Table of Contents

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2017March 31, 2019

 

OR

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                    to

 

Commission file number: 001-35155

 

BOINGO WIRELESS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

95-4856877

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

10960 Wilshire Blvd., 23rd Floor

 

 

Los Angeles, California

 

90024

(Address of principal executive offices)

 

(Zip Code)

 

(310) 586-5180

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.0001 par value

The NASDAQ Stock Market LLC

WIFI

(Title of each class)

(Name of each exchange on which registered)

(Trading symbol)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   Yes  x  No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  x  No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of ��large“large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ox

 

Accelerated filer xo

 

 

 

Non-accelerated filer o

 

Smaller Reporting Company o

(Do not check if a smaller reporting company)

 

 

 

 

Emerging Growth Company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o  No  x

 

As of October 27, 2017,May 3, 2019, there were 40,795,20943,985,167 shares of the registrant’s common stock outstanding.

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

Page

PART I — FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

Financial Statements (unaudited)

3

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

3

 

 

 

 

 

 

Condensed Consolidated Statements of Operations

4

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

5

 

 

 

 

 

 

Condensed Consolidated Statement of Stockholders’ Equity

6

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

7

 

 

 

 

 

 

Notes to the Condensed Consolidated Financial Statements

8

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1727

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

2837

 

 

 

 

Item 4.

Controls and Procedures

2837

 

 

 

PART II — OTHER INFORMATION

 

 

 

 

 

Item 1.

Legal Proceedings

2937

 

 

 

 

Item 1A.

Risk Factors

2937

 

 

 

 

Item 6.

Exhibits

2938

 

 

 

SIGNATURES

3139

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Boingo Wireless, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share amounts)

 

 

September 30,
2017

 

December 31,
2016

 

 

March 31,
2019

 

December 31,
2018

 

Assets

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,634

 

$

19,485

 

 

$

69,016

 

$

149,412

 

Marketable securities

 

36,888

 

 

Accounts receivable, net

 

39,102

 

42,978

 

 

38,434

 

42,766

 

Prepaid expenses and other current assets

 

6,722

 

5,344

 

 

8,823

 

7,815

 

Total current assets

 

67,458

 

67,807

 

 

153,161

 

199,993

 

Property and equipment, net

 

261,010

 

250,765

 

 

329,734

 

314,179

 

Operating lease right-of-use assets

 

16,478

 

 

Goodwill

 

42,403

 

42,403

 

 

58,890

 

59,640

 

Intangible assets, net

 

11,094

 

13,783

 

 

18,021

 

19,152

 

Other assets

 

6,580

 

6,223

 

 

10,784

 

9,936

 

Total assets

 

$

388,545

 

$

380,981

 

 

$

587,068

 

$

602,900

 

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

14,614

 

$

15,516

 

 

$

25,829

 

$

21,543

 

Accrued expenses and other liabilities

 

35,660

 

27,723

 

 

57,765

 

62,653

 

Deferred revenue

 

78,575

 

50,869

 

 

68,351

 

80,383

 

Current portion of operating leases

 

2,736

 

 

Current portion of long-term debt

 

875

 

1,094

 

 

778

 

 

Current portion of capital leases and notes payable

 

4,349

 

3,993

 

Current portion of finance leases

 

3,843

 

4,201

 

Current portion of notes payable

 

2,204

 

2,411

 

Total current liabilities

 

134,073

 

99,195

 

 

161,506

 

171,191

 

Deferred revenue, net of current portion

 

138,910

 

152,719

 

 

149,675

 

137,205

 

Long-term portion of operating leases

 

18,915

 

 

Long-term debt

 

5,219

 

15,875

 

 

156,411

 

151,670

 

Long-term portion of capital leases and notes payable

 

3,560

 

4,612

 

Long-term portion of finance leases

 

2,475

 

3,293

 

Long-term portion of notes payable

 

1,148

 

1,618

 

Deferred tax liabilities

 

3,513

 

3,208

 

 

1,132

 

1,073

 

Other liabilities

 

6,500

 

6,826

 

 

1,268

 

6,728

 

Total liabilities

 

291,775

 

282,435

 

 

492,530

 

472,778

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 8)

 

 

 

 

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 5,000 shares authorized; no shares issued and outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 100,000 shares authorized; 40,788 and 38,562 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively

 

4

 

4

 

Common stock, $0.0001 par value; 100,000 shares authorized; 43,979 and 42,669 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively

 

4

 

4

 

Additional paid-in capital

 

227,454

 

211,275

 

 

228,805

 

259,132

 

Accumulated deficit

 

(130,948

)

(112,601

)

 

(135,083

)

(129,930

)

Accumulated other comprehensive loss

 

(812

)

(870

)

 

(1,317

)

(1,295

)

Total common stockholders’ equity

 

95,698

 

97,808

 

 

92,409

 

127,911

 

Non-controlling interests

 

1,072

 

738

 

 

2,129

 

2,211

 

Total stockholders’ equity

 

96,770

 

98,546

 

 

94,538

 

130,122

 

Total liabilities and stockholders’ equity

 

$

388,545

 

$

380,981

 

 

$

587,068

 

$

602,900

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

Boingo Wireless, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

Three Months Ended
March 31,

 

 

2017

 

2016

 

2017

 

2016

 

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

53,655

 

$

40,796

 

$

147,021

 

$

114,370

 

 

$

66,473

 

$

58,159

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network access

 

24,143

 

17,982

 

64,655

 

49,575

 

 

31,411

 

26,565

 

Network operations

 

11,625

 

10,698

 

34,556

 

31,566

 

 

14,142

 

12,846

 

Development and technology

 

6,817

 

5,394

 

19,814

 

16,014

 

 

8,999

 

7,425

 

Selling and marketing

 

5,201

 

4,553

 

15,188

 

14,103

 

 

5,867

 

5,463

 

General and administrative

 

8,006

 

6,701

 

27,372

 

22,553

 

 

8,294

 

7,699

 

Amortization of intangible assets

 

852

 

855

 

2,673

 

2,582

 

 

1,131

 

727

 

Total costs and operating expenses

 

56,644

 

46,183

 

164,258

 

136,393

 

 

69,844

 

60,725

 

Loss from operations

 

(2,989

)

(5,387

)

(17,237

)

(22,023

)

 

(3,371

)

(2,566

)

Interest and other expense, net

 

(84

)

(117

)

(126

)

(299

)

 

(1,676

)

(79

)

Loss before income taxes

 

(3,073

)

(5,504

)

(17,363

)

(22,322

)

 

(5,047

)

(2,645

)

Income tax expense

 

167

 

95

 

507

 

457

 

 

192

 

128

 

Net loss

 

(3,240

)

(5,599

)

(17,870

)

(22,779

)

 

(5,239

)

(2,773

)

Net income attributable to non-controlling interests

 

210

 

110

 

477

 

180

 

Net (loss) income attributable to non-controlling interests

 

(86

)

456

 

Net loss attributable to common stockholders

 

$

(3,450

)

$

(5,709

)

$

(18,347

)

$

(22,959

)

 

$

(5,153

)

$

(3,229

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.09

)

$

(0.15

)

$

(0.46

)

$

(0.61

)

 

$

(0.12

)

$

(0.08

)

Diluted

 

$

(0.09

)

$

(0.15

)

$

(0.46

)

$

(0.61

)

 

$

(0.12

)

$

(0.08

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in computing net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

40,336

 

38,189

 

39,468

 

37,897

 

 

43,527

 

41,330

 

Diluted

 

40,336

 

38,189

 

39,468

 

37,897

 

 

43,527

 

41,330

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

Boingo Wireless, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands)

 

 

Three Months Ended

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

March 31,

 

 

2017

 

2016

 

2017

 

2016

 

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(3,240

)

$

(5,599

)

$

(17,870

)

$

(22,779

)

 

$

(5,239

)

$

(2,773

)

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

64

 

(11

)

40

 

213

 

 

(34

)

(4

)

Unrealized gain on marketable securities

 

16

 

 

Comprehensive loss

 

(3,176

)

(5,610

)

(17,830

)

(22,566

)

 

(5,257

)

(2,777

)

Comprehensive income attributable to non-controlling interest

 

185

 

113

 

459

 

101

 

Comprehensive (loss) income attributable to non-controlling interest

 

(82

)

453

 

Comprehensive loss attributable to common stockholders

 

$

(3,361

)

$

(5,723

)

$

(18,289

)

$

(22,667

)

 

$

(5,175

)

$

(3,230

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

Boingo Wireless, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Common

 

Common

 

Additional

 

 

 

Other

 

Non-

 

Total

 

 

Common

 

Common

 

Additional

 

 

 

Other

 

Non-

 

Total

 

 

Stock

 

Stock

 

Paid-in

 

Accumulated

 

Comprehensive

 

controlling

 

Stockholders’

 

 

Stock

 

Stock

 

Paid-in

 

Accumulated

 

Comprehensive

 

controlling

 

Stockholders’

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Loss

 

Interests

 

Equity

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Loss

 

Interests

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2016

 

38,562

 

$

4

 

$

211,275

 

$

(112,601

)

$

(870

)

$

738

 

$

98,546

 

Balance at December 31, 2018

 

42,669

 

$

4

 

$

259,132

 

$

(129,930

)

$

(1,295

)

$

2,211

 

$

130,122

 

Issuance of common stock under stock incentive plans

 

2,226

 

 

7,993

 

 

 

 

7,993

 

 

1,310

 

 

6

 

 

 

 

6

 

Shares withheld for taxes

 

 

 

(3,480

)

 

 

 

(3,480

)

 

 

 

(32,907

)

 

 

 

(32,907

)

Stock-based compensation expense

 

 

 

11,666

 

 

 

 

11,666

 

 

 

 

2,574

 

 

 

 

2,574

 

Non-controlling interest distributions

 

 

 

 

 

 

(125

)

(125

)

Net loss

 

 

 

 

(18,347

)

 

477

 

(17,870

)

 

 

 

 

(5,153

)

 

(86

)

(5,239

)

Other comprehensive income (loss)

 

 

 

 

 

58

 

(18

)

40

 

Balance at September 30, 2017

 

40,788

 

$

4

 

$

227,454

 

$

(130,948

)

$

(812

)

$

1,072

 

$

96,770

 

Other comprehensive loss

 

 

 

 

 

(22

)

4

 

(18

)

Balance at March 31, 2019

 

43,979

 

$

4

 

$

228,805

 

$

(135,083

)

$

(1,317

)

$

2,129

 

$

94,538

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

40,995

 

$

4

 

$

230,679

 

$

(131,967

)

$

(898

)

$

1,212

 

$

99,030

 

Issuance of common stock under stock incentive plans

 

758

 

 

4,228

 

 

 

 

4,228

 

Shares withheld for taxes

 

 

 

(6,340

)

 

 

 

(6,340

)

Stock-based compensation expense

 

 

 

3,312

 

 

 

 

3,312

 

Cumulative effect of a change in accounting principle

 

 

 

 

3,257

 

 

69

 

3,326

 

Net loss

 

 

 

 

(3,229

)

 

456

 

(2,773

)

Other comprehensive loss

 

 

 

 

 

(1

)

(3

)

(4

)

Balance at March 31, 2018

 

41,753

 

$

4

 

$

231,879

 

$

(131,939

)

$

(899

)

$

1,734

 

$

100,779

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

Boingo Wireless, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

Nine Months Ended
September 30,

 

 

Three Months Ended
March 31,

 

 

2017

 

2016

 

 

2019

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(17,870

)

$

(22,779

)

 

$

(5,239

)

$

(2,773

)

Adjustments to reconcile net loss including non-controlling interests to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

49,244

 

34,801

 

 

19,009

 

20,606

 

Amortization of intangible assets

 

2,673

 

2,582

 

 

1,131

 

727

 

Bad debt expense (recovery)

 

88

 

(47

)

Other

 

51

 

 

Impairment loss and loss on disposal of fixed assets, net

 

442

 

49

 

Impairment loss and loss on disposal of fixed assets and intangible assets held for sale, net

