BOINGO WIRELESS, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and notes thereto included in "Item 1.
Financial Statements" of this Quarterly Report on Form 10-Q and the audited
consolidated financial statements and notes thereto and the section titled "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report on Form 10-K for the year ended
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the documents incorporated herein by
reference contain forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, as
amended, based on our current expectations, estimates and projections about our
operations, industry, financial condition, performance, results of operations,
and liquidity. Statements containing words such as "may," "could," "believe,"
"anticipate," "expect," "intend," "plan," "project," "projections," "business
outlook," "estimate," or similar expressions constitute forward-looking
statements. These forward-looking statements include, but are not limited to,
statements about future financial performance; revenues; metrics; operating
expenses; operations and financial performance due to COVID-19; market trends,
including those in the markets in which we compete; operating and marketing
efficiencies; liquidity; cash flows and uses of cash; dividends; capital
expenditures; depreciation and amortization; tax payments; foreign currency
exchange rates; hedging arrangements; our ability to repay indebtedness, pay
dividends and invest in initiatives; our products and services; pricing;
competition; strategies; and new business initiatives, products, services, and
features. Potential factors that could affect the matters about which the
forward-looking statements are made include, among others, the factors disclosed
in the section entitled "Risk Factors" in this Quarterly Report on Form 10-Q and
additional factors that accompany the related forward-looking statements in this
Quarterly Report on Form 10-Q and our other filings with the
Overview
Boingo helps the world stay connected to the people and things they love.
We acquire long-term wireless rights at large venues like airports, transportation hubs, stadiums/arenas, military bases, multifamily properties, universities, convention centers, and office campuses; we build high-quality public and private wireless networks such as distributed antenna systems ("DAS"), towers, 5G, small cells, Citizens Broadband Radio Services ("CBRS"), and Wi-Fi at those venues; and we monetize the wireless networks through a number of products and services.
We believe we are unique in the market in several important ways:
? Our experience building multi-service converged technology networks gives us a
unique ability to build complex networks in the 5G era.
? Our economic engine is driven by shared infrastructure investment and multiple
revenue streams that drive long-term, recurring cash flows.
Our "neutral host" approach to building and operating wireless networks is
? designed to provide a solution that accommodates all carriers and offers all
venue guests or enterprise employees enhanced coverage, regardless of their
cellular provider.
With 76 DAS networks containing approximately 41,500 DAS nodes, we believe we are the largest operator of indoor DAS networks in the world. Our Wi-Fi network includes locations we manage and operate ourselves (our "managed and operated locations") as well as networks managed and operated by third-parties with whom we contract for access (our "roaming" networks) to commercial Wi-Fi hotspots around the world. Our Passpoint connectivity enables carriers to seamlessly and securely offload cellular traffic onto our carrier-grade Wi-Fi networks.
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Our business is organized into five segments and we derive revenue from various products and services sold to customers within each segment. Our core segments are Carrier Services, Military, and Private Networks and Emerging Technologies. We also provide connectivity access to customers through our Multifamily and Legacy businesses.
Our Carrier Services business is targeted toward helping wireless carriers,
large venues and enterprises meet growing needs for enhanced wireless
connectivity. We generate revenue from wireless carriers that pay us build-out
fees and/or recurring access fees so that their cellular customers may use our
DAS, tower, small cell, or Wi-Fi networks at locations where we manage and
operate the wireless networks. For the three months ended
Our Military business is primarily focused on providing a wireless broadband
solution to soldiers on military bases. Revenue from our military business,
which is driven by military personnel
Our Private Networks and Emerging Technologies business is primarily focused on
providing a converged wireless solution to venues and non-carrier customers in
verticals such as airports, logistics/fulfillment, industrial manufacturing,
sports stadiums, hospitals, on and off campus student housing, and military
bases. Our Private Networks and Emerging Technologies business offers a suite of
products and services including the design and installation of converged
networks for licensed, unlicensed, and shared spectrum including the provision
of network-as-a-service ("NaaS"), professional services, and data services that
are focused on delivering our core products for those converged networks. Our
private LTE networks are reliable carrier-grade cellular networks that provide
greater capacity, higher bandwidth, lower latency, and cellular grade network
and data security at lower cost than traditional DAS networks. Our private LTE
networks support multiple carriers and offer network segmenting options to
localize user traffic management based on types of devices connecting. For the
three months ended
Our Multifamily business is primarily focused on providing a wireless broadband
solution to multi-dwelling properties including student housing, condominiums,
apartments, senior living, and hospitality properties throughout the
Our Legacy business is comprised of other product and service offerings to
wholesale and retail customers that are no longer considered core to our
business. We generate revenue from wholesale customers such as cable companies,
technology companies, and enterprise software/services companies,
In support of our overall business strategy, we are focused on the following objectives:
? Leverage our neutral host business model to grow DAS, tower, small cell, and
wholesale roaming partnerships;
? Deploy Wi-Fi 6 and 5G networks with current and future venue partners;
? Expand our carrier offload relationships; and
? Expand our footprint of managed, operated and private networks.
