per diluted share in the prior year quarter. The current year quarter included a onetime noncash tax benefit in the amount of $5.7 million related to the reversal of our tax valuation allowance on the equity component of our convertible debt.

The prior year quarter included a onetime noncash tax benefit in the amount of $3 million due to the implementation of the Tax Cuts and Jobs Acts of 2017.

Adjusted EBITDA, a non-GAAP measure, was $23.2 million, an increase of 13.4% to the comparable 2017 quarter. As a percentage of total revenue, adjusted EBITDA was 34.1%, down from 35.6% of revenue in the comparable 2017 quarter.

Now turning to our key metrics. The number of DAS nodes in our network for the fourth quarter were 29,900 up 27.2% from the prior year period and up 9.1% from the third quarter of 2018. 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 fourth quarter, were 13,800, up 23.2% from both the prior year period and the third quarter of 2018.

Our military subscriber base was 138,000 subscribers at the end of the fourth quarter, up 6.2% versus the prior year period. Compared to the third quarter of 2018, military subscribers declined by 2.8%, in line with the anticipated seasonal trends which typically reflects a short-term reduction in subscribers during the last few weeks of December around the holidays. As expected, our military subscriber base rebounded in January.

Our retail subscriber base was 122,000 subscribers at the end of the fourth quarter, which was down 35.1% from the prior year period and down 13.5% from the third quarter of 2018.

Connects, or paid usage on our worldwide network, were approximately $67.1 million, up 5.1% from the prior year period and down 11% from the third quarter of 2018.

Moving on to discuss our balance sheet. As of December 31, 2018, cash and cash equivalents totaled $149.4 million, up from $26.7 million at December 31, 2017, and total debt was $163.2 million. Our cash and cash equivalents and total debt balances are significantly higher as a result of the convertible debt offering we completed in October of last year.

Capital expenditures were $36.2 million for the fourth quarter, which included $29.5 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 primarily by new network builds, managed and operated network upgrades and various infrastructure upgrades and enhancements. As a reminder, we estimate our annual maintenance capital requirements, which excludes all growth capital, to be approximately 3% to 5% of revenue.

Free cash flow, a non-GAAP measure, was a negative $13.7 million for the fourth quarter versus a positive $11.7 million for the fourth quarter of 2017. As a reminder, we plan to invest the majority of our free cash flow into network expansion opportunities to drive future growth, which was the case this quarter.

Before I turn to our outlook, I'd like to note that we are extremely pleased to announce that we recently renewed certain DAS customer agreements covering some of our most important venues located in the greater New York City area. These agreements allow for our carrier customers to utilize our DAS network infrastructure at John F. Kennedy, LaGuardia and Newark Liberty Airport, The Port Authority bus terminal and the PATH stations plus the Holland and Lincoln Tunnel. As a result of the customer contract renewals, we re-amortized the historical associated deferred revenue balances in place at the time of the renewals over the new and extended contract term.

We believe the impact of deferred revenue reamortization will result in an $18 million noncash reduction to revenue and EBITDA in 2019 as compared to 2018, solely from extending the period in which we are amortizing the deferred revenue balances over our carrier customer agreements.

Turning to our outlook. For the first quarter ended March 31, 2019, we are initiating guidance as follows: we expect total revenue to be in the range of $63 million to $68 million, net loss attributable to common stockholders to be in the range of $9 million to $6 million, or a loss of $0.21 to $0.14 per diluted share. And adjusted EBITDA to be in the range of $17 million to $21 million.

For the full year ended December 31, 2019, we're initiating guidance as follows: we expect total revenue to be in the range of $270 million to $280 million, representing year-over-year growth of approximately 9.6% at the midpoint of the range. It's important to note that the reamortization of the deferred revenue from the contract extensions mentioned 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 $20 million to $15 million or a loss of $0.45 to $0.34 per diluted share. Adjusted EBITDA is expected to be in the range of $80 million to $87 million, which implies an EBITDA margin of 30.4% at the midpoint of the range. Similar to the impact to revenue, the extended deferred revenue amortization period will pressure adjusted EBITDA in the mid--- in the near term, representing a reduction equal to 19.6 points of year-over-year growth, although it will not impact future cash flow generation.

We will maintain our tax valuation allowance and as such, do not expect to accrue material tax benefits or tax expenses on our income statement through '19.

We continue to expect a nominal full year tax rate as well as fully diluted shares outstanding of approximately 44 million.

