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Edited Transcript of WIFI earnings conference call or presentation 5-May-20 8:30pm GMT

Q1 2020 Boingo Wireless Inc Earnings Call

LOS ANGELES Jun 3, 2020 (Thomson StreetEvents) -- Edited Transcript of Boingo Wireless Inc earnings conference call or presentation Tuesday, May 5, 2020 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Kimberly Orlando

Boingo Wireless, Inc. - Associate - Addo Communications

* Michael J. Finley

Boingo Wireless, Inc. - CEO & Director

* Peter Hovenier

Boingo Wireless, Inc. - CFO, Treasurer & Secretary

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Conference Call Participants

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* Anthony Joseph Stoss

Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst

* Gregory Thomas Gibas

Northland Capital Markets, Research Division - VP & Senior Research Analyst

* James Dennis Breen

William Blair & Company L.L.C., Research Division - Communication Services Analyst

* Kyle P. McNealy

Jefferies LLC, Research Division - Equity Analyst

* Mark Nicholas Argento

Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst, Founding Partner & Head of Institutional Equities

* Scott Wallace Searle

Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst

* Timothy Kelly Horan

Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the Boingo Wireless, Inc. First Quarter 2020 Earnings Call.

(Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando with ADDO Investor Relations. Thank you, you may begin.

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Kimberly Orlando, Boingo Wireless, Inc. - Associate - Addo Communications [2]

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Thank you, and welcome to the Boingo Wireless First Quarter 2020 Earnings Conference Call. By now, everyone should have access to the earnings press release, which was issued today at approximately 4:00 p.m. Eastern Time. In addition, an earnings supplement has been made available on the Investor Relations portion of Boingo's website at boingo.com by clicking on the Investor tab. This call is being webcast and is available for replay. In our remarks today, we will include statements that are considered forward-looking within the meaning of securities laws, including forward-looking statements about Boingo's operations and financial performance due to COVID-19, future results of operations, business strategies and plans, our relationship with our venue partners, new venue and other contracts, and market and potential growth opportunities.

In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today, May 5, 2020, and are subject to certain risks and uncertainties that may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in our most recent Form 10-K for the year ended December 31, 2019, filed with the SEC on March 2, 2020, and our other filings with the SEC. And such risks and uncertainties include the impact of health epidemics, including the recent COVID-19 pandemic, on the company's business. The company undertakes no obligation to update any forward-looking statements.

On this call, we will refer to non-GAAP measures such as adjusted EBITDA and free cash flow, that when used in combination with GAAP results, provide us with additional analytical tools to understand our operations. We have provided reconciliations to the most directly comparable GAAP financial measures in our earnings press release and which will be posted on the Investor Relations section of our website at boingo.com.

And with that, I'll hand the call over to Boingo's Chief Executive Officer, Mike Finley.

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [3]

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Thanks, Kim, and thanks to everyone for joining today. The last 90 days have been an extraordinary time in the history of Boingo, our country and our planet. Our hearts go out to those who have lost loved ones or have been infected by this virus. We join the voices of so many Americans to echo our thanks for those who are on the frontline: first responders caring for the sick, airports and airlines providing much needed supplies, truck drivers getting things where they need to go, and shop clerks keeping the shelves stocked. For those and so many others who are fighting to keep the heartbeat of our country and our economy going, we send our thanks. On a personal note, I'd also like to extend my heartfelt thanks to the frontline team at Boingo. Our wireless networks support millions of Americans who depend on Boingo to stay connected as they shelter in place or when they are on the go for critical travel. As an essential business, our team has been working around the clock to help people stay connected.

With thousands of college students transitioning to distance learning, Boingo is keeping them connected to their studies. With our men and women in the armed forces locked down in barracks around the world, Boingo is keeping them connected to family and friends back home. And while air traffic is down significantly in airports around the country, Boingo is striving to ensure that every single person who must take an essential trip during these extraordinary times can stay connected on their travels. We're working hard 24/7 to ready our network for whatever comes next, and part of that includes stepping into help in new ways as well.

Over the past 2 months, we've provided free Wi-Fi service to more than 10,000 Air Force, Army and Marine beds set up for quarantine purposes around the country at no cost to the soldiers or military. It's one way that Boingo is giving back to those impacted by COVID-19, and we're honored to help serve our military.

I'm incredibly proud of the Boingo team for going the extra mile to ensure our customers and our venue partners have the connectivity they need. Now more than ever, it's clear how critical connectivity is to every facet of our lives, both today and in the future.

As you can imagine, one of the questions I've been asked constantly over the past couple of months is, how will the pandemic impact Boingo? What we have always known and what is now becoming clear to everyone is how durable Boingo is as a business.

For starters, it's important to understand that approximately 95% of our revenues are either contractual or recurring. As you can imagine, this provides a great deal of stability and resilience. The second point is that because Boingo is deemed an essential business, we have been able to not only support our existing wireless networks, but continue to build out new neutral host networks at a time when many other companies are not as fortunate. Construction on our MTA East Side Access and Long Island Rail Road projects continue. We have understandably been impacted by crew availability from time to time, but importantly, these projects continue to march forward. The same is true for our multifamily business. Every construction project in the works is moving forward or are only temporarily delayed. From a balance sheet perspective, we have ample liquidity and are seeing good activity on the accounts receivable front. We will continue to use cash flow to fund our network builds, where we have carrier commitments and have access to ample capital through our cash balance and credit facility, if needed. Given recent events, the decision we made to restructure the business at the end of 2019 was even more prudent than we could have imagined, and we are already benefiting from the approximately $11 million in cost savings we expected as a result of the realignment in 2020.