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Merger
On
Under the terms of the agreement, our stockholders will receive
Impact of COVID-19 on Our Business
On
Uncertainty exists concerning the magnitude of the impact and duration of the
COVID-19 pandemic. We initially experienced some negative impacts primarily
related to travel bans and restrictions, quarantines, shelter-in-place or
stay-at-home orders, and business shutdowns. Specifically, the decrease in
passenger traffic at our managed and operated venue locations directly
contributed to a decline in new retail single-use access transactions and
recurring monthly subscription sign-ups, a decline in revenues generated from
wholesale Wi-Fi partners
Certain states, including
Key Business Metrics
In addition to monitoring traditional financial measures, we also monitor our operating performance using key performance indicators. Our key performance indicators follow:
DAS nodes.This metric represents the number of active DAS nodes as of the end of the period. A DAS node is a single communications endpoint, typically an antenna, which transmits or receives radio frequency signals wirelessly. This measure is an indicator of the reach of our DAS network.
Subscribers- military. These metrics represent the number of paying Military
customers
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Revenue
Our revenue is generated from our Carrier Services, Military, Private Networks and Emerging Technologies, Multifamily, and Legacy businesses.
Carrier services. We generate revenue from telecom operator partners that pay us network build-out fees, inclusive of network upgrades, and access fees for our DAS, tower, and small cell networks. We also generate revenue from telecom operator partners that pay us to move traffic from their licensed cellular networks onto our Wi-Fi networks at our managed and operated locations.
Military. We generate revenue from sales to Military retail individuals of
month-to-month network access subscriptions that automatically renew and hourly,
daily or other single-use access, primarily through charge card transactions. We
also generate revenue from the
Private networks and emerging technologies. We generate revenue from venue owners and non-telecom operator partners that pay us network build-out fees and professional, management, and data service fees.
Multifamily. We generate Multifamily revenue from property owners
Legacy. We generate revenue from wholesale Wi-Fi partners that license our software and pay usage-based monthly network access fees to allow their customers to access our global Wi-Fi network. Usage-based network access fees may be measured in minutes, connects, megabytes, or gigabytes, and in most cases are subject to minimum volume commitments. Other wholesale Wi-Fi partners pay us monthly fees to provide a Wi-Fi infrastructure that we install, manage and operate at their venues for their customers under a service provider arrangement. We also generate revenue from sales to Legacy retail individuals of month-to-month network access subscriptions that automatically renew and hourly, daily or other single-use access, primarily through charge card transactions, advertisers that seek to reach visitors to our landing pages at our managed and operated network locations with online advertising, promotional and sponsored programs and at locations where we solely provide authorized access to a partner's Wi-Fi network through sponsored access and promotional programs, and partners in certain venues where we manage and operate the Wi-Fi network.
Results of Operations
In
We currently have five reportable and operating segments: (i) carrier services for the provision of wireless and cellular services to our wireless customers ("Carrier Services"); (ii) military for the provision of wireless services on military bases ("Military"); (iii) private networks and emerging technologies for the provision of licensed, unlicensed, and shared spectrum services for our venue partners and non-telecom customers ("Private Networks and Emerging Technologies"); (iv) multifamily for the provision of wireless services for our multifamily property owners ("Multifamily"); and (v) legacy for the provision of our other services such as retail, advertising, and wholesale Wi-Fi services to enterprise customers ("Legacy"). Prior period segment results have been recast to conform to the current presentation.