In addition, we expect our non-DAS annual capital expenditures will be approximately $25 million to $30 million for 2019, with the majority allocated to support new network builds and upgrades at our managed and operated venues.

We expect our annual capital expenditures for the deployment and upgrades of DAS networks to be between $75 million to $90 million. As a reminder, virtually all of our DAS network deployments are success-based builds, meaning we have commitments and will received guaranteed payments from our carrier customers.

In closing, our fourth quarter financial and operational performance was a strong finish to a well-executed and record-setting year. In 2018, we successfully completed a convertible debt offering, acquired and integrated Elauwit Networks and deliver the highest annual revenue in our company history. Looking ahead, with an exceptionally strong balance sheet, we believe Boingo is extremely well positioned to capitalize in the continued and exponential growth of mobile data consumption and the opportunities presented by 5G technology to drive incremental growth. We look forward to be building on this momentum in 2019.

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

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [5]

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Thanks, Pete. All in all, we feel incredibly good about how we wrapped up 2018 and are very excited about what 2019 has in store. Certainly, one of the things I'm most excited about is the announcement we made a few days ago that Mike Finley, who has served on our Board of Directors for the past 5 years, will be succeeding me as CEO effective March 18. Mike has been the President of QUALCOMM for the U.S. and Australia and has been with QUALCOMM for nearly 9 years. He's a true industry insider because he has worked for 3 of the big 4 carriers before joining QUALCOMM. As a result, he has deep wireless experience and excellent executive-level relationships. He also knows Boingo exceptionally well because he's been on our board for 5 years. He has been instrumental in helping us navigate the wireless industry and honing our strategy, and I believe, he's the right leader to lead Boingo as we build wireless infrastructure in the 5G era. While, I retire from day-to-day management after 17 years at the helm of Boingo, I look forward to working with Mike in my continued role as a board member.

With that, let's open 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 James Breen from William Blair.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [2]

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Just a couple on the guidance, and then just on cash flow. So if I'm hearing you right, because of the new contracts -- x the new contracts, the guidance would have been kind of $18 million higher from both revenue and EBITDA, is that correct?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [3]

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Yes, that's correct, Jim. Yes, so -- yes, just let me add a little color there. So the reamortization were of extending the deferred revenue balances over a new longer customer relationship period. And it's all noncash, it's cash that's been historically corrected -- or collected, and we are just amortizing it over a new life. And that does impact both revenue and EBITDA, but nothing related to cash.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [4]

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Can you speak -- if you look at those contract extensions, how much longer are they going to extend it for, do they do 10-year contracts?

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

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Yes, they're new -- we don't disclose the actual terms, but they are new long-life contracts, and typically extensions are in the 5- to 10-year lives, and this is in that range. Giving you a simple example, these are some really large contracts, so it's the 3 new York airports, it's the Holland and Lincoln tunnels, it's The Port Authority bus terminals, it's the PATH stations. So there's a lot of historical build revenue that's been put into place there. So think of it as like if there's $80 million of deferred revenue that's being amortized over an estimated 3-year life is remaining, that's $26 million a year that's going through the P&L in a given year. If that same $80 million is now amortized over a new 10-year life, that's an $8 million a year deferred revenue that falls into the P&L. So that shift right there is the $18 million.

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [6]

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And Jim -- hey, Jim, I'd also add. We went through this last year, too. Everybody tends to have a short memory in this business. But we went through the same thing with our other largest contract. I think it was about $12 million in revenue and EBITDA that was deferred back out of 2018 over the longer life of that -- of those contracts as well. So we've been through this before, and as we've talked about, they're really 2 -- 2 of the largest contracts that could have this kind of significant impact on the P&L. And last year we had one, and this year, we have the other.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [7]

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Yes, so I guess that was my question. This is very similar to the Chicago contract. If you take these 2 out of it now, you look at the rest of your DAS-based, is there anything -- if this were to happen again next year, is there anything of size that would be this similar in size? Or is everything a bit smaller?

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

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Everything's significantly smaller. In fact, we have this happen every single year, and we never really call it out, we just -- it -- because it's kind of implied in the overall growth. But New York and Chicago are outsized contracts, and they have -- there's a lot of carrier contracts attached to these venue agreements. You're talking about 7-plus venues in New York, and in Chicago, you're talking 2 great airports, but they're very large airports. So nothing else will -- would be notable that close to the P&L.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [9]

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And just from a modeling perspective, as we look at this now, so $18 million over the year, $4.5 million a quarter, does that basically come out immediately -- that $4.5 million come out of the DAS revenue line immediately in the first quarter relative to fourth quarter numbers?

