Boingo Wireless, Inc.
Q2 2020 Earnings Call Transcript

Published: 4 Aug 2020

[Operator:]

Greetings and welcome to the Boingo Wireless Second Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kimberly Orlando, ADDO Investor Relations. Thank you. You may begin.

[Kimberly Orlando:]

Thank you and welcome to the Boingo Wireless second quarter 2020 earnings conference call. By now, everyone should have access to the earnings press release, which was issued today at approximately 4 o’clock PM 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 forward-looking statements in response to your questions. Forward-looking statements are based on management’s current knowledge and expectations as of today, August 4, 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 on 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, Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May 8 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 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.

[Mike Finley:]

Thanks, Kim, and thank you to everyone for joining today. I hope you’re all doing well and staying healthy. As an essential business, many of our employees have been in the field since this pandemic began, continuing to build out and support our networks and our customers. I would like to thank them and all the employees of Boingo for their focus on our customers and networks during this extraordinary time. Let’s begin with a brief summary of the quarter. Revenue for the quarter was $58.7 million, a 2% decline versus Q1, largely due to advertising and retail, which were impacted by the historic downturn in passenger traffic due to COVID-19. However, the team has done an excellent job in managing expenses, which led to a 13.7% increase in adjusted EBITDA over Q1 to $21.3 million. Like the rest of the world, we continue to live and work through extraordinary times. Over the last 150 days, we’ve seen dramatic changes in the way we interact with our family, friends, communities, jobs and colleagues. What remains constant is the critical role wireless 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. Despite broader economic challenges, we have continued to win new opportunities and build out new neutral host networks. The team has done an incredible job, maintaining velocity in the business and we applaud them for their efforts. RFP activity has remained high. In fact, we responded to more RFPs in the second quarter of 2020, than in the same period last year, with an impressive 67% win rate. A few of the significant deals we closed in Q2, which I’ll outline in detail a bit later, includes the new Major League Soccer stadium in Austin, Texas; South Dakota State University; Massachusetts Port Authority; Metropolitan Washington Airports Authority, which includes Dulles and Reagan airports; as well as contract term extensions at London Heathrow Airport; Hollywood Bowl; and international airports in Dubai and São Paulo. These varied wins demonstrate the breadth of our technological capabilities and the depth of our innovative solutions. Another sign of Boingo’s resilience is our strong balance sheet, with ample liquidity to operate and grow the business. We follow a conservative approach to capital deployment for DAS builds by investing capital where we have strong carrier interest. While our core operations continue to generate positive cash flow, we still believe investing the majority of our cash flow from operations into network deployment is the best use of capital to drive long-term growth and greater recurring cash flows moving forward. The big picture is this. We believe we are in a great space. We are an essential business. We serve critical functions. We have a stable and resilient business model. We continue to innovate and to win. Our new business pipeline remains strong, and we are as busy as ever pursuing opportunities. It comes as no surprise to us that our key revenue drivers and the bulk of new business opportunities are aligned with the core part of our business, carrier services, military and multifamily. Let me give you a few highlights from each of these. First, carrier services, which is primarily comprised of DAS, carrier offload, and our emerging tower and small cell business. For Q2, we added 1,000 new live DAS nodes, bringing our total number of DAS nodes live to 40,500 with another 11,100 in backlog. We also signed 11 new Tier 1 carrier contracts during the quarter. We added 3 new DAS venues in the second quarter, bringing us to a total of 137 DAS venues. 73 of those venues are now live with another 64 in backlog. This backlog provides us a tremendous amount of runway. The first DAS win for the quarter was the new MLS Stadium in Austin, home to Austin FC. We are thrilled to be their partner to bring a world-class fan experience to this incredible new tech-forward soccer stadium. Boingo will design, build and manage neutral host, 5G-ready DAS and Wi-Fi 6 networks throughout the stadium, including bowl seating, suites, club sections, concourses and field sections. I was able to visit the site a few weeks ago, and it’s a beautiful new stadium, and we look forward to opening day next spring. The second DAS win for the quarter was a long-term agreement with South Dakota State University to provide campus-wide coverage that includes the SDSU Jackrabbits Football Stadium. We’re excited to bring a greater connectivity to the students of South Dakota State. Massachusetts Port Authority was our third DAS win for Q2. The long-term agreement gives Boingo exclusive rights to design, build and operate a DAS network in Boston’s Seaport District. We’re proud to bring our fiber connectivity solution to this thriving Boston community. Another deal you may have seen in the news was our recent announcement of the Hawaii Convention Center. Like Austin FC, we’ll be providing neutral host 5G-ready DAS. This contract expands Boingo’s DAS and Wi-Fi footprint in Hawaii, which already covers 5 major airports, 3 military bases and a multi-family