In
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Adoption of ASU 2020-06 required us to record a cumulative effect adjustment,
net of tax, to accumulated deficit of
January 1, 2021 Adjustment for January 1, 2021
(Unadjusted) Adoption (Adjusted)
Property and equipment, net $ 406,328 $ (6,076) $ 400,252
Long-term debt $ 171,695 $ 27,279 $ 198,974
Additional paid-in capital $ 241,868 $ (39,921) $ 201,947
The changes to the consolidated balance sheet as of
The following tables set forth our results of operations for the specified
periods:
Three Months Ended
March 31,
2021 2020(1)
(unaudited)
(in thousands)
Consolidated Statements of Operations Data:
Revenue $ 59,929 $ 59,886
Cost of sales 29,702 28,759
Gross profit 30,227 31,127
Selling, general and administrative expenses 35,148 32,601
Amortization of intangible assets 937 1,111
Loss from operations (5,858) (2,585)
Interest expense and amortization of debt discount (657) (2,349)
Interest income and other expense, net (2) 254
Loss before income taxes (6,517) (4,680)
Income tax expense (119) (45)
Net loss (6,636) (4,725)
Net loss attributable to non-controlling interests (192) (92)
Net loss attributable to common stockholders $ (6,444) $ (4,633) Depreciation and amortization expense included in the above line items: Depreciation and amortization expense
$ 20,745 $ 18,646
Stockbased compensation expense included in the above line items: Stock-based compensation expense
$ 2,277 $ 1,537
(1) As noted above, prior period amounts have not been adjusted upon adoption of
ASU 2020-06 under the modified retrospective method.
Depreciation and amortization expense
Depreciation and amortization of property and equipment increased
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Stock-based compensation expense
Stock-based compensation expense increased
The following table sets forth our results of operations for the specified periods as a percentage of our revenue for those periods:
Three Months Ended
March 31,
2021 2020(2)
(unaudited)
(as a percentage of revenue)
Consolidated Statements of Operations Data:
Revenue 100.0 % 100.0 %
Cost of sales 49.6 48.0
Gross profit 50.4 52.0
Selling, general and administrative expenses 58.6 54.4
Amortization of intangible assets 1.6 1.9
Loss from operations (9.8) (4.3)
Interest expense and amortization of debt discount (1.1) (3.9)
Interest income and other expense, net (0.0) 0.4
Loss before income taxes (10.9) (7.8)
Income tax expense (0.2) (0.1)
Net loss (11.1) (7.9)
Net loss attributable to non-controlling interests (0.3) (0.2)
Net loss attributable to common stockholders (10.8) % (7.7) %
(2) As noted above, prior period amounts have not been adjusted upon adoption of
ASU 2020-06 under the modified retrospective method.
Three Months ended
Revenue
Three Months Ended March 31,
2021 2020 Change % Change
(unaudited)
(in thousands, except percentages)
Revenue:
Carrier services $ 26,883 $ 26,848 $ 35 0.1
Military 20,645 18,002 2,643 14.7
Multifamily 5,304 5,224 80 1.5
Legacy 6,204 9,302 (3,098) (33.3)
Private networks and emerging technologies 893 510 383 75.1
Total revenue $ 59,929 $ 59,886 $ 43 0.1
Key business metrics:
DAS nodes 41.5 39.5 2.0 5.1
Subscribers-military 137 135 2 1.5
Carrier services. Carrier Services revenue remained relatively consistent for
the three months ended
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Military. Military revenue increased
Multifamily. Multifamily revenue remained relatively consistent for the three
months ended
Legacy. Legacy revenue decreased
Private networks and emerging technologies. Private networks and emerging
technologies revenue increased
Cost of Sales and Gross Profit
Three Months Ended March 31,
2021 2020 Change % Change
(unaudited)
(in thousands, except percentages)
Cost of sales:
Carrier services $ 17,737 $ 16,175 $ 1,562 9.7
Military 4,757 4,505 252 5.6
Multifamily 3,905 3,732 173 4.6
Legacy 3,035 4,336 (1,301) (30.0)
Private networks and emerging technologies 268 11 257 2,336.4
Total cost of sales $ 29,702 $ 28,759 $ 943 3.3
Three Months Ended March 31,
2021 2020 Change % Change
(unaudited)
(in thousands, except percentages)
Gross profit:
Carrier services 34.0 % 39.8 % (5.7) % (14.4)
Military 77.0 75.0 2.0 2.6
Multifamily 26.4 28.6 (2.2) (7.6)
Legacy 51.1 53.4 (2.3) (4.3)Private networks and emerging technologies 70.0 97.8 (27.9) (28.5) Total gross profit
50.4 % 52.0 % (1.5) % (3.0)
Carrier services. Carrier Services cost of sales increased
Military. Military cost of sales increased