 

91

 

70

 

Stock-based compensation

 

11,016

 

9,690

 

 

2,344

 

3,126

 

Change in deferred income taxes

 

305

 

324

 

Amortization of deferred financing costs and debt discount, net of amounts capitalized

 

2,256

 

 

Amortization of operating lease right-of-use assets

 

438

 

 

Unrealized gains and amortization of premiums/discounts for marketable securities

 

(207

)

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

3,804

 

(462

)

 

4,307

 

(3,799

)

Prepaid expenses and other assets

 

(1,816

)

(2,182

)

 

(13

)

551

 

Accounts payable

 

(1,330

)

3,464

 

 

1,397

 

706

 

Accrued expenses and other liabilities

 

6,920

 

4,018

 

 

(1,481

)

1,014

 

Deferred revenue

 

13,897

 

64,140

 

 

439

 

(2,958

)

Operating lease liabilities

 

(729

)

 

Net cash provided by operating activities

 

67,424

 

93,598

 

 

23,743

 

17,270

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

(36,665

)

 

Purchases of property and equipment

 

(54,691

)

(92,045

)

 

(32,390

)

(21,117

)

Payments for asset acquisition

 

(1,150

)

 

Net cash used in investing activities

 

(55,841

)

(92,045

)

 

(69,055

)

(21,117

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

Debt issuance costs

 

(1,687

)

 

Proceeds from credit facility

 

 

5,000

 

 

3,500

 

 

Principal payments on credit facility

 

(10,875

)

(5,656

)

 

(194

)

(219

)

Payments of acquisition related consideration

 

(1,952

)

 

Proceeds from exercise of stock options

 

7,993

 

1,981

 

 

6

 

4,228

 

Debt issuance costs

 

 

(124

)

Payments of capital leases and notes payable

 

(2,952

)

(1,889

)

Payments of finance leases and notes payable

 

(1,853

)

(1,450

)

Payments of withholding tax on net issuance of restricted stock units

 

(3,480

)

(2,112

)

 

(32,907

)

(6,340

)

Payments to non-controlling interests

 

(125

)

(286

)

Net cash used in financing activities

 

(9,439

)

(3,086

)

 

(35,087

)

(3,781

)

Effect of exchange rates on cash

 

5

 

15

 

 

3

 

7

 

Net increase (decrease) in cash and cash equivalents

 

2,149

 

(1,518

)

Net decrease in cash, cash equivalents, and restricted cash

 

(80,396

)

(7,621

)

Cash and cash equivalents at beginning of period

 

19,485

 

14,718

 

 

149,412

 

26,685

 

Cash and cash equivalents at end of period

 

$

21,634

 

$

13,200

 

Cash, cash equivalents, and restricted cash at end of period

 

$

69,016

 

$

19,064

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

 

 

 

 

 

 

Property and equipment costs in accounts payable, accrued expenses and other liabilities

 

$

19,438

 

$

19,367

 

Property and equipment costs included in accounts payable, accrued expenses and other liabilities

 

$

39,309

 

$

20,377

 

Purchase of equipment and prepaid maintenance services under capital financing arrangements

 

$

2,141

 

$

4,560

 

 

$

 

$

1,930

 

Capitalized stock-based compensation included in property and equipment costs

 

$

230

 

$

186

 

Purchase price for business acquisition included in accrued expenses and other liabilities

 

$

2,961

 

$

 

Debt issuance costs included in accrued expenses and other liabilities

 

$

125

 

$

 

Financed sale of intangible assets held for sale

 

$

311

 

$

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

Boingo Wireless, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except shares and per share amounts)

 

1. The business

 

Boingo Wireless, Inc. and its subsidiaries (collectively “we, “us”, “our” or “the Company”) is a leading global provider of wireless connectivity solutions for smartphones, tablets, laptops, wearables and other wireless-enabled consumer devices. Boingo Wireless, Inc. was incorporated on April 16, 2001 in the State of Delaware. We have a diverse monetization model that enables us to generate revenues from wholesale partnerships, retail sales, and advertising across these wireless networks. Wholesale offerings include distributed antenna systems (“DAS”) andor small cells, which are cellular extension networks, multifamily, carrier offload, Wi-Fi roaming, value-added services, private label Wi-Fi, and location basedlocation-based services. Retail products include Wi-Fi and TV services for military servicemen and womenpersonnel living in the barracks of U.S. Army, Air Force and Marine bases around the world, and Wi-Fi subscriptions and day passes that provide access to approximately 1.5over 1.2 million commercial hotspots worldwide. Advertising revenue is driven by Wi-Fi sponsorships at airports, hotels, cafes and restaurants, and public spaces. Our customers include some of the world’s largest carriers, telecommunications service providers, and global consumer brands, and property owners, as well as troops stationed at military bases and Internet savvy consumers on the go.

 

2. Summary of significant accounting policies

 

Basis of presentation

 

The accompanying interim unaudited condensed consolidated financial statements and related notes for the three and nine months ended September 30, 2017March 31, 2019 and 20162018 are unaudited. The unaudited interim condensed consolidated financial information has been prepared in accordance with the rules and regulations of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”) for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 20162018 contained in our annual report on Form 10-K filed with the SEC on March 13, 2017.1, 2019. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of our results of operations for the three and nine months ended September 30, 2017 and 2016, our cash flows for the ninethree months ended September 30, 2017,March 31, 2019 and 2018, and our financial position as of September 30, 2017.March 31, 2019. The year-end balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by GAAP. Interim results are not necessarily indicative of the results to be expected for an entire year or any other future year or interim period.

 

In January 2017,June 2018, the FinancialFASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles-Goodwill, which eliminates the separate accounting model for nonemployee share-based payment awards and Other (Topic 350),generally requires companies to account for share-based payment transactions with nonemployees in the same way as share-based payment transactions with employees. The accounting remains different for attribution, which simplifiesrepresents how an entitythe equity-based payment cost is required to test goodwillrecognized over the vesting period, and a contractual term election for impairment. An entity will no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit.valuing nonemployee equity share options. The standard is effective for interim and annual periods beginning after December 15, 2019 with early adoption permitted for goodwill impairment tests with measurement dates after2018. We adopted ASU 2018-07 on January 1, 2017. We elected to early adopt ASU 2017-04 as of January 1, 20172019 and the adoption of this standard did not have a material impact on our condensed consolidated financial statements.

 

In AugustFebruary 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2016-15,a new standard related to leases, which was codified into Accounting Standards Codification (“ASC”) 842, StatementLeases. ASC 842 requires lessees to recognize assets and liabilities for all leases with lease terms of Cash Flows (Topic 230), which addsmore than 12 months on the balance sheet. Under ASC 842, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or clarifiesoperating lease. On January 1, 2019, we adopted ASC 842 using the modified retrospective transition approach. ASC 842 permits two methods of adoption and we elected to apply the guidance to reduce diversity in how certain transactions are classified in the statement of cash flows. The standard is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted. The standard requires application using a retrospective transition method. We elected to early adopt ASU 2016-15each lease that had commenced as of January 1, 20172019 with a cumulative-effect adjustment to the opening balance of retained earnings as of that date. ASC 842 permits various optional transition practical expedients. The discount rate used to calculate the present value of the future payments was determined as of January 1, 2019 for existing lease contracts and was generally based on our incremental borrowing rate as of January 1, 2019 commensurate with the adoptionremaining lease term. We also elected the package of thispractical expedients which included the following: (i) an entity need not reassess whether any expired or existing contracts are or contain leases; (ii) an entity need not reassess the lease classification for any expired or existing leases; and (iii) an entity need not reassess initial direct costs for any existing leases. The standard did not havehad a material impact on our condensed consolidated financial statements.balance sheet but did not have an impact on our condensed consolidated statement of operations and our condensed consolidated statement of cash flows. The most significant impact was the recognition of right-of-use (“ROU”) assets and liabilities related to our operating leases, while our accounting for finance leases remained substantially unchanged. Adoption of thenew standard resulted in the recording of $16,916 of operating lease ROU assets and $22,338 of operating lease ROU liabilities as of January 1, 2019.

Principles of consolidation

 

The unaudited condensed consolidated financial statements include our accounts and the accounts of our majority owned subsidiaries. We consolidate our 70% ownership of Chicago Concourse Development Group, LLC and our 75% ownership of Boingo Holding Participacoes Ltda. in accordance with FASB Accounting Standards Codification (“ASC”)ASC 810, Consolidation. Other parties’ interests in consolidated entities are reported as non-controlling interests. All intercompany balances and transactions have been eliminated in consolidation.

Marketable securities

Our marketable securities consist of available-for-sale securities with original maturities exceeding three months. According to FASB ASC 320, Investments—Debt and Equity Securities, we have classified securities, which have readily determinable fair values and are highly liquid, as short-term because such securities are expected to be realized within a one-year period. At March 31, 2019, we had $36,888 in marketable securities. We had no marketable securities at December 31, 2018.

Marketable securities are reported at fair value with the related unrealized gains and losses reported as other comprehensive income (loss) until realized or until a determination is made that an other-than-temporary decline in market value has occurred. No significant unrealized gains and losses have been reported during the periods presented. Factors considered by us in assessing whether an other-than-temporary impairment has occurred include the nature of the investment, whether the decline in fair value is attributable to specific adverse conditions affecting the investment, the financial condition of the investee, the severity and the duration of the impairment and whether we have the ability to hold the investment to maturity. When it is determined that an other-than-temporary impairment has occurred, the investment is written down to its market value at the end of the period in which it is determined that an other-than-temporary decline has occurred. The cost of marketable securities sold is based upon the specific identification method. Any realized gains or losses on the sale of investments are reflected as a component of interest and other expense, net.

For the three months ended March 31, 2019 and 2018, we had no significant realized or unrealized gains or losses from investments in marketable securities classified as available-for-sale. As of March 31, 2019, we had $16 of cumulative unrealized gains, net of tax, which was $0 as of March 31, 2019 due to the full valuation allowance established against our deferred tax assets, in accumulated other comprehensive loss.

Segment and geographicalgeographic information

 

We operate as one reportable segment; a service provider of wireless connectivity solutions across our managed and operated network and aggregated network for mobile devices such as laptops, smartphones, tablets and other wireless-enabled consumer devices. This single segment is consistent with the internal organization structure and the manner in which operations are reviewed and managed by our Chief Executive Officer, the chief operating decision maker.

 

All significant long-lived tangible assets are held in the United States of America. We do not disclose sales by geographic area because to do so would be impracticable.

 

The following is a summary of our revenue disaggregated by primary revenue source:product offerings:

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

Revenue:

 

 

 

 

 

 

 

 

 

DAS

 

$

21,755

 

$

15,959

 

$

56,563

 

$

40,957

 

Military

 

13,946

 

10,137

 

40,029

 

28,969

 

Wholesale—Wi-Fi

 

8,307

 

5,888

 

22,438

 

16,031

 

Retail

 

6,234

 

6,619

 

19,007

 

20,100

 

Advertising and other

 

3,413

 

2,193

 

8,984

 

8,313

 

Total revenue

 

$

53,655

 

$

40,796

 

$

147,021

 

$

114,370

 

 

 

Three Months Ended
March 31,

 

 

 

2019

 

2018

 

Revenue:

 

 

 

 

 

Military/multifamily

 

$

25,897

 

$

15,854

 

DAS

 

24,095

 

23,645

 

Wholesale—Wi-Fi

 

11,020

 

11,149

 

Retail

 

3,926

 

5,310

 

Advertising and other

 

1,535

 

2,201

 

Total revenue

 

$

66,473

 

$

58,159

 

Revenue recognition

 

We generate revenue from several sources including: (i) DAS customers that are telecom operators under long-term contracts for access to our DAS at our managed and operated locations, (ii) military and retail customers under subscription plans for month-to-month network access that automatically renew, and military and retail single-use access from sales of hourly, daily or other single-usesingle- use access plans, (ii) arrangements with property owners for multifamily properties that provide for network installation and monthly Wi-Fi services and support for residents and employees, (iii) DAS customers that are telecom operators under long-term contracts for access to our DAS at our managed and operated locations, (iv) arrangements with wholesale Wi-Fi customers that provide software licensing, network access, and/or professional services fees, and (iv)(v) display advertisements and sponsorships on our walled garden sign-in pages. Software licensed by our wholesale platform services customers can only be used during the term of the service arrangements and has no utility to them upon termination of the service arrangement.

