U.S. markets close in 3 hours 9 minutes
  • S&P 500

    +3.19 (+0.09%)
  • Dow 30

    +41.75 (+0.15%)
  • Nasdaq

    -39.62 (-0.34%)
  • Russell 2000

    +13.07 (+0.82%)
  • Crude Oil

    +0.54 (+1.35%)
  • Gold

    -27.60 (-1.43%)
  • Silver

    -0.60 (-2.36%)

    -0.0041 (-0.34%)
  • 10-Yr Bond

    +0.0280 (+3.43%)

    -0.0046 (-0.35%)

    +0.2530 (+0.24%)

    +1,929.42 (+17.45%)
  • CMC Crypto 200

    +5.50 (+2.15%)
  • FTSE 100

    +9.15 (+0.16%)
  • Nikkei 225

    -165.19 (-0.70%)

Edited Transcript of WIFI earnings conference call or presentation 2-Mar-20 9:30pm GMT

·44 mins read

Q4 2019 Boingo Wireless Inc Earnings Call LOS ANGELES Mar 24, 2020 (Thomson StreetEvents) -- Edited Transcript of Boingo Wireless Inc earnings conference call or presentation Monday, March 2, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Kimberly Orlando Boingo Wireless, Inc. - Associate - Addo Communications * Michael J. Finley Boingo Wireless, Inc. - CEO & Director * Peter Hovenier Boingo Wireless, Inc. - CFO, Treasurer & Secretary ================================================================================ Conference Call Participants ================================================================================ * Anthony Joseph Stoss Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst * 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 * John David Godin Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst * Kyle P. McNealy Jefferies LLC, Research Division - Equity Analyst * Scott Wallace Searle Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst * Timothy Kelly Horan Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst * Walter Paul Piecyk LightShed Partners - Partner & TMT Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings. Welcome to Boingo Wireless Fourth Quarter and Full Year 2019 Earnings Conference Call. (Operator Instructions) Please note, 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. -------------------------------------------------------------------------------- Kimberly Orlando, Boingo Wireless, Inc. - Associate - Addo Communications [2] -------------------------------------------------------------------------------- Thank you and welcome to the Boingo Wireless Fourth Quarter and Full Year 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 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, March 2, 2020, and are subject to certain risks and uncertainties that may cause 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, 2019, filed with the SEC today on March 2, 2020, and our other filings with the SEC. The company undertakes no obligation to update any forward-looking statements. On this call, we'll 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. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [3] -------------------------------------------------------------------------------- Thanks, Kim, and thank you to everyone for joining us today. Let me begin by addressing the recent news story speculating, we are exploring a potential sale of the company. While we will not comment on rumors or speculation in the marketplace, we can share that we have received multiple inquiries regarding a potential strategic transaction. As such, our Board has engaged strategic advisers to help us assess these opportunities. For that reason, while we will be sharing fourth quarter results with you today, we are suspending forward-looking financial guidance until further notice. With that, let me turn it over to Pete, who will walk you through our fourth quarter 2019 results in detail. Pete? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [4] -------------------------------------------------------------------------------- Thanks, Mike. Today, I'll begin by reviewing our financial results and key operating metrics for the fourth quarter ended December 31, 2019. Total revenue for the fourth quarter was $64.1 million, a decrease of 5.5% over the prior year period. Revenue reflected growth in military/multifamily and wholesale WiFi, which was offset by year-over-year declines in DAS, retail and advertising and other revenue. As a percentage of total revenue across our diversified revenue streams compared to the prior year quarter, military/multifamily was 37%, up from 35%; DAS was 35%, down from 37%; wholesale WiFi was 17%, up from 16%; retail was steady at 5%; and advertising and other was 6%, down from 7%. In terms of total revenue contribution by category for the quarter, military/multifamily revenue was $24 million, representing an increase of 2.5% versus the prior year period. Growth was driven by the military vertical, which improved 4.4% year-over-year. We grew military subscriber revenue following the speed and price increases we implemented in the first quarter of 2019, which led to a 10.1% year-over-year increase in ARPU. During the fourth quarter, we built out our network to cover an additional 1,000 military beds, bringing our total footprint to 355,000 military beds as of December 31. Fourth quarter revenue in the multifamily vertical declined 3% year-over-year. While growth in our multifamily business is taking longer than originally anticipated due to longer sales and deployment cycles, we remain optimistic in our long-term growth opportunity this vertical represents. In the near term, we continue to generate strong recurring services fees for our portfolio of 238 multifamily fundings. DAS revenue of $22 million decreased $3.3 million or 12.9% year-over-year primarily due to decreased DAS above project revenue. Total DAS revenue was comprised of $13.1 million of build-out project revenue and $8.9 million of access fee revenue. Importantly, recurring DAS access fee revenue increased 24.5% year-over-year from $7.2 million, representing our fifth consecutive quarter of double-digit growth. Wholesale WiFi revenue was $11.1 million, up slightly year-over-year primarily due to the increased managed service fees from our venue partners who pay us to install, manage and operate network infrastructure at their venues. This increase was partially offset by decreased revenue from our Comes with Boingo service offering. As mentioned on previous earnings calls, we expect Comes with Boingo will continue to partially offset growth in the wholesale WiFi vertical as our program with American Express is phased out. However, we remain pleased with the performance of carrier offloads and continue to expect wholesale WiFi to be a strong driver of recurring cash flow. Retail revenue was $3.3 million, a decline of 9.7% year-over-year primarily due to a reduction in our retail subscribers. Advertising and other revenue was $3.7 million, decreased 17.5% year-over-year primarily due to a decline in the number of premium ad units sold compared to the prior year period. Now turning to our