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ended
Multifamily. Multifamily cost of sales and gross profit remained relatively
consistent for the three months ended
Legacy. Legacy cost of sales decreased
Private networks and emerging technologies. Private networks and emerging
technologies cost of sales increased
Selling, General and Administrative Expenses
Three Months Ended March 31,
2021 2020 Change % Change
(unaudited)
(in thousands, except percentages)
Selling, general and administrative expenses
Carrier services $ 6,334 $ 4,552 $ 1,782 39.1
Military 8,493 8,568 (75) (0.9)
Multifamily 2,503 2,779 (276) (9.9)
Legacy 3,436 4,280 (844) (19.7)
Private networks and emerging technologies 550 60 490 816.7
Corporate 13,832 12,362 1,470 11.9
Total selling, general and administrative expenses
Carrier services. Carrier services selling, general and administrative expenses
increased
Military. Military selling, general and administrative expenses decreased
slightly for the three months ended
Multifamily. Multifamily selling, general and administrative expenses decreased
Legacy. Legacy selling, general and administrative expenses decreased
Private networks and emerging technologies. Private networks and emerging
technologies selling, general and administrative expenses increased
Corporate. Corporate selling, general and administrative expenses increased
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Amortization of Intangible Assets
Amortization of intangible assets expense remained relatively consistent for the
three months ended
Interest Expense and Amortization of Debt Discount
Interest expense and amortization of debt discount decreased
Interest Income and Other Expense, Net
Interest income and other expense, net decreased
Income Tax Expense
There were no significant changes in income tax expense for the three months
ended
Non-controlling Interests
Non-controlling interests remained relatively consistent for the three months
ended
Net Loss Attributable to Common Stockholders
Net loss attributable to common stockholders increased
Reconciliation of Non-GAAP Financial Measures
We define Adjusted EBITDA as net loss attributable to common stockholders plus depreciation and amortization of property and equipment, stock-based compensation expense, amortization of intangible assets, income tax expense, interest expense and amortization of debt discount, interest income and other expense, net, non-controlling interests, and excludes charges or gains that are non-recurring, infrequent, or unusual.
We believe that Adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that:
Adjusted EBITDA provides investors and other users of our financial information
consistency and comparability with our past financial performance, facilitates
? period-to-period comparisons of operations and facilitates comparisons with
other companies, many of which use similar non-generally accepted accounting
principles in
GAAP results; and
it is useful to exclude (i) non-cash charges, such as depreciation and
amortization of property and equipment, amortization of intangible assets and
stock-based compensation, from Adjusted EBITDA because the amount of such
expenses in any specific period may not directly correlate to the underlying
? performance of our business operations, and these expenses can vary
significantly between periods as a result of full amortization of previously
acquired tangible and intangible assets or the timing of new stock-based awards
and (ii) transaction costs because they represent non-recurring charges and are
not indicative of the underlying performance of our business operations.
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We use Adjusted EBITDA in conjunction with traditional GAAP measures as part of our overall assessment of our performance, for planning purposes, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance.
We do not place undue reliance on Adjusted EBITDA as our only measure of operating performance. Adjusted EBITDA should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using non-GAAP financial measures, including that other companies may calculate these measures differently than we do.
We compensate for the inherent limitations associated with using Adjusted EBITDA through disclosure of these limitations, presentation of our financial statements in accordance with GAAP and reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net loss attributable to common stockholders.
