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Edited Transcript of WIFI.OQ earnings conference call or presentation 9-Nov-20 9:30pm GMT

·50 min read

Q3 2020 Boingo Wireless Inc Earnings Call LOS ANGELES Nov 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Boingo Wireless Inc earnings conference call or presentation Monday, November 9, 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 * 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 ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings, and welcome to Boingo Wireless Third Quarter 2020 Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host today, Kimberly Orlando with Addo Investor Relations. Please proceed. -------------------------------------------------------------------------------- Kimberly Orlando, Boingo Wireless, Inc. - Associate - Addo Communications [2] -------------------------------------------------------------------------------- Thank you, and welcome to the Boingo Wireless Third Quarter 2020 Earnings Conference Call. By now, everyone should have access to their earnings press release, which was issued today at approximately 4:00 p.m. Eastern Time. In addition, an earnings supplement has been made available on the Investor Relations portion of Boingo's website at boingo.com by clicking on the Investor tab. This call is being webcast and it is available for replay. In our remarks today, we will include statements that are considered forward-looking within the meaning of securities laws, including forward-looking statements about Boingo's operations and financial performance, including due to COVID-19, strategic plans and transactions, future results of operations, business strategies and plans, our relationships with our venue partners, new venue and other contracts and market and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today, November 9, 2020, 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, 2019, filed with the SEC on March 2, 2020, and Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May 8, 2020; form 10-Q for the quarter ended June 30, 2020, filed with the SEC on August 7, 2020; and our other filings with the SEC and such risks and uncertainties include the impact of health epidemics, including the recent COVID-19 pandemic on the company's business. 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 the 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. Good afternoon, everyone, and thanks for joining us today. I hope each of you are doing well and staying healthy. As a country and as a company, we've been dealing with the challenges of COVID-19 for over 7 months now. I'd like to extend my heartfelt thanks to the team here at Boingo. I'm incredibly proud of how they have gone the extra mile to ensure our customers as well as our venue and carrier partners have the connectivity they need. Our wireless networks support millions of people who depend on Boingo to stay connected. As an essential business, our team has been working around the clock to help people stay connected. Now more than ever, it's clear how critical connectivity is to every facet of our lives, both today and in the future. I'd like to begin today's call by giving you an update on our strategic process. There continues to be strong interest and engagement from multiple parties, and based upon that, we continue to run the strategic review process to evaluate opportunities that we believe would be in the best interest of our stockholders. While the process continues, we remain focused on the data execution against the extraordinary opportunities in front of us, which we will share with you on this call. With that, let me pivot to our Q3 highlights and results. For the third quarter of 2020, revenue was $58.8 million, a modest increase versus $58.7 million in the prior quarter and a 9.2% decrease versus $64.7 million in Q3 2019. The decline in revenue versus the prior year was primarily related to onetime DAS revenue in the prior year quarter and our retail and advertising products, which have been hit hard by the COVID-related reduction in airline travel. While our revenue growth has experienced pressure primarily due to issues related to COVID-19, we've maintained a consistent and constant focus on improving our overall cost structure. I'm proud to say the team has delivered adjusted EBITDA of $22.5 million for the quarter, which is an increase of 5.7% versus $21.3 million in Q2 and an increase of 2.9% versus $21.9 million in Q3 2019. While COVID-19 has been a challenge to the world over, one thing that remains clear is the critical role connectivity plays in our daily lives. This need for connectivity demonstrates Boingo's resilience as an essential business as well as the durability of our business model. The long-term wireless rights we hold at major venues, whether they are transportation, military, stadiums or multifamily, enable us to deliver connectivity for whatever comes next. That could mean license spectrum products like DAS, small cells and towers, unlicensed spectrum like WiFi 6 and 6E or unlicensed cellular like CBRS. We believe our nearly 20 years of experience in both licensed and unlicensed spectrum, combined with our neutral host approach, gives us a unique and defensible business model in this 5G era. Let me turn now to an overview of our key business drivers and walk you through highlights of each. We'll start with carrier services, which includes DAS, offload and our emerging tower and private networks products. Despite the challenges of COVID, we continue to win new deals and build out new neutral host networks. The team has done an incredible job maintaining velocity in the business in the third quarter. We've responded to 60% more RFPs during the first 3 quarters of 2020 than we did in the same period of 2019. And our win rate continues to be at least 50%. Given our projected 18 to 24 month build cycle, we believe these wins will continue to fuel our venue backlog for many months to come. One of the new venues signed in the third quarter was for a long-term DAS right at the new Aztec stadium at San Diego State University. Part of the new SDSU Mission Valley campus, this year-round entertainment destination is projected to feature over 300 events annually. And speaking of stadiums, we've also been engaged to consult on the connectivity solutions that will be built into Inglewood Basketball and Entertainment Center, the new home of Los Angeles Clippers. The Clippers have been clear that their vision is to create the best home in basketball, and we're honored to help bring this vision to life. For the third quarter, we added 300 new DAS nodes, bringing our total number of DAS nodes live to 40,800 with an additional 11,600 DAS nodes in backlog. We also signed 5 new Tier 1 carrier contracts. With a total DAS portfolio of 138 venues, 73 of those venues are now live with another 65 in backlog. We believe our backlog provides us with a tremendous amount of runway. 