Boingo Wireless, Inc.
Q4 2019 Earnings Call Transcript

Published: 3 Mar 2020

[Operator:]

Greetings. Welcome to Boingo Wireless Fourth Quarter and Full-Year 2000 (sic) [2019] Earnings Conference Call. [Operator instructions] Please note, this conference is being recorded.I would now like to turn the conference over to your host, Kimberly Orlando with ADDO Investor Relations. Thank you. You may begin.

[Kimberly Orlando:]

Thank you, and welcome to the Boingo Wireless fourth quarter and full-year 2019 earnings conference call. By now, everyone should have access to the earnings press release, which was issued today at approximately 4

[Mike Finley:]

Thanks, Kim, and thank you to everyone for joining us today. Let me begin by addressing the recent new story speculating we are exploring a potential sale of the company. While we will not comment on rumors or speculation in the marketplace, we can share that we have received multiple enquiries regarding a potential strategic transaction. As such, our Board has engaged strategic advisors to help us assess these opportunities. For that reason, while we will be sharing fourth quarter results with you today, we are suspending forward-looking financial guidance until further notice.With that, let me turn it over to Pete, who will walk you through our fourth quarter 2019 results in detail. Pete?

[Pete Hovenier:]

Thanks, Mike. Today I will begin by reviewing our financial results and key operating metrics for the fourth quarter ended December 31, 2019. Total revenue for the fourth quarter was $64.1 million, a decrease of 5.5% over the prior year period. Revenue reflected growth in military/multifamily and wholesale Wi-Fi which was offset by year-over-year declines in DAS, retail and advertising other revenue.As a percentage of total revenue across our diversified revenue streams compared to the prior year quarter, military/multifamily was 37%, up from 35%, DAS was 35%, down from 37%, wholesale Wi-Fi was 17%, up from 16%, retail was steady at 5%, and advertising and other was 6%, down from 7%.In terms of total revenue contribution by category for the quarter, military/multifamily revenue was $24 million, representing an increase of 2.5% versus the prior year period. Growth was driven by the military vertical which improved 4.4% year-over-year. We grew military subscriber revenue following the speed and price increases we implemented in the first quarter of 2019 which led to a 10.1% year-over-year increase in ARPU.During the fourth quarter, we built out our network to cover an additional 1,000 military beds, bringing our total footprint to 355,000 military beds as of December 31. Fourth quarter revenue in the multifamily vertical declined 3% year-over-year, while growth in our multifamily business is taking longer than originally anticipated due to longer sales and deployment cycles, we remain optimistic in our long-term growth opportunity this vertical represents.In the near-term, we continue to generate strong recurring services fees for our portfolio of 238 multifamily properties. DAS revenue of $22 million decreased $3.3 million or 12.9% year-over-year, primarily due to decreased DAS above project revenue. Total DAS revenue was comprised of $13.1 million of build-out project revenue and $8.9 million of access fee revenue.Importantly, recurring DAS access fee revenue increased 24.5% year-over-year from $7.2 million, representing our fifth consecutive quarter of double-digit growth. Wholesale Wi-Fi revenue was $11.1 million, up slightly year-over-year primarily due to increased managed service fee from our venue partners who pay us to install, manage and operate network infrastructure at their venues. This increase was partially offset by decreased revenue from our Comes with Boingo service offering.As mentioned on previous earnings calls, we expect Comes with Boingo will continue to partially offset growth in the wholesale Wi-Fi vertical as our program with American Express is phased out. However, we remain pleased with the performance of carrier offloads and continue to expect wholesale Wi-Fi to be the strong driver of recurring cash flow.Retail revenue was $3.3 million, a decline of 9.7% year-over-year, primarily due to reduction in our retail subscribers. Advertising and other revenue was $2.7 million, decreased 17.5% year-over-year, primarily due to a decline in the number of premium ad units sold compared to the prior year period.Now turning to our fourth quarter costs and operating expenses. As a result of our business realignment plan announced in December, we recorded a restructuring charge totaling $2.3 million in the fourth quarter of 2019, related to employee severance and benefits costs, following elimination of approximately 80 positions from various Boingo offices across the country.Upon the completion of our restructuring