Boingo executives cited pronounced COVID-19 impacts on retail and advertising segments during their second-quarter earnings call on Tuesday as locations it serves, like large venues and airports, saw significantly limited traffic.
That said, the company continued to win new contracts for distributed antenna systems (DAS) and shutdowns provided opportunities to work on high-value projects in New York.
Boingo’s Q2 revenues were down 2% since the first quarter and 14.4% year over year to $58.7 million. On the earnings call, CEO Mike Finley attributed the sequential drop largely to its retail and advertising business hit by “the historic downturn in passenger traffic.” Boingo is a major provider for transportation hubs and large venues.
While restricted passenger traffic is hurting retail Wi-Fi, its carrier offload business wasn’t hit as hard.
“Importantly, the vast majority of our carrier offload is now under fixed contractual commitments,” Finley said, according to a SeekingAlpha transcript. “That means that although airport traffic was down significantly in Q2, we were only minimally impacted from a revenue perspective.”
Boingo CFO Peter Hovenier during the call also reiterated that around 95% of total revenues are recurring rather than usage based.
Total connects – a metric that represents paid usage on Boingo’s global Wi-Fi network including retail and wholesale - in the second quarter dove a drastic 84% year over year, to 13.8 million, compared to 85.8 million in Q2 2019. That also marks a nearly 80% decline from 66.5 million connects in the first quarter of 2020. Continued declines were expected since the majority of connects come from public venues. But again, most revenues come from contracts not based on usage.
Executives didn’t have any update about a potential sale or strategic deal for its business but said discussions are still happening with multiple interested parties, as disclosed earlier this year.
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“We believe Boingo will eventually sell part or all of its business to towers or an infrastructure-focused private equity firm,” wrote Oppenheimer analysts Wednesday, noting the lack of an update on the strategic transaction was a negative since the firm saw it as the key focus for Q2. “Positively, COVID is highlighting the need for critical neutral wireless infrastructure that Boingo provides.”
New DAS contracts and RFPs roll in
As a DAS and neutral host provider, Boingo won three new DAS contracts at major venues in the second quarter as activity remained high. There was also interest for its new tower and small cell business within the core carrier services segment.
Boingo responded to more RFPs in Q2 than in the same quarter last year and had a 67% win rate, Finley said on the call. In terms of RFPs, the company is seeing a desire for converged network services.
“It’s going to require not just licensed, but unlicensed spectrum together, CBRS, private networks,” Finley said. “And when you look at the capabilities of that, for things like concessions and point of sale, that goes not only in airports, but also in many other venues, first responder, cleaning and maintenance tracking of venues that can be robotics. So really requires a big robust network, that is kind of a converged neutral host, which is what we do.”
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The three new DAS contracts include the new Major League Soccer stadium in Austin, South Dakota State University campus and football stadium, and Massachusetts Port Authority. Boingo now counts a total of 137 DAS venues, with 73 live and 64 still in backlog.
Another major deal signed in the period was a 10-year agreement to provide cellular neutral-host 5G-ready DAS for the 1.1 million square foot Hawaii Convention Center facility.
“Despite lower traffic volumes due to COVID-19, some large venues continue to invest in indoor wireless infrastructure,” wrote Oppenheimer analysts.
Like the Hawaii Convention Center, Boingo is providing a neutral host 5G-ready DAS for the Austin FC.
Still, Boingo reported a 19.6% decline in DAS revenue year over year to $22.21 million. The number of live nodes increased by 1,000 since the first quarter, with 40,500 now live. Boingo still has 11,100 nodes in backlog.
As for tower and small cell sites, Finley said there were more than 100 applications from Tier 1 wireless carriers on macro sites, which was more than the company initially expected.
The pandemic has also provided opportunity to work on long-term projects with the Metropolitan Transportation Authority (MTA) in New York, including one for the Long Island Rail Road (LIRR).
Finley said the MTA project is “going along really well,” noting that with less traffic and activity happening they can move faster to build out the networks. The first phase of the LIRR project is expected to go live with a carrier partner by the end of the year.
Military and multifamily see uptick
Boingo’s other core segments, military bases and multifamily, weathered pandemic impacts relatively well, with a 2.8% drop in revenue to $23.71 million year over year and increases in both since Q1.
Military revenue ticked up 3.1% since the prior quarter, while average revenue per user (ARPU) increased 1.7%. That’s in part due to the large amount of network traffic from sheltering in place at military bases.
In addition to daily operations and quality of life, “the military has seen the value of having complementary education networks available for students engaging in remote learning from their barracks. We believe these education networks represent an exciting market opportunity for us going forward,” Finley said.
Revenue for the multifamily segment increased 8% from Q1 because of new networks, as well as upgrades in student housing, Oppenheimer analysts noted. Boingo said about 85% of its student housing partners plan to reopen with an in-person and virtual hybrid model, leaning on connectivity.
Additional Boingo Q2 metrics:
- Wholesale Wi-Fi revenues of $9.7 million were down 9.4%. on lower carrier usage fees.
- Cash EBITDA declined 22% year over year to around $9.7 million.
- Of $22.21 million in DAS revenue, DAS build-out projects contributed $14 million, while $8.2 million came from access fee revenue.
- Retail Wi-Fi declined 38.4% to $2.36 million and advertising dropped 66% to $671,000.
- Boingo retail subscribers dropped to 56,000 versus 92,000 a year ago.