fourth quarter costs and operating expenses. As a result of our business realignment plan announced in December, we recorded a restructuring charge totaling $2.3 million in the fourth quarter of 2019 related to employee severance and benefits costs following the elimination of approximately 80 positions from various Boingo offices across the country. Upon the completion of our restructuring plan, in addition to increased focus and alignment, we expect to realize approximately $11 million of annualized cost savings beginning in the first quarter of 2020. Network access costs totaled $29.2 million, representing a 13.1% decrease over the fourth quarter of 2018, primarily due to decreased depreciation expense related to fixed assets from our DAS build-out projects and decreased multifamily construction and support fees. Gross margin, which is defined as revenue less network access costs, was 54.3%, up approximately 4 points from the prior year period. The increase in gross margin largely reflects the shift in the diversified revenue streams driven primarily by the increase in higher-margin DAS access fees and military revenues and declines in our lower-margin DAS build and advertising revenue. Network operations expenses totaled $15 million, an increase of 11.7% year-over-year, primarily due to the aforementioned restructuring charge and an increase in personnel-related and other expenses. Development and technology expenses of $9 million increased 6.5% in the prior year period primarily due to restructuring, higher hardware and software maintenance expenses. Selling and marketing expenses were $6.7 million, increased 8.2% from the prior year period, primarily due to the restructuring charge. General and administrative expenses were $6.9 million, declined 14.2% year-over-year primarily due to a decrease in personnel-related expenses, which is inclusive of stock-based compensation. Now turning to our profitability measures for the quarter. Net loss attributable to common stockholders was $5.2 million or $0.12 per diluted share compared to a net income of $0.4 million or $0.01 per diluted share in the fourth quarter of 2018. As a reminder, net income in the fourth quarter of 2018 reflected a onetime noncash tax benefit of $5.7 million related to the reversal of our tax valuation allowance on the equity component of our convertible debt. Adjusted EBITDA, a non-GAAP measure, was $19.8 million, a decrease of 14.5% year-over-year. As a percentage of total revenue, adjusted EBITDA was 30.9%, down from 34.1% of revenue in the prior year quarter. Now turning to our key metrics. Number of DAS nodes in our network for the fourth quarter was 38,100, up 27.4% from the prior year period, down 2.4% for the third quarter of 2019. 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, was 11,700, down 15.2% from the prior year period and down 3.3% from the third quarter of 2019. The decrease from the prior year period is due to the deployment of 15 new DAS venues during 2019. Our military subscriber base was 133,000 subscribers at the end of the fourth quarter, down 3.6% from the prior year period. Compared to the third quarter of 2019, military subscribers decreased 2.9%, in line with the anticipated seasonal trends which typically reflect a short-term reduction in subscribers during the last few weeks of December, around the holidays. Our retail subscriber base was 81,000 at the end of the fourth quarter, which was down 33.6% from the prior year period and down 4.7% from the third quarter of 2019. Next, our paid usage on our worldwide network were approximately 89.4 million, up 33.1% from the prior year period and effectively flat from the third quarter of 2019. Moving on to discuss our balance sheet. As of December 31, 2019, cash, cash equivalents and marketable securities totaled $80.6 million, down $6.2 million from $86.8 million at September 30, 2019. The decrease in our cash balance was primarily due to investments made in our DAS network infrastructure. Total debt was $168.4 million, and we had $150 million available on our credit facility as of December 31, 2019. Capital expenditures were $32.2 million for the fourth quarter, which included $27.2 million for DAS infrastructure build-out projects which are primarily reimbursed through revenue by our telecom operator partners. Free cash flow, a non-GAAP measure, was a negative $4.6 million for the fourth quarter compared to a negative $13.7 million in the fourth quarter of 2018. For the full year of 2019, free cash flow was a negative $25 million compared to a negative $15.4 million in 2018. While our operations continue to generate cash, these results are in line with our previously stated expectations of being a net consumer of free cash flow for the full year of 2019, primarily due to our ability to selectively fund network build-out opportunities, including prefunding certain capital expenditures related to our MTA build-out projects. We continue to believe that investing the majority of our free cash flow into network expansion opportunities is the best use of capital to drive long-term growth. With that, I'll turn it back over to Mike. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [5] -------------------------------------------------------------------------------- Thanks, Pete. Before we go to questions, I would like to say I'm very excited about the year ahead. At the end of 2019, we made the tough decision to realign the company into 3 core business units: carrier services, military and multifamily as well as a fourth business unit focused on our legacy products like retail, advertising and Comes with Boingo. We believe by narrowing our focus and investment in the core areas of our business, and by managing the legacy business unit to maximize cash flow and profitability, we will be able to achieve faster growth, drive execution and improve overall profitability for the company. Carrier services, which is comprised of DAS, WiFi offload and macro towers remain the most important driver of long-term value for our business, and we're excited for what 2020 has in store. We're already seeing more DAS RFP activity in the first 2 months of the year than we saw in the first half of 2019. DAS access fee revenue is on the rise, as highlighted by the almost 50% year-over-year growth in 2019 compared to 2018. We launched 15 new DAS venues in 2019, bringing the number of total venues live to 73, and have an additional 61 DAS venues in backlog. 