 

Revenues are recognized when a contract with a customer exists and control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services and the identified performance obligation has been satisfied. Contracts entered into at or near the same time with the same customer are combined and accounted for as a single contract if the contracts have a single commercial objective, the amount of consideration is dependent on the price or performance of the other contract, or the services promised in the contracts are a single performance obligation. Contract amendments are routine in the performance of our DAS, wholesale Wi-Fi, and advertising contracts. Contracts are often amended to account for changes in contract specifications or requirements or expand network access services. In most instances, our DAS and wholesale Wi-Fi contract amendments are for additional goods or services that are distinct, and the contract price increases by an amount that reflects the standalone selling price of the additional goods or services; therefore, such contract amendments are accounted for as separate contracts. Contract amendments for our advertising contracts are also generally for additional goods or services that are distinct; however, the contract price does not increase by an amount that reflects the standalone selling price of the additional goods or services. Advertising contract amendments are therefore generally accounted for as contract modifications under the prospective method. Contract amendments to transaction prices with no change in remaining services are accounted for as contract modifications under the cumulative catch-up method.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and is recognized as revenue when, or as, the performance obligation is satisfied, which typically occurs when the services are rendered. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers. Judgment may be used to determine the standalone selling prices for items that are not sold separately, including services provided at no additional charge. Most of our performance obligations are satisfied over time as services are provided. We generally recognize revenue when an arrangement exists,on a gross basis as we are primarily responsible for fulfilling the promises to provide the specified goods or services, have been rendered, feeswe are fixed or determinable, no significant obligations remainresponsible for paying all costs related to the earned feesgoods or services before they have been transferred to the customer, and collection ofwe have discretion in establishing prices for the related receivable is reasonably assured.specified goods or services. Revenue is presented net of any sales and value added taxes.

 

Payment terms vary on a contract-by-contract basis, although terms generally include a requirement of payment within 30 to 60 days for non-recurring payments, the first day of the monthly or quarterly billing cycle for recurring payments for DAS and wholesale Wi-Fi contracts, and the first day of the month prior to the month that services are provided for multifamily contracts. We apply a practical expedient for purposes of determining whether a significant financing component may exist for our contracts if, at contract inception, we expect that the period between when we transfer the promised good or service to the customer and when the customer pays for that good or service will be one year or less. In instances where the customer pays for a good or service one year or more in advance of the period when we transfer the promised good or service to the customer, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is not to receive financing from our customers or to provide customers with financing but rather to maximize our profitability on the customer contract. Specifically, inclusion of non-refundable upfront fees in our long-term customer contracts increases the likelihood that the customer will be committed through the end of the contractual term and ensures recoverability of the capital outlay that we incur in expectation of the customer fulfilling its contractual obligations. We may also provide service credits to our customers if we fail to meet contractual monthly system uptime requirements and we account for the variable consideration related to these service credits using the most likely amount method.

For contracts that include variable consideration, we estimate the amount of consideration at contract inception under the expected value method or the most likely amount method and include the amount of variable consideration that is not considered to be constrained. Significant judgment is used in constraining estimates of variable consideration. We update our estimates at the end of each reporting period as additional information becomes available.

Timing of revenue recognition may differ from the timing of invoicing to customers. We record unbilled receivables (contract assets) when revenue is recognized prior to invoicing, deferred revenue (contract liabilities) when revenue is recognized after invoicing, and receivables when we have an unconditional right to consideration to invoice and receive payment in the future. We present our DAS, multifamily, and wholesale Wi-Fi contracts in our condensed consolidated balance sheet as either a contract asset or a contract liability with any unconditional rights to consideration presented separately as a receivable. Our other customer contracts generally do not have any significant contract asset or contract liability balances. Generally, a significant portion of the billing for our DAS contracts occurs prior to revenue recognition, resulting in our DAS contracts being presented as contract liabilities. In contrast, our wholesale Wi-Fi contracts that contain recurring fees with annual escalations are generally presented as contract assets as revenue is recognized prior to invoicing. Our multifamily contracts can be presented as either contract liabilities or contract assets primarily as a result of timing of invoicing for the network installations.

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain sales incentive programs meet the requirements to be capitalized. Total capitalized costs to obtain a contract were immaterial during the three months ended March 31, 2019 and are included in prepaid expenses and other current assets and non-current other assets on our condensed consolidated balance sheets. We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less, the most significant of which relates to sales commissions related to obtaining our advertising customer contracts. Contract costs are evaluated for impairment in accordance with ASC 310, Receivables.

Military and retail

Military and retail customers must review and agree to abide by our standard “Customer Agreement (With Acceptable Use Policy) and End User License Agreement” before they are able to sign up for our subscription or single-use Wi-Fi network access services. Our military and retail customer contracts generally contain a single performance obligationprovide non-exclusive access to Wi-Fi services, together with performance of standard maintenance, customer support, and the Wi-Finder app to facilitate seamless connection to the Company’s Wi-Fi network. The performance obligation is considered a series of distinct services as the performance obligation is satisfied over time and the same time-based input method would be used to measure our progress toward complete satisfaction of the performance obligation to transfer each distinct service in the series to the customer. Our contracts also provide our military and retail subscription customers with the option to renew the agreement when the subscription term is over. We do not consider this option to provide the customer with a material right that should be accounted for as a separate performance obligation because the customer would not receive a discount if it decided to renew and the option to renew is cancellable within 5 days’ notice prior to the end of the then current term by either party.

The contract transaction price is determined based on the subscription or single-use plan selected by the customer. Our military and retail service plans are for fixed price services as described on our website. From time to time, we offer promotional discounts that result in an immediate reduction in the price paid by the customer. Subscription fees from military and retail customers are paid monthly in advance. We provide refunds for our military and retail services on a case-by-case basis. Refunds and credit card chargeback amounts are not significant and are recorded as contra-revenue in the period the refunds are made, or chargebacks are received.

Subscription fee revenue is recognized ratably over the subscription period. Revenue generated from military and retail single-use access is recognized when access is provided, and the performance obligation is satisfied.

Multifamily

We enter into long-term contracts with property owners. The initial term of our contracts with property owners generally range from three to five years and the contracts may contain renewal options. Some of our contracts provide termination for convenience clauses that may or may not include substantive termination penalties. We apply judgment in determining the contract term, which is the period during which we have present and enforceable rights and obligations. Our customer contracts generally contain two performance obligations: (i) install the network required to provide Wi-Fi services; and (ii) provide Wi-Fi services and technical support to the residents and employees. Our contracts may also provide our property owners with the option to renew the agreement. We do not consider this option to provide the property owner with a material right that should be accounted for as a separate performance obligation because the property owner would not receive a discount if it decided to renew and the option to renew is generally cancellable by either party subject to the notice of non-renewal requirements specified in the contract. Our contracts may also provide our customers with the option to purchase additional future services. We do not consider this option to provide the customer with a material right that should be accounted for as a separate performance obligation since the cost of the additional future services are generally at market rates for such services and we are not automatically obligated to stand ready to deliver these additional goods or services because the customer may reject our proposal.

Our contract fee structure includes a network installation fee and recurring Wi-Fi service and support fees. The network installation fee is generally structured as a firm-fixed price arrangement and becomes payable as certain contract and/or installation milestones are achieved. We generally estimate variable consideration for unpriced change orders using the most likely amount method based on the expected price for those services. If network installations are not completed by specified dates, we may be subject to network installation penalties. We estimate the variable consideration for our network installation fees using the most likely amount method based on the amount of network installation penalties we expect to incur. Title to the network generally transfers to the property owner once installation is completed and the network has been accepted. We generally recognize revenue related to our network installation performance obligation using a cost-to-cost method over the network installation period. We may provide latent defect warranties for materials and installation labor services related to our network installation services. Our warranty obligations are generally not accounted for as separate performance obligations as warranties cannot be separately purchased and warranties do not provide a service in addition to the assurance that the network will function as expected.

The recurring fees commence once the network is launched with recurring fees generally based upon a fixed or variable occupancy rate. The recurring Wi-Fi service fees may be adjusted prospectively for changes in circuit and/or video content costs, and Wi-Fi support fees may escalate on an annual basis. We estimate the variable consideration for our recurring fees using the expected value method with the exception of the variable consideration related to actual occupancy rates, which we record when we have the contractual right to bill. We evaluate our estimates of variable consideration each period and record a cumulative catch-up adjustment in the period in which changes occur for the amount allocated to satisfied performance obligations. We recognize revenue related to the recurring fees on a monthly basis over the contract term as the Wi-Fi services and support is rendered, and the performance obligation is satisfied.

DAS

We enter into long-term contracts with telecom operators at our managed and operated locations. The initial term of our contracts with telecom operators generally range from five to twenty years and the agreements generally contain renewal options. Some of our contracts provide termination for convenience clauses that may or may not include substantive termination penalties. We apply judgment in determining the contract term, the period during which we have present and enforceable rights and obligations. Our DAS customer contracts generally contain a single performance obligationprovide non-exclusive access to our DAS or small cell networks consists of build-out feesto provide telecom operators’ customers with access to the licensed wireless spectrum, together with providing telecom operators with construction, installation, optimization/engineering, maintenance services and recurring access fees under certain long-term contracts withagreed-upon storage space for the telecom operators’ transmission equipment, each related to providing such licensed wireless spectrum to the telecom operators. Build-out fees paid upfront are generally deferredThe performance obligation is considered a series of distinct services as the performance obligation is satisfied over time and recognized ratably over the termsame time-based input method would be used to measure our progress toward complete satisfaction of the estimatedperformance obligation to transfer each distinct service in the series to the customer. Our contract fee structure generally includes a non-refundable upfront fee and we evaluated whether customer relationshipoptions to renew services give rise to a material right that should be accounted for as a separate performance obligation because of those non-refundable upfront fees. We believe that a material right generally does not exist for our DAS customer contracts that contain renewal options because the telecom operators’ decision to renew is highly dependent upon our ability to maintain our exclusivity as the DAS service provider at the venue location and our limited operating history with venue and customer renewals. The telecom operators will make the decision to incur the capital improvement costs at the venue location irrespective of our remaining exclusivity period oncewith the build-outvenue as the telecom operators expect that the assets will continue to be serviced regardless of whether we will remain such exclusive DAS service provider. Our contracts also provide our DAS customers with the option to purchase additional future services such as upgrades or enhancements. This option is complete.not considered to provide the customer with a material right that should be accounted for as a separate performance obligation since the cost of the additional future services depends entirely on the market rate of such services at the time such services are requested and we are not automatically obligated to stand ready to deliver these additional goods or services as the customer may reject our proposal. Periodically, we install and sell Wi-Fi and DAS networks to customers where we do not have service contracts or remaining obligations beyond the installation of those networks and we recognize build-out fees for such projects as revenue when the installation work is completed, and the network has been accepted by the customer. Minimum monthly

Our contract fee structure may include varying components of an upfront build-out fee and recurring access, feesmaintenance, and other fees. The upfront build-out fee is generally structured as a firm-fixed price or cost-plus arrangement and becomes payable as certain contract and/or construction milestones are achieved. Our DAS and small cell networks are neutral-host networks that can accommodate multiple telecom operators. Some of our DAS customer contracts provide for usagecredits that may be issued to existing telecom operators for additional telecom operators subsequently joining the DAS network. The credits are generally based upon a fixed dollar amount per additional telecom operator, a fixed percentage amount of the original build-out fee paid by the telecom operator per additional telecom operator, or a proportionate share based upon the split among the relevant number of telecom operators for the actual costs incurred by all telecom operators to construct the DAS networks are non-cancellablenetwork. In most cases, there is significant uncertainty on whether additional telecom operator contracts will be executed at inception of the contract with the existing telecom operator. We believe that the upfront build-out fee is fixed consideration once the build-out is complete and any subsequent credits that may be issued would be accounted for in a manner similar to a contract modification under the prospective method because (i) the execution of customer contracts with additional telecom carriers is at our sole election and (ii) we would not execute agreements with additional telecom carriers if it would not increase our revenues and gross profits at the venue level. Further, the credits issued to the existing telecom operator changes the transaction price on a go-forward basis, which corresponds with the decline in service levels for

the existing telecom operator once the neutral-host DAS network can be accessed by the additional telecom operator. The recurring access, maintenance, and other fees generally escalate on an annual basis. These minimum monthly accessThe recurring fees are recognized ratablyvariable consideration until the contract term and annual escalation dates are fixed. We estimate the variable consideration for our recurring fees using the most likely amount method based on the expected commencement date for the services. We evaluate our estimates of variable consideration each period and record a cumulative catch-up adjustment in the period in which changes occur for the amount allocated to satisfied performance obligations.