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

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It's -- you'll see the full impact starting in Q2. You'll see a partial impact here in Q1. But literally, it just extended.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [11]

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Okay. So those contracts got resigned sometime in the first quarter?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [12]

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Correct.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [13]

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Okay. And then just secondly, just around cash flow, can you just give us some color around your -- what your free cash flow would have been this year, ex self-funding of DAS? And then how that looks in 2019, ex self-funding and DAS? And then could that sort of -- the DAS funding part is based on success, I was wondering what it looks like without that?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [14]

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No, I'm absolutely happy to give you some color. So this year, we end the year with about a negative $50 million of free cash flow. This year, being 2018. And that is almost all due to investments in the network. The DAS component alone was a little more than $30 million. And then we also did more and more in the way of WiFi upgrades to drive growth as well. So we are constantly focused in on expanding our network, which drives revenue over future periods. In terms of '19, going forward, we're working with our carrier customers on would they prefer to pay monies upfront for network investments or would they prefer to pay monies over time. We tend to be agnostic, meaning, we will do whatever is right for our carrier customers. We obviously have a bias, but we try to do what is in the best interest of our carrier customers. In terms of 2019, we expect 25% to 30% of our DAS builds to be under a model where we fund the capital, and that would come out to be about $20 million to $30 million. That does not include the MTA contracts. That is still being sorted out and we'll determine if that will be -- some of it, we expect, will probably be funded and some will not. And those are significant contracts, as Dave just talked about, and we're still sorting all that out.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [15]

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So ex self-funding, free cash flow in 2018 would have been somewhere in the $20 million to $25 million range? And is that going to go up to mid-$30s million in 2019?

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [16]

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It should, absolutely. I mean, we're -- it all depends on collections and such. So this particular quarter, if you look at our working capital, you'll notice our AR went up significantly. We did a lot of project closeouts. So we closed out 4 and launched 4 new DAS venues in the quarter. Most of those were done in the later half of the quarter and so there are some large invoices that went out in Q4 that we'll collect upon in Q1. So truly time (inaudible) capital.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [17]

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And then just one last question on the offload business, down to $11.1 million this quarter, is this the bottom now? We should see growth sequentially from here on out now those contracts are fully affected and the AT&T expansion is happening?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [18]

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Yes, that's exactly how we're positioning this and envision this. So smart routing was implemented partially in Q3. So some Q3 did not have smart routing, the end of Q3 did. It was all live through Q4, and we are now live on a significantly larger footprint with AT&T. It's really nice to say AT&T versus Carrier #2, which I've been saying for the last few years. And we expect it to grow from here. And we'll talk guidance, I'm sure, here shortly. But we expect WiFi carrier offloading to grow. Same-store sales for offloading will be down because of smart routing. But because of the expansion and the new venues, we expect WiFi carrier offloading to grow, call it, in the mid-teens, low-20s in 2019.

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Operator [19]

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Our next question is from Tim Horan from Oppenheimer.

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Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [20]

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Can you just clarify what percentage of EBITDA was cash EBITDA this quarter and kind of what you're expecting for next year?

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

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Sure. So for all of 2019, we expect the portion of our EBITDA, which is not related to deferred revenue, so cash EBITDA, to be about 50%. In Q4 of 2018, it was just about 30%.

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Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [22]

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30%. Okay, got you. That's real helpful. And the -- and what do you kind of expect that to trend over the next few years?

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

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So we continue to expect that to grow. So as we do more and more where we fund the network builds, there'll be less amortization deferred revenue, which is that's going to be a noncash component flowing through. As we do more and more of these builds, you're going to see cash and EBITDA to be much more in alignment. So we end 2019 with, call it, 50% of our EBITDA as cash-based and going forward, we continue to see that trend. So I'm not ready to pick a number per se but I do expect it to grow and grow meaningfully.

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Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [24]

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And can we just walk through the DAS extension of the contract. How many years was left on that contract, and why did you choose this time to extend it? And maybe can -- was there any change in the annual price increases in those contracts or any change in revenue share or anything?

