Boingo Wireless, Inc.
Q2 2013 Earnings Call Transcript

Published: 9 Aug 2013

[Operator:]

Greetings and welcome to the Boingo Wireless Second Quarter 2013 Earnings Conference Call. At this time all participants are in a 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 of Addo Communications. Thank you, Ms. Orlando. You may begin.

[Kimberly Orlando:]

Thank you and welcome to Boingo Wireless’ second quarter 2013 earnings conference call. By now everyone should have access to the earnings release, which was issued today at approximately 4’o clock PM Eastern Time. If you have yet to receive the release it is available on the Investor Relations portion of Boingo’s website at www.boingo.com by clicking on the Investor tab. This call is being webcast and it is available for replay. In our remarks today we will include statements that are considered forward-looking within the meanings of Securities Laws. 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, August 8, 2013 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-Q, for the quarter ended March 31, 2013 filed with the SEC on May 10, 2013. The company undertakes no obligation to update any forward-looking statements. On this call we will refer to non-GAAP measures that when used in combination with GAAP results, provide us with additional analytical tools to understand our operations. We have provided reconciliations of non-GAAP to GAAP measures in our earnings release. And with that I’ll hand the call over to Boingo’s CEO, David Hagan.

[David Hagan:]

Good afternoon, everyone and thank you for joining us today to discuss our financial results for the second quarter of 2013. We’re pleased to report that our positive momentum carried through the second quarter of all three lines of business retail, wholesale and advertising contributing to our overall strong performance. Strategic initiatives around DAS and advertising saw especially notable traction as we continued to leverage our unique expertise and position the marketplace to grow these lines of business. Mobile data traffic continues to increase industry wide with mobile video driving significant portions of that growth. According to analysis by Avvasi over the top mobile video traffic doubled after Instagram launched its video feature in June. Further the research shows that Instagram video now accounts for more than 30% of all over the top video eclipsing traffic from Google, YouTube and Twitter’s video products combined. This happened within one week of launch indicating we are still early on mobile data growth curve. This exponential increase in the sharing and consumption of video content will continue to put pressure on carrier networks generating additional opportunities for DAS and carrier grade Wi-Fi installations. We believe this long-term trend will provide ongoing opportunities for Boingo’s growth. As consumers with the latest gadgets and killer apps continue to drive demand for data, our retail and advertising businesses over performed for the quarter to help lead us to $26.2 million in revenue which exceeded the high stability in the wholesale sector especially as it relates to revenue generated by DAS upgrade projects for carriers helped amplify the retail and advertising gains. Adjusted EBITDA came in at $6.1 million also above our expectations for the quarter. As we have discussed we will continue to invest in network upgrades this year to support expanded capacity across our managed and operative network. At the same time we’ll be more aggressively ramping the roll-out military networks in the second half of the year. Overall we are pleased with the strength of our balance sheet and our ability to invest in growth opportunities while returning value to shareholders. At the beginning of the second quarter we announced a $10 million stock repurchase program and during the quarter we were able to repurchase nearly $1 million of stock in a fairly narrow trading window. We will continue our repurchase efforts in this quarter and we have opened trading windows with the goal of building long-term value for shareholders. During the second quarter we marked several key milestones in our advertising business that helped to drive revenue growth. We completed the integration of our sponsorship and advertising platform at the Starbucks Wi-Fi network. This allowed us to deliver sponsorships and display ads throughout more than 7,000 company owned Starbucks stores in the United States and Canada including sponsorships from our key advertisers such Google and Disney. Last week it was announced that Google and Level 3 will replace AT&T as the Wi-Fi provider for Starbucks estimated to increase network speeds by 10 to 100 times. This is great news for our advertising business as the enhanced connectivity will make Starbucks stores an even more enticing destination for text savvy consumers seeking Internet access. This would further expand the inventory available for Boingo to monetize its sponsorships and display ads while creating an even greater value exchange between consumers and advertisers. In order to better fulfill this expansion in advertising inventory we continue to ramp our advertising sales team adding representatives