plan, in addition to increased focus and alignment, we expect to realize approximately $11 million of annualized cost savings beginning the first quarter of 2020. Network access costs totaled $29.2 million, representing a 13.1% decrease over the fourth quarter of 2018, primarily due to the decreased depreciation expense related to fixed assets from our DAS build-out projects and decreased multifamily construction and support fees.Gross margin, which is defined as revenue less network access costs, was 54.3%, up approximately 4 points from the prior-year period. The increase in gross margin largely reflects the shift in the diversified revenue streams, driven primarily by the increase in higher margin DAS access fees and military revenues and declines in our lower margin DAS build and advertising revenue.Network operations expenses totaled $15 million, an increase of 11.7% year over year, primarily due to the aforementioned restructuring charge and an increase in personnel related and other expenses. Development and technology expenses of $9 million increased 6.5% from the prior-year period, primarily due to restructuring, higher hardware and software maintenance expenses. Selling and marketing expenses were $6.7 million, increased 8.2% from the prior year period primarily due to restructuring charge.General and administrative expenses were $6.9 million, declined 14.2% year over year, primarily due to a decrease in personnel related expenses which is inclusive of stock-based compensation.Now turning to our profitability measures in the quarter. Net loss attributable to common stockholders was 5.2 million or $0.12 per diluted share compared to a net income of $0.4 million or a penny per diluted share in the fourth quarter of 2018. As a reminder, net income in the fourth quarter of 2018 reflected a one-time noncash tax benefit of $5.7 million related to a reversal of our tax valuation allowance from the equity components of our comfortable debt.Adjusted EBITDA, a non-GAAP measure, was $19.8 million, a decrease of 14.5% year-over-year. As a percentage of total revenue, adjusted EBITDA was 30.9%, down from 34.1% of revenue in the prior-year quarter.Now turning to our key metrics. The number of DAS nodes in our network for the fourth quarter was 38,100, up 27.4% from the prior-year period and 2.4% from the third quarter of 2019. The number of DAS nodes in backlog, which represents the number of DAS nodes under contract but not yet active as of the end of the fourth quarter was 11,700, down 15.2% from the prior-year period and down 3.3% from the third quarter of 2019. The decrease from the prior year period is due to deployment of 15 new DAS venues during 2019.Our military subscriber base was 133,000 subscribers at the end of the fourth quarter, down 3.6% from the prior-year period. Compared to the third quarter of 2019, military subscribers decreased 2.9% in line with the anticipated seasonal trends which typically reflect a short-term reduction in subscribers during the last few weeks of December around the holidays.Our retail subscriber base was 81,000, at the end of the fourth quarter, which was down 33.6% from the prior-year period and down 4.7% from the third quarter of 2019. Connects, or paid usage in our worldwide network, were approximately 89.4 million, up 33.1% from the prior-year period and effectively flat from the third quarter of 2019.Moving on to discuss our balance sheet. As of December 31, 2019, cash, cash equivalents, and marketable securities totaled $80.6 million, down $6.2 million from $86.8 million at September 30, 2019. The decrease in our cash balance was primarily due to investments made in our DAS network infrastructure.Total debt was $168.1 million and we had a $150 million available in our credit facility as of December 31, 2019. Capital expenditures were $32.2 million for the fourth quarter, which included $27.2 million for DAS infrastructure build-out projects which are primarily reimbursed through revenue by our telecom operator partners.Free cash flow, a non-GAAP measure, was a negative $4.6 million for the fourth quarter, compared to a negative $13.7 million in the fourth quarter of 2018. For the full-year of 2019, free cash flow was a negative $25 million compared to a negative $15.4 million in 2018. While our operations continues to generate cash, these results are in line with our previously stated expectations of being a net consumer free cash flow for the full-year 2019, primarily due to our ability to selectively fund network build-out opportunities, including pre-funding certain capital expenditures related to our MTA build-out projects. We continue to believe that investing the majority of our free cash flow in the network expansion opportunities is the best use of capital to drive long-term growth.With that, I will turn it back over to Mike.