2 venues in the backlog include the MTA Long Island Rail Road and Grand Central Terminal East Side Access projects in New York City. We expect these MTA projects to be the largest DAS deployments in Boingo's history, and we are excited to launch the first phase of these projects later this year. WiFi offload continues to be an important way that we partner with the carriers to help solve the insatiable growth of mobile data traffic. In fact, WiFi offload was just named by FierceWireless as the second most significant wireless development of the last decade. This is incredibly exciting for Boingo as we helped pioneer the offload technology from concept to real-world deployment. While AT&T and Sprint are now live on most of our WiFi network, we remain confident that it's not a question of if, but when every domestic carrier is participating in some form of offload to ease congestion on their cellular networks. As I highlighted on our last call, we extended our military contract with the Army & Air Force Exchange Service, or AAFES, which covers our Army and Air Force base deployments for an additional 15 years through 2038. As a result of our contract extension, we are now seeing more opportunities to continue to add coverage to support new beds and common areas on an existing basis. Further, we believe there is a tremendous upside potential with the military for carrier offload, macro cell towers, small cells and private services as part of this long-term extension. We believe multifamily represents an exciting long-term opportunity for Boingo, but we are just beginning to scratch the surface. REITs and developers know how crucial it is for their properties to have a top-notch wireless solution for both the residents it attracts and the rents they can charge, with high-speed Internet being recognized as a top amenity. Boingo brings significant value in this regard, given our deep knowledge in the space and high-quality network solutions. In closing, we are pleased with our performance in 2019, which included several key milestones, such as the signing of a 15-year contract extension with the Army and Air Force through 2038, the launch of 15 new DAS venues, an impressive year-over-year growth of nearly 50% in DAS access fee revenue. In addition, the business realignment, while difficult, represents an important milestone which we expect will result in a more focused, leaner and stronger Boingo. We believe Boingo is well positioned to be a significant beneficiary of the evolving wireless ecosystem for years to come. The seemingly insatiable growth of mobile data traffic will help fuel the growth of DAS, WiFi offload, CBRS and the 5G revolution. We believe our long-term wireless rights in key strategic venues, coupled with our neutral host approach and long-standing relationships with the carriers, give us a unique ability to deliver the next generation of convergence. I am very excited for what lies ahead for our business. With that, I'll open the call to questions. Please keep in mind that we will not address any questions regarding a potential strategic transaction or 2020 guidance. Operator, you may now open the call for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from the line of Scott Searle with Roth Capital. -------------------------------------------------------------------------------- Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [2] -------------------------------------------------------------------------------- Pete, Mike, maybe just to quickly clarify, I want to make sure on the OpEx reduction front with the realignment. That $11 million, when will we see that full quarterly impact? Are we seeing it entirely in the first quarter? Or is it going to be in the second quarter that we start to see that full impact? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [3] -------------------------------------------------------------------------------- Scott, so you'll see most of it come through in Q1. They're -- I would say, like 85%, 90% of this will be realized starting in Q1. And by Q2, 100% will be realized. -------------------------------------------------------------------------------- Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [4] -------------------------------------------------------------------------------- Got you. And on the DAS front, it seems like that was an area of a little bit of sequential weakness in the fourth quarter. The pipeline is still strong. It sounds like the RFP activity is very strong. Could you take us through what exactly you saw in the fourth quarter? And are you starting to see more of a shift into the access fee front as opposed to build revenues? And how are you trying to push things as we're moving forward? And maybe to lump on top of that, in terms of that pipeline, 5G, CBRS, private networks, how does it all fit in? And sequentially and directionally, how should we be thinking about the DAS business going from the December quarter into the March quarter? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [5] -------------------------------------------------------------------------------- Sure. I'll start, and I know Mike will add some color here. So as it relates to Q4 in particular -- first, I'd like to recap. 2019 was a great year in launching 15 new venues. I know we talked about launching more, we expected to launch a bit more here in Q4. Those venues did not go away, those customers did not go away. Some of the timing of the launches shifted out to the right, not atypical in these large-scale construction projects. But still, a ton of activity going on. As it relates to your question, specifically, as it is to build fees versus recurring access fees, we are seeing growth in recurring access fees. Year-over-year, our Q4 access fees were up 24%. That's something we're proud of, and that growth is something we expect to continue going forward. It is a trend that we are seeing, and it's something we're working on with our carrier customers. But it's important to note, what we're really focused in on is getting the carriers to a yes, and so we'll be flexible with our carrier customers on whatever structure they want to do. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [6] -------------------------------------------------------------------------------- Yes. Scott, it's Mike. I'll just add, yes, about the pipeline of things. Yes, it's -- there's so much talk and continuous talk about 5G, which is happening and it's evolving. And it's -- I think 2020 and '21, we'll start to see more, especially as more devices come into the marketplace. But certainly, CBRS now being live, that's starting to come in. But we continue to do 4G upgrades and 4G as well. So really, kind of the neutral host approach of bringing connectivity and converged connectivity into venues is going to continue to evolve, and we'll see more 4G, we'll see 5G I think on a growing basis as we move through the year. And then bringing it all together, with WiFi and the other pieces, is really what makes the best networks, and that's what the venues are seeing and asking for. -------------------------------------------------------------------------------- Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [7] -------------------------------------------------------------------------------- And Mike, if I could, just one follow-up, and I'll hop back in the queue. But there's certainly been a lot of concern and speculation related to the Sprint/T-Mobile impact. It seems like there's a positive resolution on that front. I'm wondering if you could kind of address what you're seeing in that customer in regard from a demand standpoint? And also, the talk of the fourth carrier, Dish kind of coming in, does that start to materialize in the revenue stream in the not too distant future? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [8] -------------------------------------------------------------------------------- Yes, thanks, Scott. Yes. So I think the fact that it's settled now is good. We build our networks for the total number of customers. So the fact that they're coming together is probably a good thing from that regard. And their number of customers as one will just be the combination, obviously, of the 2. So for us, we've said all along that either way, it would probably work out fine. This is a good outcome, and I think we'll start to see those companies coming together here pretty quickly. So it's not completely finished yet. But as that comes together, there will obviously be a strong and viable competitor and company in the space. As far as Dish goes, yes, I think that's another opportunity as they evolve into the fourth carrier. And as far as projecting when that will be meaningfully is hard to determine. But I don't think we probably -- we wouldn't probably see much this year, but in the out years, that would start to happen, I believe. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Our next question comes from the line of Anthony Stoss with Craig-Hallum. -------------------------------------------------------------------------------- Anthony Joseph Stoss, Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst [10] -------------------------------------------------------------------------------- Mike and Pete, can you refresh our memory, the size of the MTA contract, if it's gotten any bigger or smaller since you last reported? And also, can you maybe detail or give us a range of what you expect the size of it to be in 2021, your first full year, I guess, of deployment? And then, Mike, you talked about when you first joined Boingo, part of the reason you joined was your view on indoor private LTE networks being built out. I'm curious if you -- what you're seeing there, if you're seeing any interest in 5G already on the indoor private network side? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [11] -------------------------------------------------------------------------------- So I'll start off. So as it relates to the MTA contract, it's not really anything meaningfully, Tony, since we last announced it. It's a big contract, and it's early in the process of our discussions with the carriers. The discussions are going quite well, the building is going on as we speak. And as we said in our last call, we expect that we will launch, at least the first phase here in 2020. That has not changed. As it relates to when will the entire project go live, we're not ready to comment on that one yet, and we aren't also able to give commentary on what the size will it be in 2021. But what I can say is it's making great progress. We are happy with how the teams are working, we're happy with the engagement with the carriers, and we couldn't be more excited about this -- with those projects. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [12] -------------------------------------------------------------------------------- Yes. And then, Tony, I'll follow-up. Yes, I still think private LTE is a really interesting opportunity and one that's going to grow. 5G brings a lot of that into perspective, and CBRS does as well WiFi 6. So really, the convergence of all of these technologies and capabilities is what's going to help, I think, spur the opportunities, both in the private side as well as all of indoor kind of across the board. And as 5G comes out further, devices get launched and capabilities become more apparent and the app developers get moving, then there's going to be greater demand for high speed, low latency and whether that's in existing venues or private-type locations. I'm just as excited today as I was when I joined almost a year ago. -------------------------------------------------------------------------------- Anthony Joseph Stoss, Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst [13] -------------------------------------------------------------------------------- And as a quick follow-up, Mike, you commented on this call that you're seeing more interest or RFP activity in DAS in the first 2 months than they did the first 6 months of 2019. Do you have a goal right now for a number of DAS deployments for 2020? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [14] -------------------------------------------------------------------------------- Yes. We haven't stated that and we're still working through that at this point. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- Our next question comes from the line of Tim Horan with Oppenheimer. -------------------------------------------------------------------------------- Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [16] -------------------------------------------------------------------------------- Mike, can you talk about the DAS demand? Is this for new venues, maybe what type of venues are you seeing? And -- or is this for kind of 5G upgrades or new carriers coming into existing locations? Any more color there? And then -- and maybe, Pete, can you give us a little bit more color on the wholesale WiFi trends? It was a little weaker than we were expecting. But I know there's a lot of puts and takes there. Maybe if you can give any color on some of the Amex contract or volume use or whatever else kind of drove the results. So I guess, for -- just looking for, is that number kind of a good run rate? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [17] -------------------------------------------------------------------------------- Yes. Thanks, Tim. This is Mike. I'll start, and then I'll turn it over to Pete. Yes, I think it's -- clearly, if you look at the number of venues we're in, every one of those is a great opportunity for a 5G upgrade. And so as we've stated, that started to happen and that will continue to evolve. And we're in a great spot for that as people -- customers' demand and requirements for high speed, low latency just continue to grow. So that obviously will grow there. And as far as just the new RFP, it really is -- there's a number of new facilities that are coming up. There's a lot of different upgrades. And we're kind of across the board in transportation hubs, anywhere there's high-traffic and lots of people, transportation hubs, sports stadiums, airports and things like that. So it's very similar to the group of customers we have today. -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [18] -------------------------------------------------------------------------------- Yes, as it relates to wholesale WiFi, Tim, so yes, we were up sequentially very modestly. And as we look at the elements of wholesale WiFi, we continue to see encouragement from what we're working with the carriers for offloading. We're also seeing continued success on what we call managed services, where we manage and operate venues on wireless networks on behalf of venues. But we saw the weakness piece come from Comes with Boingo. And that did materialize again in Q4, and we continue to see that decline while the Amex program phases out. We aren't giving color today as it relates to 2020, but what you should be thinking of is wholesale offload, growth coming from managed services and offload, but declines coming from Comes with Boingo. -------------------------------------------------------------------------------- Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [19] -------------------------------------------------------------------------------- And maybe just on the advertising front. What percentage of the advertising has been be driven by your sales force? So just to try to get a baseline of what the run rate is of that business now that you've scaled that back. -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [20] -------------------------------------------------------------------------------- Yes. So 100% of our advertising sales was coming from the sales force. So we -- as we went through this business realignment, that was an area where we definitely will see some pressure. We had a larger sales force that we talked about previously, call it, all in around 20 folks, and that number is significantly less on a go forward. We are finding we are spending a lot of money supporting a business that, frankly, wasn't growing. And so we made corrective actions there. And we have a handful of sellers now, but it's very small. And how we're going to market is very different. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- Our next question comes from the line of James Breen with William Blair. -------------------------------------------------------------------------------- James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [22] -------------------------------------------------------------------------------- Just one on the housekeeping side. Can you just say, how much -- how low it was in the military number? And then just across the business, military lost a few subs again this quarter. Just -- can you talk about what you're seeing there and if you think that's reversing? Is it more of a troop deployment issue? Is it a little bit better than it was in the last 2 quarters? And then just on the DAS side, just around the MTA contract. You talked a little bit about sort of the timing on that. Can you talk about how much you spent on that last year at 2019? And what you think that's going to come ballpark for 2020 from a CapEx perspective? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [23] -------------------------------------------------------------------------------- Sure. So as it relates to multifamily, so revenue for the quarter was $6 million. Of that, the vast majority was recurring access fees, so almost $4.5 million was recurring access fees. As it stands -- as we talk about subs in the military, so we absolutely saw our typical seasonal decline, so our penetration rate as of the end of the quarter was 37.5%. But if you think about our penetration rate as an average throughout Q4, it was around 39%. So it was a seasonal drop, and I can't comment that -- like we normally do. We saw that come right back up in the beginning of January. As it relates to MTA, in terms of the capital spent in 2019, it was in the -- our overall commitments that we have made to MTA is over $25 million so far. We're continuing to fund that build while we engage the carriers. I won't comment specifically on how much we will spend in 2020 on MTA because a lot of it will have to do with when we launch the different phases, and also too with which carriers because capital also is dependent upon the carriers. But just note that it has our full support and we're balancing the need to fund the network and -- but also to making sure we're not putting capital too far in advance of getting commitments from our carrier customers. -------------------------------------------------------------------------------- James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [24] -------------------------------------------------------------------------------- Okay. And you talked about realigning the revenue into those 3 buckets. Will you start reporting that way at some point, maybe in the first quarter? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [25] -------------------------------------------------------------------------------- We do intend to start reporting under the new alignment. I won't comment if it will be Q1 versus other time in 2020. But yes, we will be changing how we report. -------------------------------------------------------------------------------- James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [26] -------------------------------------------------------------------------------- Okay. And then just, I guess, the last question. Why not give guidance for the year? What's the rationale around that relative to the business and the M&A? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [27] -------------------------------------------------------------------------------- Yes. I mean we said it in our prepared comments, so it really has to do with the inquiries and just given the activity that's out there and the speculation rumors. We feel like this is not the time. -------------------------------------------------------------------------------- Operator [28] -------------------------------------------------------------------------------- Our next question comes from the line of Walter Piecyk with LightShed. -------------------------------------------------------------------------------- Walter Paul Piecyk, LightShed Partners - Partner & TMT Analyst [29] -------------------------------------------------------------------------------- Mike, the 73 venues that you have, I was just looking for -- if you can just refresh my memory in terms of how those arrangements work? Because I think if -- let's take Verizon as an example, if they want to do millimeter wave, which means highly suitable to stadiums and indoor and things like that, I don't think it can go through your DAS system. So correct me if I'm wrong that it would require a different type of antenna structure and system. So I'm just curious if the 73 venues, if you can kind of break out which of those do you have the exclusivity to be the guy that would then build that for Verizon and I guess, AT&T or whoever else wants to build a millimeter wave in those venues? What do the financial arrangements look like generically across those 73 venues? And would you suspect that in those cases, it would be kind of a traditional business model that you did historically, which is like you get VZ and T to pony up a couple of million bucks and then just amortize that as deferred revenue? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [30] -------------------------------------------------------------------------------- Yes, great. Thanks, Walter. I'll talk generically, obviously, but I'll try to take your question as it is. So in all of the venues where we have the rights, we have the rights. So the first question would be all 73, we would have the rights to do that. As far as the design and the build-out, it would really be dependent on the venue itself, the carrier, which spectrum they're planning to use. You've stated millimeter wave, and I understand the question. So in those cases, it's a little bit more specific to that. But the way that we operate with the operators, we do it in the same manner with 5G and upgrades as we've done with 4G and the 3G. And then as we build it out, then it's just a function of working with them on where and how they want to deploy, as we do with all the other venues and all the other upgrades in history we have. And from a contractual perspective, it's the same. -------------------------------------------------------------------------------- Walter Paul Piecyk, LightShed Partners - Partner & TMT Analyst [31] -------------------------------------------------------------------------------- So again, for the 73, it is exclusive across all 73, meaning that if they want to do millimeter wave, even if it's more CapEx, that's -- it can only go through you guys in terms of those contracts? And how long on average of those contracts extend? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [32] -------------------------------------------------------------------------------- I mean the first answer is yes. But the contracts have varying degrees. As you know, we have -- we are into long-term contracts, and we don't claim -- describe what every one of them are, but they all tend to be longer term. -------------------------------------------------------------------------------- Walter Paul Piecyk, LightShed Partners - Partner & TMT Analyst [33] -------------------------------------------------------------------------------- Got it. And then on the -- Pete, it's a question for you on the -- my favorite question, which is this reimbursable CapEx. You actually -- I want to shed -- I know you're not giving what you're going to do in 2020, you're targeting. But given this year, I think the last time we chatted about this, you were looking at doing $75 million to $90 million total with the mix between self-funded and carrier-funded. So you came in substantially above that. Was any of that conceptually pulling in 2020? Like how did that happen that it was that much higher than what you were initially thinking? Or am I -- do I have the numbers wrong? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [34] -------------------------------------------------------------------------------- Yes. So you -- those were some earlier numbers. When we last gave guidance, we talked about our DAS CapEx for the year being between $95 million and $105 million. So for the year, it came in at $107 million. So a little bit above that. It's driven by carrier demand. So when you look at what we have going on in -- as it relates to upgrades, new venue deployment as well as supporting the MTA build process, we continue to see a significant amount of demand, and that's a very good thing. -------------------------------------------------------------------------------- Walter Paul Piecyk, LightShed Partners - Partner & TMT Analyst [35] -------------------------------------------------------------------------------- Got you. And then the last thing. So if I just took DAS rev divided by nodes -- first of all, why is that bad to do it that way and create a new metric? And then also like does $200 sound like that should be the right number per month for the revenue generated per node? I get that it's like -- it can be squirrelly because you're amortizing some of the revenue. But actually, even if with amortization, it still should work out to be a clean type of metric. Does $200 per node per month sound like the right number? Or can that go lower? Because that's been obviously dropping. -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [36] -------------------------------------------------------------------------------- Yes, I know exactly what you're trying to do here. The challenge with that is it works really well for new venue deployments. But as you start doing upgrades and as carriers add incremental nodes when they do these upgrades, the same rate does not apply. And so as a result, your revenue per node by default is going to go down as a result of upgrades. So it's a proper and a good way to think about it, and it's how I will look at it internally when I think about anchor carriers and subsequent carrier additions to a new venue. But upgrades kind of change the whole dynamic that comes into play. And it has to do with at what point does a carrier decommission a node? And that's something we don't get the color on that as quick as we would like. -------------------------------------------------------------------------------- Walter Paul Piecyk, LightShed Partners - Partner & TMT Analyst [37] -------------------------------------------------------------------------------- And just one last one. NOLs, what are your NOLs? And -- I mean is the bottom line here on the strategic alternative, is that -- it's really that exclusivity that people want in terms of the next phase of investment? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [38] -------------------------------------------------------------------------------- Yes. Of course, I don't have the NOLs in front of me, but we are in a net loss position, and we expect to be a noncash taxpayer for a while. As -- look, people look at Boingo for different things, but one of the things we continue to say is the fact that we have long-term key strategic venues and that we provide wireless connectivity in those venues and have a great history of getting multiple carriers per location. It makes us valuable to different players and also to -- just in terms of growing the business. It's winning venues, signing up carriers to those locations creates real value. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- (Operator Instructions) Our next question comes from the line of Greg Gibas with Northland Capital. -------------------------------------------------------------------------------- Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [40] -------------------------------------------------------------------------------- You talked a lot about the profitability benefits that you're getting from the restructuring. But roughly how much will the recent restructuring impact the revenue, if in any way at all? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [41] -------------------------------------------------------------------------------- So I'll take on this. The area where we expect to see the most impact around the realignment really has to do with the advertising business, which we've talked about previously. So there's been questions and commentary we received when we talk to the investment community that we are abandoning our legacy business, and that is not the case. But what we are doing is we're putting a lot of focus on the areas of the business that are growing and that we believe create the most value. And the areas that are not growing as much, we're managing them, but we're doing it responsibly. And so everything we do is going to be managed in a way that we look at what's the opportunity, what's the cost and then how can we maximize the overall contribution margin. We have a leader responsible for the legacy business, and he's absolutely trying to grow the business. It's going to be tough. When you look at retail, you look at advertising, you look at Comes with Boingo, those businesses are under decline. But it doesn't mean that they don't generate good incremental contribution margin, and that's how we're running the business. -------------------------------------------------------------------------------- Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [42] -------------------------------------------------------------------------------- Okay, sure. And then as we think about the Comes with Boingo program having that continued negative effect on that wholesale WiFi segment, how should we think about when Amex will be completely phased out? And maybe when that part of the segment would return to growth? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [43] -------------------------------------------------------------------------------- Yes. Unfortunately, it kind of gets into the whole 2020 guidance piece. So you should be thinking about Amex phasing out in the early part of the year. But beyond that, I really can't comment. -------------------------------------------------------------------------------- Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [44] -------------------------------------------------------------------------------- Okay. Fair enough. Last one for me then would just be -- as that DAS penetration moves closer to 12% maybe in the market today, is there any -- can you talk about the dynamics about maybe -- have you noticed a slowing pace of new venues coming to market or maybe the mix of venues that have shifted at all? And I guess, kind of I would accompany that with maybe what verticals or venue types you're excited about for the DAS business in 2020? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [45] -------------------------------------------------------------------------------- Yes, I can touch base. I know Mike can go a bit more. But look, the demand from carriers and venues for in-building wireless is at great levels. We talked a bit about how our RFP activity is heavier, that's driven by venues. But we also continue to get feedback from carriers. And if you think about a 5G world, and 5G is -- it's almost was made for in-building wireless when you think about how that works and how you become most efficient. So we love the position we're in, and we love what we're trying to do. So I like the space that we occupy about running the wireless networks at key strategic locations and bringing as many carriers as possible and leveraging that shared infrastructure for healthy returns for us, for the carriers as well as to the venues. It's a true win-win-win. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [46] -------------------------------------------------------------------------------- Yes. All I'll add is, obviously, if you break it up, you have a whole grouping of existing venues of all types, transportation hubs, airports, sporting venues, things like that, and you have some that are new, and there's new building going on in multiple places around the country. And then you always have some sort of new opportunity or new type of venue. There's some gaming things that are starting to happen. But there's a common denominator in all of them, which is they all want the fastest -- highest speed, lowest latency network that you can get. So whether you're in an existing one, one that's being built or one that's coming, they all want the same thing. So if we're in the places where we're at and as -- we would consider that upgrade opportunities, if there's new venues. Our approach on a neutral side and bringing all types of network and capabilities together is very appealing to those venues and for the ones that would be coming to be any different. So as we move on over the next -- pick your timeframe, 12, 24, 36 months, and devices are coming out and capabilities come out and app developers get involved, some of the things like we saw in 4G, for example, Uber and Lyft were not use cases for 4G network spectrum. So we envision there'll be more of that, and we think we're in a good spot for that. -------------------------------------------------------------------------------- Operator [47] -------------------------------------------------------------------------------- Our next question comes from the line of John Godin with Lake Street Capital Markets. -------------------------------------------------------------------------------- John David Godin, Lake Street Capital Markets, LLC, Research Division - Equity Research Analyst [48] -------------------------------------------------------------------------------- First, on military. Obviously, we saw a nice ARPU increase there driven by the price increase. Is there more room for that to go up going forward? And what are you thinking about as far as ARPU versus adding new beds? And second, on the multifamily. It was kind of consist commentary over the past couple of quarters of elongated sales cycles. Anything else changed there that's worth calling out? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [49] -------------------------------------------------------------------------------- Sure. So I'll start here. So as it relates to ARPU and military. Yes, we've had some great ARPU increases you've seen materialize over 2019. The bulk of that had to do with the service and price increase that happened in the -- started at least in the early part of 2019. So don't expect a material amount of incremental ARPU increases in 2020. I think we've talked about that in the past, so I'm comfortable sharing it. We can -- as we talked about in the last call as well, we continue to look at opportunities to add new beds. That is something that we think is important. And as we extended our contract with AAFES and have another 15 years, giving us a contract through 2038, we're looking at certain venues that at one point, we questioned as we brought down the cost to deploy these bases and have longer term. It allows us to look at bases a little bit differently. So I do expect to add beds, but not ready yet to provide color as to how much. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [50] -------------------------------------------------------------------------------- Yes. And then on the multifamily side, I'd say when we acquired Elauwit, they were primarily in student housing, and we continue to be in that business and grow it. But as we've also shifted into the more commercial multifamily side, that's where it gets -- the sales cycle has been a little longer. But if you think in terms of this decade, there's estimated to be 20% growth of multifamily units annually over the next 10 years. And so we're in the beginning of that cycle. And the reality of it is, some of those properties that we're working with today are dirt for the new buildings, and those can take, pick your time frame, 12, 24 months, to build out. And then the massive number of existing properties have a combination of -- some that have contracts associated with them that will roll off over time. And although they are built, there's a great benefit to that, that we can get on with implementing our technology there, but there's people living in them and there's walls and things. So it takes a little time to kind of get that going. So it's a big opportunity. And on the commercial side, it just is one that has a little longer cycle than some of the student housing stuff. -------------------------------------------------------------------------------- Operator [51] -------------------------------------------------------------------------------- Our final question comes from the line of Kyle McNealy with Jefferies. -------------------------------------------------------------------------------- Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [52] -------------------------------------------------------------------------------- I wanted to get a sense for where you're at with small cells right now. Are you seeing more and more projects become small cell-focused right now? Or do you have an expectation when they might become more small-cell focused in the future or ramp more meaningfully? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [53] -------------------------------------------------------------------------------- Yes, there's actually -- I mean this is kind of one that's becoming for a long time, and I do think that there's probably more activity that's starting to happen on the small cell side. And again, as a neutral provider and provider of all types of technology, there's -- I think there's some interesting opportunities that will probably start to finally come into play here over the next period of time. But for us, it's kind of one part of providing all types of connectivity and converged connectivity. So I do think it's obviously a little closer than it's probably been in the past. -------------------------------------------------------------------------------- Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [54] -------------------------------------------------------------------------------- Okay. Fair enough. And is there anything more that you can say about any kind of leading indicators, like RFP activity and upgrade requests? You mentioned some factors there earlier in the call. But could you help us understand where we're at with the timing of carriers' 5G plans? I know you've previously said that it could be mid-2020 when we could see a bigger ramp in 5G in venues. But is that still your thought? Or what are you thinking currently about the timing of a 5G ramp? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [55] -------------------------------------------------------------------------------- Well, I'll just give you maybe a little more historical as I've kind of commented over the last number of times, is 5G will ramp faster than 4G did. The combination of chips and capabilities being available, infrastructure being up and more global in nature than 4G was, and then what really drives a lot of it is devices that have the capabilities. And so there's been a lot of announcements by chip guys and by device players of having devices available. And generally, when you see that, the devices don't tend to come until infrastructure is built. So the carriers are best to answer that question for them. But I would just tell you, I think that 5G, all the discussion and information that's come about 5G will be faster. And I think as devices come more towards the middle end of this year, you'll start to see some of that happen. -------------------------------------------------------------------------------- Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [56] -------------------------------------------------------------------------------- Okay. And then one more on multifamily. I guess, where are you at with the agreements and how they're progressing with the many REITs across the U.S.? And maybe outline the stage of the process you're in right now and maybe some milestones or some kind of expectation on timing there. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [57] -------------------------------------------------------------------------------- Yes, we continue to have great discussions and relationships. As I've said before, although we don't have a large-scale agreement with any of the REITs, we do work with all of the REITs on a regular basis, and we are working with them on properties. So nothing to report there yet, but we're continuing to work with them and grow opportunities with them as we move forward. -------------------------------------------------------------------------------- Operator [58] -------------------------------------------------------------------------------- Ladies and gentlemen, we have reached the end of our question-and-answer session as well as today's conference call. We thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day.