5 years ago, we launched our first Passpoint networks and helped carriers solve their capacity crunch in high-density locations. Now we believe open roaming will be another important step in connectivity and we are beginning market trials to test how carriers can expand their coverage over existing WiFi networks, use an open roaming with Boingo's Cloud Hub at the center. Open Roaming, which is built on the Passport technology that is at the heart of our offload capability has the capacity to augment and accelerate the rollout of advanced high-speed wireless coverage. Last week, the Wireless Broadband Alliance or WBA announced an ambitious vision for the future of WiFi at the Alliance's 37th Annual Wireless Global Congress in London. Boingo's CTO, Dr. Derek Peterson; who co-chairs to the WAA, along with JR Wilson, Vice President, Power Strategy and Roaming for AT&T, confirmed the WBA's commitment to driving the creation of a secure and seamless global WiFi network that will enable business users and consumers to seamlessly connect to a Wi-Fi signal almost anywhere in the world without the need for a log in, registration or passwords. The vision encompasses new revenue streams for existing network providers, the creation of new and innovative business models for companies opening their networks as well as new marketing, promotional and sponsorship opportunities. Another way we're solving connectivity challenges is through our burgeoning power business. We now have more than 130 site applications with strong carrier response. The demand is strong, and we are laser-focused on deployments to meet this increasing demand. Based on our long-term military contract and the rights to deploy wireless networks on bases, coupled with the pre-approval work we've done with the joint spectrum command, we believe we're well positioned to turn up tower and small cell site expeditiously. We are enthusiastic about the durable recurring revenue this business will provide. Turning now to the military. In addition to all the activity going on there with towers and small cell sites, we have been equally busy providing incremental private services to help support increasing connectivity needs due to the pandemic. Year-to-date, we've generated nearly twice the amount of private services revenue than we did for the same period in 2019. Given the number of troops under quarantine or relegated to training and studying from their barracks, we've been asked to launch a number of bulk paid WiFi networks and education specific networks to help solve these connectivity challenges. On the consumer side of the business, we've been concentrating on driving ARPU through a higher take rate of the Blazing Tier as well as the rollout of our new 100 megabits per second Extreme tier trial. We're making good progress. Broadband ARPU for Q3 was $42.42, an increase of 2.9% compared to Q3 of 2019. Overall penetration for the quarter was 37.9%, which was up slightly compared to the prior quarter and expected given the training deployment and permanent change of station moves over the summer were much lower than we typically experienced due to COVID-19 shelter-in-place restrictions. And while new beds have remained essentially flat for the past 2 quarters, we do expect new construction to ramp up again in the fourth quarter with the launch of new beds at Fort Hood and McGregor Ranch. One thing we don't talk about much is how incredible the Boingo field operations team is at quickly recovering from natural disasters. With multiple bases in hurricane zones, we've unfortunately become adept at restaging equipment with our field engineers and engaging repair crews to quickly replace damaged equipment and realign radio links. Fort Polk was hit directly by Hurricane Laura this past quarter, and I want to extend my personal thanks to our field teams for getting service back up and running quickly. Next, I'll turn to a discussion on our multifamily business. With over 200 of our multifamily properties in the student housing space, getting all these students online seamlessly as they return to school was our core focus in late August, early September. Most universities have returned to a combination of in-person and at-home learning, and network traffic is up an average of 20% compared to the prior year, with some properties up 50%. The pandemic has clearly demonstrated the need for connectivity, and this is especially true for our multifamily business unit with both student and conventional properties needing to ensure their residents have the ability to easily study and work from home. To that end, we won 6 new properties during the quarter, bringing our total portfolio of multifamily properties to 238. Of note, the industry is beginning to embrace our network as a service offering, wherein Boingo invest the capital for the network in exchange for a much larger recurring revenue stream and a longer contract. This provides predictable recurring revenues for our business and opens the door to monetize network incrementally to additional solutions and use cases in the future. Construction continues despite the challenges of COVID. We've commenced 33 projects year-to-date including the REIT at Winkler, a new luxury multifamily community owned by MJ Development Southeast and managed by Greystar in Fort Myers, Florida. The Reef at Winkler is one of the Southwest Florida's first smart community. The developer chose Boingo to deliver high-speed Internet service engineered for the 5G era. Residents will have instant on Internet access at the time of their move in with speeds up to 800 megabits per second. The network will also service the property's wireless backbone to power IoT home automation applications like lighting, door locks and climate control. We're excited to help power an incredible residents experience at The Reef at Winkler. With that review of our core business drivers, let me turn it over to Pete for an in-depth look at our financial results for Q3. Pete? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [4] -------------------------------------------------------------------------------- Thanks, Mike. I'll review our financial results and key operating metrics for the third quarter ended September 30, 2020. Total revenue for the third quarter was $58.8 million up 0.1% from the prior quarter and down 9.2% from the prior year period. The modest increase versus prior quarter was primarily driven by gains in wholesale WiFi and advertising and other revenue, which were offset by decreases in retail and DAS. The year-over-year decline was primarily driven by decreases in DAS, retail and advertising and other revenue and to a lesser extent, decreased wholesale Wifi. Military multifamily revenue was up slightly year-over-year. Importantly, the decline in our top line revenue was largely driven by weakness in our legacy businesses due to the continued decreases in travel as a result of this pandemic. Although we expected this decline in our noncore legacy verticals following our business realignment, the decline has accelerated at a faster pace than we originally had anticipated, given the ongoing significant reduction in travel. As a percentage of total revenue across our diversified revenue streams compared to the prior year quarter, military multifamily was 41%, up from 37%. DAS was 37%, in line with the third quarter of 2019, wholesale WiFi was 17%, consistent with the prior year quarter. Retail was 4%, down from 6%; and advertising and other was 1%, down from 3%. In terms of total revenue contribution by category for the quarter, military multifamily revenue was $23.8 million, representing an increase of 0.4% versus the prior quarter and an increase of 0.7% versus the prior year period. In military, the improvement versus the prior quarter and prior year is primarily due to incremental revenue growth in private services and an increase of our average monthly revenue per subscriber. Gross growth in private services revenue was driven by increased demand for the military for our bulk paid WiFi offering, which includes