[Mike Finley:]

Thanks, Pete. Before we go to questions, I would like to say, I’m very excited about the year ahead. At the end of 2019, we made the tough decision to realign the company into three core business units

[Operator:]

Thank you. [Operator Instructions] Our first question comes on the line of Scott Searle with ROTH Capital. Please proceed with your question.

[Scott Searle:]

Hi. Good afternoon. Thanks for taking my questions. Pete, Mike, maybe just to quickly clarify, I want to make sure on the OpEx reduction front with the realignment, that $11million, when will we see that full quarterly impact? Are we seeing it entirely in the first quarter or is it going to be in the second quarter that we start to see that full impact?

[Pete Hovenier:]

Hey, Scott. So you'll see most of it come through in Q1 there. I would say like 85%, 90% of this will be realized starting in Q1. And by Q2, 100% will be realized.

[Scott Searle:]

Got you. And on the DAS front, it seems like that was an area of a little bit of sequential weakness in the fourth quarter. The pipeline is still strong. It sounds like the RFP activity is very strong. Could you take us through what exactly you saw in the fourth quarter? And are you starting to see more of a shift then to the access fee front as opposed to build revenues? And how are you trying to push things as we're moving forward and maybe to lump on top of that, in terms of that pipeline, 5G, CBRS, private networks, how does it all fit in sequentially and directionally? How should we be thinking about the DAS business going from the December quarter into the March quarter? Thanks.

[Pete Hovenier:]

Sure. I'll start and I know Mike will add some color here. So as it relates to Q4 in particular, first I'd like to recap. 2019 was a great year in launching 50 new venues. I know we talked about launching more. We expected to launch a bit more here in Q4. Those venues did not go away. Those customers did not go away. Some of the timing of the launches shipped it out to the right, not atypical in these large scale construction projects, but still a ton of activity going on. As it relates to your question specifically, as it is to build these versus recurring access fees, we are seeing growth in recurring access fees. year-over-year, our Q4 access fees were up 24%. That's something we're proud of and that growth is something we expect to continue going forward. It is a trend that we are seeing and it's something we're working on with our carrier customers. But it's important to note what we're really focused in on is getting the carriers to a yes. And so we'll be flexible with our carrier customers on whatever structure they want to do.

[Mike Finley:]

Yes. Hey, Scott. It's Mike. I'll just add. You asked about the pipeline and things. Yes, it's -- there's so much talk and continuous talk about 5G, which is happening and it's evolving and it's I think 2020 and '21, we'll start to see more, especially as more devices come into the marketplace. But certainly CBRS now being live, that's starting to come in, but we continue to do 4G upgrades and 4G as well. So really, kind of the neutral host approach of bringing connectivity and converged connectivity into venues, it's going to continue to evolve and we'll see more 4G, we'll see 5G, I think on a growing basis as we move through the year and then bringing it all together with Wi-Fi and the other pieces is really what makes the best networks and that's what the venues are seeing and asking for.

[Scott Searle:]

Hey, Mike, if I could just one follow-up and I'll hop back in the queue. But there's certainly been a lot of concern and speculation relating to the Sprint T-Mobile impact. It seems like there's positive resolution on that front. I’m wondering if you could kind of address what you're seeing in that customer regard from a demand standpoint and also the talk of the fourth carrier, Dish kind of coming in, does that start to materialize on the revenue stream in the not too distant future? Thanks.

[Mike Finley:]

Yes. Thanks, Scott. Yes, so that -- I think the fact that it's settled now is good. You know, we build our networks for the total number of customers. So the fact that they're coming together, is probably a good thing from that regard. And their number of customers is one will just be the combination, obviously, of the two. So for us, we've said all along that, either way, it would probably work out fine. This is a good outcome. And I think we'll start to see those companies coming together here pretty quickly. So it's not completely finished yet, but as that comes together, they'll obviously be a strong and viable competitor and company in the space. As far as Dish goes, yes, I think that's another opportunity as they evolve into the fourth carrier. And as far as projecting when that will be meaningfully, is hard to determine. But I don't think we probably -- we wouldn't probably see much this year, but in the out years, that would start to happen, I believe.

[Scott Searle:]

Great. Thank you.

[Mike Finley:]

Thank you, Scott.