community. Beyond DAS, we have been making good progress on macro tower and small cell deployments at the military bases we serve. The initiative will provide enhanced coverage and services for our troops, and we are off to a promising start. Based on our long-term military contracts and the rights to deploy wireless network on bases coupled with the work we’ve done with the JSC, the Joint Spectrum Command. We believe, we are well positioned to turn up tower and small cell sites expeditiously. Today, we have already received more than 100 applications for tower and small cell sites from Tier 1 wireless carriers, which exceeds our initial expectations. With an average sale to completion cycle of 24 to 36 months, the macro tower business represents a longer-term revenue opportunity, and we are excited about our fast start. Turning now to offload. We recently signed an agreement with Google to provide Wi-Fi offload to Google Fi devices. Using Passpoint technology, Google Fi devices will automatically connect to Boingo Wi-Fi hotspots, when they are in a Passpoint enabled location. While this will be a trial to start, we believe it will grow over time and expand to new locations, much like our other offload agreements have. We’re excited to have Google on board. Importantly, the vast majority of our carrier offload is now under fixed contractual commitments. That means that although airport traffic was down significantly in Q2, we were only minimally impacted from a revenue perspective. With airports and past passenger traffic in mind, we recently launched the solution to solve for a newly evolving macro trends in Q2, namely, the Touchless Experience. Technology enabled Touchless safety measures are part of the solution to help America get back to business in the wake of COVID-19. In the transportation sector, Boingo has identified key use cases, we have company technologies and network requirements to help airports prepare for the new age of travel and to facilitate a new Touchless passenger experience. This will help prepare airports to reopen on a wider scale, while increasing passenger confidence. And airports are just one example. Such Touchless applications can help entertainment and sports venues, commercial real estate, multifamily housing, retail locations and more, we believe Boingo’s well positioned to lead the way here. Turning now to military. Revenue for the quarter was up 3.1% versus Q1, and ARPU was up 1.7%. While we did not add any new beds during the quarter, we focused our resources on supporting requests for additional private services due to the pandemic, which I’ll share about more in a moment as well as network improvements to ensure our network quality in the barracks. As you can imagine, we saw a large uptick in network traffic due to the number of service men and women sheltering in place. Overall penetration remained steady at 37.6% largely due to reduce troop movement. Wi-Fi has become increasingly important not only for daily operations, but for quality of life initiatives that the military wishes to provide. We currently have more than 11,000 beds under contract for what we refer to as both paid Wi-Fi, and we anticipate more on the way. In addition, the military has seen the value of having complementary education networks available for students engaging in remote learning from their barracks. We believe these education networks represent an exciting market opportunity for us going forward. We have a number of proposals for education that works out now and several have already come under contract. Finally, we rolled out a new 100 megabits per second speed here called Boingo Extreme at 4 bases during the quarter. Boingo Extreme offers our fastest residential service yet, and the takeaway during the trial has been very promising. The product allows us to provide an enhanced service to the troops and an increased ARPU. We look forward to expanding the trial to additional bases in the third quarter of 2020. Now let’s turn to multifamily like DAS and military. We continue to actively build out new multifamily construction projects during the pandemic. We had 2 new properties go live during the second quarter. And we currently remain on schedule with the majority of our existing builds. Fall semester for many college campuses begins this month, and approximately 85% of our student housing partners plan to reopen with social distancing protocols in place. With most campuses offering a hybrid of in-person and virtual classes, connectivity plays a critical role. We secured 4 new multifamily contracts during the quarter, 2 of which are conventional properties into our student housing, located in Texas, Florida, Indiana and Washington. These new construction properties include 1,298 beds, and all promote state-of-the-art wireless connectivity as a key feature for residents. Three of the four contracts are network-as-a-service or NaaS. Under a NaaS approach, Boingo deploys a highly – high quality robust network throughout the property and enters into a long-term services agreement with the property owner to provide our services to all residents. The network-as-a-service model provides for increased and predictable recurring services revenues for our business, and opens the door to monetize the network incrementally to additional solutions, and use cases in the future. As you can see, it has been a busy productive quarter for the core parts of our business. Before I conclude, I’d like to provide an update on our strategic process. As we announced a few months ago, we are engaged with multiple parties who have expressed interest in Boingo’s unique position to drive value through our long-term wireless rights and neutral host converged network approach. While we’re continuing to work through discussions with multiple parties, we did not have an update to share regarding the strategic process at this time. With that, let me turn it over to Pete, who will walk through our financial results for the quarter in more detail. Pete?