We, like everyone, have been challenged by COVID-19, but the big picture is that Boingo plays in a critical space, delivers a vital solution and is supported by a business model which is almost all contractual or recurring revenue. No one can fully -- be fully prepared for or predict the nature, duration or scope of the overall impact of a once-in-a-century global pandemic, but we believe that all things considered, Boingo may emerge from this period with velocity.

With that, let me turn to our Q1 results. For the first quarter of 2020, revenue was $59.9 million and adjusted EBITDA was $18.7 million. As a reminder, due to the recent announcement that Boingo was engaged with multiple parties regarding a potential strategic transaction, we did not provide guidance for this period. Our results were in line or ahead of our internal plan and would have been $1 million to $2 million higher for the quarter without the impact of COVID-19. Each of our core lines of revenue, carrier services, military and multifamily, delivered solid performance for the quarter.

Let me give you just a few of the highlights for each, starting with carrier services. For Q1, carrier services, which is primarily comprised of DAS and carrier offload, experienced minimal impact to revenue during the quarter due to COVID-19. As I mentioned earlier, construction on all of our key projects continues unabated, and RFP activity level is very high. We've added 1,400 new DAS nodes in the quarter, bringing our total DAS nodes live to 39,500. In addition, we've added 1 new DAS venue to our backlog for a total of 61 DAS venues in backlog. We were also awarded 4 new venues, which we expect to add to the backlog over the next few months as we execute these agreements with our venue partners. Our new venue sales pipeline remains strong and our backlog provides Boingo a tremendous amount of runway to build out over the next 18 months to 2 years.

Finally, we had 3 venues where a carrier joined the network during the quarter. These include Portland International Airport, Louis Armstrong New Orleans International Airport and the Cellairis Amphitheatre in Atlanta. In addition to new builds, we continue to work with our carrier partners to upgrade existing networks to 5G. During the first quarter, we completed a 5G upgrade for one of the carriers at Detroit International Airport, which is a very exciting accomplishment. Based on our experience this quarter, we anticipate continue -- 5G upgrade work to continue with all 3 major carriers. We continue to believe that the completion of the T-Mobile-Sprint merger is a net positive for Boingo, and we anticipate that T-Mobile will aggressively accelerate the pace of their network investments as we get deeper into 2020.

And finally, one important point to consider in terms of the durability of Boingo's business model is that carrier offload contracts have primarily shifted to being fixed, not usage based. Although airport occupancy was down significantly in the latter half of Q1, this did not impact carrier offload revenue.

Now let's turn to military. We added 4,000 new beds in the quarter, bringing our total beds deployed to 359,000. We added 2,000 military subscribers in the quarter for a total of 135,000 military subscribers. While overall penetration was a bit lower than we anticipated, during the first 2 months of the quarter, we did see sales pick up significantly in March. We've also been responding to many private service requests during this time frame, as our military customers seek to add connectivity solutions across the bases we serve. I'm also thrilled to announce that we have completed construction on the first 2 cell sites on a military base this quarter and are simply awaiting the carrier to be plugged in. This is the first of what we anticipate will be many macro towers and small cell sites on our military base footprint and another example of the value of our long-term contract with AAFES and MCCS. I mentioned at the top of my remarks that we have made complementary Wi-Fi service available to more than 10,000 quarantine beds on military bases we serve. And it's made a huge impact on our soldiers, airmen and marines. Michelle A. Schmidt, Brigadier General and Deputy Commanding General of support for the 10th Mountain Division and Fort Drum said, "I want to personally thank you for your recent incredible support of our 10th Mountain soldiers. Welcoming our soldiers home from Afghanistan amidst a medical pandemic was no easy task. Having served in overseas deployments a number of times myself, I cannot imagine finally returning home only to go into quarantine for 2 weeks. As great as our soldiers are, I know this was not good news for them. However, free Wi-Fi during their time in quarantine really made all the difference. This obviously enabled them to stay connected to their families and friends and made this 2-week period much easier to bear. Your amazing support during this unprecedented time was absolutely invaluable. The 10th Mountain Division is proud to have you as a partner and friend." We appreciate this letter from Brigadier General Schmidt, and will continue to support our military partners in whatever way we can during the pandemic and beyond.

Turning now to multifamily. We had a number of wins during the first quarter. We executed 5 new deals, representing over 2,700 new beds. Three were student housing complexes and two were conventional multifamily properties. While no one can be certain about how COVID-19 will impact college campuses in the coming months, the early feedback we are currently receiving from schools across the country is that they expect to reopen their campuses starting in August, albeit with social distancing in place. This bodes well for the student housing multifamily properties we serve as they depend on occupancy to drive rents.

Before I turn it over to Pete, I want to mention a couple of other exciting announcements that have happened. First, just a few days ago, the FCC announced their intention to allocate a significant amount of spectrum in the 6 gigahertz band for unlicensed use, the biggest spectrum addition since the FCC cleared the way for Wi-Fi in 1989, and 4x the size of the current 2.5 and 5 megahertz band. This bandwidth will mean a lot less interference for the new devices that we -- will be built to take advantage of it. It will mean much faster speeds and lower latency, supercharging future innovation. Wi-Fi 6 becomes another important tool in our wireless toolkit to bring our venue partners -- to bring to our venue partners, and we applaud the FCC for making this decision.