[Operator:]

Our next question comes from the line of Anthony Stoss with Craig-Hallum. Please proceed with your question.

[Anthony Stoss:]

Hi, Pete and Mike. Can you refresh our memory, the size, the MTA contract, if it's gotten any bigger or smaller since you last reported? And also, can you maybe, detail or give us a range of what you expect the size of it to be in 2021, your first full-year, I guess some deployment? And then, Mike, you talked about when you first joined Boingo, part of the reason you joined was your view on indoor private LTE networks being built out. I'm curious if you -- what you're seeing there, if you're seeing any interest in 5G already on the indoor private network side? Thanks.

[Pete Hovenier:]

So I'll start off. So as it relates to the MTA contract, it is not really anything meaningfully, Tony, since we -- last announcement, it's a big contract. And it's early in the process of our discussions with the carriers. The discussions are going quite well. The building is going on as we speak. And as we said in our last call, we expect that we will launch at least the first phase here in 2020. That has not changed. As it relates to when will that the entire project go live, we're not ready to comment on that one yet. And we are also able to give commentary on what the size will it be in 2021. But what I can say is making great progress. We are happy with how the teams are working. We're happy with the engagement of the carriers and we couldn't be more excited about this -- of those projects.

[Mike Finley:]

And then, Tony, I'll follow-up. Yes, I still think private LTE is, a really interesting opportunity and one that's going to grow 5G, brings a lot of that into perspective. The CBRS does as well, Wi-Fi 6. So really the convergence of all of these technologies and capabilities is what's going to help, I think, spur the opportunities both in the private side as well as all of indoor kind of across the board. And as 5G comes out further devices get launched and capabilities become more apparent and the app developers get moving, then, there's going to be great -- greater demand for high speed, low latency and whether that's in existing venues or a private type locations, I’m just as excited today as I was when I joined almost a year-ago.

[Anthony Stoss:]

And then as a quick follow-up, Mike, you commented on this call that you're seeing more interest or RFP activity in DAS in the first two months than they did the first six months in 2019. You have a goal right now for a number of DAS deployments for 2020?

[Mike Finley:]

Yes, we haven't stated that and we're still working through that at this point.

[Anthony Stoss:]

Okay. Thanks, guys. Best of luck.

[Mike Finley:]

Thanks, Tony.

[Operator:]

Our next question comes from the line of Tim Horan with Oppenheimer. Please proceed with your question.

[Timothy Horan:]

Thanks, guys. Mike, can you talk about the DAS demand? Is this for new venues, maybe what type of venues you're seeing and -- or is this for kind of 5G upgrades or new carriers coming into existing locations, anymore color there? And then, maybe, Pete, can you give us a little bit more color on the wholesale Wi-Fi trends? It was a little weaker than we were expecting, but I know there's a lot of puts and takes there. Maybe if you can give any color on some of the Amex contract or volume use or whatever else kind of drove the results, or I guess we're just looking for is that number kind of a good run rate? Thanks.

[Mike Finley:]

Yes. Thanks, Tim. It's Mike. I'll start and then I will turn it over to Pete. Yes, I think it's clearly if you look at the number of venues we're in, every one of those is a great opportunity for a 5G upgrade. And so as we've stated, that started to happen and that we will continue to evolve and we're in a great spot for that as you know people, customers demand and requirements for high speed, low latency just continue to grow. So that obviously will grow there. And as far as just the new RFP is really is, there's a number of new facilities that are coming up, there's a lot of different upgrades. And we're kind of across the board in transportation hubs anywhere there's high traffic and lots of people, transportation hubs, sports stadiums, airports and things like that. So it's very similar to the group of customers we have today.

[Pete Hovenier:]

As it relates to wholesale Wi-Fi, Tim, so, yes, we were up sequentially very modestly. And as we look at the elements of wholesale Wi-Fi, we continue to see encouragement from what we're working with the carriers for offloading. We're also seeing continued success on what we call managed services, where we manage and venues on the [indiscernible], wireless network on behalf of venues. But we saw the weakness piece come from Comes with Boingo. And that did materialize again in Q4 and we continue to see that decline while the Amex program phases out. We're giving color today as it relates to 2020, but what you should be thinking of is, wholesale offloads growth coming from managed services and offload led declines coming from Comes with Boingo.