[Peter Hovenier:]

Thanks, Mike. Today I’ll review our financial results and key operating metrics for the second quarter ended June 30, 2020. Total revenue for the second quarter was $58.7 million, down 2% from the prior quarter and down 14.4% from the prior year period. The decline versus prior quarter was primarily driven by decreases in retail, advertising and other revenue, our legacy businesses, which were partially offset by modest gains in military/multifamily and DAS revenue. The year-over-year decline was primarily driven by decreases in DAS, retail and advertising other revenue and to a lesser extent, decreases in wholesale Wi-Fi, and military/multifamily revenue. While the decline in total revenue appears concerning on the surface, the year-over-year decline was generally in line with our expectations following our business realignment plan. DAS, military/multifamily both improved over the prior quarter, while retail and advertising and other revenue, which we consider to be non-core to our future were directly and materially impacted by COVID-19. As a percentage of total revenue across our diversified revenue streams compared to the prior quarter, military/multifamily was 40%, up from 36%; DAS was 38%, down 40%; wholesale Wi-Fi was 17%, up from 16%; retail was 4%, down from 6%; and advertising and other was 1%, down from 2%. In terms of total revenue contribution by category for the quarter, military/multifamily revenue was $23.7 million, representing an increase of 4.4% versus the prior quarter and decrease of 2.8% versus the prior year period. In military, the improvement versus the prior quarter was primarily due to an increase in average monthly revenue per subscriber. The year-over-year decline was a result of reduced military subscribers, which was partially offset by an increase in average monthly revenue per subscriber. As of June 30, our total footprint of military beds totaled 359,000 beds across 64 military bases, which was unchanged from the prior quarter. We remain confident and that the opportunities presented by the military vertical, and its potential to drive long-term recurring cash flows. In particular, we are encouraged by the continued interest and traction we are seeing from macro cell towers, small cell deployments and bulk service offerings on bases as we strive to meet the increasing connectivity needs of our military partners and carrier customers. In the multifamily vertical, second quarter revenue increased 8.8% versus the prior quarter and declined 3.4% year-over-year. The increase compared to the prior quarter was due to seasonal multifamily construction revenue trends, primarily from deploying new networks and upgrades the student housing vertical. The year-over-year decline reflects reduced multifamily construction revenue due to the ongoing mix shift into sales under our network-as-a-service model, which incorporates higher recurring services fees over a longer term. DAS revenue of $22.2 million was up modestly from the prior quarter and decreased 19.6% year-over-year. DAS revenue for the second quarter was comprised of $14 million of build-out project revenue and $8.2 million of access fee revenue. The decline in total DAS revenue over the prior year period, which primarily due to decreased DAS build out project revenue as a result of re-amortization of deferred revenue balances from customer contract extensions in 2019, along with reduced access fees from our telecom operator partners. DAS access fee revenue in the prior year period included a $3 million onetime benefit from the amendment and contract extension of one of our carrier customers. When not including this one-time benefit, second quarter DAS access fee revenues would have improved 6.3% year-over-year. Wholesale Wi-Fi revenue was $9.7 million, a slight decrease of 9.4% versus the prior quarter and a decrease of 9.4% compared to the prior year period. Both the sequential and year-over-year declines were primarily due to lower partner usage-based from our comes with Boingo service offerings and our program with American Express is phased out. Importantly, we believe carrier offload will continue to be a stable driver of recurring cash flow moving forward. Retail revenue was $2.4 million, down 20% versus the prior quarter and down 38.4% year-over-year, primarily due to ongoing reductions in retail subscribers, which has been amplified by the declines in venue traffic we’ve experienced due to COVID-19. Advertising and another revenue of $700,000 decreased 70.6% versus the prior quarter and 66% over the prior year, primarily due to reductions in the number of premium ad units sold due to the clients and video traffic as a result of COVID-19. Now turn to our second quarter costs and operating expenses. Network access costs totaled $27.9 million representing a 3% decrease versus the prior quarter and a 6.4% increase to the second quarter of 2019. The declines were primarily due to lower revenue share pay to our venue partners at our managed and operated locations, and reduce customer usage and partner venues. The declines were partially offset by increased depreciation expense. Gross margin, which is defined as revenue less network access costs was 52.5%, an improvement of 50 basis points compared to the prior quarter and a decline of 405 basis points versus the prior year period. The sequential improvement was largely due to reduced revenue share to our customer usage apartment venues. On a year-over-year basis, the decline reflects a shift in a diversified revenue stream. Network operations cost totaled $13.5 million, an increase of 2% compared to the prior year, quarter and a decrease of 4.9% year-over-year. The increase from the prior quarter was primarily due to increased depreciation and break-fix fees at our managed and operated venues, which were partially offset by decreased personnel-related expenses. The year-over-year decrease was primarily due to reduce personnel-related expenses. Development and technology expenses of $6.5 million decreased 7% versus the prior quarter, and 22.2% year-over-year, primarily due to declines in personnel related and other expenses. Selling and marketing expenses were $5.9 million, an increase of 4.9% compared to the prior quarter, and a decrease of 5.5% from the prior year period. The increase versus the prior quarter was primarily due to a