in key geographies to serve our advertising partners and increase our sales through that inventory. Since our media platform allows us to target ads and sponsorships by location, device and day part we are able to better serve major advertisers to meet those specific requirements in their campaigns. We also ran several in these sponsorship models during the quarter to give advertisers a wide variety of options to help meet the marketing objectives. In addition to our benchmark video interstitials the Boingo media team rolled out app delivery, [type in] and post sponsorship modules. These offerings extend our suite of high consumer engagement sponsorship opportunities that advertisers crave. The new modules were employed by consumer brands that ran the gamut from travel specialists like hotel.com, ecommerce giant eBay. Our wholesale business recently tallied several key wins including finalizing three contracts to deploy neutral host multi-care DAS networks at the Memphis International Airport, the Pinnacle Bank Arena in Lincoln Nebraska and across sections of the University of Arizona Campus including football stadium. These deployments will follow our traditional DAS capitalization structure as participating carriers covering the cost of the network build which minimizes our capital outlay. The stadiums are expected to begin contributing revenue in the fourth quarter of this year while the Memphis Airport is expected to go live in early 2014. DAS networks continue to be a growth opportunity for Boingo while sales cycle is relatively long the typical contracts is 10 years which provide significant opportunities to monetize the networks over the life of the contracts. With mobile data demand continuing to escalate, carriers are actively engaged with DAS opportunities especially for large venues like stadiums and airports where the high density of users can [recoup] on the capacity of nearby macro cells. With more than 10 years of experience in neutral host ads Boingo has strong relationships with the four major U.S. carriers that will accelerate carrier commitment to our new DAS deployment. Another considerable win for the wholesale segment includes the renewal of our Skype platform services agreement, whereby Skype resells access to Boingo’s global network to its customers using Skype credit as their currency. This is a nearly frictionless purchase process for Skype users in generating mutual wholesale revenue for both Boingo. We also launched an agreement with Samsung which has done a one year free Boingo Wi-Fi access into the purchase of selected Galaxy tablet and smartphone models. Since the access is paid for by Samsung we recorded this as wholesale revenue and not counting the user additions in our retail subscriber accounts. At the end of the 12 month promotional period we will have the opportunity to convert the users to retail subscribers. As Tablet sales continue to sky rocket and the overwhelming majority of these devices are Wi-Fi only SKUs we believe this agreement with one of the premier brands will generate interest from other OEMs. Since the business model involves the OEM paying Boingo a fee per device sold there’s a significant revenue opportunity due to the mass scale of Tablet and smartphone markets. Our retail business has seen some revitalization during the second quarter with the total subscribers exceeding 313,000 reflecting the addition of more than 17,000 new subscribers for the quarter not including the Samsung Galaxy promotional accounts. These additions have come almost exclusively through airport and website sale efforts. We continue to expand our retail sales channels striking an agreement with Mexican fixed line operator Telmex allowing them to offer Boingo Wi-Fi plans to their broadband customers. Our retail broadband and IPTV products for the military markets are ramping up as we continue to build up the networks on the west coast [marine] basis. Camp Pendleton’s build out is almost complete with more than 22,000 beds covered with high speed Wi-Fi and IPTV access. With most of the base now covered we will turn our marketing activities to raise awareness of the services amongst [inaudible] on the base. We are working with Marine Corps West to prepare the next basis in line for installation and service activation. While the rollout is moving slowly than we would like largely due to logistical complexities we remain excited about the long term prospects of the business. With that in mind we will continue to invest in the acceleration of installs with a view towards sales and revenue growth gaining speed in 2014 especially as we pursue additional opportunities with other branches of the military. All market data points to continued growth in mobile demand with more people looking for higher bandwidth in more places. We believe we’re positioned to leverage our DAS, Wi-Fi and advertising strength to capitalize on this demand through new venue agreements for managed networks and carrier offload agreements as well as via service agreements with sponsorships advertising and other location-based service offerings. With that I’ll turn it over to Pete, so he can walk you through the specifics for the quarter.

[Peter Hovenier:]