[Timothy Horan:]

And then maybe just on the advertising front, what percentage of the advertising has been -- were driven by your sales force. So, just to try to get a baseline of what the run rate is at that business now that you’ve scaled that back.

[Pete Hovenier:]

Yes. So 100% of our advertising sales was coming from the sales force. So we -- as we went through this business realignment, that was an area where we definitely will see some pressure. We have a larger sales force that we talked about previously, call it all in around 20 folks and that number is significantly less when you go forward. We are finding we are spending a lot of money supporting a business that, frankly, wasn't growing. And so we made corrective actions there. And we have a handful of sellers now, but it very small and how we're going to market is very different.

[Timothy Horan:]

Thank you.

[Operator:]

Our next question comes from the line of James Breen with William Blair. Please proceed with your question.

[James Breen:]

Thanks for taking the question. Just one on the housekeeping segment. Can you just say, how much [indiscernible] was in the military number? And then just across the business, military lost a few subs again this quarter. Just can you talk about what you're seeing and if you think that's reversing? Is it more of a troop deployment issue? Is it a little bit better than it was in the last two quarters? And then just on the DAS side, just around the MTA contract, you talked a little bit about sort of the timing on that. Can you talk about how much you spent on that last year, 2019, and what you think that's going to come in the ballpark for 2020 from a CapEx perspective? Thanks.

[Pete Hovenier:]

Sure. So as it relates to multifamily, the revenue for the quarter was $6 million. Of that the vast majority was recurring access fees. So almost $4.5 million was recurring access fees. As it stands -- as we talk about subs in the military, so we absolutely saw our typical seasonal decline. So our penetration rate as of the end of the quarter was 37.5%. But if you think about our penetration rate as an average throughout Q4, it was around 39%. So it was a seasonal drop, and I can't comment that. Like what we normally do, we saw that come right back up in the beginning of January. As it relates to MTA, in terms of the capital spent in 2019, it was in the -- our overall commitments that we have made to MTA is over $25 million. So far we continue to fund that build while we engage the carriers. I won't comment specifically on how much we will spend in 2020 on MTA because a lot of that will have to do with when we launch the different bases and also to with which carriers because capital also is depending upon the carriers. But just note that it has our full support and we're balancing the need to fund the network and -- but also to making sure we're not putting capital too far in advance of getting commitments from our carrier customers.

[James Breen:]

Okay. And you talked about realigning the revenues into those three buckets. Will you start reporting that way at some point, maybe in the first quarter?

[Pete Hovenier:]

We do intend to start reporting under the new alignment. I won't comment it will be Q1 versus the time in 2020, but yes, we will be changing how we report.

[James Breen:]

Okay. And then I just guess the last question, why not give guidance for the year? What's the rationale around that relative to the business and the M&A?

[Pete Hovenier:]

Yes. We said it in our prepared comments. So it really has to do with the inquiries. And just given the activity that's out there and the speculation rumors, we feel like this is not the time.

[James Breen:]

Okay. Thanks.

[Operator:]

Our next question comes from the line of Walt Piecyk with LightShed. Please proceed with your question.

[Walt Piecyk:]

Thanks. Hey, Mike. The 73 venues that you have, I was just looking for, if you can just refresh my memory in terms of how those arrangements work. I think if -- let's take Verizon as an example, if they want to do millimeter wave, which means highly suitable to stadiums and indoor and things like that. I don't think it can go through your DAS system, so correct me if I'm wrong that it would require a different type of antenna structure and system. So I'm just curious if the 73 venues, if you can kind of break out, which of those do you have the exclusivity to be the guy that would then build that for Verizon, and I guess AT&T or whoever else wants to build millimeter wave in those venues or what are the financial arrangements look like generically across those 73 venues? And would you suspect that in those cases it would be kind of a traditional business model that you did historically, which is like you get [indiscernible] to pony up a couple million bucks and then just amortize that as deferred revenue. Thank you.