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [25]

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Yes. No, great question. So it was up for normal course extension and that recently just happened. So look, this is the best thing we can do in our business is to extend relationships with our customers. So the best thing we can do is to keep customers longer and servicing them and generating more cash from those customers. That's exactly what happened here.

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

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I think the other part of Tim's question was, is there any change of terms?

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [27]

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Yes, there's no change in terms. So it is a contemplated extension, no change whatsoever. And so we're continuing to go forward. And we're very pleased with how this came about.

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Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [28]

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And lastly, maybe any color, if you guys are thinking when we might start to see, like, the New York City subway built out with a DAS system or the PATH trains? Or any other kind of the transportation systems around the country? Or are you actively engaged in dialogue on those contracts?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [29]

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So PATH is a Boingo venue, and we've -- we launched the -- some of the PATH stations here in the later part of Q4 2018. So that's some of the venues you saw go live in this Q4. And we're going to continue to look at other venues. The MTA tunnels that we just won, they're -- look, these are long, big projects. East Side Access is probably not going live until 2020 is what's we're understanding from the MTA. Long Island Rail Road might be a little bit quicker. There's some infrastructure that was already in place that we're going to be able to leverage. We are working...

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [30]

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And those are full tunnel builds.

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [31]

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Full tunnel builds.

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [32]

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They're subway access build, to your question.

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Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [33]

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I was referring -- sorry, Dave, I was -- sorry, guys, I was referring to the PATH tunnels and the subway tunnels, not the platforms?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [34]

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Ah, got it. That would be future opportunity. That's definitely something we will be talking to the MTA and The PA about. But it's not on the plan today. But we -- as you know, we have deep relationships with both the MTA and The Port Authority.

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Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [35]

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Okay. And any idea when they might build those tunnels out, rough idea? I thought the PATH was looking at it already?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [36]

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Nothing we can comment at this time.

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Operator [37]

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Our next question is from Anthony Stoss from Craig-Hallum.

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Anthony Joseph Stoss, Craig-Hallum Capital Group LLC, Research Division - Managing Partner & Senior Research Analyst [38]

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Pete, so can you -- a couple of things, CapEx plans for 2019? How much you plan on spending, if you have any thoughts on that? Also what you're seeing on the 5G small cell activity side? And then lastly, any WiFi offload pricing changes that are going on? And what your thoughts are in kind of pricing going forward?

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [39]

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So Pete, why don't you start with CapEx. And I'll take the other 2.

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [40]

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Okay. So CapEx, so what we talked about in our prepared comments is we gave a range of $75 million to $90 million on DAS CapEx for 2019, and then the non-DAS really being WiFi builds and upgrades on military bases predominantly between $25 million and $30 million in 2019.

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [41]

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And then on 5G small cell, so we're getting a lot of interest from the carriers, continuing discussion. We've talked in the past about sensible deployments on the military bases, those are definitely still on the table. We know there is keen interest on the market side in the multifamily space. The owners and developers of multifamily properties that we've talked to, one of the biggest problems they've been trying to solve for is a potential tenant walks into the building, they have bad cell service and they walk right out of this -- right out of that apartment and go down the street and try and find one that has better service. And one the things we're excited about is we're uniquely experienced in being able to provide that better cellular coverage in addition to the Internet access that we're providing through WiFi. So we think the small cell market, as it develops from an equipment perspective, is really going to feed into our future business opportunities within the multifamily space. So that will be our -- the very tight target market. And then we continue to talk to other types of venues and the carriers for other small cell deployments. But going forward, I think that first phase of opportunity is going to be in multifamily for us. In terms of WiFi offload pricing, it's all fully negotiated. No big changes there. We like the pricing a lot, the carriers are happy with the pricing. On a cost per bit basis, WiFi offload is cheaper than anything else that they can do. So we think, over time, and ultimately, faster speeds and better economics usually win. And that's how we feel WiFi is positioned in the market as these technologies converge. 5G is going to be a whole handful of different technologies and WiFi, certainly, has a role to play there. So we're still well positioned and excited about the future prospects.

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Anthony Joseph Stoss, Craig-Hallum Capital Group LLC, Research Division - Managing Partner & Senior Research Analyst [42]

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And then Dave, as a follow-up. When Mike Finley joins, do you think there's a change in strategic thinking or what do you think Mike brings to the table something that you guys weren't able to accomplish so far?