dedicated education and related networks to help meet the increasing connectivity needs of our troops on bases due to the pandemic. Our bulk paid WiFi offering represents an exciting market opportunity for us on military basis. As of September 30, our total footprint of military beds totaled 359,000 across 64 military bases, which was unchanged from the prior quarter. We remain very encouraged by our traction on military bases as we continue to make progress with macro cell towers, small cell deployments and bulk service offerings. We remain confident in the opportunities presented by the military vertical and its potential to drive long-term recurring cash flows. In the multifamily vertical, third quarter revenue decreased 3% versus the prior quarter and declined 4.1% year-over-year. The quarter-over-quarter and year-over-year decline reflects lower multifamily construction revenue. Despite the ongoing challenges from COVID, students are returning to school. Occupancy and data utilization across the properties is up and new construction continues, and we are continuing to see growth in our recurring services revenue. DAS revenue of $21.9 million was down modestly compared to the prior quarter and decreased 7.7% year-over-year. DAS revenue for the third quarter was comprised of $13.7 million of build-out project revenue and $8.2 million of access fee revenue. The decline in total DAS revenue from the prior year period was primarily due to a decrease in access fee revenue from our telecom operative partners. Included in the DAS access fee revenue in the prior year period was a onetime benefit of $1.8 million from the amendment and contract extension of one of our carrier customers. This decrease was partially offset by an increase in build out project revenue. Wholesale WiFi was $10.1 million, an increase of 4.2% versus the prior quarter and a decrease of 9.7% compared to the prior year period. The increase compared to the prior quarter was due to an increase in managed service fees from our venue partners that pay us to install, manage and operate network infrastructure at their venues. The year-over-year decline was primarily driven by a decline in partner usage-based fees from our Comes with Boingo service offering as our program with American Express was phased out over the prior year. We continue to believe that carrier offload will be a key driver of recurring cash flow moving forward. Retail revenue was $2.1 million down 13% versus the prior quarter and down 43.5% year-over-year, primarily due to the continued decrease in retail subscribers, which has been heightened by the persistent decline in venue traffic as a result of COVID-19. Advertising and other revenue of $900,000 increased 34.3% versus the prior quarter and declined 64% over the prior year. The year-over-year decline is primarily due to a reduction in the number of premium ad units sold due to declines in venue traffic as result of COVID-19. Increase from prior quarter was due to an increase in the number of premium ad units sold as travel began to slowly resume, although at far reduced levels from the prior year. Now turning to our third quarter costs and operating expenses. Network access costs totaled $28.5 million, representing a 2.1% increase versus the prior quarter and a 2.4% decrease versus the third quarter of 2019. The year-over-year decline was primarily due to lower revenue share paid to our venue partners at our managed and operated locations, decreased multifamily construction and support fees and reduced customer usage of partner venues. The declines were partially offset by increased depreciation expense related to fixed assets from our DAS build up projects. Gross margin is defined as revenue less network access costs was 51.6%, a decline of 91 basis points compared to the prior quarter and a decline of 338 basis points compared to the prior year period. Both the sequential and year-over-year declines were due to the shift of our diversified revenue streams. Network operations expenses totaled $12.9 million, a decrease of 4.7% compared to the prior quarter and a decrease of 5.7% year-over-year. The decrease compared to both periods was primarily due to reduced personnel-related expenses, which were partially offset by increased depreciation. Development technology expenses of $6.3 million decreased 3.4% versus the prior quarter and 23.3% year-over-year, primarily due to declines in personnel-related and other expenses. Selling and marketing expenses were $4.9 million, a decrease of 16.2% compared to the prior quarter and a decrease of 14.3% from the prior year period. The decrease versus the prior quarter was primarily due to a onetime $1.1 million increase of litigation loss contingency accruals in the second quarter of 2020 related to claims of damages at one of our venues in Brazil. The decrease compared to the prior year period was primarily due to reduction in travel and entertainment and personnel-related and other discretionary expenses. General and administrative expenses of $5.9 million decreased 19.4% over the prior quarter and increased 17.1% over the prior year period. The decrease from prior quarter was primarily due to a $1 million reduction in nonrecurring expenses associated with our strategic process recorded in the prior quarter. The increase from the prior year is primarily due to a $1 million reduction in the fair value of the contingent consideration related to our acquisition of Elauwit Networks recorded in the third quarter of 2019. As a result of our successful business realignment as well as the effective cost reduction measures we have implemented at the end of the last year, third quarter costs and operating expenses of $59.5 million decreased 4.3% and 5.4% from the prior quarter and prior year, respectively. Now turning to our profitability measures for the quarter. Net loss attributable to common stockholders was $2.9 million or $0.07 per diluted share compared to a net loss of $5.8 million or $0.13 per diluted share in the second quarter of 2020 and a net loss of $200,000 or breakeven per diluted share in the third quarter of 2019. Adjusted EBITDA, a non-GAAP measure, was $22.5 million, an increase of 5.7% from the prior quarter and an increase of 2.9% compared to the prior year. As a percentage of total revenue, adjusted EBITDA was 38.3%, up from 36.3% in the prior quarter and up from 33.8% in the prior year period. Turning now to our key metrics. The number of DAS nodes in our network for the third quarter, 40,800, up 0.7% in the second quarter of 2020 and up 9.7% from the prior year period. Number of DAS nodes in backlog, which represents the number of DAS nodes under contract and not yet active as of the end of the third quarter was 11,600, up 4.5% in the second quarter of 2020 and down 4.1% in the prior year period. Our military subscriber base was 136,000 subscribers at \ end of the third quarter, which was relatively consistent with the prior quarter and prior year period. Our retail subscriber base was 49,000 subscribers at the end of the third quarter, which was down 12.5% in the second quarter of 2020 and down 42.4% from the prior year period. Connects, or paid usage on our worldwide network were approximately 28.3 million, up 105.9% in the second quarter of 2020 and down 68.3% from the prior year period, in line with our expectations, given that the majority of our connects come from public venues, which continue to experience notably lower passenger traffic. As a result of COVID-19, connects