We generally recognize revenue related to our single performance obligation for our DAS customer contract monthly over the contract term ofonce the customer has the ability to access the DAS network and we commence maintenance on the DAS network.

Wholesale Wi-Fi

We enter into long-term contracts with enterprise customers such as telecom operator agreement.operators, cable companies, technology companies, and enterprise software/services companies, that pay us usage-based Wi-Fi network access and software licensing fees to allow their customers’ access to our footprint worldwide. We also enter into long-term contracts with financial institutions and other enterprise customers who provide access to our Wi-Fi footprint as a value-added service for their customers. The initial term of our contracts with telecom operatorswholesale Wi-Fi customers generally range from fiveone to twentythree years and the agreements generally contain renewal clauses. Revenue from DASoptions. Some of our contracts provide termination for convenience clauses that may or may not include substantive termination penalties. We apply judgment in determining the contract term, the period during which we have present and enforceable rights and obligations. Our wholesale Wi-Fi customer contracts generally contain a single performance obligationprovide non-exclusive rights to access our Wi-Fi networks to provide wholesale Wi-Fi customers’ end customers with access to the high-speed broadband network access fees in excessthat may be bundled together with integration services, support services, and/or performance of standard maintenance. The performance obligation is considered a series of distinct services as the performance obligation is satisfied over time and the same time-based input method or usage-based output method would be used to measure our progress toward complete satisfaction of the monthly minimumsperformance obligation to transfer each distinct service in the series to the customer. Our contracts may also provide our enterprise customers with the option to renew the agreement. This option is not considered to provide the customer with a material right that should be accounted for as a separate performance obligation because the customer would not receive a discount if it decided to renew and the option to renew is generally cancellable by either party subject to the notice of non-renewal requirements specified in the contract. Our contracts may also provide our wholesale Wi-Fi customers with the option to purchase additional future services. We do not consider this option to provide the customer with a material right that should be accounted for as a separate performance obligation since the cost of the additional future services are generally at market rates for such services and we are not automatically obligated to stand ready to deliver these additional goods or services because the customer may reject our proposal. Periodically, we install and sell Wi-Fi networks to customers where we do not have service contracts or remaining obligations beyond the installation of those networks and we recognize build-out fees for such projects as revenue when the installation work is completed, and the network has been accepted by the customer.

Our contract fee structure may include varying components of a minimum fee and usage-based fees. Minimum fees represent fixed price consideration while usage-based fees represent variable consideration. With respect to variable consideration, our commitment to our wholesale Wi-Fi customers consists of providing continuous access to the network. It is therefore a single performance obligation to stand ready to perform and we allocate the variable fees charged for usage when we have the contractual right to bill. The variable component of revenue is recognized when earned.based on the actual usage during the period.

 

Subscription fees from military and retail customers are paid monthly in advance andWholesale Wi-Fi revenue is deferredrecognized as it is earned over the relevant contract term with variable consideration recognized when we have the contractual right to bill.

Advertising

We generally enter into short-term cancellable insertion orders with our advertising customers for the portions of monthly recurring subscription fees collected in advance. Weadvertising campaigns that are served at our managed and operated locations and other locations where we solely provide refundsauthorized access to a partner’s Wi-Fi network through sponsored and promotional programs. Our sponsorship advertising arrangements are generally priced under a cost per engagement structure, which is a set price per click or engagement, or a cost per install structure for our military and retailthird party application downloads. Our display advertising arrangements are priced based on cost per thousand impressions. Insertion orders may also include bonus items. Our advertising customer contracts may contain multiple performance obligations with each distinct service. These distinct services on a case-by-case basis. These amounts are not significant and are recorded as contra-revenuemay include an advertisement video or banner impressions in the contract bundled with the requirement to provide network, space on the website, and integration of customer advertisement onto the website, and each is generally considered to be its own performance obligation. The performance obligations are considered a series of distinct services as the performance obligations are satisfied over time and the same action-based output method would be used to measure our progress toward complete satisfaction of the performance obligation to transfer each distinct service in the series to the customer.

The contract transaction price is comprised of variable consideration based on the stated rates applied against the number of units delivered inclusive of the bonus units subject to the maximums provided for in the insertion order. It is customary for us to provide additional units over and above the amounts contractually required; however, there are a number of factors that can also negatively impact our ability to deliver the units required by the customer such as service outages at the venue resulting from power or circuit failures and customer cancellation of the remaining undelivered units under the insertion order due to campaign performance or budgetary constraints. Typically, the advertising campaign periods are short in duration. We therefore use the contractual rates per the insertion orders and actual units delivered to determine the transaction price each period end. The transaction price is allocated to each performance obligation based on the refunds are made. Subscription feestandalone selling price of each performance obligation.

Advertising revenue is recognized ratably over the subscription period. Revenue generated from militaryservice period based on actual units delivered subject to the maximums provided for in the insertion order.

Leases

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, current portion of operating and retail single-use accessfinance leases, and long-term portion of operating and finance leases in our condensed consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of operating and finance leases, and long-term portion of operating and finance leases in our condensed consolidated balance sheets.

Operating and finance lease ROU assets and ROU liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized when access is provided.on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are accounted for separately for the asset classes maintained. We exclude short-term leases with a lease term of 12 months or less at commencement date from our condensed consolidated balance sheets.

 

Services provided to wholesale Wi-Fi partners generally contain several elements including: (i) a term license to use our software to access our Wi-Fi network, (ii) access fees for Wi-Fi network usage, and/or (iii) professional services for software integration and customization and to maintain the Wi-Fi service. The term license, monthly minimum network access fees and professional services are billed on a monthly basis based upon predetermined fixed rates. Once the term license for integration and customization are delivered, the fees from the arrangement are recognized ratably over the remaining term of the service arrangement. The initial term of the license agreements is generally between one to five years and the agreements generally contain renewal clauses. Revenue for Wi-Fi network access fees in excess of the monthly minimum amounts is recognized when earned. All elements within

existing service arrangements are generally delivered and earned concurrently throughout the term of the respective service arrangement.

In instances where the minimum monthly Wi-Fi and DAS network access fees escalate over the term of the wholesale service arrangement, an unbilled receivable is recognized when performance is within our control and when we have reasonable assurance that the unbilled receivable balance will be collected.Income taxes

 

We adoptedcalculate our interim income tax provision in accordance with ASC 270, Interim Reporting, and ASC 740, Accounting for Income Taxes. At the provisionsend of ASU 2009-13, Revenue Recognition (Topic 605)—Multiple-Deliverable Revenue Arrangements, on a prospective basis on January 1, 2011. For multiple-deliverable arrangements entered into prioreach interim period, we estimate the annual effective tax rate and apply that rate to January 1, 2011 that are accounted for under ASC 605-25, Revenue Recognition—Multiple-Deliverable Revenue Arrangements, we defer recognition of revenue for the full arrangement and recognize all revenue ratably over the term of the estimated customer relationship period for DAS arrangements and the wholesale service period for Wi-Fi platform service arrangements, as we do not have evidence of fair value for the undelivered elementsour ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items is recognized in the arrangement. For multiple-deliverable arrangements entered intointerim period in which those items occur. In addition, the effect of changes in enacted tax laws, rates, or materially modified after January 1, 2011 thattax status is recognized in the interim period in which the change occurs. Excess windfall tax benefits and tax deficiencies related to our stock option exercises and restricted stock unit (“RSU”) vesting are accounted for under ASC 605-25, we evaluate whetherrecognized as an income tax benefit or not separate unitsexpense in our condensed consolidated statements of accounting exist and then allocateoperations in the arrangement consideration to all units of accounting basedperiod they are deducted on the relative selling price method using estimated selling prices if vendor specific objective evidenceincome tax return. Excess windfall tax benefits and third party evidence istax deficiencies are therefore not available. We recognizeanticipated when determining the revenue associated withannual effective tax rate and are instead recognized in the separate units of accounting upon completion of such services or ratably over the term of the estimated customer relationshipinterim period for DAS arrangements and the wholesale service period for Wi-Fi platform service arrangements.in which those items occur.

 

Advertising revenue is generated from advertisements on our managedThe computation of the annual estimated effective tax rate at each interim period requires certain estimates and operated or partner networks. In determining whether an arrangement exists, we ensure that a binding arrangement issignificant judgment, including the expected operating income (loss) for the year, projections of the proportion of income (loss) earned and taxed in place, suchvarious states, permanent and temporary differences as a standard insertion orderresult of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained, or a fully executed customer-specific agreement. Obligations pursuantas the tax environment changes.

As of March 31, 2019, we had an immaterial amount of unremitted earnings in our subsidiaries located outside of the U.S. for which state taxes have not been paid. Our intention is to indefinitely reinvest these earnings outside the U.S. If we were to remit our advertising revenue arrangements typically include a minimum numberforeign earnings, we would be subject to state income taxes or withholding taxes imposed on actual distributions, or currency transaction gains (losses) that would result in taxation upon remittance. However, the amounts of units orany such tax liabilities resulting from the satisfactionrepatriation of certain performance criteria. Advertising and other revenue is recognized when the servicesforeign earnings are performed.not material.

 

Foreign currency translation

 

Our Brazilian subsidiary uses the Brazilian Real as its functional currency. Assets and liabilities of our Brazilian subsidiary are translated to U.S. dollars at period-end rates of exchange, and revenues and expenses are translated at average exchange rates prevailing for each month. The resulting translation adjustments are made directly to a separate component of other comprehensive loss, which is reflected in stockholders’ equity in our condensed consolidated balance sheets. As of September 30, 2017March 31, 2019 and December 31, 2016,2018, the Company had $$(1,333(812)) and $(870)$(1,295), respectively, of cumulative foreign currency translation adjustments, net of tax, which was $0 as of September 30, 2017March 31, 2019 and December 31, 20162018 due to the full valuation allowance established against our deferred tax assets, in accumulated other comprehensive loss.

 

Some ofThe functional currency for our other foreign subsidiaries also enter into transactions and have monetary assets and liabilities that are denominated in a currency other thanis the entities’ respective functional currencies.U.S. dollar. Gains and losses from the revaluation of foreign currency transactions and monetary assets and liabilities are included in the condensed consolidated statements of operations.

Use of estimates

The preparation of accompanying condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the accompanying condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Assets and liabilities which are subject to significant judgment and the use of estimates include the allowance for doubtful accounts, recoverability of goodwill and long-lived assets, valuation allowances with respect to deferred tax assets, uncertain tax positions, useful lives associated with property and equipment, valuation of ROU assets and ROU liabilities, valuation and useful lives of intangible assets, valuation of contingent consideration, contract assets and contract liabilities including estimates of variable consideration, and the valuation and assumptions underlying stock-based compensation and other equity instruments. On an ongoing basis, we evaluate our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities.

 

Fair value of financial instruments

 

Fair value is defined as the price that would be received from selling an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market in which it would transact, and we consider assumptions that market participants would use when pricing the asset or liability.