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [43]

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Yes, great question. And thanks for teeing that perfect one up for me, because I've been hoping someone would ask me that question. There's going to be no change in strategy. Mike's been on the board for 5 years. We develop strategy in partnership with the Board of Directors, we being the management team, in partnership with the Board of Directors. So he knows our strategy, agrees with our strategy, helped develop our strategy. So no strategic change, no strategy change. In terms of what Mike brings, I think it's -- I'm very confident to say, it's safe to say that he brings carrier relationships and both executive-level relationships and knowledge of how they're deploying capital, and how they're thinking about network builds in the various technologies, frankly, way better than I ever have or could in the future. He's just -- he's grown up in that business. And his last 9 years at QUALCOMM gives him really keen insight, both from a technology perspective, roadmap perspective and from a carrier perspective. So I'm incredibly bullish on having Mike fill my shoes. I think it's going to go extremely well. And I'm going to continue to remain, obviously, on the board and a significant shareholder. And so I'm going to help Mike be successful and the rest of the team be successful down the road. But yes, no change in strategy, and he's going to be awesome.

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Operator [44]

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Our next question is from Paul Penney from Northland Securities.

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Gregory Thomas Gibas, Northland Capital Markets, Research Division - Analyst [45]

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This is Greg on for Paul. Congrats on finally being able to name Carrier 2. Could you maybe extrapolate on what this means for a pathway for Carriers 3 and 4?

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [46]

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Sure. Yes, we were very excited to able to name Carrier 2 as well, as you can imagine. And Carriers 3 and 4, we continue to talk with them, lots of discussion about how WiFi plays a role in the overall network topology for each of the other 2. We have nothing to report on this call, obviously, or you would have seen a press release on it. But we're expecting good things to come there.

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Gregory Thomas Gibas, Northland Capital Markets, Research Division - Analyst [47]

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Got it. And then second, now that you've expanded into multifamily housing, do you have your eye on maybe any other verticals that are worth expanding into like hospitals, university campuses, that kind of thing?

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [48]

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Yes, we've done a little bit on the university campus space kind of edge out from where we've had a stage with an arena, that type of thing. I think you'll see that where we have the -- the Elauwit acquisition, their focus had been on student housing. Most of it campus adjacent, meaning not right on campus, not university controlled, but privately controlled. But there's some potential avenues there onto campus. But in general, we feel like kind of the focus on the verticals that we have and with the multifamily opportunity being the size that it is, we don't really need to widen our focus. We need to keep our heads down and keep executing.

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Gregory Thomas Gibas, Northland Capital Markets, Research Division - Analyst [49]

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Makes sense. And then could you provide some clarity on the economics difference between DAS and then small cells?

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [50]

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Pete, you want to do them?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [51]

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Yes. So the way to think about DAS and small cell is, really, it's more of a size differential than anything is how we tend to think about it here. We ultimately are a solution provider for the carriers and it's challenging to get a DAS network built for less than $1 million. But you can do a small cell network built in the, call it, the tens of thousands per node. So a venue that may need 3 or 4 or 5 nodes, you can absolutely deploy from a small cell standpoint, but it doesn't makes sense to do it from a DAS standpoint. And if you extrapolate up, the largest venues don't make sense to do from a small cell standpoint because the cost per node gets inefficient where the DAS node -- a node for a DAS network tends to -- it relies on the head-end. And that's the big differential between DAS and small cell. DAS has a very large head-end, which has a shared cost that allows the cost per node to come down dramatically as you deploy more nodes. So fundamentally, think of them as very similar technology. But it -- one is suited for one purpose and one is suited for another. The largest venues, DAS, and some of the smaller venues, small cell.

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [52]

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And even -- I'll use the multifamily, example. So the Vista Tower project that we mentioned in my script, that's actually a DAS implementation. That's -- it's a huge project. Most multifamily venues would not be that large. And so we would expect more small cell application in the majority of the multifamily space. So that's a good example of what Pete just talked you through.

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Operator [53]

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Our next question is from Mark Argento from Lake Street Capital Markets.