Thank you, Dave. Today I’ll begin by reviewing our financial results and key operating metrics for the second quarter ended June 30, 2013 and then conclude with our financial outlook for the third quarter and full year of 2013. Total revenue was $26.2 million, representing an 8% increase over the prior year period. The increase reflects growth in advertising, wholesale and retail subscription revenue partially offset by decline in retail single-use revenue. Across our diversified revenue streams, wholesale represented a 47% of second quarter revenues, retail represented 44%, and advertising accounted the remaining 9% of revenue this quarter. Wholesale revenue totaled $12.3 million, representing a 10.9% increase from the comparable period last year. The increase in wholesale revenues primarily reflects increases in new DAS build-out projects and service provider fees partially offset by decreased partner usage base fees. Retail subscription revenue was $8.7 million, representing a 8.9% increase over the prior year period. This increase was due to a 9.1% growth in our subscription base, partially offset by a decrease in average monthly revenue per subscriber some increased promotional offers and the growing mix of lower priced smartphone or tablet-only subscriptions. Retail subscription revenue was $2.1 million, representing a 27% from second quarter 2012. This decline primarily reflects the transition of certain paid and managed and operated locations towards tiered or free pricing model and offer certain paid managed and operated locations an increase in customers that opted for subscriptions. Advertising and other revenues was $2.3 million, representing a 82% increase over the prior year period. The increase was primarily due to the positive momentum of our Boingo media advertising business built from the assets acquired from Cloud Nine Media in August of 2012. Including promotional campaigns relating to our Starbucks advertising network. This growth was partially offset by a decrease in other revenues related to timing of one time build-out projects. Now turning to our second quarter’s cost and operating expenses. Network access cost totaled $11 million, representing 13.2% increase over the second quarter of 2012. The increase is primarily attributable to the increase in revenue share [paid] for using our managed and operated locations. Of increased depreciation and bandwidth expenses partially offsetting the increases with the decreased costs related to the sale of equipment venue build-outs and decreased customer usage at partner fees. Gross margin, which is defined as revenue less network access costs was 57.9%, down 230 basis points from 60.2% in the prior year period. The decline in gross margin largely reflects a shift in diversified revenue stream driven by decline in retail single use revenue and increased growth in our lower margin associate and advertising revenue. Network operations expenses totaled $4.8 million, an increase of 26.8% from the comparable 2012 quarter, primarily due to increased personnel-related expenses, depreciation. The development and technology expenses were $2.7 million, down 3.8% for the comparable quarter last year due to primarily to decreased personnel-related expenses offset by increased depreciation. Selling and marketing expenses were $3.8 million, a 58% increase from the comparable 2012 quarter due primarily to increased personnel-related expenses due to the Cloud Nine acquisition and related investments in our advertising sales team, which also included increased travel and entertainment expenses. General and administrative expenses were $3.8 million, a 20.7% increase from the comparable 2012 quarter due to primarily to increased professional fees and personnel-related expenses, partially offset by decreased consulting fees. Now turning to our profitability measures, net loss attributable to common stockholders was $400,000 or a loss of $0.01 per diluted shares versus net income of $1.5 million or $0.04 per diluted share for the prior year quarter. Adjusted EBITDA was $6.1 million compared to $6.8 million in the comparable 2012 quarter. The year-over-year decline in adjusted EBITDA primarily reflects pre-tax loss driven by increased costs and operating expenses. Which was partially offset by year-over-year increase in revenues Please refer to our earnings release for the definition and reconciliation of this non-GAAP measure. In terms of our operating metrics we ended the quarter for Connex usage on a worldwide network of approximately $11.2 million up 172% from the prior-year period and up 79% from the first quarter of 2013. The increase versus prior year quarter is primarily due to increased Connex from advertising sponsorships. Compared to last quarter we experienced increased customer usage across entire worldwide network including a significant increase in advertising and sponsorship Connex which includes those from Starbucks which is now part of the Boingo media advertising network. Our retail subscriber base was 313,000 at the end of the second quarter, which is up 9.1% from the prior-year period, down 5.7% from the first quarter of 2013. As compared to the prior-year period and versus last year our subscriber base continued to benefit from the growth in the installed base of smartphone and tablets and from the continued improvement in the conversion of single-use customers to one of our subscription plan. Our monthly churn rate for the second quarter was 10.2% versus 9.1% for comparable 2012 quarter and 9.9% last quarter. The increase in churn is due primarily to cancellations with customers acquired from our promotional plan. Now moving on to our balance sheet, at June 30, 2013 cash, cash equivalents and marketable securities totaled $87.5 million, or $2.25 per diluted share outstanding, and we remain essentially debt free. Capital expenditures for the quarter were $7.1 million, which included $3.7 million utilized for DAS infrastructure build-out projects that are reimbursed by our telecom operator partners. Our non-reimbursed capital expenditures were driven primarily by new network builds, network upgrades consistent enhancements in preparation for increased traffic from carrier offloading. I will now turn to outlook to the third quarter and full year of 2013. For the third quarter, we’re initiating our guidance as follows

[David Hagan:]