[Mike Finley:]

Right. Thanks, Walt. Yes, I'll talk generically, obviously, but I'll try to take your question as it is. So in all of the venues where we have the rights, we have the rights. So the first question would be all 73 we would have the rights to do that. As far as the design and the build out, it would really be depended on the venue itself, the carrier, which spectrum they're planning to use, you've stated millimeter wave and I understand the question. So in those cases, it's a little bit more specific to that. But the way that we operate with the operators, we do in the same manner with 5G and upgrades as we've done with 4G and the 3G and then as we build it out, then it's just a function of working with them on, where and how they want to deploy as we do with all the other venues and all the other upgrades in history we have and from a contractual perspective, it's the same.

[Walt Piecyk:]

So, again, for the 73, it is exclusive across all 73, meaning that if they want to do millimeter wave, even if it's more CapEx, that it can only go through you guys in terms of those contracts and how long on average of those contracts extend?

[Mike Finley:]

I mean, the first answer is yes, but the contracts have varying degrees, as you know we have --we are in the long-term contracts and we don't claim -- describe what every one of them are, but they all tend to be longer term.

[Walt Piecyk:]

Got it. And then on -- Pete, the question for you on my favorite question, which is this reimbursable CapEx. You actually -- I want to ask, I know you're not giving what you're going to do in 2020 or targeting, but even in this year, I think the last time we chatted about this, you were looking at doing 75 to 90 total with a mix between self-funded and carrier funded. And so you came in substantially above that. Was any of that conceptually pulling in 2020? Like how did that happen? It was that much higher than what you were initially thinking, or am I -- do I have the numbers wrong?

[Pete Hovenier:]

Yes. So you -- those were some earlier numbers. When we last gave guidance we talked about our DAS CapEx for the year being 95, between 95 and 105. So for the year came in 107. So even a little bit above that. It's driven by carrier demand. So when you look at what we have going on in as it relates to upgrades, new venue deployment as well as supporting the MTA build process. We continue to see a significant amount of demand. And that's a very good thing.

[Walt Piecyk:]

Got you. And then the last thing. So if I just took DAS rev divided by nodes, first of all, why is that bad to do it that way and create a new metric? And then also like this 200 sound like that should be the right number per month for the revenue generated per node. I get that it's like it can be squirrelly because you're amortizing some of the revenue. But actually, even if with amortization, it still should work out to be a clean type of metric, just 200 bucks per node per month, sound like the right number or can that go lower? Because that's been obviously dropping.

[Pete Hovenier:]

Yes, I know exactly what you're trying to do here. The challenge with that is, that works really well for new venue deployments. But as you start doing upgrades and as carriers add incremental nodes with it, when they do these upgrades, the same rate does not apply. And so as a result, your revenue per node by default is going to go down as a result of upgrades. So it's a proper or a good way to think about it. And it's how I will look at it internally when I think about anchor carriers and subsequent carrier additions to a new venue. But upgrades kind of change the whole dynamic that comes into play. Then they have to do with at what point does a carrier decommission a node. And that's something we don't get the color on that as quickly as we would like.

[Walt Piecyk:]

Thanks. Just one last one. NOLs, what are your NOLs? I mean, it's a bottom line here on the strategic alternative, is that -- it's really that exclusivity that people want in terms of the next phase of investment?

[Pete Hovenier:]

Yes, unfortunately I don’t have the NOLs in front of me, but we're in a net loss position. They expect to be a noncash taxpayer for a while. As people look at window for different things, but one of the things we continue to say is, the fact that we have long-term key strategic venues and that we provide wireless connectivity in those venues, they have a great history of getting multiple carriers per location. It makes us valuable to different players and also to -- just in terms of growing the business. It's winning venues, signing up carriers with locations, creates real value.

[Walt Piecyk:]

Great. Thank you.

[Pete Hovenier:]

Okay. Thanks, Walt.

[Mike Finley:]

Thanks, Walt.

[Operator:]

[Operator Instructions] Our next question comes from line of Greg Gibas with Northland Capital. Please proceed with your question.

[Greg Gibas:]

Good afternoon, guys. Thanks for taking my questions. You talked a lot about the profitability benefits that you're getting from the restructuring, but roughly how much will the recent restructuring impact the revenue, if in any way at all?