Finally, we're thrilled to announce that Michael Zeto has joined our team as the SVP of Global Strategy and Emerging Business. Zeto joins us from AT&T, where he was most recently Vice President of IoT Solutions and General Manager for Smart Cities. He'll be working closely with me to drive innovation and identify new opportunities across 5G, CBRS, Wi-Fi 6 and IoT, and to create new revenue streams and business models that contribute to profitable growth. I'm excited to have him on board.

With that, let me turn it over to Pete for an in-depth look at our financials for the quarter. Pete?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [4]

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Thanks, Mike. Today, I will review our financial results and key operating metrics for the first quarter ended March 31, 2020. Total revenue for the first quarter was $59.9 million, a decrease of 9.9% over the prior year period. Revenue reflected growth in advertising and other revenue, which was offset by year-over-year declines in retail, military/multifamily, wholesale Wi-Fi and DAS revenue.

As a percentage of total revenue across our diversified revenue streams compared to the prior year quarter, military/multifamily was 38%, down from 39%. DAS was 37%, up from 36%. Wholesale Wi-Fi was 16%, down from 17%. Retail was 5%, down from 6%. And advertising and other was 4%, up from 2%. In terms of total revenue contribution by category for the quarter, military/multifamily revenue was $22.7 million, representing a decrease of 12.3% versus the prior year period. The decline was primarily due to reduced multifamily construction revenue. The decline in multifamily construction revenue was due in part to a sales mix shift resulting in less sales under our traditional multifamily model of nonrecurring construction revenue along with recurring service fees.

We are now seeing an increase of sales from our Boingo funded model, which I'll refer to as our network-as-a-service multifamily product. Our customers like the flexibility of this product as it has an all-inclusive monthly fee to provide a high-quality, robust network throughout the property. The network-as-a-service product results in higher recurring service fees over a much longer term as compared to the traditional multifamily product offering. In the near term, we continue to generate strong recurring service fee revenue from our portfolio of 236 multifamily properties.

The decline in the military vertical was primarily due to a decrease in subscribers, which was partially offset by an increase in average monthly revenue per subscriber. Despite the decline in subscribers during the quarter, we experienced an increase in subscribers and usage at the end of March, a trend that has continued into the second quarter. During the first quarter, we built out our network to cover an additional 4,000 military beds, bringing our total footprint to 359,000 military beds as of March 31. In addition, as Mike highlighted, we are working hand-in-hand with our military partners to provide high-speed wireless connectivity to our soldiers directly impacted by the COVID-19 pandemic across the military footprint. We are extremely proud to be providing a vital service and supporting the connectivity needs of our troops during this difficult time. We continue to believe that the military vertical will be a strong driver of recurring cash flow, with incremental opportunities coming from the implementation of additional products and services such as recurring service fees to support remote learning, macro cell towers, small cells and additional connectivity services to support our military partners on these bases.

DAS revenue was $22.2 million, a decrease of $1.9 million or 7.9% year-over-year. Total DAS revenue was comprised of $14 million of build-out project revenue and $8.2 million of access fee revenue. The decline in total DAS revenue was primarily due to decreased DAS build-out project revenue as a result of the re-amortization of deferred revenue balances from our customer contract extensions in 2019. Importantly, recurring DAS access fee revenue increased 27.3% year-over-year from $6.4 million, representing our sixth consecutive quarter of double-digit growth.

Wholesale Wi-Fi revenue was $9.7 million, representing a decrease of 11.6% from the prior year period, primarily due to lower partner usage base fees from our Comes with Boingo service offering as our program with American Express is phased out. That said, we remain pleased with our performance of carrier offload, which continued to be a strong driver of recurring cash flow with almost all of our off-board revenue now under fixed contractual commitments.

Retail revenue was $3 million, decline of 24.6% year-over-year, primarily due to reduced retail subscribers, which was magnified from decreased travel due to COVID-19. Advertising and other revenue is $2.3 million, an increase of 48.6% year-over-year, primarily due to an increase in the number of premium ad units sold as compared to the prior year period. Absent the impact of COVID-19, we believe our topline performance in this vertical would have been even stronger.

Now turning to our first quarter costs and operating expenses. As a result of our business realignment plan announced in December 2019, we expect to achieve approximately $11 million of annualized cost savings throughout the year. These savings will help us better focus on investing in our long-term key growth drivers of products and services sold to our carriers for carrier services, along with our military and multifamily verticals. We are already starting to realize the benefits and savings from this realignment as of the first quarter of 2020.

Network access costs totaled $28.8 million, representing an 8.4% decrease over the first quarter of 2019, primarily due to decreased multifamily construction and support fees and lower depreciation expenses related to fixed assets from our DAS build-out projects. Gross margin, which is defined as revenue plus network access cost, was 52%, down 77 basis points from prior year period. Network operations expenses totaled $13.3 million, a decrease of 6% over the prior year period, primarily due to decreased personnel-related expenses.

Development and technology expenses were $7 million, a decrease of 22.4% from the prior year period, primarily due to decreased personnel-related and consulting expenses. Selling and marketing expenses were $5.6 million, a decrease of 4.9% from the prior year period, primarily due to decrease in personnel-related expenses. General and administrative expenses of $6.8 million declined 18.6% year-over-year, primarily due to a decrease in personnel-related expenses and professional fees.