Thanks, Pete. So to sum up our call today, we’re pleased with our continued momentum through the second quarter. Strategically our emphasis remains the same to increase network holdings through managed services or partnerships and to maximize monetization opportunities on these networks. We continue to gain momentum in the DAS space expanding overall in mobile data connectivity. We continue to upgrade our managed and operated Wi-Fi networks in support of the capacity and throughput we believe will be necessary to support carrier offered initiatives. We are investing in our military network deployment to accelerate the retail revenue opportunity as those build outs are completed. Our advertising and sponsorship business continues to grow, both as we add new networks to increase overall inventory and as we increase sell-through of that available inventory through a growing ad sales team. And we continue to leverage the appeal of a unified global network in our discussion with operators and OEMs around the world. We believe Boingo remains well positioned to exploit the continuing trend in mobile data growth and to become the leading small scale service provider company. Thanks for listening today. Operator, we’ll now open the call for questions.

[Operator:]

Thank you. (Operator Instructions). Our first question is coming from the line of Mr. Brett Feldman with Deutsche Bank. Your line is open you may proceed with your question.

[Brett Feldman:]

Thanks for taking question. You mentioned the Starbucks deal I was hoping to get a little more color on that only because Google and Level 3 appear to be involved there as well. So I was just hoping maybe you could sort of clarify for everybody on the call what your role is and how it relates or doesn’t relate to what the other operators are doing? And then also is there any significance to the pace at which Level 3 and Google upgrade their site do they have any direct impact on you? And then the second question is on guidance, if I look at your historic quarter guidance we can kind of back into a 4Q view now. You are looking for sequential growth in revenue and EBITDA in the third quarter of maybe 1 million to 1.5 million each but then much bigger ramps in the fourth quarter any particular, it looks like expect EBITDA on the fourth quarter to grow more than revenue and someone if there is cost item that actually goes down as we go into year-end?

[David Hagan:]

Great question, thanks Brett. I think there were multiple discussions on the Starbucks situations. Let me give an overview of that I’ll now hand it over to Pete. On the EBITDA question you may have a follow up on Starbucks. So I think the Starbucks’ situation is pretty unique. Hey put out a bit or a Wi-Fi new axe partner so the way to think about the three companies now involved is we signed an exclusive advertising agreement with them now few months ago. And there is new situation with media with Google and Level Three doesn’t impact in any way. Google will be focused on the user experience, content. I think they going to co-brand the network name or SSID so they’re going to become a content partner if you will with Starbucks and then Level 3 is really the pipe, they are providing they will be providing circuits into the Starbucks facilities and then hanging the access points in operating the Wi-Fi network. So that’s kind of the segmentation of three companies but for us there is no change to our advertising agreement. Pete you want to handle the EBITDA question?

[Peter Hovenier:]

Sure, so on guidance Brett you are right we do ramp in Q4. So the ramp in Q4 really is going to be driven by a couple of things. As you know advertising hits our largest quarter in Q4 so we expect that to be a largest contributor. As well as our new Samsung deal we expect to be a positive deal. And then Endeka as we start to roll out these basis we expect some positive contribution. On the cost side we also has some contingent sale expenses that we had when we bought Cloud 9 in the first half of this year which we pumped in the back half of this coming year. So all those together we’re very aware of it. The implied EBITDA margin in Q4 is in the mid-30s.

[Brett Feldman:]

Got it. And let me, the other for the modeling exercise we’re going to do here which cost item will see that reduction?

[Peter Hovenier:]

Mainly in the sales and marketing line item.

[Brett Feldman:]

Okay.

[Peter Hovenier:]

Brett, I think I had missed the second part of your service question which is the network capacity increases does that have any impact on us. And generally when we see network upgrade and we see this on our own Internet network you would see now in carriers it move from 3G to 4G. And I think we’ll see in Starbucks when they go to a much faster network. You get more uses on the network consuming more data more information. And for us the advertising partners should create more inventory, more users. So over time we would expect to least upgrade the network that increases the size by advertising the opportunities somewhere.

[Brett Feldman:]

Again, what ultimately drives the revenue that you get from that deal like is it real time or every single person that uses the net somehow drives revenue for you or is it reset on a monthly basis like what’s the concept behind that?

[David Hagan:]

So we go out and spell the inventory into ad agencies and major brands. And we are paid on an insertion basis right so they contract for the space if you will and they may pay as once the ad campaign is run.

[Brett Feldman:]

So everyone to access is the network through the Starbuck is going to see something or is it depended on where you are?