one-time $1.1 million increase in the litigation loss contingency accruals in the second quarter of 2020 related to a claim of damages at one of our venues in Brazil. This increase which is partially offset by reduced personnel-related expenses. The decrease compared to the prior year period, it was primarily due to reduce personnel-related and discretionary expenses. General and administrative expenses of $7.3 million increased 8% over the prior quarter, and 3.9% over the prior year period, primarily due to non-recurring expenses totaling $1.1 million associated with our strategic process, which were partially offset by reduced professional and related service provider fees and tax and licensing fees. Excluding the $2.2 million of non-recurring fees incurred during the quarter, total second quarter costs and operating expenses of $60 million decreased $2.5 million or 3.9% from the prior quarter and $6.7 million or 10.1% year-over-year, reflecting the success of our business realignment plan, as well as additional cost saving initiatives. Now turn to our profitability measures for the quarter. Net loss attributable to common stockholders was $5.8 million or $0.13 per diluted share, compared to a net loss of $4.6 million or $0.10 per diluted share in the first quarter of 2020. Net income of $200,000 or breakeven per diluted share in the second quarter of 2019. Adjusted EBITDA, a non-GAAP measure was $21.3 million, an increase of 13.7% over the prior quarter, and a decrease of 2.6% compared to the prior year period. As a percentage of total revenue, adjusted EBITDA was 36.3%, up from 31.2% in the prior quarter, and up from 31.9% in the prior-year period. Now, turning to our key metrics. Number of DAS nodes in our network for the second quarter were 40,500, up 2.5% from the first quarter of 2020 and up 15.1% from the prior-year period. The number of DAS nodes in backlog, which represents the number of DAS nodes under contract but not yet active, as of the end of the second quarter was 11,100, up 2.8% in the first quarter of 2020 and down 9.8% from the prior-year period. Our military subscriber base was 135,000 subscribers at the end of the second quarter, which was consistent with the first quarter of 2020 and down 4.9% from the prior-year period. Our retail subscriber base was 56,000 subscribers at the end of the second quarter, which was down 20% in the first quarter of 2020 and down 39.1% from the prior-year period. Connects, our paid usage in our worldwide network were approximately 13.8 million, down 79.3% from the first quarter of 2020 and down 84% from the prior-year period. As anticipated, given the majority of our Connects come from public venues, which have experienced significantly reduced passenger traffic as a result of COVID-19-related travel bans and restrictions, shelter-in-place orders and business shutdowns, we’ve seen Connects continue to decline. Importantly, despite these headwinds, the durability of our business model has shown that we are still able to drive value to our customers with approximately 95% of our revenues being contractual or recurring in nature as opposed to usage base. Moving on to discuss our balance sheet. As of June 30, 2020, cash, cash equivalents and marketable securities totaled $172 million, down slightly from $175.2 million March 31, 2020. We have strong quarter of cash collections as evidenced by the $15.7 million reduction in our accounts receivable balance compared to March 31, 2020. Total debt was $270.4 million, up slightly from $269.5 million, March 31. As a reminder, we proactively drew down $100 million from our $150 million revolving credit facility last quarter as a precaution to enable greater financial flexibility in response to COVID-19. As of June 30 2020, we have approximately $50 million remaining borrowing capacity under our revolving line of credit and we remain comfortable with our overall liquidity position. Capital expenditures were $29.1 million for the quarter, which included $21.5 million of DAS infrastructure build-out projects. They are primarily reimbursed through revenue by our telecom operator partners. Our non-reimbursed capital expenditures were driven mainly by new network builds, managed and operated network upgrades, and various infrastructure upgrades and enhancements. As a reminder, we estimate our annual maintenance capital requirements, which excludes our growth capital to be approximately 3% to 5% of revenue. Free cash flow, a non-GAAP measure was a negative $1.4 million for the second quarter compared to a negative $3.6 million for the first quarter of 2020 and a negative $32.2 million in the second quarter of 2019. As our core business continues to generate significant cash flow from operations, we continue to believe investing majority of our free cash flow into network infrastructure deployments secured by long-term venue agreements is the best use of capital to drive growth and to increase long-term recurring cash flows. Before we conclude, I wanted to note that we are continuing to engage with multiple interested parties regarding a potential strategic transaction as announced and discussed on prior earnings calls. As such, we are maintaining our suspension of forward-looking financial guidance until further notice. In closing, I am very pleased with our consistent strong operational execution in the second quarter of 2020, which led to improved financial performance over the prior quarter. Despite the slight sequential decline in total revenue, we demonstrated strong margin expansion, along with cost reductions, which resulted in a 13.7% improvement in adjusted EBITDA compared to the first quarter of 2020. Our performance reflected strong cash generation, prudent expense management and positive momentum, as we continue to win key customer contracts and new venues. Most importantly, given the durability and the resilience of our business model, and the actions we have taken to ensure our financial flexibility, we believe we are well positioned to withstand these challenging times, given our diverse revenue streams that are largely contractual, or recurring in nature, our strong balance sheet and liquidity position and our conservative approach to capital deployment. We remain very excited about the near- and long-term prospects ahead. With that, I’ll turn it back over to Mike for closing comments.