Now I'll turn to our profitability measures for the quarter. Net loss attributable to common stockholders was $4.6 million or $0.10 per diluted share compared to a net loss of $5.2 million or $0.12 per diluted share in the first quarter of 2019. Adjusted EBITDA, a non-GAAP measure, was $18.7 million, a decrease of 2.1% year-over-year. As a percent of total revenue, adjusted EBITDA was 31.2%, up from 28.8% of revenue in the prior year quarter.

Turning now to our key metrics. Number of DAS nodes in our network for the first quarter was 39,500, up 27% from the prior year period and up 3.7% in the fourth quarter of 2019. 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 first quarter was 10,800, down 21.2% from the prior year period and down 7.7% from the fourth quarter of 2019.

Our military subscriber base was 135,000 subscribers at the end of the first quarter, down 8.2% from the prior year period. Compared to the fourth quarter of 2019, military subscribers increased 1.5%, in line with seasonal trends following the December holidays as well as the result of increasing connectivity demand we've experienced in response to COVID-19. Our retail subscriber base was 70,000 subscribers at the end of the first quarter, which was down 38.1% from the prior year period and down 13.6% in the fourth quarter of 2019.

Connects, or paid uses on our worldwide network, were approximately 66.5 million, down 15.4% from the prior year period and down 25.6% in the fourth quarter of 2019.

Moving on to discuss our balance sheet. As of March 31, 2020, cash, cash equivalents and marketable securities totaled $175.2 million, up $94.6 million from $80.6 million at December 31, 2019. The increase in our cash balance was primarily due to our proactive decision to draw down $100 million from our $150 million revolving credit facility as a precaution to enable greater financial flexibility in response to COVID-19. As of March 31, 2020, we had approximately $50 million of remaining borrowing capacity on our revolving line of credit. Total debt was $269.5 million, up $101.1 million from $168.4 million at December 31, 2019.

We remain comfortable with our overall liquidity position. Our core business continues to generate significant cash, as evidenced by our $19 million of net cash provided by operating activities during the first quarter. Importantly, our cash inflows from our customers more than cover our cash outflows from operations. Given the current environment, we remain highly judicious in regard to our capital allocation strategy and are primarily deploying capital in situations where we have customer commitments in place.

Capital expenditures were $22.6 million for the first quarter, which included $17.5 million for DAS infrastructure build-out projects that are primarily reimbursed through revenue by our telecom operator partners. Our nonreimbursed capital expenditures were driven mainly by new network builds, managed and operated network upgrades, and various infrastructure upgrades and enhancements. As a reminder, we estimate our annual maintenance capital requirements, which excludes all growth capital, to be approximately 3% to 5% of revenue.

Free cash flow, a non-GAAP measure, was a negative $3.6 million for the first quarter compared to a negative $8.6 million for the first quarter of 2019. As our core business continues to generate significant cash from operations, we still believe investing the majority of our free cash flow into network deployment is the best use of capital to drive long-term growth and greater recurring cash flows.

All things considered in this highly fluid, uncertain environment, I am pleased with our first quarter operational performance. While no one can predict the nature, duration or scope of the overall impact of the COVID-19 pandemic will have on our business, we entered into this situation from a position of strength with a durable business model and financial flexibility. I remain confident that Boingo is well positioned to execute and withstand these unique and difficult times, given we have diverse revenue sources with highly recurring and attractive committed and recurring revenue streams, our strong balance sheet with ample liquidity and our conservative approach to capital deployment. As we look ahead, we remain focused on executing our strategy of securing long-term wireless rights to key strategic venues and building out our network to deliver enhanced connectivity solutions. Overall, I'm humbled by the efforts of my fellow Boingoites in delivering our essential services to so many people across the globe. We take our responsibility seriously, and I'm so proud of the work our teams are doing to help our partners and customers through this difficult time.

With that, I'll turn it back over to Mike for closing comments.

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [5]

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Thanks, Pete. What's become clear over the past weeks is that connectivity is critical to our daily lives. Boingo's wireless networks support millions of Americans who depend on Boingo to stay connected as they shelter in place or when they are on the go for critical travel. We have a strong balance sheet, ample liquidity and the cash generated by our business that funds our network infrastructure builds. Should we need it, we have access to plenty of capital through our credit facilities. Our focus on reducing expenses and increase profitability at the end of 2019 has prepared us well to weather the recent events.

We have had an all-company video meeting every week since we have been working from home, and I end every call with the following: We as a company and a country are resilient. This is hard, but we will get through it. We are an essential business and company now and after this is over.

Boingo's business is in the essential space of connectivity, delivers a vital neutral solution and is supported by a business model with approximately 95% contractual or recurring revenue. While we can't anticipate what's around the corner, we believe that Boingo will emerge from this period with velocity and continue to deliver a critical and essential service to our military men and women, our venues, our customers and our partners.

I'd now like to open the call to questions. Please keep in mind that we will not address any questions regarding a potential strategic transaction or a 2020 guidance.

Operator, you may now open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Anthony Stoss with Craig-Hallum.

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Anthony Joseph Stoss, Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst [2]

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Nice job on your adjusted EBITDA. Really hanging in there. Mike, can you comment about just on COVID, how much it's impacting your ability to get DAS nodes live? Also, I'm just curious on the MTA contract. You mentioned that, that's progressing. When do you think that will go live? Or has anything changed in terms of that going live?

Then as an additional follow-up. I liked how you tucked in, you have 2 cell sites now live on a military base. Would you view that as a test from a single carrier? Can you size that opportunity over all your military bases that you run in terms of DAS?