were down sharply year-over-year. Moving on to discuss our balance sheet. As of September 30, 2020, cash, cash equivalents and marketable securities totaled $54.6 million, down from $172 million at June 30, 2020. Our cash balance decreased from the prior quarter as we paid off our revolving credit facility balance of $100 million, which we drew down part to 2020 as a precautionary measure due to COVID-19 and invested cash and build out our network infrastructure. Consistent with our plan, during the quarter, we made significant investments to support our ongoing MPA projects, the largest build in Boingo's history and the funding of select network builds. Importantly, although the MTA builds our long-term ventures have required significant upfront cash commitments, we believe they will generate long-term high-quality recurring cash flow. I'd like to reinforce that we are highly selective with our cash investments. We are a neutral host service provider. Returns on investments are increased with multiple customers to use shared infrastructure. We expect the investments we are making today to generate long term, high-quality recurring cash flows over many years in the future. In addition, as a result of the COVID-19 environment, we have made an effort to take advantage of the reduced traffic in some of our venues to build out networks faster and for a lower cost, ensuring that we are well-positioned to execute as the economy recovers. Total debt was $171.5 million, down from $270.4 million at June 30. As of September 30, 2020, we had $150 million of remaining borrowing capacity under our revolving line of credit, and we remain comfortable with our overall liquidity position. Capital expenditures were $34.1 million for the third quarter, which included $27.6 million used for DAS infrastructure build-out projects that are primarily reimbursed through revenue by our telecom operator partners. Our nonreimbursed capital expenditures were driven mainly by new network builds managed and operated network upgrades and various infrastructure upgrades and enhancements. As a reminder, virtually all of our DAS network deployments are success-based builds, meaning we have commitments in place with guaranteed payments from our carrier customers. Further, 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 $15.9 million for the third quarter compared to a negative $1.4 million in the second quarter of 2020 and a positive $20.5 million for the third quarter 2019. As our core business continues to generate significant cash from operations, we continue to believe investing in network infrastructure deployments secured by long-term venue agreements is the best use of capital to drive growth and increase long-term recurring cash flows. Before I conclude, I want to note that we are continuing to engage with multiple interested parties regarding a potential strategic transaction as announced and discussed in prior earnings calls. As such, we are maintaining our suspension of forward-looking financial guidance until further notice. Despite the continued challenging backdrop for the COVID-19 environment, I remain very pleased with our operational execution during the quarter. We were able to maintain revenue relatively in line with the previous quarter and improve adjusted EBITDA over both the prior quarter and prior year period as a result of our enhanced operating efficiencies. In summary, our results demonstrate the resiliency of our business model, and we are confident of our strategy of securing long-term wireless rights in key strategic venues and building out our network to deliver enhanced connectivity solutions will drive significant long-term value for all of our key stakeholders. With that, I'll turn it back over to Mike for closing comments. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [5] -------------------------------------------------------------------------------- Thanks, Pete. As you can see, despite some of the challenges we faced during COVID, we've once again confirmed that our business model is extremely durable. Our diverse revenue streams from carrier services, including our emerging tower business, military and multifamily business lines generate strong recurring revenues, and our legacy business line continues to contribute significant profitability to the bottom line. With approximately 95% and of our revenues either contractual or recurring. Our model is built for stability and resilience. We continue to innovate and lead in the wireless space. We're putting wins on the board in every part of our business from new venues, new carriers being added to existing networks and a tower business that's really taking off. We're making progress every day on the MTA, our largest ever construction project, and we believe this will be a significant growth driver in 2021. We're innovating with new networks like our WiFi 6 launch this quarter in São Paulo, Brazil, a worldwide first for WiFi 6. We believe the opportunity for private networks over CBRS is an incredible opportunity for Boingo going forward, and we are hard at work in this space. The big picture is this. We're in a great position. We believe there is an incredible pipeline of new opportunities in front of us, with a multibillion-dollar total addressable market. Our job is to execute, and that is what the team is doing each and every day. With that, I look forward to taking your questions. Operator, you may now open up the call for Q&A. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) The first question comes from Anthony Stoss with Craig-Hallum. -------------------------------------------------------------------------------- Anthony Joseph Stoss, Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst [2] -------------------------------------------------------------------------------- Mike, I wanted to focus in on a word. It's a word that you haven't used before to describe your M&A process. You're talking about strong interest. The word strong, I'm curious if that was intentional. Moreover, I'd love to hear your thoughts on the -- today's vaccine announcement from Pfizer, how that plays into the potential M&A process. Also, on the business side, if you wouldn't mind telling or sharing with us your views on renewals in terms of change, et cetera. So love to hear your thoughts on that and then I have a couple of follow-ups for Pete. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [3] -------------------------------------------------------------------------------- All right. Great. Thanks, Tony. Appreciate it. Yes. Strong, no, I think it's really just on the process just highlighting there continues to be interest in multiple parties, and our Board has continued with the process and guided us towards that. So I'm not sure I'd add anything specific or significant to that word. On the vaccine, yes, I think for all of us, I think that's an incredible opportunity if we can get that going. And one of the words I heard a lot and a lot of the news cast today was just hope, just people having hope and seeing a vision to getting closer to being getting out -- getting back to our normal life. So for us, that is very engaged in high-traffic areas, airports, transportation hubs, stadiums, multifamily properties, things like that, where people are moving around. That's very positive for us. And I think in our comments and as Pete highlighted, a lot of the work we've been doing during this period is enabling us to get some work done faster and maybe more efficiently. And