[David Hagan:]

Generally speaking it will be everybody who gains access at Starbucks location will be filling some form of advertising yes.

[Brett Feldman:]

So the experience in Starbucks is very good and you can demonstrate lots of people logging on as ultimately what drives the revenue potential that’s the model?

[David Hagan:]

Correct.

[Brett Feldman:]

Right thanks for taking the question.

[Operator:]

Thank you. Our next question is coming from the line of Mr. James Faucette with Pacific Crest Securities. Your line is now open. You may proceed with your question.

[James Faucette:]

Thanks a lot. Just two questions from me. First as you are pursuing winning more locations with DAS associated with those. Can you talk out of how we should think about any differences in those concessions versus Wi-Fi only either in terms of timeframe or those kinds of circumstances? Just wondering clearly there should be increased revenue opportunity but just wondering if there are other significant changes?

[David Hagan:]

Sure, so typically a DAS agreement because of the amount of capital involved which is significantly more than Wi-Fi the agreement tend to be 10 years in length, for Wi-Fi agreements five years is probably more typical and some regions shorter than that. So there is at least 2x contract length as a part of that and again that’s driven by the amount of capital upfront. In terms of our business model we obviously have two parts. We do the build and then we bring the carriers on and they pay us recurring fees. So we have a significant build of revenue stream because we amortize those over the life of the contract. So I think as you know we have few revenue streams for DAS. But it’s a massive market it’s part of the whole small scale topology shift in wireless networking and Wi-Fi DAS, Femto, pico-cell are all going to be part of the answer. And so we are well positioned to take advantage of that.

[James Faucette:]

Great. And then I was wondering if you could just give an update on progress with AT&T and the previous announcement regarding your offloading agreement where we are in implementation how we should be thinking about its impact I know you talked about that potentially having much of impact of 2014 but just looking for an update?

[David Hagan:]

Sure, the answer is really the same as what we’re going to talking about. So we don’t have – we’ve very little revenue associated with that relationship in 2013. So no change there. We continue to work with the AT&T engineers on solutions to the domestic product offering. A lot of good work is going on there, testing going on so good activity. But no real change in our expectations it’s much more of a 2014 plays than it is 2013.

[James Faucette:]

Great. And then last question from me this afternoon. Just wondering if you could kind of give talk about how you are seeing the competitive environment for concessions right now. I mean in the past you’ve partnered and much like, it sounds like you are doing today with Google on some, on the other hand with them securing the Starbucks locations as a more of service provider, part of that service provider partnership. Are you seeing them compete more directly for concessions or just trying to get a feel for where you are seeing competitive bidding for as you go on try to get new locations. Thanks a lot.

[David Hagan:]

I think the Starbucks situation as I said earlier is pretty unique. In general the competitive set hasn’t really changed. It depends on what type of venue it is, what part of the world it is. We get a different set of competitors but typically it will be against a telco. Sometimes there if the cable goes in there, there is typically system integration companies. Sometimes the IT shops of the venues themselves want to build and operate the network. So that really hasn’t changed. And as you probably heard me say I really view Wi-Fi as a competition market. So we compete against one another to win a venue but then the model of the operations in the industry is to share traffic. So we may compete against AT&T for venue. But we also have bilateral roaming agreement with them. And so we put each traffic on the others’ Wi-Fi networks.

[Operator:]

Thank you. Our next question is coming from the line of Mr. Jim Breen with William Blair. Your line is now open you may be proceed with your question.

[Jim Breen:]

Thanks for taking the question. Just from a competitor standpoint a year ago or so we were talking about some of the competition you are seeing in some of the airport venues and other places. Can you just comment how that’s environment changed it seems like it’s calmed down a little bit overall in the market? Thanks.

[David Hagan:]

Yeah it’s really there is not a lot of change. Typically when we go after a new venue there are 10 competitors or 15 competitors it’s usually a pretty small step. And again the market is pretty fragmented so type of venue by region all drive who are players. We tend to be everywhere. So we are one of the constants. But again it could be a Telco like AT&T is obviously fairly active they have a real Wi-Fi strategy, other telcos are less active. We see the cable cos on occasion but they are really driven by their franchise territory and so you don’t see them bid outside of their franchise territory that often. In fact I don’t think we ever have. And so you have those different dynamics depending on what kind of venue and where it is. And then they’re handful of small players mostly brands we’ve never heard of their system integrators, they’re selling gear into IT departments and again the IT department themselves sometimes like to run their own network. So the competitive side really hasn’t changed much over the last year or so.