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [3]

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Yes. Tony, thanks. Appreciate the questions. First, on the DAS nodes. Actually, it really hasn't impacted us there much at all. We've had -- been able to get a lot of work done because we have a lot of people not traveling, both on our side and the people we're partnering with. So getting those built out, we've been in really good shape there, and I think we feel pretty good about the going forward. If this goes a lot longer, you go well into the end of the year, early next year when you're trying to bring the networks up, when you have to do tests and things like that, then you get a little more dependent on the operators and things and bringing people into certain locations. But as far as kind of the velocity of the business, and we mentioned RP activity and things and getting things done, it's actually been really good on that side.

On the MTA, that's continuing to work. And I know for anybody that's in New York, and if you're following that, obviously, daily, the impact it's had in New York City and the surrounding area. But specific to that, we've had really just minimal distraction there or people not working. And the fact that some of the trains aren't running, it's actually enabled us to get some work done faster and a little bit ahead of plan and schedule. So things seem to be going pretty well there, and we feel really good about that. Parts of that at least coming online this year.

And then the last piece, the sites on the base. Yes, it's the first two. They're not a test, it's not a trial. It's a plan and work that we feel we're not only qualified and capable to do, but something the military needs and wants. And so we view that -- we're on 64 bases. We view that as a real opportunity for us to enter into that business, and we'll start there.

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Anthony Joseph Stoss, Craig-Hallum Capital Group LLC, Research Division - Partner & Senior Research Analyst [4]

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Maybe as a follow-up, and I know you don't want to talk about the strategic opportunities, but since you went public with this, really at the last conference call, is it fair to assume that there's been additional interested parties that have shown up?

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [5]

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It would be fair to say that.

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Operator [6]

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Our next question comes from the line of Greg Gibas with Northland Securities.

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Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [7]

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Have any owners pressured you in any way to offer breaks on contracts or maybe renegotiations in any way?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [8]

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To date, no. So we are obviously in direct contact with our venue owners. And to date, we have not had them come to us. Now as a reminder, Greg, on the venue owner side, for the most part, we are paying them in the form of a revenue share. So there -- think of them as someone, we're building on a network, and then we're providing a service at their locations, and we give them a portion of the revenue that we receive. But no, in general, our customers have -- they continue to pay. We're obviously monitoring this. It's a unique, unprecedented time, but our customers have been good, and they've been continuing to pay for the service that we provide.

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Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [9]

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Okay. Great. That's good to hear, Pete. And then we think about Boingo's core business being minimally impacted with that 95% contractual or recurring revenues. But I guess, what aspect of the business do you expect to have the greatest impact?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [10]

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Yes. So it's -- the part of the business that has the most impact related to COVID is what you'd expect, it's really related to travel. So that would be the connectivity that we provide in airports, given that airport travel is down meaningfully. So that would be the retail portion of our business and the advertising portion. Just to give you a little bit of color, we have done a good job on ad sales. And as you saw, our ad sales year-over-year is up significantly, up over 45%. We actually are in a situation right now where going forward, we have more ads sold in Q2 than we think we may have inventory to deliver, given what we're projecting for traffic going through airports. So it's a unique spot, and I didn't think we would ever see that, but travel has come down meaningfully and the customers that we serve still see the value of what we're providing.

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Gregory Thomas Gibas, Northland Capital Markets, Research Division - VP & Senior Research Analyst [11]

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Okay. Got it. And last one for me would just be, if we could get an update on the impact from the T-Mobile-Sprint merger. Has your outlook on that impact from this merger changed in any way over the last couple of months?

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [12]

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So it really hasn't. I'd say -- I'll give those guys a lot of credit, I mean for all the time it took to bring that together and for it to kind of formally come together, right in the middle of the COVID. I feel for Mike and Abdul and the team, but they've done a fantastic job. And no -- yes, I think we see a lot of opportunity there. They've been very aggressive, I think, coming out of the gate, and it's been kind of impressive to see how they've executed, and again, we work with numbers of customers. And if you think of travelers and things like that, and they've come together and now they're just bigger than they were. So we continue to work with them, and we still feel very confident about that being kind of a net positive for Boingo.

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Operator [13]

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Our next question comes from the line of James Breen with William Blair & Company.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [14]

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Just a couple. Pete, on the military/multifamily side, it was $22.7 million in revenue in the quarter. Can you break out how much of that was the military versus multifamily? Just trying to sort of back into an ARPU number from the military.

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [15]

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Sure. So multifamily was $5.2 million and military $17.5 million.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [16]

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Okay. And generally, military subs were up sequentially, and you started to see that trend continue into this quarter as well, is that what you said?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [17]

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Yes, we did. The sub adds actually happened a little later in the quarter than we initially anticipated. Usually, we see this come back right towards the very beginning of Q1. And in this case, it happened a little bit later and then picked up even a little bit more as we got towards the end of March, and the activity and usage around COVID increased meaningfully on military bases. And then as Mike commented on, we're providing now service to the soldiers on base. And there is over 10,000 beds we're covering today for soldiers who were in quarantine in one form or another, and that's complementary service. So obviously, revenue would be up more if that was a paid service, but that's not something we're doing right now because we're trying to help out our troops.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [18]

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And then just on the wholesale Wi-Fi side, year-over-year, you saw $1.3 million or so decline, a little less. Is that decline mainly the wholesale Wi-Fi portion versus the offload portion? Because do you still have sort of minimum takes with your 2 carrier partners on the offload side?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [19]

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Yes. So to give you a little color there. So offload with the carriers is up both year-over-year and sequentially. So not dramatically up sequentially, but it is up. So the entire decline is all related to Comes with Boingo and, specifically, the phasing out of American Express. So we continue to provide value on the offload front. In fact, it's important to call out. Even though the footprint that we have on -- and the traffic that's happening on -- in airports is down, as you expect, offload traffic is down meaningfully in airports, but traffic is up meaningfully as well on military bases. And so we're -- in aggregate, overall traffic for offload, it's down, but not down as much as one would think, given COVID.