[Pete Hovenier:]

So I'll take on this. The area where we expect to see the most impact around the realignment really has to do with the advertising business in which we talked about previously. So there's been questions and commentary we receive when we talk to the investment community that we are abandoning our legacy business. And that is not the case. But what we are doing is we're putting a lot of focus on the areas of the business that are growing and that we believe create the most value and the areas that are not growing as much now we're managing them, but we're doing it responsibly. And so everything we do is going to be managed in a way that we look at it. What's the opportunity, what's the cost and then how can we maximize the overall contribution margin. We have a leader responsible for the legacy business and he's absolutely trying to grow the business. It's going to be tough. When you look at retail, you look at advertising, you look at Comes with Boingo, those businesses are under decline. That doesn't mean that they don't generate good incremental contribution margin. And that's how we're running the business.

[Greg Gibas:]

Okay. Sure. And then as we think about the Comes with Boingo program having that continued negative effect on that wholesale Wi-Fi segment. How should we think about when Amex will be completely phased out and maybe when that part of the segment will return to growth?

[Pete Hovenier:]

Yes, unfortunately it kind of gets into the whole 2020 guidance piece, so you should be thinking about Amex phasing out in the early part of the year. But beyond that, I really can't comment.

[Greg Gibas:]

Okay. Fair enough. Last one for me then would just be, as DAS penetration moves closer to 12% maybe in the market today, is there any -- can you talk about the dynamics about maybe have you noticed a slowing pace of new venues coming to market or maybe the mix of venues that it shifted at all? And I guess kind of how would a company that with maybe verticals or venue types you're excited about for the rest business in 2020?

[Pete Hovenier:]

Yes, I can touch base. I know Mike can go a bit more. But look the demand from carriers and venues for in-building wireless is a great level. So we talked a bit about how RFP activity is heavier, that's driven by venues, but we also continue to get feedback from carriers. And you think about a 5G world and 5G is it's almost was made for in-building wireless. When you think about how that works and how you become most efficient. So we love the position we're in. And we love what we're trying to do. So I like the space that we occupy about running the wireless networks at key strategic locations and bringing as many carriers as possible and leveraging that shared infrastructure for healthy returns for us, for the carriers, as well as into the venues. It's a true win-win.

[Mike Finley:]

Yes, I will add is, you obviously, if you break it up, you have the whole grouping of existing venues of all types, transportation hubs, airports, sporting venues, things like that. And you have some that are new and there's new building going on in multiple places around the country. And then you always have some sort of new opportunity or new type of venue. There's some gaming things that are starting to happen. But there's a common denominator in all of them, which is they all want, the fastest, highest speed, lowest latency network that you can get. So whether you're an existing one, one that's being built or one that's coming, they all want the same thing. So if we're in the places, where we're at and as -- we would consider that upgrade opportunities if there's new venues, our approach on a neutral site and bringing all types of network and capabilities together is very appealing to those venues and for the ones that would be coming it be any different. So, as we move on over the next pick your time frame, 12, 24, 36 months and devices are coming out and capabilities come out and app developers get involved. Some of the things like we saw in 4G, for example, Uber and Lyft were not use cases for 4G network spectrum. So, we envision there'll be more of that and we think we're in a good spot for that.

[Greg Gibas:]

Got it. Thanks, guys.

[Mike Finley:]

Thank you.

[Pete Hovenier:]

Thank you.

[Operator:]

Our next question comes from the line of John Godin with Lake Street Capital Markets. Please proceed with your question.

[John Godin:]

Hey, guys. Thanks for taking my question. First on military, obviously, we saw nice ARPU increase there driven by the price increase. Is there more room for that to go up going forward? And what are you thinking about as far as ARPU versus adding new beds? And second, on the multifamily, it's kind of consistent commentary over the past couple of quarters of the elongated sales cycles. Anything else change there that's worth calling out? Thank you.