[Mike Finley:]

Thanks, Pete. The critical role that connectivity plays in our lives has never been more evident than it has been during this pandemic. Boingo is an essential business. Despite the challenges, we continue to win deals and build new neutral host networks. We have a large backlog of venues to deploy, plus our new business pipeline is robust. We have a strong balance sheet and we believe we have ample liquidity to operate and grow the business. Our core operations continue to generate significant cash flow, allowing us to make capital investments secured by long-term venue agreements, such as high-value projects like MTA East Side Access, and Long Island Railroad projects. For these reasons, we believe Boingo is well-positioned with the durable business model. We remain confident in the immediate and long-term prospects of our business. Operator, you may now open the call for questions. But please note that we will not be taking any questions regarding the strategic process at this time.

[Operator:]

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Anthony Stoss of Craig-Hallum. Please go ahead.

[Anthony Stoss:]

Hi, guys. Nice job navigating these tough times. Say, I didn’t hear anything in your prepared remarks regarding the New York City MTA contracts. Can you update us on what you expect from a timeline perspective and maybe share if your customers have secured funding for that? And then the second question, probably for Mike, you mentioned that the RFP activities remained really high. Can you elaborate a little bit more, if that’s more on the 5G side or Wi-Fi 6? Any color would be helpful. Thank you.

[Mike Finley:]

Yeah, hey, Tony. Thanks. I appreciate the questions. I’ll start on MTA, or Pete wants to add some, then I’ll cover the RFP question. Yeah, MTA and that project is going along really well. I mean, with COVID there’s not as much traffic and activity that’s going on. So it’s actually providing us a faster and better way to get our networks built out. So, we, obviously, want to see New York back. We want to see people back working. But on that side of it, that’s actually been something that’s fairly positive for us. As far as activity with the carriers and our partners, that’s going very well, nothing to say here today. But that’s a key project, not only for us, but for them. And, as we continue to get closer to that opening, we’ll obviously be able to talk more about that. Pete, I don’t know if you have anything to add on that or…?

[Peter Hovenier:]

Yeah, the only thing really worked out, Tony, is on the MTA, it’s important to remember. There are 2 separate agreements, one for the Long Island Railroad portion and the other for the East Side Access tunnel. As we’ve previously stated, we expect we will go live for the first phase of the Long Island Railroad portion in 2020 with a carrier and that has not changed. So we’re still seeing good traction. We’re still building and we expect to have a carrier live by end of the year.

[Mike Finley:]

And then, on the RFP side, yeah, I mean, it actually is – I think it really describes the strength of Boingo. It’s really across the board. As connectivity continues to be a major part of what our customers want, both in venues and transportation hubs, schools, military bases, it’s really all of the capabilities and network that can be provided. We talked about this touch-less activity. It really kind of exemplifies kind of what we’re doing and who we are. It’s going to require not just licensed, but unlicensed spectrum together, CBRS, private networks. And when you look at the capabilities of that, for things like concessions and point of sale, that goes not only in airports, but also in many other venues, first responder, cleaning and maintenance tracking of venues that can be robotics, so really requires a big robust network, that is kind of a converged neutral host, which is what we do. So, on the RFP side, that’s what we’re seeing. It’s not one or another. It’s really the converged network side of it.

[Anthony Stoss:]

Okay, if I can sneak in one more for Pete on the OpEx side of things, you guys have done a good job managing your costs. Is this kind of the new level or do you think it can go down a little bit more in Q3?

[Mike Finley:]

Yeah, I think we’re seeing right now is a good run rate based upon where we are today with, particularly with COVID-19. But as we always will say, we continue to monitor and look for cost saving initiatives and the team has done a great job of being frugal and prudent, and we will continue to be so.