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James Dennis Breen, William Blair & Company L.L.C., Research Division - Communication Services Analyst [20]

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Okay. And then just lastly, just on the retail side, as we sort of think about that, the decline you obviously saw, almost $1 million year-over-year and about $300,000 sequentially, yet trying to sort of lay that out over time. Is there anticipation that continues to decline? And is there a base level at which it stops where you feel like there is just a recurring revenue portion, $6 million or $7 million, that just stays there?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [21]

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Yes. We believe that. In fact, what's interesting is, as we've gone through, obviously, through Q1, but even as we analyze where we are today, it's less about customers going away, churning away. What we're just not seeing is the new customer additions as much because the main way we acquire customers is at a venue. And so when there is less travel, you're seeing less customers seeing the opportunity to sign up at a venue. So that's -- so I think that the decline is really not adding new customers versus losing the base.

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Operator [22]

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

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Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [23]

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The COVID impact of $2 million, can you just give us a little more color on that? And -- yes, that would be great.

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [24]

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Yes. So what we're really talking about, Tim, is just the impact we believe we saw in the quarter around -- and primarily tied to advertising and retail. I mean that -- we did see that start to drop off precipitously towards the last part of March. As I just briefly mentioned, we had a scenario where now in Q2, we have more ad sales sold then we believe we have inventory to deliver. And that was absolutely the case here towards the last part of March. We had more campaigns sold. We had ads we wanted to deliver, but as traffic went down, and the majority of our advertising traffic happens on -- or happen at airports, when that goes down, there is just less campaigns to serve. So it's mainly around that. It's not around our wholesale business. It's not around military. It's not about DAS. It's not about offload. Obviously, COVID impacts everything. I mean, look, we are all impacted in our daily lives. But as it comes to our business, particularly, and where we see more direct impact, it's around retail and advertising more than anything else.

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Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [25]

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Got it. So is this a good run rate of revenue, $60 million? It sounds like you exited the quarter below that somewhat. I mean I know there is a million moving parts on construction revenues and the changes in amortization and changes in how you structure these contracts. I know it's a million moving parts, but it sounds like this run rate is a little above where it really is at this point.

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [26]

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Yes, I think that's a fair assumption. And as I've talked about in the past with you and others, you really should think about Boingo as a run rate type business. And so it's fair to think about this being a place that we should be growing upon.

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Timothy Kelly Horan, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [27]

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Great. And then lastly, I know you kind of answered it, but just specifically to multifamily. Do you expect the multi -- well, specifically, the college housing to kind of come back in August, September. And if it doesn't, do they have a way to stop paying for broadband if they're not using it? It seems like a lot of these venues are not using the broadband. And if it goes on for another 12 months or so, do they have a way to pause the contract?

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [28]

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Yes. So I'll take that. Yes, look, we're anticipating from what we're hearing, we said it in our remarks, that schools are going to open, and housing. There is actually still a lot of kids that are there now because you have international students, a lot of different things that they've had to go. So but to answer your question, I think, yes, if the schools don't open, I think that does have some impact, obviously, on the property owners. But we have longer-term contracts, and look, we'll be good partners. We'll work with these entities. And I think one of the things we're seeing in COVID, and a number of people I'm talking to, a number of friends that are in multiple different businesses is, everybody is impacted by this and everybody wants to work together to make sure that their businesses move on and survive and do well. So we're prepared for that if it happens, but we're hoping it doesn't, for all the obvious reasons, mostly that everybody is doing well and healthy. But we're prepared with that, and then we'll be a good partner.

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Operator [29]

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Our next question comes from the line of Scott Searle with Roth Capital.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [30]

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Pete, just quickly to clarify on the OpEx front, given the realignment, it looks like some of those benefits were seen in the first quarter. Does it go lower than that in terms of absolute dollars into the second quarter? And just to clarify, on the DAS access fees of $8.2 million, I know there are minimums in there. Is that basically at the minimum level now? So that is a solid number to think about going forward? And then I have a couple of follow-ups.

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [31]

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Sure. So on the OpEx, yes, the vast majority of the savings that we identified, so call it, the $11 million annualized, the vast majority of that has been realized as of Q1. So the pro rata portion, of course. So you should be thinking of this as, again, as a run rate. In fact, probably even a little higher in Q1 as we have more audit fees that happen on the G&A side in Q1 than in some other periods.