 

The accounting guidance for fair value measurement also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

 

·                  Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

·                  Level 2—Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly.

·                  Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

The carrying amount reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, other assets, accounts payable, accrued expenses and other liabilities, and deferred revenue approximates fair value due to the short-termshort duration and nature of these financial instruments. As of September 30, 2017 and December 31, 2016, the carrying amount reflected in the accompanying condensed consolidated balance sheets for current and long-term portions of capital leases and notes payable approximate fair value (Level 2) based on the lack of significant change in our credit risk.

 

Recent accounting pronouncements

 

In May 2017,August 2018, the FASB issued ASU 2017-09,2018-15, Compensation-Stock Compensation (Topic 718)Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Scope of ModificationCustomer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which provides guidance on the types of changesrequires customers to the terms or conditions of share-based payment awards to which an entity applies modification accounting under ASC 718. According to the new standard, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the modified award is the same criteria for capitalizing implementation costs incurred in a cloud computing arrangement that is hosted by the vendor as the original award immediately before the original award is modified.they would for an arrangement that has a software license. The standard is effective for interim and annual periods beginning after December 15, 2017. Early2019 and early adoption is permitted for all entities.permitted. The standard willcan be appliedadopted prospectively to modifications that occur on or after the adoption date. We currently do not expect that this standard will have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for all leases with lease terms of more than 12 months on the balance sheet. Under the new guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or operating lease. The standard is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted for all entities on a modified retrospective basis, with elective reliefs.retrospectively. We are currently evaluating the expected impact of this new standard.

 

3. Acquisitions

Elauwit Networks, LLC

On August 1, 2018, we acquired the assets of Elauwit Networks, LLC (“Elauwit”) for $28,000 plus other contingent consideration. Elauwit provides data and video services to multi-unit dwelling properties including student housing, condominiums, apartments, senior living, and hospitality industries throughout the U.S. In May 2014,addition, Elauwit builds and maintains the network that supports these services for property owners and managers and provides support for residents and employees.

The acquisition has been accounted for under the acquisition method of accounting in accordance with FASB issued ASU 2014-09,ASC 805, Revenue From ContractsBusiness Combinations. As such, the assets acquired and liabilities assumed are recorded at their acquisition-date fair values. The total purchase price was $29,537, which includes contingent consideration fair valued at $961. At the closing date, we paid cash of $15,576. $13,000 of the purchase price was held back for the following: (i) $11,000 held back for third-party consents not obtained at closing for certain customer agreements, which will be released as Elauwit delivers third-party consents with Customersrespect to such customer agreements; and (ii) a $2,000 indemnification holdback that is being retained for a period of 12 months following the closing of the acquisition. In 2018, we paid $9,048 of the amounts held back for third-party consents. We paid the remaining $1,952 for amounts held back for third-party consents in January 2019. The contingent consideration could require payments in the aggregate amount of up to $15,000 that would be due and payable subject to certain conditions and the successful achievement of annual revenue targets for the acquired business during the 2019 and 2020 fiscal years. The contingent consideration is subject to acceleration under certain corporate events.

The fair value of the contingent consideration is based on Level 3 inputs. Further changes in the fair value of the contingent consideration will be recorded through operating income (loss). The contingent consideration was valued at the date of acquisition using the Monte Carlo method reflecting the average expected monthly revenue, an annual risk-free rate of 2.78%, and an annual revenue volatility rate of 40%.

The identifiable intangible assets were primarily valued using the excess earnings, relief from royalty, and loss-of-revenue methods using discount rates ranging from 8.0% to 21.0% and a 1.0% royalty rate, where applicable, except for certain backlog intangible assets held for sale that were valued at fair value less costs to sell using a discount rate of 8%. The amortizable intangible assets held for use are being amortized on a straight-line basis over their estimated useful lives. Intangible assets held for sale are not amortized. We allocated the excess of the purchase price over the fair value of assets acquired and liabilities assumed to goodwill, which is intendeddeductible for tax purposes. The goodwill arising from the Elauwit acquisition is attributable primarily to improveexpected synergies and convergeother benefits, including the financial reporting requirementsacquired workforce, from combining Elauwit with us.

ASC 805 provides for revenuea measurement period not to exceed one year from contracts with customers between U.S. GAAPthe acquisition date to adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and International Accounting Standards. In accordance with this new standard, an entity would recognize revenue to depict the transfer of promised goods or services. The standard establishes a five-step model and related application guidance, which will replace most existing revenue recognition guidance in U.S. GAAP. The FASB has subsequently issued several updates and proposals to clarify guidance to be applied. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts with Customers (Topic (606): Deferral of the Effective Date, to defer the effective date of the new revenue standard by one year. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends the principal versus agent guidance in the new revenue standard. ASU 2016-08 clarifiescircumstances that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which amends the revenue guidance on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which amends certain aspects of Topic 606. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which provides disclosure relief and clarifies the scope and application of the new revenue standard and related cost guidance. The standard, as amended, will be effective for annual and interim periods in fiscal years beginning after December 15, 2017. The FASB also agreed to allow entities to choose to adopt the new standardexisted as of the original effective date. An entity may choose to adoptacquisition date that, if known, would have affected the new standard either retrospectively or through a cumulative effect adjustmentmeasurement of the amounts recognized as of that date. During the startthree months ended March 31, 2019, we recorded a measurement period adjustment to increase the value of backlog intangible assets held for sale and decrease goodwill by $750 as a result of the first periodidentification of additional assets that were acquired. Intangible assets held for which it appliessale are included within prepaid expenses and other current assets on the new standard. We have selected January 1, 2018 as our effectivecondensed consolidated balance sheets. To date, but we have not yet selected a transition method. We are currently evaluatingrecorded any other material measurement period adjustments. The following summarizes the adoption approach. Our final determination will depend on a numberpreliminary purchase price allocation:

 

 

Estimated
Fair Value

 

Weighted Average
Estimated Useful
Life (years)

 

Consideration:

 

 

 

 

 

Cash paid

 

$

15,576

 

 

 

Holdback consideration

 

13,000

 

 

 

Contingent consideration

 

961

 

 

 

Total consideration

 

$

29,537

 

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed:

 

 

 

 

 

Accounts receivable

 

$

4,494

 

 

 

Prepaid expenses and other current assets

 

1,687

 

 

 

Property and equipment

 

195

 

 

 

Other non-current assets

 

177

 

 

 

Accounts payable

 

(2,049

)

 

 

Accrued expenses and other liabilities

 

(683

)

 

 

Deferred revenue

 

(3,854

)

 

 

Other non-current liabilities

 

(307

)

 

 

Net tangible liabilities acquired

 

(340

)

 

 

Backlog

 

7,030

 

5.0

 

Backlog - held for sale

 

750

 

 

Customer relationships

 

2,490

 

10.0

 

Partner relationships

 

1,200

 

10.0

 

Transition services agreement

 

540

 

2.0

 

Non-compete agreement

 

1,380

 

3.0

 

Goodwill

 

16,487

 

 

 

Total purchase price

 

$

29,537

 

 

 

The following table presents the results of factors, such asElauwit included in the significanceCompany’s revenue and net loss:

 

 

Three Months Ended
March 31,

 

 

 

2019

 

2018

 

Revenue

 

$

7,420

 

$

 

Net loss

 

(2,357

)

 

Pro forma results (Unaudited)

The following table presents the unaudited pro forma results of the impactCompany for the three months ended March 31, 2018 as if the acquisition of Elauwit had occurred on January 1, 2017 and therefore includes Elauwit’s revenue and net income (loss), as adjusted, for such period. These results are not intended to reflect the actual operations of the new standardCompany had the acquisition occurred on our financial results, our ability to accumulate and analyzeJanuary 1, 2017. Income taxes were calculated based on the information necessary to assesseffective tax rate for 2018, excluding the impacttax effects on prior period financial statements and our ability to maintain two setsthe equity component of financials under current and new standards if we were to adoptConvertible Notes recorded in 2018. Acquisition transaction costs have been excluded from the full retrospective approach. We are completing the assessment stage of our evaluation of the impact of the new standard on our accounting policies, processes, and system requirements and are in the implementation stage. We have assigned internal resources in addition to the engagement of third party service providers to assist in the evaluation and implementation. While we continue to assess all potential impacts under the new standard, there is the potential for change to the timing of recognition of revenue for DAS and wholesale Wi-Fi. We are also in the evaluation stage for advertising and other revenue. Revenue for military and retail will remain substantially unchanged.pro forma net loss.

 

 

Three Months Ended
March 31, 2018

 

Revenue

 

$

64,546

 

Net loss

 

(3,399

)

Net loss attributable to common stockholders

 

(3,848

)

Net loss per share attributable to common stockholders

 

 

 

Basic

 

$

(0.09

)

Diluted

 

$

(0.09

)

3.4. Cash and cash equivalents and marketable securities

 

Cash and cash equivalents and marketable securities consisted of the following:

 

 

September 30,
2017

 

December 31,
2016

 

 

March 31,
2019

 

December 31,
2018

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

Cash

 

$

19,384

 

$

17,246

 

 

$

4,611

 

$

11,689

 

Money market accounts

 

2,250

 

2,239

 

 

59,910

 

137,723

 

Marketable securities

 

4,495

 

 

Total cash and cash equivalents

 

$

21,634

 

$

19,485

 

 

$

69,016

 

$

149,412

 

Short-term marketable securities—available-for-sale:

 

 

 

 

 

Marketable securities

 

$

36,888

 

$

 

Total short-term marketable securities

 

$

36,888

 

$

 

 

Our money market account assets are measuredAll contractual maturities of marketable securities were less than one year at fair value onMarch 31, 2019. Marketable securities consist primarily of debt securities which include commercial paper and debt instruments including notes issued by foreign or domestic industrial and financial corporations and governments which pay in U.S. dollars and carry a recurring basis utilizing Level 1 inputs.rating of A or better. For the three months ended March 31, 2019 and 2018, interest income was $714 and $8, respectively, which is included in interest and other expense, net in the accompanying condensed consolidated statements of operations.

 

4.5. Contract assets and contract liabilities

The opening and closing balances of our contract asset, net and contract liability, net balances from contracts with customers for the three months ended March 31, 2019 are as follows:

 

 

Contract
assets, net

 

Contract
liabilities, net

 

Balance at December 31, 2018

 

$

468

 

$

217,733

 

Balance at March 31, 2019

 

1,117

 

218,029

 

Change

 

$

649

 

$

296

 

The current and non-current portions of our contract assets, net are included within prepaid expenses and other current assets and other assets, respectively, and current and non-current portions of our contract liabilities, net are included within deferred revenue and deferred revenue, net of current portion, respectively, in our condensed consolidated balance sheets. Contract assets, net is generated from our multifamily and wholesale Wi-Fi contracts and the change in the contract assets, net balance includes activity related to amounts invoiced offset by revenue recognized from performance obligations satisfied in the current reporting period.

Contract liabilities are recorded when fees are collected, or we have an unconditional right to consideration (a receivable) in advance of delivery of goods or services. The change in contract liabilities, net balance is related to customer activity associated with each of our product offerings including the receipt of cash payments and the satisfaction of our performance obligations. Revenues for the three months ended March 31, 2019 include the following:

 

 

Three Months Ended
March 31, 2019

 

Amounts included in the beginning of period contract liability balance

 

$

28,871

 

Amounts associated with performance obligations satisfied in previous periods

 

294

 

As of March 31, 2019, the aggregate amount of the transaction price allocated to remaining service performance obligations for our DAS contracts was $202,993. We expect to recognize this revenue as service is provided over the remaining contract term. As of March 31, 2019, our DAS contracts have a remaining duration of less than one year to approximately fifteen years.

Certain of our wholesale Wi-Fi contracts include variable consideration based on usage. This variable consideration has been excluded from the disclosure of remaining performance obligations. As of March 31, 2019, the aggregate amount of the transaction price allocated to remaining service performance obligations for certain of our wholesale Wi-Fi contracts with guaranteed minimum consideration was $9,863. We expect to recognize this revenue as service is provided over the remaining contract term. As of March 31, 2019, our wholesale Wi-Fi contracts have a remaining duration of less than one year to approximately fifteen years.