so we'll be ready to go when this starts to pick up. I can tell you, I've personally been traveling and the airports and airlines have just -- have just been picking up already. So yes, I think the vaccine would be very helpful. On the renewals, yes, we have long-term agreements in place and those that are coming up for renewal. I think one of the things that's only become clearer is the need for not just connectivity but really always-on, reliable, secure, high-speed connectivity. And we think from a converged shared network neutral host perspective, where -- which we do, we're seeing more and more of that. That's what these venues want existing and the ones that we're talking to going forward, new are definitely going to want that. So we think we're in a good spot there. -------------------------------------------------------------------------------- Anthony Joseph Stoss, Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst [4] -------------------------------------------------------------------------------- I guess, Mike, you misinterpreted my question related to the vaccine. I'm curious if you think some of your strategic partners or potential suitors were waiting for news of this prior to maybe formalizing something. And you've seen American Tower purchase Insight recently. So there's activity in our industry. I'm just curious if you think some of your suitors have been waiting for the vaccine. And then, I guess, repeat on the MTA side, earlier, you were thinking that it could go live sometime in December. Is that now looking more like a Q1 2021 event? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [5] -------------------------------------------------------------------------------- I'll start, Tony, and I'll give it over to Pete. Sorry about that. Yes, I guess, yes, who knows? I don't know. I think, certainly, COVID has created a number of different issues and probably opportunities in some ways. But I think, as I mentioned earlier, I think the hope of getting back to normal life and getting people back, I'm sure would have some bearing. But it's hard for me to say. -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [6] -------------------------------------------------------------------------------- Yes. And Tony, on the MTA, we continue to build. We're making great progress, and we have said all along, we'll be ready, and we expect we'll have a carrier live in Q4. And I can assure you that we still continue to believe that we are going to be ready. And we absolutely believe we'll be carrier committed in Q4, and we believe that carrier should be able to get live in Q4 as well. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- Our next question comes from Matt Wilson with Oppenheimer. -------------------------------------------------------------------------------- Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [8] -------------------------------------------------------------------------------- It's Tim Horan. Pete, can you just talk about the WiFi commitments? What percentage of that revenue now is committed and for how long? Because I'm assuming carriers aren't really using it all that much, but the revenue looks pretty stable. -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [9] -------------------------------------------------------------------------------- Yes. So I think you're really talking about is wholesale WiFi and carrier offload, probably in particular, so the wholesale WiFi for the quarter was a little over $10 million. Almost half of that was WiFi offload. And it's guaranteed commitments. And there is real usage on the network. What's interesting is you look at this -- as we look at the data and while we see -- if you look at our connects, our connects are down almost 70% year-over-year. But you look at the offload traffic and the decline in offload traffic, it's not down nearly that much. It was down, as you would expect. But what we're seeing is the increased traffic we're offloading on military bases and the amount of data that's going on that network is really still helping to offset that overall decline. So the feedback we continue to get from our carrier customers is that they value our offload network and provides a real solution to help them meet the needs of the connectivity for their customers. And while airport, stadiums and arenas may not be as congested as they were a year ago, the military base network is definitely seeing a lot of traffic. And so net-net, our customers continue to pay, and we have a high degree in confidence this is going to continue in the future. -------------------------------------------------------------------------------- Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [10] -------------------------------------------------------------------------------- And then just to be clear on the DAS side, how have your bookings been trending for new sites? Has there been much change through COVID? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [11] -------------------------------------------------------------------------------- So we continue to win, as we talked about in the prepared comments. We continue to win venues. We announced, obviously, San Diego State. We talked on the Clippers, so there's -- there are wins that are continuing to happen. Carriers are committed to sign up to networks. It's -- we do line up venues. And so as a result of that, that probably puts a little extra wrinkle and scrutiny. But all that said, we're continuing to win. And we're highly encouraged by the activity and traction we're seeing with all the carriers. There's almost renewed vigor coming from the carriers as they think about their capital deployments. And look, at the end of the day, it's coming from things like Wi-Fi 6, it's coming from upcoming Wi-Fi 6E. 5G is playing a huge part, and that is -- that's very valuable. It's very good for our business long term. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [12] -------------------------------------------------------------------------------- Yes. And Tim, my sort -- go ahead, is I'll just add. I think you're hearing and seeing also more devices for 5G are coming on to the market. And kind of go back in time, as that's occurred over the other Gs, the need for network to be built and available when those devices come online is really critical. So that's a place where we play a key part with our partners, the operators in this. -------------------------------------------------------------------------------- Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [13] -------------------------------------------------------------------------------- And then lastly, on the strategic review, do you have a formal book out? And if so, when did you put it out there? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [14] -------------------------------------------------------------------------------- Yes. So we -- as we talked about on the call and at the end of February, we engaged a strategic adviser to advise the company and our Board. And yes, they've been engaging with parties, and there's information out there with parties who run the NDA. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- Our next question comes from Greg Gibas with Northland Securities. -------------------------------------------------------------------------------- Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [16] -------------------------------------------------------------------------------- With the 6 new multifamily properties this quarter, I was just wondering if it's more of a function of win rate going up in that segment? Or are you seeing significantly higher RFP activity there? Any trends, I guess, you expect to see regarding RFP activity would also be helpful as well. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [17] -------------------------------------------------------------------------------- Yes. Thanks, Greg. Appreciate it. Yes. It's interesting. We've added some resources there on the sales side. So we've hired some experienced people from that category. So we're seeing some of that come to happen. As you know, there's a lot of opportunity of new apartments and new facilities coming up. And so we're more engaged on more of these opportunities. So the combination of that has, I think, led to just the more activity that's occurring. -------------------------------------------------------------------------------- Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [18] -------------------------------------------------------------------------------- Got it. And sorry if I missed this, Pete, but did you actually break out revenue for the multifamily segment? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [19] -------------------------------------------------------------------------------- We did not call out specifically, but it was $5.5 million for the quarter and of that breakdown, $1.4 million was construction, so meaning $4.1 million was recurring services revenue, so about a rough order, call it, 75-25 split between construction and recurring services. -------------------------------------------------------------------------------- Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [20] -------------------------------------------------------------------------------- Got it. Okay. That's helpful. And then turning to the military. As you kind of continue to roll out that Boingo Extreme offering at new bases, I was just wondering if you could maybe comment on the typical uplift in ARPU or even take rates that you see following the launch at that basis. -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [21] -------------------------------------------------------------------------------- Yes. So we've actually seen nice improvement of ARPU. So we commented here that we've seen ARPU increase of almost 3% year-over-year, and that is predominantly related to the Extreme. And it's important to note, that the Extreme package is not available at all bases. So the uptick is actually quite a bit higher than that, but it's not yet on all locations because we're going through methodically location by location. In terms of change in the uptake, it's not really change in the overall uptake. That's really more of a decision of buy versus not buy. But on what plan they are buying, we're seeing more and more skew towards the upper end plans, which includes the Extreme, which is highly encouraging and, again, a key driver of the ongoing ARPU increase. Our ARPU has continued to increase really over the last, I think, 5 quarters. -------------------------------------------------------------------------------- Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [22] -------------------------------------------------------------------------------- Got it. Sounds good. I guess, last quick one for me was just kind of pertaining to the strategic process. Are you seeing new participants come to the table there? Or is it really the same number of players that we've talked about over the last couple of quarters? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [23] -------------------------------------------------------------------------------- It's been pretty active throughout. So it's -- we're not going to obviously discuss who and that, but it's been a pretty active process. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- Our next question comes from James Breen with William Blair. -------------------------------------------------------------------------------- James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [25] -------------------------------------------------------------------------------- Just a couple. One, can you talk about what process is with the MTA contracts in New York and how that build up's gone? And when do you expect to start to see revenue there? And then can you just remind us, of your total revenue, how much of that is coming from the 3 large carriers, AT&T, T-Mobile, Verizon? And then lastly maybe, Pete, can you just talk about cash flow? It was negative -- a little more negative this quarter than last. Seems like you're investing. How are you sort of thinking about that given the fact that it seems like you paid back your revolver, so it doesn't seems like there's a lot of pressure there in terms of maintaining more cash in the balance sheet? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [26] -------------------------------------------------------------------------------- Sure. So I'll address all those. So on the MTA process, we're we are going strong. As I mentioned, with the question with Tony, we have been saying all along, we expect to have the first carrier live here in 2020. We are -- still believe that we will get the carrier committed, and we will do everything in our power and believe that, that carrier can get up and running and live here in 2020. So look, we're aware that there is, call it, 1.5 months left to make that happen, and it's a high focus across the company. This is an area, frankly, where the pandemic has helped us, meaning that we've been able to be more efficient in this build, and we've actually been able to reduce costs in certain areas by having the ability to be more efficient. So in most places, COVID, I think, is more of a headwind, but at least on the construction side with the MTA contracts, it has primarily been more of a tailwind, which has been positive for us. As it relates to customer concentration, so if you look at our business, you got to really think about it in pieces. Military and retail and advertising, obviously, not tied to the carriers. But DAS and wholesale WiFi is predominantly the carriers. I mean, DAS really is all carriers, and wholesale WiFi is, call it, half of that is coming from the big 3 carriers. Yes. And then the last one was free cash flow. Yes, we did spend a lot of cash this quarter, but it is in line with our overall projections. And really, the reason for the free cash flow usage in the quarter more than anything else is the continued support of network builds predominantly related to MTA because of the demand we're seeing, the opportunities to build networks at a faster rate where we can be more efficient and getting ready for coming out of this pandemic and really working to improve our margins, so very encouraged and very comfortable with our overall liquidity position. We paid down the revolver because we feel comfortable with our liquidity position of almost $55 million cash on the balance sheet and with $150 million of borrowing capacity. And we know that the capital we have deployed will return great recurring cash flow. Some will be in the front of -- in the way of upfront militaries and others will be on the way of ongoing recurring rents. So again, just we're comfortable. -------------------------------------------------------------------------------- James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [27] -------------------------------------------------------------------------------- Do you anticipate getting some cash back from the carriers as MTA goes live to offset some of those costs? -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [28] -------------------------------------------------------------------------------- Absolutely, we will. It probably will not happen here in 2020 just as it relates to collection cycles and such, there's a shot. But we will absolutely be getting cash upfront from the carriers and meaningful cash approximate carriers as they join these networks. -------------------------------------------------------------------------------- James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [29] -------------------------------------------------------------------------------- Great. And just maybe one for Mike. As we're moving toward 5G more broadly. And finally, the consumer devices are being launched, have there been early discussions with carriers and upgrades and all the existing properties you get out there? And what would something like that look like? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [30] -------------------------------------------------------------------------------- Yes. Thanks, Jim. Yes. No, it's across the board. Obviously, the new opportunities we're winning, in some cases, they're new buildings, new properties. They're going to be ready built for what we believe and they do as well, having a converged network, utilizing all of the capabilities and technologies that are out there. So that's somewhat obvious in new facilities. But in existing venues that we're at, we're seeing that as well. And I think take stadiums or airports. They want to be more contactless. They want to be more touchless, and that requires even greater connectivity and security and those types of things. So in existing buildings, we're seeing the need and the request for that to grow, expand depending what types of facilities. And we talked a little bit about our private networking business that's launching. And that's a real key to that as well as you get into hospitals, industrial plants, commercial developments and things like that. We're seeing the same thing there. So the fact that 5G is here, it really is, for us, a combination of all the technology and capability, and we're seeing a great response to being neutral in that regard. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- Our next question comes from Kyle McNealy with Jefferies. -------------------------------------------------------------------------------- Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [32] -------------------------------------------------------------------------------- I wonder if you can characterize the effect of various spectrum auctions you have on your DAS business. We had the CBRS mid-year and the C-band through the end of the year. I expect that the new spectrum will eventually be a positive catalyst at some point. But is there any cash conservation from the carriers that you see in the near-term that eventually turn into a faster pace of deployment once the spectrum and build plans get finalized? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [33] -------------------------------------------------------------------------------- Yes. I think I get your question. Look, for us, all new spectrum and complexity is really good. You're seeing the devices that are coming out that have the capabilities to do multiple parts of these technologies and capabilities. And therefore, then the network has to have that in a place where we get great traction is our ability to be agnostic and neutral and to build those networks with and on behalf of our partners, and the venues are seeing more and more need for these types of kind of all-inclusive networks and capabilities. So if the question is on the spectrum side, as that comes together, do we see more opportunity, the answer would be yes. I didn't quite understand the question about conservation from the carriers, but the carriers are -- if this is the question -- are always and just very focused on customer experience for their users and more and more of that overall total connectivity is really important. And we're seeing that in the big venues that we're in. And to the earlier question, even the existing venues where we're at, using that as they go forward. -------------------------------------------------------------------------------- Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [34] -------------------------------------------------------------------------------- Okay. Great. Yes. I guess I'm really targeting this question at, is there any gating factor of the new spectrum on their pace of joining networks and focusing on certain DAS venues that they aren't going to that they may, where there's some CapEx cost that's associated with that. But they have a big portfolio of spectrum existing, so maybe it's not a factor. So just trying to get an understanding of how these recent spectrum auctions might have an impact in the near term. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [35] -------------------------------------------------------------------------------- Yes. I would just say, I think, for us, I would think it's all positive. I don't see any downside to the spectrum that is in place now and it's coming. I'll give Chairman Pai and the FCC great credit for really what they've done. CTIA has been very engaged in making that happen as well. So -- but we see that as positive, and I think the carriers do as well. -------------------------------------------------------------------------------- Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [36] -------------------------------------------------------------------------------- And one other quick one on the bulk paid military packages, I get the sense from the last few times we talked about that, that it may cause a bit of a skew in the penetration rate in the reported military subscriber numbers. Is there any update on what impact that might have if you do bulk paid packages, does it put downward pressure on military subscribers that are reported that we should be aware of? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [37] -------------------------------------------------------------------------------- We obviously look at that and obviously contemplate that, but we haven't seen it. And the one thing that the military -- I'll give them great credit for is they really want to make sure that there's connectivity and opportunity for our military personnel, obviously, in the barracks, which is where we've started, your question is about more involved. But there's a lot of training that goes on, both in classroom and things like that. And with COVID, they haven't been able to do some of the things that they've historically done. So it's really -- I don't want to say it's completely additive, but it's certainly not a takeaway, and it's really adding connectivity and capability so that the military personnel can be -- not only have entertainment and communication capabilities but also training and educational opportunities. And we've been working quite closely with military to make sure that's available for the troops and for them. -------------------------------------------------------------------------------- Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [38] -------------------------------------------------------------------------------- Okay. Great. And lastly, the 130 tower and cell site RFPs on military bases, is there any update to when that can convert into revenue when the ramp would be? I expect that it's going to be a bit long-dated because of the build cycles, but any update to the time line there? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [39] -------------------------------------------------------------------------------- Yes, you're right. I mean that business takes a while to really come back to you in the form of results and revenue. The real key is the applications you're getting, the sites you're getting built, the carriers you're getting to engage. And we've seen, quite honestly, great action and velocity in that. The military bases have historically been tough to get networking coverage. They're very widespread. They have lots and lots of land and property, and it's just -- it's a time-consuming process. But I think we think our benefit and capabilities there to get that moving a little faster is already resident in the applications, and we expect that to continue. But as far as where you'll start to see that, that's going to be a ways out. That's a 24, 36-month type thing. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- Our next question comes from Scott Searle with ROTH Capital. -------------------------------------------------------------------------------- Scott Wallace Searle, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [41] -------------------------------------------------------------------------------- Just to dig in a little bit on the DAS backlog, could you provide a little bit of color in terms of how that demand pipeline is filling up across 5G, CBRS. In particular, some carriers hadn't been spending, specifically Sprint and T-Mobile had gone a little bit dark going into the merger. It sounds like they're starting to pick up on the activity front. If you could comment on that. And maybe if you're starting to see some activity as it relates to DISH. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [42] -------------------------------------------------------------------------------- Yes, I'll start. I don't know if Pete wants to add. Yes, you're right. I think it's kind of incredible for T-Mobile and Sprint to come together right in the middle of COVID, and they've done really a fantastic job. And you're right, I do think they're starting to become more active as they're deploying their network and bringing their company together. So that's a real positive on that side. Of course, Verizon and AT&T have always been out in front and Scott, as you well know, the -- as new devices are coming online, in some cases, new devices that have lots of volume, that really starts to drive the need for these networks to be built out. So the carriers are doing a fantastic job in building out the 5G network and the work that we're doing with them in our current networks and in those that we're winning, we're seeing their activity continue to stay and progress. And as far as other capabilities, the CBRS is coming online. And the private networking, we're starting to see that expand out of some of our historical venue type opportunities of stadiums and airports and transportation hubs. Into hospitals and manufacturing and more in kind of the plant and industrial automation type side. So the carriers have been driving a lot of this. We've been engaged, I guess, probably more in the background, if you will, for a number of years. So now it's really starting to happen. And I think COVID has identified even a greater need for connectivity if there was such a thing. But we're seeing it, and we think we'll be in the middle of that. -------------------------------------------------------------------------------- Scott Wallace Searle, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [43] -------------------------------------------------------------------------------- Mike, maybe just to drill down on the private networks commentary in CBRS, it kind of got slipped in there up until the end. And it seems like it's a very, very large opportunity. It's not -- but certainly pretty huge. I was wondering if you could flesh that out a little bit in terms of timing when it starts to become more relevant. Do we start to see that actually filtering into 2021 expectations? And what does it do to you guys from a capital requirement standpoint? -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [44] -------------------------------------------------------------------------------- You bet, Scott. Yes, I'll let Pete handle the capital requirement piece after I'm done. But again, I think that's -- as you've said, that's like anything in technology and networking. When it starts to happen, it's already been worked and worked on for a number of years. So we've been doing a lot of work behind the scenes. As you know, we brought Michael Zito on the beginning of the year to help drive and launch that business. So I would tell you, I think that's moving a little faster than we had thought, which is great. There's a lot of entities that are very engaged and kind of in a partnering type of perspective. So again, the need for a converged share neutral connectivity only plays better there. The top targets, obviously, are in the industrial, manufacturing, hospitals, things like that. And so there's a lot of activity going on. As far as when we start to see that, I think the activities has already picked up. We expect that to continue probably more than we originally thought in '21. And then like most of these things, it does take a little time for that to develop in '22, is probably a time, then, we first start to see some of that. -------------------------------------------------------------------------------- Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [45] -------------------------------------------------------------------------------- And Scott, on the capital requirements. So the business model is still coming together. I mean, we're in early stages with a handful of different players. And as you know, we've had some trials going on. What the ultimate model becomes, I think, is still being sorted out. But at this stage, we feel comfortable, but as this opportunity gets more vetted and we see increased demand, which we are optimistic and hopeful for, if we need to rethink this, we absolutely will. What I do know is capital is available for great opportunities, but it has to be a great opportunity with good return on capital. And so we see those opportunities, we will ensure that we are well capitalized. And again, as a reminder, as I said earlier, we still have $100 million line of credit, and we feel very comfortable that, that meets our needs for the foreseeable future. -------------------------------------------------------------------------------- Operator [46] -------------------------------------------------------------------------------- At this time, we've come to the end of the Q&A session. I would like to turn the call back over to Mr. Mike Finley for closing comments. -------------------------------------------------------------------------------- Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [47] -------------------------------------------------------------------------------- Thank you, operator, and thanks to each of you for joining today. I ask you to please stay safe and stay healthy. Thank you. -------------------------------------------------------------------------------- Operator [48] -------------------------------------------------------------------------------- Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation, and have a great day.