[Anthony Stoss:]

Thanks, guys.

[Peter Hovenier:]

Thanks, Tony.

[Mike Finley:]

Thanks, Tony.

[Operator:]

Our next question comes from Tim Horan of Oppenheimer. Please go ahead.

[Timothy Horan:]

Thanks, guys. The 95% of revenue, are you kind of implying that this is a relatively good run rate of revenue that we’ve kind of bottomed out? I guess, do you have some visibility the next year or so. And, I guess, related to that, are you including kind of construction revenue in that and maybe the Wi-Fi usage base revenue? Yeah, just so we understand both of those things.

[Mike Finley:]

Hey, Tim, you broke up for just the very first part of that. I missed the very first part of your question. I’m sorry.

[Timothy Horan:]

Yeah, yeah, sure. So, I think you guys are saying 95% of revenue is recurring. Can you just give us a little bit more color around how you think about that 95% of revenue? Does that provide you with visibility on the distance basically, relatively good revenue run rate next couple of years? Thanks.

[Mike Finley:]

Yeah, no, thanks for the clarity. So, yeah, just to be clear, what we said is 95% is recurring or contractual. So what we’re really trying to point out there is that our business model, it is solid, we’re providing value. And it does give us a good level of predictability. But we are seeing in certain parts of the business, particularly, what we consider our legacy business, advertising and retail. Retail is recurring, but it has seen some steep declines. Now, we don’t think it is core to our future. But it does generate good recurring cash flow that benefits the company, so while we’re – it’s not a key focus, we will absolutely enjoy that cash flow for as long as it continues. But more importantly, I think what you’re really thinking is, how does it go as a run rate. And as you look at the core parts, specifically, DAS, military in particular, those should continue to grow and they should continue to throw off incremental recurring cash. And run rate is absolutely the way to think about that business.

[Timothy Horan:]

Thank you.

[Mike Finley:]

Right, thanks.

[Operator:]

Our next question comes from James Breen of William Blair & Co. Please go ahead.

[James Breen:]

Thanks for taking the question. Just a couple, Pete, I think, can you clarify what you talked about in terms of [LOL and how that brakes] [ph] progressed maybe sequentially and year-over-year. And then just strategically looking forward, I think, we understand the impacts around a pandemic. But as you think about the large carriers and then move towards 5G, how will that manifest itself? Will that be new RFPs? Or will those be sort of add-ons to existing contracts that you have with carriers going forward? Thanks.

[Peter Hovenier:]

So I’ll start off with the multifamily. I think Mike will go into the other. So on multifamily. So we did see a step up in Q2 from Q1 sequentially, and we typically expect that trend to continue, particularly as the multifamily business still as a skewing towards a student housing vertical. We are seeing more and more sales in the conventional market. And so becoming less and less reliant in student housing, but that is still a core part of that business. So you typically will see growth throughout the first 3 quarters, and then typically a drop in Q4 from a seasonality standpoint. Our network-as-a-service platform is doing better. That program has helped us get more recurring cash flows. Now it does mean absolute revenues will come down as there’s less construction revenue that’s coming in the current quarter immediately. But that revenue is recognized more over time. But we will do that trade all day long because it’s a longer-term relationship and it gives us better recurring cash flows over time.

[Mike Finley:]

Yeah, Jim, it’s Mike. Thanks for the question. Yeah, on 5G for us it’s really both, I think, to your questions, and all of our existing venues, we would – just like we did with 4G, adding to the 3G network, we’ll be adding 5G in a number of those locations, we’ve announced some of them already, but that’s something that continues to go forward. And, of course, it’s part of the converged network that we have and are continuing to grow out. In new locations, it’s really the same, we’re building out 4G, we still brought out 3G networks even in a lot some new locations. But, of course, adding that with Wi-Fi, Wi-Fi 6, soon to be Wi-Fi 6E coming into CBRS. It’s really a combination of all. And when you talk about things like a Touchless experience, and gambling and things like that as arenas start to fill up and airport transportation comes back. It’s going to enable us in the operators as partners to be in a really good spot to provide connectivity to customers as they come back through.

[James Breen:]

And I just want to follow up to building out some of these venues that you have in backlog, a lot of states construction work is considered essential. Are you able to continue to work into these contracts even some of the sport aren’t happening, stadiums are closed?

[Mike Finley:]

Yeah, we are. And happen. I think throughout the whole pandemic, I think, there’s really only been about a week that was kind of shutdown in New York. And other than that, we’ve had a great ability to continue to build. And I mentioned, Austin in my comments, I was there a couple weeks ago, and that continues to get built out, and in a lot of ways, that’s a new stadium, but in a lot of ways with people not in the stadiums, transportation hubs, it’s actually enabling us to get some work done faster and to upgrade some things faster. So…

[James Breen:]

Great. Thank you.