In terms of the DAS access fees, yes, it's $8.2 million. We should be seeing growth from there. Q1 is always a little lower than Q4 due to -- there is an element of usage-based on access fees with us, not a lot as we renegotiate some contracts over the years, but there was a step-down due to the usage-based portion. But throughout the year, we would expect the $8.2 million of access fees to grow.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [32]

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Got you. And to follow up, Mike, it sounds like things are going very well from a DAS deployment standpoint. It doesn't actually sound like there's been much of a slowdown on that front or your impeded ability. As well, it sounds like your RFP pipeline is pretty active. You've got -- Sprint and T-Mo sound like they're coming back. I'm wondering if you could expand on that a little bit in terms of your ability to close RFPs at the current time. It sounds like there is an active pipeline. Are deals getting closed? And how are they factoring in 5G? Could you give us some idea of what that composition is looking like?

And also the competitive landscape there, given that others are impeded in terms of their ability to deploy right now, what is that translating to in terms of win rate?

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [33]

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Yes. Great questions, Scott. Thanks. So yes, we've seen really no interruption in the DAS builds, and I think your question is more along new contracts. We came out of last year, quite honestly, with a lot of activity. And as you know, we made some changes at the end of the year. We kind of really focused people on 3 main areas of our business and DAS, and working with the operators and venues was one of them. So we came into the quarter with a lot of activity going in. We've seen that expand. We're adding some salespeople. So like I said earlier, I think it's kind of a strange thing, but with a lot of the -- multiple people we need to work with to get things done, and with so many people staying in place and not traveling.

On the contractual side, we were able to get things done in a pretty speedy manner. So if there is any impact at all that we've seen is on a few of the RFPs that were in progress. They may get moved back a little bit, depending on the segment and the vertical. But I'm talking 2 weeks or 30 days potentially. Kind of on the flip side of that, if there is new venues or new opportunities, they're actually moving very fast because they view this as an opportunity to get some stuff done when their venue may not have -- won't be having people in it. So -- and then the activity as it builds and stuff has continued to stay there. So the carriers have been great to work with. The 5G side, I think they've all come out and highlighted how important it is to them, and how they want to move through this year. And I think a couple of them even highlighted that they would use this time to maybe expedite some of those activities, and of course, we'd be working with them on that.

And then on the competitive landscape, look, we work within a competitive set, but our actual win rate has gone up slightly. We've always had a good win rate, in the 40% to 50% range, and we've seen, in the first part of the year, that, that's a little bit higher than that. So on that side of things, a lot of activity, a lot of new opportunities, and we're on them, and they seem to be moving along quite well.

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Scott Wallace Searle, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [34]

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Mike, just one last follow-up there. On the 5G front and maybe I'll feather CBRS into that discussion as well, starting to ramp up this year, despite the fact that the auctions got moved back about a month. Are -- is that starting to enter the dialogue as well? Do you expect any deployments from a CBRS standpoint? And is there a target that you would start talking about in terms of 5G or CBRS nodes or private networks and neutral host opportunities as you start to look out to the end of this year and into 2021?

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [35]

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Yes. Great question, Scott. Yes, CBRS is really kicking in. We've obviously done a number of trials we've talked about before. And there is a lot that's happening right now. As I mentioned in my remarks, we've added Mike Zeto to lead our Strategy, but also Emerging Business. And he's really going to be focusing a lot on CBRS, private LTE and everything that comes associated with that, working with different partners and things like that. So we're optimistic on that. Mike's background, he's basically created some businesses and then brought them to life, and that's what we kind of see here. Obviously, we think there's some opportunities in our existing businesses that this would be add on, obviously, when you talk about 5G. But on the new opportunities for CBRS, private network, smart cities, IoT, things like that, there is quite a bit going on in activity. You're probably not going to see much of that mean much in 2020, but as you get into '21 and the outer years, we're pretty optimistic about that.

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Operator [36]

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Our next question comes from the line of Kyle McNealy with Jefferies.

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Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [37]

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Could you give us a sense for the COVID or work from home related impact on the pace of carriers joining your DAS networks right now and supporting new deployments? It appears their business models are solid through the COVID issue and situation. But do you see any evidence of them prioritizing coverage around people's homes versus large venue locations, maybe hotspots around neighborhoods where people live, given there is no one gathering in stadiums and arenas right now and traffic across the airports is obviously down?

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [38]

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Yes. Thanks, Kyle, it's Mike. Not really. I -- look, I'll tell you what, I'll give the carriers a lot of credit because they were obviously well prepared for this as much as anybody could be. Anybody wouldn't think of a global pandemic happening, but they've done a fantastic job, and we don't see evidence of that. We see them continuing to focus on the work that we're doing with them. As I've commented, I think, a couple of times, the ability that we have or the -- because people are staying in place in their home, we're actually getting some of the -- sometimes longer term opportunities to get contracts done, get done. And then the fact that a lot of these venues don't have big traffic and people in them for the things that we were working on, on the books and things they want to do, we're continuing to do that. And it actually can happen at a little bit better pace.

The only thing that can be impacted a little bit is if you have to test the network or put something through the process with some paces before. And if that requires somebody to go out or multiple people to go out to a particular location, we may see a little delay in that. But again, we're not talking months and things like that. It gets pushed back a couple of weeks or whatever, but everything we were working on was going through. The new opportunities continue to come in. And like I said, on the contractual side, we're actually able to get those done a little faster. People actually really enjoy engaging and getting that done.

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [39]

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Sorry, just to add some color. I mean if you look at what Mike said in his prepared comments that on the venues we added, we added carriers at 2 airports and really 1 amphitheater for doing concerts. Airports are clearly down in terms of usage as an amphitheater is not doing shows at this moment, but there is still a demand. And then the 5G upgrade that we did in Detroit was -- that was done towards the very end of the quarter. So there is still demand. It catches people off guard, but yes, there is a lot of demand still.