Information about remaining performance obligations that are part of a contract that has an original expected duration of one year or less have been excluded from the above, which primarily consists of network installations for our multifamily customers and monthly service contracts.

6. Property and equipment

 

The following is a summary of property and equipment, at cost less accumulated depreciation and amortization:

 

 

September 30,
2017

 

December 31,
2016

 

 

March 31,
2019

 

December 31,
2018

 

Leasehold improvements

 

$

405,712

 

$

358,477

 

 

$

485,162

 

$

474,808

 

Construction in progress

 

61,080

 

40,369

 

Software

 

39,481

 

33,349

 

 

53,971

 

51,534

 

Construction in progress

 

22,249

 

18,859

 

Computer equipment

 

12,437

 

10,878

 

 

15,257

 

14,215

 

Furniture, fixtures and office equipment

 

1,792

 

1,760

 

 

2,144

 

2,141

 

Total property and equipment

 

481,671

 

423,323

 

 

617,614

 

583,067

 

Less: accumulated depreciation and amortization

 

(220,661

)

(172,558

)

 

(287,880

)

(268,888

)

Total property and equipment, net

 

$

261,010

 

$

250,765

 

 

$

329,734

 

$

314,179

 

 

Depreciation and amortization expense, which includes depreciation and amortization for property and equipment under capitalfinance leases, is allocated as follows in the accompanying condensed consolidated statements of operations:

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

Network access

 

$

11,625

 

$

7,227

 

$

29,354

 

$

18,689

 

Network operations

 

3,987

 

3,733

 

12,273

 

10,183

 

Development and technology

 

2,375

 

1,881

 

6,840

 

5,172

 

General and administrative

 

258

 

252

 

777

 

757

 

Total depreciation and amortization of property and equipment

 

$

18,245

 

$

13,093

 

$

49,244

 

$

34,801

 

During the nine months ended September 30, 2017, we recognized $166 of impairment losses primarily related to construction in progress projects that were abandoned. During the nine months ended September 30, 2017, we also recognized $276 of losses on disposals of property and equipment.

 

 

Three Months Ended
March 31,

 

 

 

2019

 

2018

 

Network access

 

$

11,582

 

$

13,587

 

Network operations

 

4,386

 

4,256

 

Development and technology

 

2,779

 

2,508

 

General and administrative

 

262

 

255

 

Total depreciation and amortization of property and equipment

 

$

19,009

 

$

20,606

 

5.7. Accrued expenses and other liabilities

 

Accrued expenses and other liabilities consisted of the following:

 

 

 

September 30,
2017

 

December 31,
2016

 

Accrued construction in progress

 

$

8,744

 

$

6,753

 

Accrued customer liabilities

 

5,904

 

4,651

 

Revenue share

 

4,857

 

5,611

 

Salaries and wages

 

4,581

 

3,001

 

Accrued partner network

 

1,846

 

1,022

 

Accrued taxes

 

1,800

 

1,761

 

Accrued professional fees

 

1,725

 

1,183

 

Other

 

6,203

 

3,741

 

Total accrued expenses and other liabilities

 

$

35,660

 

$

27,723

 

 

 

March 31,
2019

 

December 31,
2018

 

Accrued construction in progress

 

$

21,035

 

20,930

 

Accrued customer liabilities

 

14,445

 

$

15,219

 

Revenue share

 

5,251

 

5,514

 

Accrued taxes

 

3,397

 

2,745

 

Salaries and wages

 

2,802

 

4,425

 

Holdback consideration

 

2,000

 

2,000

 

Accrued partner network

 

1,331

 

1,228

 

Accrued professional fees

 

1,298

 

1,434

 

Acquisition purchase consideration

 

 

1,952

 

Other

 

6,206

 

7,206

 

Total accrued expenses and other liabilities

 

$

57,765

 

$

62,653

 

6. Income taxes8. Convertible Notes

 

We calculate our interim income tax provisionIn October 2018, the Company sold, through the initial purchasers, convertible senior notes (“Convertible Notes”) to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended, for gross proceeds of $201,250. The Convertible Notes are senior, unsecured obligations with interest payable semi-annually in accordance with ASC 270, Interim Reporting,cash at a rate of 1.00% per annum on April 1st and ASC 740, Accounting for Income Taxes. At the endOctober 1st of each interimyear, beginning on April 1, 2019. The Convertible Notes will mature on October 1, 2023 unless they are redeemed, repurchased or converted prior to such date. Prior to April 1, 2023, the Convertible Notes are convertible at the option of holders only during certain periods and upon satisfaction of certain conditions. Thereafter, the Convertible Notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Convertible Notes may be settled in shares of the Company’s common stock, cash or a combination of cash and shares of the Company’s common stock, at the Company’s election.

The Convertible Notes have an initial conversion rate of 23.6323 shares of common stock per $1,000 principal amount of the Convertible Notes, which will be subject to customary anti-dilution adjustments in certain circumstances. This represents an initial effective conversion price of approximately $42.31 per share, which represents a premium of approximately 30% to the $32.55 per share closing price of the Company’s common stock on October 2, 2018, the date the Company priced the offering.

The Company may redeem all or any portion of the Convertible Notes, at its option, on or after October 5, 2021, at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of the Company’s stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period we estimate(including the annual effective taxlast trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides written notice of redemption.

Holders of Convertible Notes may require the Company 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 the Company issues a notice of redemption prior to the maturity date, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their Convertible Notes in connection with such corporate event or notice of redemption.

In connection with the pricing of the Convertible Notes, the Company 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 the Company’s common stock that initially underlie the Convertible Notes. The cap price of the capped call transactions is initially $65.10 per share of the Company’s common stock, representing a premium of 100% above the closing price of $32.55 per share of the Company’s common stock on October 2, 2018, and applyis subject to certain adjustments under the terms of the capped call transactions. The capped call transactions are expected generally to reduce potential dilution to the Company’s common stock upon conversion of the Convertible Notes and/or offset the potential cash payments that ratethe Company could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction and/or offset subject to a cap based on the cap price.

The following table summarizes the Convertible Notes as of March 31, 2019:

 

 

March 31,
2019

 

Par value of the Convertible Notes

 

$

201,250

 

Unamortized debt discounts

 

(43,052

)

Unamortized debt issuance costs

 

(4,315

)

Net carrying value of Convertible Notes

 

$

153,883

 

The fair value of our ordinary quarterly earnings.Convertible Notes was $181,552 as of March 31, 2019. The tax expense or benefit related to significant, unusual, or extraordinary itemsestimated fair value of Convertible Notes is recognizedbased on market rates and the closing trading price of the Convertible Notes as of March 28, 2019 and is classified as Level 2 in the interim periodfair value hierarchy. As of March 31, 2019, the if-converted value of the Convertible Notes did not exceed the principal amount.

Debt issuance costs are amortized on an effective interest basis over the term of the Convertible Notes. Debt issuance cost amortization expense, net of amounts capitalized, is included in which those items occur. In addition, the effect of changes in enacted tax laws, rates, or tax status is recognizedinterest and other expense, net in the interim period in which the change occurs. Excess windfall tax benefits and tax deficiencies related to our stock option exercises and restricted stock unit (“RSU”) vestings are recognized as an income tax benefit or expense in ouraccompanying condensed consolidated statements of operations in the period they are deducted on the income tax return. Excess windfall tax benefits and tax deficiencies are therefore not anticipated when determining the annual effective tax rate and are instead recognized in the interim period in which those items occur.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment, including the expected operating income (loss) for the year, projections of the proportion of income (loss) earned and taxed in various states, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained, or as the tax environment changes.

Income tax expense of $167 and $95 reflects an effective tax rate of 5.4% and 1.8% for the three months ended September 30, 2017 and 2016, respectively. Income taxMarch 31, 2019. The following table sets forth interest expense of $507 and $457 reflects an effective tax rate of 2.9% and 2.1% forrelated to the nine months ended September 30, 2017 and 2016, respectively. Our effective tax rate differs from the statutory rate primarily due to our valuation allowanceConvertible Notes for the three and nine months ended September 30, 2017March 31, 2019:

 

 

March 31,
2019

 

Contractual interest expense

 

$

503

 

Amortization of debt issuance costs

 

208

 

Amortization of debt discount

 

2,006

 

Total

 

$

2,717

 

Effective interest rate of the liability component

 

7.1

%

During the three months ended March 31, 2019, we capitalized $465 of amortization and 2016. As of September 30, 2017 and December 31, 2016, we had $389 and $380 of uncertain tax positions, respectively, $84 of which is a reduction to deferred tax assets, which is presented net of uncertain tax positions, in the accompanying condensed consolidated balance sheets. We accrue interest and penaltiesexpense related to unrecognized tax benefits as a component of income taxes. As of September 30, 2017 and December 31, 2016, we have accrued $76 and $67 for related interest, net of federal income tax benefits, and penalties recorded in income tax expense on our condensed consolidated statements of operations, respectively. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate at September 30, 2017 was $229.Convertible Notes.

 

We operate within federal, stateAmortization expense for our debt discount and international taxing jurisdictions anddebt issuance costs through 2023 are subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended period of time to resolve. We are subject to taxation in the United States and in various states. Our tax years 2014 and forward are subject to examination by the IRS and our tax years 2012 and forward are subject to examination by material state jurisdictions. However, due to prior year loss carryovers, the IRS and state tax authorities may examine any tax years for which the carryovers are used to offset future taxable income.as follows:

 

 

Debt
Discounts

 

Debt Issuance
Costs

 

April 1, 2019—December 31, 2019

 

$

6,239

 

$

642

 

January 1, 2020—December 31, 2020

 

8,864

 

901

 

January 1, 2021—December 31, 2021

 

9,528

 

955

 

January 1, 2022—December 31, 2022

 

10,241

 

1,015

 

January 1, 2023—December 31, 2023

 

8,180

 

802

 

 

 

$

43,052

 

$

4,315

 

 

7.9. Credit Facility

 

We haveIn February 2019, we entered into a Credit Agreement (the “Credit Agreement”) and related agreements as amended, with Bank of America, N.A. acting as agent for lenders named therein, including Bank of America, N.A., Silicon Valley Bank, Bank of the West, Zions Bancorporation, N.A. dba California Bank & Trust, and CitizensBarclays Bank N.A.PLC (the “Lenders”), for a secured credit facility in the form of a revolving line of credit of up to $69,750 with an option to increase the available amount to $86,500 upon the satisfaction of certain conditions$150,000 (the “Revolving Line of Credit”) and a term loan of $3,500 (the “Term Loan” and together with the Revolving Line of Credit, the “Credit Facility”). We may use borrowings under the Credit Facility for general working capital and corporate purposes. In general, amounts borrowed under the Credit Facility are secured by a lien against all of our assets, with certain exclusions.

 

As of September 30, 2017 and DecemberMarch 31, 2016, $5,000 and $15,000, respectively, was outstanding under the Revolving Line of Credit. Amounts2019, we had no amounts outstanding under the Revolving Line of Credit are classified within long-term debt in our condensed consolidated balance sheet as of September 30, 2017 as we do not expect to repayand $3,306 outstanding under the outstanding debt in the next twelve-month period. The Revolving Line of Credit requires quarterly payments of interest and matures on November 21, 2018, but may be prepaid in whole or part at any time.Term Loan. Amounts borrowed under the Revolving Line of Credit and Term Loan will bear at our election, a variable interest at the greater of LIBOR plus 2.5%1.75% - 3.5%2.75% or Lender’s Prime Rate plus 1.5%0.75% - 2.5%1.75% per year and we will pay a fee of 0.375%0.25% - 0.5% per year on any unused portion of the Revolving Line of Credit. As of September 30, 2017 and December 31, 2016, $1,094 and $1,969, respectively, was outstanding under the Term Loan. The Term Loan requires quarterly payments of interest and principal amortizing fully over the four-year-term such thatuntil it is repaid in full on the maturity date of November 21, 2018, but may be prepaid in whole or part at any time. Our Credit Facility will mature on April 3, 2023. Repayment of amounts borrowed under the Credit Facility may be accelerated in the event that we are in violation of the representations, warranties and covenants made in the Credit Agreement, including certain financial covenants set forth therein, and under other specified default events including, but not limited to, non-payment or inability to pay debt, breach of cross default provisions, insolvency provisions, and change of control.