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Mark Nicholas Argento, Lake Street Capital Markets, LLC, Research Division - Head of Capital Markets & Senior Research Analyst [54]

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Just quickly, a follow-up on the CapEx question. So the MTA deal, are you guys going to be deploying Boingo capital into that deal? Then talk a little bit more globally about how you think about where there are opportunities for you to deploy CapEx? Is it more DAS situations versus small cell? Or how do you see that mix over time?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [55]

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Yes. So the on the MTA deal, at this point right now, we're working on the MTA deployment while -- particularly on the East Side Access network, because the tunnel is wide open, there's no trains in it, so it's much more efficient for us to start building today. So we're seeding in terms of network design, where the placement's going to go. But the big installation of gear and equipment is really going to happen once we have signed on a carrier and really lock in the design with the anchor tenants. So at this point in time, it's too early to say if it's going to be our capital versus the carrier's capital. I suspect there'll be some of these carriers will choose to not give us significant capital upfront and use our balance sheet to deploy the network, which is perfectly fine with us, and others will prefer to give us large infusions upfront, think of it as network joining fee, and that's perfectly fine as well. So what's beautiful about our balance sheet today and one of the reasons we did the convertible debt offering is to allow us flexibility like this particular project so we can go out and fund this and not have to rely on carrier capital. So it gives us a lot of flexibility.

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Operator [56]

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Our next question is from Walter Piecyk from BTIG.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [57]

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Pete, sorry if I missed this, did you say the -- what the reimbursable CapEx was for the fourth quarter?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [58]

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We did actually say on the reimbursable. It was just under $30 million, let me give you the exact...

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [59]

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So high-$20s million, and the split was for the self-funded stuff versus carrier fund, it was what, like, $8 million to $10 million for self-funded?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [60]

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Majority would be self-funded.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [61]

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Got it. And then for next year, I think I heard you right, it's $70 million total, with $25 million or $30 million self-funded, and then $45 million to $50 million carrier-funded, is that correct?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [62]

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No. So what we try to do here is break out between WiFi, CapEx and DAS CapEx. So WiFi being $25 million to $30 million, and then DAS CapEx being $75 million to $90 million. Of that $75 million to $90 million, we believe, at this point in time, 25% to 30% of it will be Boingo-funded, so call it between $20 million to $30 million on round numbers. But that's still being sorted out, and it will be throughout the year as we work with our carrier customers. Some of that is already baked, others will be sold throughout the year.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [63]

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But that $25 million to $30 million, in terms of what you're calling the WiFi CapEx, that's what we would, in the past, call just the non-reimbursable CapEx, right? That was about in the mid-$20s million this year?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [64]

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Correct. So what you'd be expecting is we'll be spending more in CapEx this year.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [65]

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Right. But it being -- that's actually -- I mean, you're kind of flat year-on-year for the WiFi, that's not up. And then for the reimbursable, I mean, I think, you've talked about that before going up more like $100 million. So it's probably -- you're saying only up to, like, $75 million to $90 million, so it's probably now up as much as you were thinking a couple of months ago?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [66]

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A lot depends -- and this range could change as we get further in the year. I mean, a lot depends on what happens with MTA and the timing of MTA. So this has some MTA dollars in there, absolutely. But MTA is a substantial build, and it will -- it could cause us to raise these ranges accordingly.

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [67]

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If it comes in sooner.

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [68]

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Yes, if it comes in sooner, there could be more cash applied there. If it definitely comes in sooner, obviously, it reduces it.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [69]

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Right. So -- but if I look at that mix -- I mean, if I look at the mix of 2018, if you did 80-ish -- a little over $80 million, the mix was, whatever, $50 million/$30 million, carrier-funded versus self-funded. So the mix in '19 is going the opposite way. It's not going towards self-funded, it's going towards carrier-funded based on those numbers. Am I looking at that right?

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [70]

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You're looking at it right from right now. But I would say, the carrier-funded piece is, we go into a cycle with the carriers and we go all the way down the path of the deal, and then they'll decide, do they want to pay the capital themselves or they want to have higher recurring access fees.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [71]

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Of course, you'll see how it plays out. But right now, you're expecting the mix to be more heavy on carrier-funded versus self-funded based on the guidance?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [72]

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And if you recall, this is exactly what we said at the beginning of 2018. So we raised up the amount we saw through self-funding throughout the year. And I wouldn't be surprised if that happens, but going in, we're going to err on the side of conservatism.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [73]

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Got it. And so that, obviously, if it mixes more to self-funded then that's clearly going to have an impact on cash flow if that mix changes or if the overall number goes up, right? I mean, it's just the way it works. And then I think you mentioned before, obviously, the goal of mix into a higher mix of actual cash EBITDA in terms of your EBITDA, and that moving towards the self-funded, notwithstanding this kind of mix thing that we just talked about, are there some amortized revenue streams that are going to roll off to 0? And is that going to help to change the mix within EBITDA?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [74]