[Jim Breen:]

Great, thanks. And then just a comment on the acquisition that you made at the beginning of the year that puts you into Pendleton and Marines West any developments there in terms of some of the other contracts that are coming up or what potential is there for those future contracts? Thanks.

[David Hagan:]

You bet. The acquisition was Endeka. We now call it Boingo Broadband. As I mentioned in my script my prepared remarks the roll-out has been a little slower than we would like. No negative there other than we need to go to each base that we’re going to roll out with our network design and then the officers in-charge of the various technologies and implementations within those bases have to sign off on the design, make sure there is no interference in those types of things. And that has taken longer than what we had expected. The good news is the adoption rate that we’re seeing in the early bases like Pendleton are very strong. And so we’re feeling good about the business model and I think hopefully in the second half of the year we will be able to pick up on the implementation schedule, significantly. Well also as we talk about we expect to get other contracts down the road with other branches of the military I can’t comment on anything imminent at this point but we are certainly calling on any of them and are feeling good about the military space opportunity.

[Jim Breen:]

Great, thanks. And just one last question on the ad side, could you talk about seasonality there and how should we think about sort of the back half of the year first half? Thanks.

[David Hagan:]

So the advertising market is very much and this isn’t just Boingo this is the advertising market in general offline and online. And it is very skewed Q4, fourth quarter market opportunity driven by the retailing around the holidays. So our Q1 was weaker than we expected. Our Q2 was really strong and we’re expecting to build upon that in Q3. And then we hope to have a really robust Q4 which everybody in the space tends to have. So that’s the seasonality of the market. And then it’s all related that will also ramping up the sales team. So we have both of those factors to deal with but we’re looking for really strong results both in Q3 and Q4 in advertising.

[Jim Breen:]

Great, thanks a lot.

[David Hagan:]

Thank you.

[Operator:]

Thank you. Our next question is coming from the line of Kunal Madhukar with Jefferies. Your line is now open. You may proceed with your question.

[Kunal Madhukar:]

Hi, thanks for taking the question. On the Wi-Fi equipment that you are installing in the network [inaudible] Wi-Fi venues are they hot spot capable?

[David Hagan:]

Kunal great question, they are. So we are doing a network upgrade as we talked about across our entire network moving to adding in AC everything that we’re putting in is hotspot 2.0 ready and also in past line which is really the hardware certification. So everything that we’re doing is as we’re doing is upgrade will be Hot Spot 2.0 and [inaudible] certified. We’re pretty well through the process and we’ll share more in the second half of this year as we talked about. And then a little bit more on hot spot 2.0. As you’re probably aware we are part of the committee that doing the hot spot 2.0 trial Phase II was just coming to an end. That was really from the end to end authentication if you’re getting users onto the network and off the network, that nearly complete a minimal roll into Phase III which is more about settlement process. So the hot spot 2.0 trial is going very well. Boing is one of the participants a handful of global carriers in all of that enrollment to kind of the final paper that will be written that everybody will within the industry comply with. So we are ahead of the curve in terms of the infrastructure and we’re an active participant at the round table through the trial. So we are in a good shape there.

[Kunal Madhukar:]

Great. One other question, follow up on Brett’s question on advertising and in Starbucks locations. Suppose I am using Wi-Fi of the Starbucks location, I go to Google.com and I do a search on let’s say additional camera or something and I get some results, will I also get some ad results from you?

[David Hagan:]

No, so we are really the front end of getting people online and then I don’t think anybody knows may be other than Google and Starbucks what they what they want to do once the customer gets onto their portal but that will be more in Google’s hand than the others.

[Kunal Madhukar:]

Okay, great. And just a couple of housekeeping, one on the – and I might have missed this, one was CapEx for the quarter and the other was ending subs if you don’t mind?

[Peter Hovenier:]

Sure so any subs were 330,000 there was a gain of 17,000 subs for the quarter. And CapEx was 7.1 million of that 3.7 was reimbursed by our carrier customers meaning 3.4 was the CapEx that we paid for.

[Kunal Madhukar:]

Okay, great. Thank you.

[Operator:]

Thank you. At this time there are no further questions. And with that we will end today’s teleconference. You may disconnect your lines at this time. Thank you very much for your participation and have a wonderful evening.