The following provides a reconciliation of net loss attributable to common stockholders to Adjusted EBITDA:
Three Months Ended
March 31,
2021 2020(3)
(unaudited)
(in thousands)
Net loss attributable to common stockholders $ (6,444) $ (4,633) Depreciation and amortization of property and equipment 20,745 18,646 Stock-based compensation expense
2,277 1,537
Amortization of intangible assets 937 1,111
Income tax expense 119 45
Interest expense and amortization of debt discount 657 2,349
Interest income and other expense, net 2 (254)
Non-controlling interests (192) (92)
Transaction costs 3,204 -
Adjusted EBITDA $ 21,305 $ 18,709 (3) As noted above, prior period amounts have not been adjusted upon adoption of
ASU 2020-06 under the modified retrospective method.
Adjusted EBITDA was
Liquidity and Capital Resources
We have financed our operations primarily through cash provided by operating
activities and borrowings under our Convertible Notes (defined below) and credit
facilities. Our primary sources of liquidity as of
Our principal uses of liquidity have been to fund our operations, working
capital requirements, capital expenditures and acquisitions. We expect that
these requirements will be our principal needs for liquidity over the near term.
Our capital expenditures in the three months ended
In
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or Lender's Prime Rate plus 0.75% - 1.75% per year and we will pay a fee of
0.25% - 0.5% per year on any unused portion of the Revolving Line of Credit. As
of
Repayment of amounts borrowed under the Credit Facility may be accelerated in the event that we are in violation of the representation, warranties and covenants made in the Credit Agreement, including certain financial covenants set forth therein, and under other specific default events including, but not limited to, non-payment or inability to pay debt, breach of cross default provisions, insolvency provisions, and change in control. We are subject to customary covenants, including a minimum quarterly consolidated senior secured leverage ratio, a minimum quarterly consolidated total leverage ratio, a maximum quarterly consolidated fixed charge coverage ratio, and cash on hand minimums. We complied with all such financial and non-financial covenants through the date of this report. The Credit Facility provides us with significant additional flexibility and liquidity to pursue our strategic objectives for capital expenditures and acquisitions that we may pursue from time to time.
In
The Convertible Notes have an initial conversion rate of 23.6323 shares of
common stock per
We may redeem all or any portion of the Convertible Notes, at our option, on or
after
Holders of Convertible Notes may require us to repurchase their Convertible
Notes upon the occurrence of certain events that constitute a fundamental change
under the indenture governing the Convertible Notes at a fundamental change
repurchase price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest to, but excluding, the date of repurchase. In connection with
certain corporate events or if we issue a notice of redemption prior to the
maturity date, it will, under certain circumstances, increase the conversion
rate for holders
In connection with the pricing of the Convertible Notes, we entered into
privately negotiated capped call transactions with a financial institution. The
capped call transactions initially cover, subject to customary anti-dilution
adjustments, the number of shares of our common stock that initially underlie
the Convertible Notes. The cap price of the capped call transactions is
initially
We believe that our existing cash and cash equivalents, cash flow from
operations and availability under the Credit Facility will be sufficient to fund
our operations and planned capital expenditures for at least the next 12 months
from the date of issuance of our financial statements. Specifically, the Company
generally has long-term contracts with its customers that generate significant
recurring cash flows that can be used to fund operations and the Company has
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solutions. We expect our capital expenditures for 2021 will range from
We have contracts with the
The following table sets forth cash flow data for the three months endedMarch 31 : 2021 2020 (unaudited) (in thousands) Net cash provided by operating activities$ 18,966 $ 19,033 Net cash used in investing activities (17,640) (11,659)
Net cash (used in) provided by financing activities (1,168) 98,177
Net Cash Provided by Operating Activities
For the three months ended
For the three months ended
For the three months ended
Contractual Obligations and Commitments
We have the following contractual obligations and commitments as of
Off-Balance Sheet Arrangements
We do not have any off-balance sheet financing arrangements and we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
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Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and
estimates from the information provided for the year ended
Recently Issued Accounting Standards
Information regarding recent accounting pronouncements is contained in Note 2 "Summary of Significant Accounting Policies" to the accompanying condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q and under "Critical Accounting Policies and Estimates" in Part I, Item II, of this Quarterly Report on Form 10-Q, the information of which is incorporated herein by this reference.
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