[Pete Hovenier:]

Sure. So I'll start here. So as it relates to ARPU military, yes, we've had some great ARPU increases you've seen materialize over 2019. The bulk of that had to do with the service and price increase that happened in the -- started release in the early part of 2019. So I don't expect a material amount of incremental ARPU increases in 2020. I think we talked about that in the past. I'm comfortable sharing it. We can as we talked about in the last call as well, we continue to look at opportunities to add new beds. That is something that we think is important as we extended our contract with APs and have another 15 years giving us a contract through 2038, we're looking at certain venues. At one point, we question as we brought down the cost to deploy these bases and have longer term. It allows us to look at bases a little bit differently. So I do expect to add beds, but not ready yet to provide color as to how much.

[Mike Finley:]

Yes, then on the multifamily side, I'd say, when we acquired Elauwit, they were primarily in student housing, and we continue to be in that business and grow it. But as we've also shifted into the more commercial multifamily side, that's where it gets the sale cycle has been a little longer. But if you think in terms of this decade, there's estimate to be 20% growth of multifamily units annually over the next 10 years. And so we're in the beginning of that cycle. And the reality of it is, some of those properties that we're working with today are dirt for the new buildings. And those can take -- pick your time frame, 12, 24 months to build out. And then, the massive number of existing properties, have a combination of some that have contracts associated with them that will roll off over time. And although they're built, there's a great benefit to that that we can get on with implementing our technology there. But there's people living in them and there's walls and things. So it takes a little time to kind of get that going. So it's a big opportunity. And on the commercial side, it just is one that has a little longer cycle than some of the student housing stuff.

[John Godin:]

All right. Thanks, guys.

[Mike Finley:]

Thank you.

[Pete Hovenier:]

Thanks, John.

[John Godin:]

Our final question comes from the line of Kyle McNealy with Jefferies. Please proceed with your question.

[Kyle McNealy:]

Hi. Thanks for the question. I wanted to get a sense for where you're at with small cells right now? Are you seeing more and more projects become small, so focused right now, or do you have an expectation when they might become more small cell focused in the future or ramp more meaningfully?

[Mike Finley:]

Yes, there's actually -- I mean, this is kind of one that's been coming for a long time, and I do think that there's probably more activity that's starting to happen on the small cell side. And, again, as a neutral provider and provider of all types of technology, there's -- I think there's some interesting opportunities that that will probably start to finally come into play here over the next period of time. But for us, it's kind of one part of providing all types of connectivity and converged connectivity. So I do think it's obviously a little closer than it's probably been in the past.

[Kyle McNealy:]

Okay. Fair enough. And is there anything more that you can say about -- any kind of leading indicators like RFP activity and upgrade requests? You mentioned some factors there earlier in the call, but could -- that could help us understand where we're at with the timing of carriers 5G plans? I know you've previously said that it could be mid 2020 when we could see a bigger ramp in 5G -- 5G in venues. But is that still your thought, or what do you think internally about the timing of a 5G ramp?

[Mike Finley:]

Well, I'll just give you maybe a little more historical, as I've kind of commented over the last number of times, is 5G will ramp faster than 4G did. The combination of chips and capabilities being available, infrastructure being up and more global in nature than 4G was. And then, what really drives a lot of it is devices that have the capabilities. And so, there's been a lot of announcements by chip guys and by device players of having devices available. And generally when you see that, the devices don't tend to come until infrastructure is built. So, the carriers are best to answer that question for them, but I would just tell you, I think that 5G, all the discussion and information that's come about 5G will be faster. And I think those devices come more towards the low end of this year, you'll start to see some of that that happen.

[Kyle McNealy:]

Okay. And then one more on multifamily. I guess where are you at with the agreements and how they're progressing with the many reach across the U.S. and maybe outline the stage of the process you're in right now and maybe some milestones or some kind of expectation on timing there?

[Mike Finley:]

We continue to have great discussions and relationships. As I've said before, although we don't have a large scale agreement with any of the REITs. We do work with all the RIETs on a regular basis and we are working with them on properties. So nothing to report there yet, but we're continuing to work with them and grow opportunities with them as we move forward.

[Kyle McNealy:]

Okay. Thanks a lot.

[Mike Finley:]

Thank you.

[Pete Hovenier:]

Thanks, Kyle.

[Operator:]

Ladies and gentlemen, we have reached the end of our question-and-answer session as well as today's conference call. We thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day.