Principal payments due under our Term Loan through 2018 are as follows:

Period

 

Principal
Payments

 

October 1, 2017 — December 31, 2017

 

$

219

 

January 1, 2018 — December 31, 2018

 

875

 

 

 

$

1,094

 

We areThe Company is subject to customary financial and non-financial covenants under the Credit Facility, 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 monthly liquiditycash on hand minimums. We were in compliance with all financial covenants

Principal payments due under our Term Loan through 2023 are as of September 30, 2017.follows:

 

 

Principal Payments

 

April 1, 2019—December 31, 2019

 

$

583

 

January 1, 2020—December 31, 2020

 

778

 

January 1, 2021—December 31, 2021

 

778

 

January 1, 2022—December 31, 2022

 

778

 

January 1, 2023—December 31, 2023

 

389

 

 

 

$

3,306

 

 

Debt issuance costs are amortized on a straight-line basis over the term of the Credit Facility. Amortization expense related to debt issuance costs, net of amounts capitalized, are included in interest and other expense net in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016. Amortization and interest expense capitalized during the three and nine months ended September 30, 2017 amounted to $159 and $585, respectively. Amortization and interest expense capitalized during the three and nine months ended September 30, 2016 amounted to $227 and $710, respectivelyMarch 31, 2019. Amortization and interest expense expensed during the three and nine months ended September 30, 2017March 31, 2019 amounted to $36 and $144, respectively. Amortization and interest expense expensed during the three and nine months ended September 30, 2016 amounted to $86 and $182, respectively.$56. The interest rate for ourthe Credit Facility for the ninethree months ended September 30, 2017 ranged from 3.5% to 3.8%March 31, 2019 was 4.2%.

 

Amortization expense for our debt issuance costs through 2018 is2023 are as follows:

 

Period

 

Amortization
Expense

 

October 1, 2017 — December 31, 2017

 

$

61

 

January 1, 2018 — December 31, 2018

 

217

 

 

 

$

278

 

 

 

Amortization 
Expense

 

April 1, 2019—December 31, 2019

 

$

343

 

January 1, 2020—December 31, 2020

 

457

 

January 1, 2021—December 31, 2021

 

457

 

January 1, 2022—December 31, 2022

 

457

 

January 1, 2023—December 31, 2023

 

120

 

 

 

$

1,834

 

 

10. Leases

We have operating and finance leases for corporate offices, datacenters, data communication equipment and database software. Our operating leases have remaining lease terms of less than one year to nine years and our finance leases have remaining lease terms of one month to two years. Some of our operating leases may include one or more options to renew and can extend the lease term from 1 year to 10 years. The exercise of operating lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Some of our operating lease agreements include options to terminate the leases upon written notice and may include early termination penalties. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. As of September 30, 2017March 31, 2019, assets recorded under finance leases were $12,280 and accumulated depreciation and amortization associated with finance leases was $3,809.

The components of lease expense were as follows:

 

 

Three Months 
Ended March 31,
 2019

 

Operating lease expense

 

$

885

 

Finance lease expense:

 

 

 

Depreciation and amortization of assets included in property and equipment, net

 

524

 

Interest on lease liabilities

 

56

 

Total finance lease expense

 

$

580

 

Supplemental cash flow information related to leases was as follows:

 

 

Three Months 
Ended March 31,
 2019

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

Operating cash flows from operating leases

 

$

(977

)

Operating cash flows from finance leases

 

(56

)

Financing cash flows from finance leases

 

(1,176

)

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

Operating leases

 

16,916

 

Operating lease ROU assets obtained in exchange for lease obligations include the effects of the adoption of ASC 842 effective January 1, 2019.

Other information related to leases was as follows:

March 31, 2019

Weighted average remaining lease term:

Operating leases

6.8 years

Financing leases

1.7 years

Weighted average discount rate:

Operating leases

5.3%

Finance leases

3.2%

Future minimum lease payments under non-cancellable leases as of March 31, 2019 as presented in accordance with ASC 842 were as follows:

 

 

Operating 
Leases

 

Finance 
Leases

 

April 1, 2019 – December 31, 2019

 

$

2,739

 

$

3,142

 

January 1, 2020—December 31, 2020

 

3,609

 

2,784

 

January 1, 2021—December 31, 2021

 

3,508

 

574

 

January 1, 2022—December 31, 2022

 

3,541

 

 

January 1, 2023—December 31, 2023

 

3,626

 

 

January 1, 2024—December 31, 2024

 

3,639

 

 

Thereafter

 

5,235

 

 

Total future minimum lease payments

 

25,897

 

6,500

 

Less: Imputed interest

 

(4,246

)

(182

)

Total

 

21,651

 

6,318

 

Current portion of operating and finance leases

 

2,736

 

3,843

 

Long-term portion of operating and finance leases

 

$

18,915

 

$

2,475

 

Future minimum lease payments under non-cancellable leases as of December 31, 2016,2018 as presented in accordance with ASC 840, Leases, were as follows:

 

 

Operating 
Leases

 

Capital 
Leases

 

January 1, 2019 – December 31, 2019

 

$

3,573

 

$

4,373

 

January 1, 2020—December 31, 2020

 

3,456

 

2,783

 

January 1, 2021—December 31, 2021

 

3,385

 

574

 

January 1, 2022—December 31, 2022

 

3,414

 

 

January 1, 2023—December 31, 2023

 

3,495

 

 

Thereafter

 

8,835

 

 

Minimum lease payments

 

$

26,158

 

7,730

 

Less: Amounts representing interest ranging from 1.3% to 7.7%

 

 

 

(236

)

Minimum lease payments

 

 

 

7,494

 

Current portion of capital leases

 

 

 

4,201

 

Long-term portion of capital leases

 

 

 

 

$

3,293

 

11. Notes payable

We enter into financed maintenance arrangements for some of our leased data communication equipment. Future minimum lease payments under notes payable as of March 31, 2019 were as follows:

 

 

Notes Payable

 

April 1, 2019 – December 31, 2019

 

$

1,775

 

January 1, 2020—December 31, 2020

 

1,541

 

January 1, 2021—December 31, 2021

 

95

 

Total future minimum payments

 

3,411

 

Less: Imputed interest

 

(59

)

Total

 

3,352

 

Current portion of note payable

 

2,204

 

Long-term portion of notes payable

 

$

1,148

 

12. Fair value measurement

The following table sets forth our financial assets and liabilities that are measured at fair value on a recurring basis:

At March 31, 2019

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Money market accounts

 

$

59,910

 

$

 

$

 

$

59,910

 

Marketable securities

 

4,463

 

36,920

 

 

41,383

 

Total assets

 

$

64,373

 

$

36,920

 

$

 

$

101,293

 

Liabilities:

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

 

$

 

$

961

 

$

961

 

Total liabilities

 

$

 

$

 

$

961

 

$

961

 

At December 31, 2018

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Money market accounts

 

$

137,723

 

$

 

$

 

$

137,723

 

Total assets

 

$

137,723

 

$

 

$

 

$

137,723

 

Liabilities:

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

 

$

 

$

961

 

$

961

 

Total liabilities

 

$

 

$

 

$

961

 

$

961

 

Our marketable securities utilize Level 1 and Level 2 inputs and consist primarily of corporate securities, which primarily include commercial paper and debt instruments including notes issued by foreign or domestic industrial and financial corporations and governments which pay in U.S. dollars and carry a rating of A or better. We have evaluated the carrying amount reflectedvarious types of securities in our investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs. Due to variations in trading volumes and the lack of quoted market prices in active markets, our fixed maturities are classified as Level 2 securities. The fair value of our fixed maturity marketable securities is derived through the use of a third-party pricing source using recent reported trades for identical or similar securities, making adjustments through the reporting date based upon available market observable data.

The Company’s contingent consideration obligation was initially recorded at fair value and the Company will revalue this obligation each reporting period until the related contingencies are resolved. The fair value measurement is estimated using probability-weighted discounted cash flow approaches that are based on significant unobservable inputs related to achievement of estimated annual sales and are reviewed quarterly. Significant changes to estimated annual sales and discount rates would result in corresponding changes in the accompanyingfair value of this obligation. There were no significant changes to the fair value of our contingent consideration liabilities during the three months ended March 31, 2019. The following table presents a reconciliation of the beginning and ending amounts related to the fair value of contingent consideration categorized as Level 3:

Balance, December 31, 2018

 

$

961

 

Payment of contingent consideration

 

 

Change in fair value

 

 

Balance, March 31, 2019

 

$

961

 

13. Income taxes

Income tax expense of $192 and $128 reflects an effective tax rate of 3.8% and 4.8% for the three months ended March 31, 2019 and 2018, respectively. Our effective tax rate differs from the statutory rate primarily due to our valuation allowance for the three months ended March 31, 2019 and 2018.

We operate within federal, state and international taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended period to resolve. We are subject to taxation in the United States and in various states. Our tax years 2015 and forward are subject to examination by the IRS and our tax years 2014 and forward are subject to examination by material state jurisdictions. However, due to prior year loss carryovers, the IRS and state tax authorities may examine any tax years for which the carryovers are used to offset future taxable income. We are currently subject to examination by the IRS for our 2015 tax year. Although the ultimate outcome is unknown, we believe that any adjustments that may result from examination is not likely to have a material adverse effect on our condensed consolidated balance sheets for the current portionresults of long-term debt and long-term debt approximates fair value (Level 2) based on the variable nature of the interest rates and lack of significant change to our credit risk.operations, financial position or cash flows.

 

8.14. Commitments and contingencies

 

Letters of credit

 

We have entered into Letter of Credit Authorization agreements (collectively, “Letters of Credit”), which are issued under our Credit Agreement. The Letters of Credit are irrevocable and serve as performance guarantees that will allow our customers to draw upon the available funds if we are in default. As of September 30, 2017,March 31, 2019, we have Letters of Credit totaling $6,275$12,498 that are scheduled to expire or renew withinover the next one-year period.two years. There have been no drafts drawn under these Letters of Credit as of September 30, 2017.March 31, 2019.

 

Legal proceedings

 

From time to time, we may be subject to claims, suits, investigations and proceedings arising out of the normal course of business. We are not currently a party to any litigation that we believe could have a material adverse effect on our business, financial position, results of operations or cash flows. Legal costs are expensed as incurred.

 

Other matters

 

We have received a claim from one of our venue partners with respect to contractual terms on our revenue share payments. The claim asserts that we have underpaid revenue share payments and related interest by approximately $4,600. We are currently in final settlement discussions with our venue partner. As of September 30, 2017,March 31, 2019, we have accrued for the probable and estimable losses that have been incurred, which have been recorded as general and administrative expenses in the condensed consolidated statements of operations. We are not currently a party to any other claims that we believe could have a material adverse effect on our business, financial position, results of operations or cash flows.

9.15. Stock incentive plans

 

In March 2011, our board of directors approved the 2011 Equity Incentive Plan (“2011 Plan”). The 2011 Plan provides for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted shares of our common stock, stock units, and performance cash awards. As of January 1st of each year, the number of shares of common stock reserved for issuance under the 2011 Plan shall automatically be increased by a number equal to the lesser of (a) 4.5% of the total number of shares of common stock then outstanding, (b) 3,000,000 shares of common stock or (c) as determined by our board of directors. The automatic “evergreen” share reserve increase feature will be terminated after January 2018, so that no additional automatic annual share increases will occur thereafter. As of September 30, 2017,March 31, 2019, options to purchase 1,234,593approximately 290,000 shares of common stock and RSUs covering 3,469,449approximately 970,000 shares of common stock were outstanding under the 2011 Plan.