[Mike Finley:]

All right. Thanks, Jim.

[Peter Hovenier:]

Thanks, Jim.

[Operator:]

Our next question comes from Kyle McNealy of Jefferies. Please go ahead.

[Kyle McNealy:]

Hi, thanks for taking the question. This is a patient deployment question. It’s similar to the one you just answered. But you help us understand in total, across all of your current projects that are ongoing. Can you help us understand how much activity you’re seeing from the venue’s trying to use this time where there’s lower foot traffic in their real estate to get their construction projects done? And how might that be negatively offset by any uncertainty around when their higher traffic levels would eventually resume? I guess, what I’m trying to get at is, how can we think about the current projects and whether they’re either accelerated or slowed down in terms of the broader and grand scheme of things? That would be helpful. Thanks.

[Mike Finley:]

Yeah. I’ll start, maybe, Pete can add on. I would say for the most part, this is all – I hate to say it in this period of time, but it’s all pretty positive in that regard and getting work done. I think, I’m very optimistic, in general, but I think a lot of the locations we’re working with, even though it’s a very difficult time I do – I think, airports believe traffic will come back, cities believe work will come back, and people will come back and getting this work done, it’s really continues. And I think some of that’s highlighted as well in the RFPs that continue to come and contracts that continue to get signed and upgrade to continue to grow. And I think you’ve heard from the operators in there, their earnings calls as well that they’re continuing to build. So we’re seeing that activity continue, as we sit here today.

[Peter Hovenier:]

Yeah, the only thing really, I feel like I should add here is, I think, as most people know, and Kyle, we still have a very conservative capital deployment strategy. So we build, but we typically build once we have a carrier committed to join the venue. Now that doesn’t necessarily mean they paid us a large fee upfront. Sometimes it’s a commitment to pay us over time, which is fine. But what you don’t see us do a lot of is building and hope the carriers will come. We are doing that at the MTA project, which we talked about in length, and we feel very, very confident that we will get carriers live on the MTA network. But on other locations, we take a very cautious, I’d say, conservative capital deployment strategy. So that has not changed.

[Kyle McNealy:]

Okay. Thanks. That’s helpful. And then the multifamily side, I would expect that Boingo multifamily would see a tailwind from work from home and distance learning, you talked about it a bit in the prepared remarks. And the end customer subscribers would see more important that they should place in a broadband Wi-Fi connectivity. Are you seeing any acceleration in the timeline that multifamily customers are thinking about initiating new projects and upgrades? Like, is your pipeline building and the inbounds that you’ve got from customers, it has increased since the start of COVID and how should we think about how going to multifamily might offset some of other pressures with advertising retail and other pieces that have been COVID impacted?

[Mike Finley:]

Yeah, I’ll start. I don’t know if Pete wants to add. Yeah, there is some, but I’ll separate it between two. The student housing side and the conventional multifamily we’re really kind of just beginning into that conventional multifamily side and those builds are generally longer and a little bit more into the future. We’ve been seeing the desire on the builders and the property owners to want to have, robust, connected neutral host networks for their property? So it’s not new, I think COVID has – it has obviously, only strengthened that need as they move forward. Getting some of the existing buildings moved over to those types of projects, I think, we’ll continue to see some velocity there. And then, on the student housing that is a little bit on the existing product – projects, at least a little more year to year. And with so much activity going on with schoolwork, I think, as we stated there’s 85% of schools that we have are coming back, I can tell you from personal experience, I have kids in college, and they all want to go back and they’re all going back so that I know. So I think there’s room to believe that that number is accurate.

[Kyle McNealy:]

Okay. Thanks. One last quick one on T-Mobile/Sprint in that merger caused a little bit of slowness towards the end of the year, last year, are you starting to see them pick back up towards normal levels or better. What’s the outlook there that you can share?

[Mike Finley:]

Yeah, I would just say this, look, I – it’s hard to believe what they’ve done by combining those 2 companies right in the middle of this pandemic, but there’s a lot of activity going on there. They’ve done a great job working through the 2 companies coming together. And, I think the activity will begin to pick up we have a lot of different work that we’re doing with them, both today and then more broadly as we go into the future. So that’s probably the best I can say about that right now.

[Kyle McNealy:]

Okay. Thanks a lot.

[Peter Hovenier:]

Thanks, Kyle.

[Mike Finley:]

Thanks, Kyle.

[Operator:]

[Operator Instructions] Our next question comes from Scott Searle of Roth Capital. Please go ahead.