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Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [40]

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Okay. Great. And then switching gears to military. I guess I could see some positive aspects of this, too. Did you see any evidence of any subscribers -- are you getting like an increased upgrade activity of subscribers going to a higher tier because they're spending so much time in the barrack room doing entertainment type things or doing some type of work. I would expect that gaming would be high, entertainment would be high, Netflix and things like that. So are you seeing any evidence of any benefit there?

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [41]

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I'll start. Maybe Pete can add on. We've had a pretty high percentage of the higher end to begin with. We're definitely seeing more usage, no doubt about that, as you could expect. And we're thrilled at that, and like -- I want to complement our team again. We have and have had people in the field working to make sure that these networks are up and running and meeting the demand of our end users. The military bases have obviously been a big user of that. So we're seeing a little less churn because people aren't moving around as much and being deployed and moving to various things. But the usage is up, the network is working great. And I think as I said and Pete said as well, we are supplying some of the quarantine barracks with service. We have been and we'll continue to do that, but we're also working with the military on opportunities they have. Little things that became real things, like they have a lot of educational activities that go on in classrooms that they couldn't do. So now they needed to have them in barracks that maybe the soldiers didn't subscribe or whatever, and we're working with the military to provide connectivity in a lot of different places to make sure they can have all these various activities. So there is quite a bit going on there and the military has been a great partner. And they've been very proactive to make sure the troops are being taken care of, and we're right there with them.

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Kyle P. McNealy, Jefferies LLC, Research Division - Equity Analyst [42]

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Okay. And is there any abnormal uptick or any additional spending, OpEx or CapEx-wise to support the network traffic growth for those subscribers? Is there anything that's not in your normal run rate of activity that we should be aware of?

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Peter Hovenier, Boingo Wireless, Inc. - CFO, Treasurer & Secretary [43]

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I wouldn't say there is anything that's abnormal. We've done some circuit upgrades, as you would imagine, but that's all normal. Of course, I'd say some of this happened a little quicker. We are continuing to do upgrades. We always plan on upgrades at military bases to make sure that the network can just handle the load. And we've had to be a little more proactive and do some of these a little bit earlier, but it's all in, what I'd call, the normal course. It just maybe had flashed forward 6, 7 months or so, but nothing that's abnormal.

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Operator [44]

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(Operator Instructions) Our next question comes from the line of Mark Argento with Lake Street Capital Markets.

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Mark Nicholas Argento, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst, Founding Partner & Head of Institutional Equities [45]

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Mike, Pete, just one quick one. When you guys are thinking about kind of long term, you hear a lot of these airlines talking about traffic levels. It might take 3, 4 years to kind of get back. And obviously, venues and sporting events, we'll see when that gets kind of back online. But when you kind of judge -- suppose that and look at it relative to kind of any renewals or any contracts that you have coming up for renewal, how do you feel about kind of your book right now? And then in terms of if there is some kind of degradation on longer-term ROIs, if you get renewed at a lower rate, or if that plays in here at all?

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [46]

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Yes. Thanks, Mark. I'll start and I'll -- Pete wants to add something on. I'll tell you, it's a little bit -- I'm a little bit more on the optimistic side. So certainly I understand the traffic in the airports is down, but I do believe that, that will come back. So now everybody's got a guess, is it third quarter, fourth quarter, 3 years, whatever. But I do believe that, that will come back. On the positive side, though, what we're seeing in the discussions we're having is, connectivity and neutral connectivity is only going to be more necessary. So there is going to be a lot of things that will happen at airports as far as temperature checking, and where will they do that? Will they do it in the parking lots? Will they do it here? Are they -- the -- how you get rides and stuff is already changing in a lot of airports. Requiring connectivity, not just inside the airports, but outside and surrounding them. And so we're seeing a lot and having a lot of discussions about that. Coverage on the tarmacs and things like that, that our airports would like and carriers are looking to do more of as well. And of course, the upgrades to 5G and CBRS and all that.

But at the end of the day, the real positive thing, I think, is these venues, whatever they are, want all customers to have great connectivity. And when you add together 5G license, you add Wi-Fi 6 and unlicensed, you add CBRS, and you bring all that together and devices are coming that are going to be capable to do all that. The air traffic will obviously have to build over time, but as it builds, the requirement for data and the necessity for connectivity and information is going to build probably at a faster rate than it otherwise was planned. So we like the spot we're in there. We've got great partnerships, and we've worked very well with these entities for a long time, and we think we're in a good spot to continue to provide that, and for a lot of the reasons I just highlighted.

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Operator [47]

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We have reached the end of our question-and-answer session. I'd like to turn the call back over to Mr. Finley for any closing remarks.

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Michael J. Finley, Boingo Wireless, Inc. - CEO & Director [48]

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Thank you, and thanks, everybody, for joining and appreciate you taking time to be with us. I also want to thank the Boingo employees who have shifted to work from home and are continuing to support our customers, both on military bases, venues, airports and stadiums as well. So I appreciate that. And look, as we talked about today, our business is essential. In the space of connectivity, we deliver a vital, neutral solution. We're supported by a business model, we've talked about, that's contractual and recurring. We obviously can't anticipate what's around the corner, but we believe Boingo will emerge from this period with velocity and continue to deliver critical and essential service to our military men and women, our venues, and our customers and our partners. So thank you to all of you today for joining us, and please stay healthy.

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Operator [49]

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Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.