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Well, absolutely. And of course, the reamortization we just talked about tied with the contract extensions is going to be part of that. So there is $18 million less of revenue and EBITDA that is not tied to cash. And so that, by itself, is going to improve the mix of cash EBITDA and EBITDA.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [75]

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So when you do a contract extension, let�s say, you signed a $2 million contract, you amortized it over x number of years. Now when you do the extension, do you try and get them to pay on an annual basis as opposed to doing like another onetime fee and then amortize it on a noncash basis?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [76]

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We focus more on the recurring access fees. But there's also usually upgrades that come along with it as well.

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Walter Paul Piecyk, BTIG, LLC, Research Division - Co-Head of Research and MD [77]

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But upgrade, you will begin one of those onetime fees than amortize them on a noncash basis?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [78]

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That's -- but then -- yes. But then, again, we can also self-fund those, too.

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Operator [79]

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(Operator Instructions) Last question is from Kyle McNealy from Jefferies.

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Kyle P. McNealy, Jefferies LLC, Research Division - Equity Associate [80]

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So a question on adjusted EBITDA margin guidance for 2019. Full year implies the about 30% EBITDA margin, lower than last year over 36%, and just wanted to see if you could walk us through, how much of the decline is due to Elauwit layering in? How much is the reamortization of the large projects that you talked about? And how much might be changes in OpEx lines and general mix shift in the segment?

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Peter Hovenier, Boingo Wireless, Inc. - CFO & Secretary [81]

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Yes, the vast majority of this is all tied to the $18 million reamortization. Had that not come into play, you'd be looking at EBITDA margins that would be growing. The Elauwit mix does also come into the play as well, but the biggest piece by far is the reamortization.

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Kyle P. McNealy, Jefferies LLC, Research Division - Equity Associate [82]

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Okay, great. And then you mentioned briefly about the venue acquisition pipeline. Just wanted to see if you could add any metrics around that in terms of what does the pipeline look like right now versus historical? If there are any numbers you can tie around venue deals in progress, carrier partners and venues willing to move forward on deals, anything you can add there will be helpful?

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [83]

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Yes, Kyle, I think, the clearest thing to point to, it's been covered in our scripts is, we've got 58 DAS venues live, and we have 72 that are signed, in other words, under contract but not yet deployed. And that's before we can get to the sales pipeline, right? So that 72 over the next 18 to 24 months, we hope to bring to market with at least 2 carriers. That's the name of the game in the DAS business. But I can tell you that the sales pipeline, on the outside of that, remains incredibly strong. If you look at the number of venue deals we did last year, you can say, well, it's a little bit light. But when you factor in the size of the MTA deal, which is equal to at least 20 normal DAS-sized deals, we had an incredible year. And we expect 2019 to be similar to that.

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Kyle P. McNealy, Jefferies LLC, Research Division - Equity Associate [84]

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Okay, great. And then on 5G, setting aside what the actual impact of 5G is to your business and just thinking about the timing, I'm assuming you don't have any 5G-related projects yet. When do you think that those could have a chance to start showing up, is 2020, 2021? And then, is there like a 2 -- 1- to 2-year project time that would push out the revenue opportunity from that? How should we think about that?

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [85]

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Yes, the -- what you hear about from the carriers right now is kind of pre-5G though there's certainly a lot of planning going on with them. So one element that's really concrete that we're doing with the carriers now is a CBRS, so the 3.5 spectrum. Incredible interest from the carriers. It's been added into some existing design projects that we have with the carriers. And they're calling it, we've got to add 5G to this. In their terminology, they're using the CBRS as the 5G. So that's really exciting. A little bit of that could hit in 2019. But again, the cycle on DAS 18 to 24 months, so most of that would be 2020 and beyond. But there's a lot of interest and activity in CBRS because the technology is coming to market quickly. And then on the kind of the broader 5G technologies, the non-standalone -- or excuse me, the standalone 5G, a lot of discussion going on. But that's much more of a 2020 and beyond implementation.

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Operator [86]

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This concludes the question-and-answer session. I'd like to turn the floor back to Mr. Hagan for any closing comments.

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David Hagan, Boingo Wireless, Inc. - Chairman & CEO [87]

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Thank you, operator, and thank you, everyone for your questions today. Take care.

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Operator [88]

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This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.