[Scott Searle:]

Hey, good afternoon. Thanks for taking my question. Hey, Mike and Pete. Hey, just a quick follow up on some of the U.S. operator activity. Dish has got a timeline to start to get their 5G network built. And we finally started to see them releasing some of the winners, at least as relates to some of the core capabilities and other vendors. Are you starting to see them pick up in the pipeline as well? And they may be to just layer on top of that, as it relates to 5G. And Mike, I think in the past, you’ve talked about some of the opportunities to deliver more value, not necessarily one plus one equals two, but one plus one equals something greater than one, but it delivers a lot more share. And based on your win rate, it seems like someone that’s in effect. So I’m kind of wondering how the 5G pricing strategy is working out, bring everything into your umbrella, and then I had a couple of follow ups on CBRS.

[Mike Finley:]

Yeah. So yes, I think, Dish has become, obviously, very active. I believe they’ve had some announcements in the last couple of weeks. So we’ve been very engaged with Dish and we’ll work with them as we move forward and they continue to develop their plans. On the 5G side, I’m not sure that I understood the question, Scott.

[Scott Searle:]

Sorry, just in terms of the pricing, it’s not necessarily a full-price incremental node. But you talked about basically being able to provide a broader regional set of services and suite of services across 3G, 4G, 5G, CBRS. I’m just kind of wondering how the overall pricing is working out. It seems like from a gross margin standpoint, at least in the early going, it’s good, but what do you kind of kind of seeing, what are the expectations from a carrier standpoint on the pricing front?

[Mike Finley:]

Yeah, I think probably what I’ve said in the past and it’s actually we’re executing against and working quite well is really having a broader more – when I say global, but broader overall strategy with the carriers and all of the various projects and technologies that they have and want to deploy. So we obviously have – instead of looking at kind of venue by venue, we’re looking and working with them in total. So 5G becomes a big part of that. Adding new venues becomes a big part of that. And adding on to the existing – as we talk about touch-less experience or other new capabilities that are coming, we’re essentially providing the network and the converged network to enable those types of things. Some of those are services that operators and others will be able to deliver to our combined customers, i.e., venues.

[Scott Searle:]

Got you. And maybe, lastly, if I could on the CBRS front, we’ve got Auction 105 going on right now. It seems like there is a high level of interest across operators’ MSOs and enterprises. First, from an existing venue standpoint, I’m wondering are all new venues that are being built supporting CBRS and do some of the legacy – for lack of a better word, legacy venues also support CBRS. Are you seeing that interest level kind of coming in from the carriers? And are you seeing interest from new players as well? Are the MSOs starting to engage with you for things like that? And maybe to just throw on the backend of that, private networks, big opportunity as well, you guys have the neutral host capabilities to do something like that. And even with CBRS, you’ve got guys like John Deere in there who are bidding on some spectrum. I’m wondering if you’re seeing other more enterprise-centric types of opportunities as it relates to CBRS. Thanks.

[Mike Finley:]

Yeah, thanks. Yeah, great question actually. There’s a lot there. But, yeah, the auctions, I think everybody anticipated that that would be a valuable and robust auction. And then, I’ll kind of combine I think the rest of – the existing buildings, legacy buildings, new buildings. Yeah, I mean, we look at CBRS as just another part of the spectrum that we can incorporate into our neutral host converged network that is going to provide robust services for multiple. So take a big airport or transportation hub or a venue, we’re serving a lot of customers in that regard. We serve the people that come through those venues with their devices, we serve the venues themselves. We work with our partners and the operators to – we support them and work with them. And I think CBRS and some of the new opportunities that are coming forward, and private networks and things like that, we’ll have a combination of that. So that, some of those things will occur in our existing locations, so there’ll be private services that can occur in our existing locations. And then, I think, as you mentioned, the private networking and the additional entities that are coming forward and seeing those as opportunities, we’ll be in a great position to work with as well. So, foundationally our strategy supports everything you’ve highlighted there and we’re working towards that.

[Scott Searle:]

Great, thank you.

[Mike Finley:]

Thanks, Scott.

[Operator:]

There are no further questions at this time. I would like to turn the floor back over to the presenters for closing comments.

[Mike Finley:]

Thank you, Arial. Thanks, everybody, for joining on the call, really appreciate the time. We believe Boingo is well positioned to not just weather these challenges presented by the unprecedented time in our history, but to thrive. Connectivity is more important than ever and our long-term wireless rights and strategic venues, our long-standing relationships with the carriers and our durable resilient business model allows Boingo to maintain velocity. We’re excited about what lies ahead for our business. Thank you all again for joining today and stay healthy. Thanks.

[Operator:]

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.