No further awards will be made under our Amended and Restated 2001 Stock Incentive Plan (“2001 Plan”), and it will be terminated. Options outstanding under the 2001 Plan will continue to be governed by their existing terms.

 

Stock-based compensation expense is allocated as follows on the accompanying condensed consolidated statements of operations:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2017

 

2016

 

2017

 

2016

 

 

Three Months Ended
March 31,

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

Network operations

 

$

552

 

$

483

 

$

1,660

 

$

1,660

 

 

$

506

 

$

537

 

Development and technology

 

275

 

267

 

825

 

830

 

 

303

 

278

 

Selling and marketing

 

524

 

424

 

1,589

 

1,431

 

 

529

 

473

 

General and administrative

 

2,333

 

1,832

 

6,942

 

5,769

 

 

1,006

 

1,838

 

Total stock-based compensation

 

$

3,684

 

$

3,006

 

$

11,016

 

$

9,690

 

Total stock-based compensation expense

 

$

2,344

 

$

3,126

 

 

During the three and nine months ended September 30, 2017,March 31, 2019 and 2018, we capitalized $163$230 and $530, respectively, of stock-based compensation expense. During the three and nine months ended September 30, 2016, we capitalized $182 and $553,$186, respectively, of stock-based compensation expense.

 

Stock option awards

 

We grant stock option awards to both employees and non-employee directors. The grant date for these awards is the same as the measurement date. The stock option awards generally vest over a four-year service period with 25% vesting when the individual completes 12 months of continuous service and the remaining 75% vesting monthly thereafter. These awards are valued as of the measurement date and the stock-based compensation expense, net of forfeitures, is recognized on a straight-line basis over the requisite service period.

 

A summary of the stock option activity is as follows:

 

 

 

Number of
Options
(000’s)

 

Weighted
Average
Exercise
Price

 

Weighted-
Average
Remaining
Contract
Life
(years)

 

Aggregate
Intrinsic
Value

 

Outstanding at December 31, 2016

 

3,084

 

$

7.04

 

3.8

 

$

17,145

 

Exercised

 

(1,665

)

$

4.80

 

 

 

 

 

Canceled/forfeited

 

(20

)

$

6.69

 

 

 

 

 

Outstanding at September 30, 2017

 

1,399

 

$

9.70

 

4.0

 

$

16,318

 

Exercisable at September 30, 2017

 

1,385

 

$

9.74

 

4.0

 

$

16,105

 

 

 

Number of
Options
(000’s)

 

Weighted
Average
Exercise
Price

 

Weighted-
Average
Remaining
Contract
Life
(years)

 

Aggregate
Intrinsic
Value

 

Outstanding at December 31, 2018

 

304

 

$

7.49

 

3.8

 

$

3,970

 

Exercised

 

(4

)

$

2.01

 

 

 

 

 

Canceled/forfeited

 

 

$

 

 

 

 

 

Outstanding and exercisable at March 31, 2019

 

300

 

$

7.55

 

3.6

 

$

4,766

 

 

Restricted stock unit awards

 

We grant time-basedservice-based RSUs to executive and non-executive personnel and non-employee directors. The time-basedservice-based RSUs granted to executive and non-executive personnel generally vest over a three-year period subject to continuous service on each vesting date. The time-basedservice-based RSUs for our non-employee directors generally vest over a one-year period for existing members and 25%33.3% per year over a four-yearthree-year period for new members subject to continuous service on each vesting date.

We grant performance-based RSUs to executive personnel. These awards vest subject to certain performance objectives based on the Company’s revenue growth, and/or Adjusted EBITDA growth, and/or relative total stockholder return achieved during the specified performance period and certain long-term service conditions. The maximum number of RSUs that may vest is determined based on actual Company achievement and performance-based RSUs generally vest over a three-year period subject to continuous service on each vesting date. We recognize stock-based compensation expense for performance-based RSUs when we believe that it is probable that the performance objectives will be met.

A summary of the RSU activity is as follows:

 

 

Number of Shares
(000’s)

 

Weighted Average
Grant-Date Fair
Value

 

 

Number of Shares
(000’s)

 

Weighted Average
Grant-Date Fair
Value

 

Non-vested at December 31, 2016

 

3,825

 

$

6.55

 

Non-vested at December 31, 2018

 

3,119

 

$

8.60

 

Granted(1)

 

598

 

$

12.69

 

 

517

 

$

23.36

 

Vested

 

(815

)

$

7.36

 

 

(2,656

)

$

6.58

 

Canceled/forfeited

 

(139

)

$

8.85

 

 

(10

)

$

25.51

 

Non-vested at September 30, 2017

 

3,469

 

$

7.33

 

Non-vested at March 31, 2019

 

970

 

$

21.80

 


(1)         The RSUs granted to all of our named executive officers in 2017 were subject to satisfaction of specified service-based and performance-based conditions. The performance objectives were subject to under- or over- achievement on a sliding scale, with a threshold of 50% of the target number of RSUs and a maximum of 150% of the target RSUs. In February 2019, our Compensation Committee determined actual achievement of the 2017 performance-based RSUs resulting in additional RSUs granted of approximately 29,000 at a grant-date fair value of $11.94 per share during the three months ended March 31, 2019.

 

During the ninethree months ended September 30, 2017,March 31, 2019, 814,583approximately 2,656,000 shares of RSUs vested. The Company issued 560,661approximately 1,306,000 shares and the remaining shares were withheld to pay minimum statutory federal, state, and local employment payroll taxes on those vested awards.

 

10.16. Net loss per share attributable to common stockholders

 

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

Three Months Ended
March 31,

 

 

2017

 

2016

 

2017

 

2016

 

 

2019

 

2018

 

 

(in thousands)

 

 

(in thousands)

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders, basic and diluted

 

$

(3,450

)

$

(5,709

)

$

(18,347

)

$

(22,959

)

 

$

(5,153

)

$

(3,229

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common stock, basic and diluted

 

40,336

 

38,189

 

39,468

 

37,897

 

 

43,527

 

41,330

 

Net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.09

)

$

(0.15

)

$

(0.46

)

$

(0.61

)

 

$

(0.12

)

$

(0.08

)

 

For the three and nine months ended September 30, 2017March 31, 2019 and 2016,2018, we excluded all assumed exercises of stock options and the assumed issuance of common stock under RSUs from the computation of diluted net loss per share as the effect would be anti-dilutive due to the net loss for the period. For the three months ended March 31, 2019, we also excluded the shares that would be issuable assuming conversion of the Convertible Notes and the shares for the capped call as their effect would be anti-dilutive. Diluted EPS for our Convertible Notes is calculated under the treasury method in accordance with ASC 260, Earnings Per Share.

 

On April 1, 2013, the Company approved a stock repurchase program to repurchase up to $10,000 of the Company’s common stock in the open market, exclusive of any commissions, markups or expenses. The stock repurchased will be retired and will resume the status of authorized but unissued shares of common stock. The Company did not repurchase any of our common stock during the three and nine months ended September 30, 2017.March 31, 2019. As of September 30, 2017,March 31, 2019, the remaining approved amount for repurchases was approximately $5,180.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

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 December 31, 2016,2018, filed with the Securities Exchange Commission on March 13, 2017.1, 2019.

 

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,” “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; 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 Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2016.2018. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as the date hereof. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that may cause actual performance and results to differ materially from those predicted. Reported results should not be considered an indication of future performance. Except as required by law, we undertake no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

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, stadiums/arenas, military bases, multifamily properties, universities, convention centers, and office campuses; we build high-quality wireless networks such as distributed antenna systems (“DAS”), Wi-Fi, and small cells at those venues; and we monetize the wireless networks through a number of products and services.

Over the past 1517 years, we’ve built a global networkfootprint of wireless networks that we estimate reaches more than a billion consumers annually. We operate 59 DAS networks containing approximately 22,20031,100 DAS nodes. Wenodes, and believe we are the largest operator of indoor DAS providernetworks in the world. Our Wi-Fi network, which 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), includes approximately 1.5over 1.2 million commercial Wi-Fi hotspots in more than 100 countries around the world. We also operate Wi-Fi and internet protocol television (“IPTV”) networks at 60 U.S. Army, Air Force, and Marine bases around the world.

 

We generate revenue from our wireless networks in a number of ways, including our multifamily, DAS, small cells and wholesale Wi-Fi offerings, which are targeted towards businesses, and our military, retail, and advertising offerings, which are targeted towards consumers.

 

Military/multifamily revenue, which is driven by military personnel who purchase Wi-Fi services on military bases, and multifamily revenue, which is driven by property owners who purchase network installation services and recurring monthly Wi-Fi services and support, accounted for approximately 39% of our total revenue for the three months ended March 31, 2019. As of March 31, 2019, we have grown our military subscriber base to approximately 147,000, an increase of approximately 3.5% over the prior year comparative period. Retail revenue, which is driven by consumers who purchase a recurring monthly subscription plan or one-time Wi-Fi access, accounted for approximately 6% of our total revenue for the three months ended March 31, 2019. As of March 31, 2019, our retail subscriber base was approximately 113,000, a decrease of approximately 32.7% over the prior year comparative period.

We generate wholesale Wi-Fi revenue from telecom operators that pay us build-out fees and recurring access fees so that their cellular customers may use our DAS or small cell networks at locations where we manage and operate the wireless network. For the three months ended September 30, 2017,March 31, 2019, DAS revenue accounted for approximately 41%36% of our revenue.

 

Military revenue, which is driven by military personnel who purchase broadband and IPTV services on military bases accounted for approximately 26% of our total revenue for the three months ended September 30, 2017. As of September 30, 2017, we have grown our military subscriber base to approximately 133,000 from approximately 86,000 in the prior year comparative period. Retail revenue, which is driven by consumers who purchase a recurring monthly subscription plan or one-time Wi-Fi access, accounted for approximately 12% of our total revenue for the three months ended September 30, 2017. As of September 30, 2017, our retail subscriber base was approximately 194,000, an increase of approximately 4.9% over the prior year comparative period.

Our enterprisewholesale customers such as telecom operators, cable companies, technology companies, and enterprise software/services companies, pay us usage-based Wi-Fi network access and software licensing fees to allow their customers’ access to our footprint worldwide. Wholesale Wi-Fi revenue also includes financial institutions and other enterprise customers who provide Boingo as a value-added service for their customers. For the three months ended September 30, 2017,March 31, 2019, wholesale Wi-Fi revenue accounted for approximately 15%17% of our revenue.

 

We also generate revenue from advertisers that seek to reach consumers via sponsored Wi-Fi access. For the three months ended September 30, 2017,March 31, 2019, advertising and other revenue accounted for approximately 6%2% of our revenue.

 

Our customer agreements for certain DAS networks include both a fixed and variable fee structure with the highest percentage of sales typically occurring in the fourth quarter of each year and the lowest percentage of sales occurring in the first quarter of each year. Our advertising business is similarly weighted tomultifamily network installation services have historically been performed for the fourth quarter,student housing market with the highest percentage of salesrevenues typically occurring in the fourththird quarter and the lowest percentage of sales occurring in the first quarter.each year. We expect these trends to continue. Our other products haveWe do not experienced anyexpect significant seasonal impact.impact for any of our other products.

 

In support of our overall business strategy, we are focused on the following objectives:

 

·                       expand our footprint of managed and operated and aggregated networks;

 

·                       leverage our neutral-host business model to grow DAS, small cell, and wholesale roaming partnerships;

 

·                       expand our carrier offload relationships;

·                       maximize our military business through recurring subscriber fees and shorter-term transaction plans, as well as strategic build-outs; and

 

·                       increase our brand awareness.

 

Key Business Metrics

 

In addition to monitoring traditional financial measures, we also monitor our operating performance using key performance indicators. There are fourOur key metrics that we use to monitor results and activity in the business as follows: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.

 

Subscribersmilitary and Subscribersretail.  These metrics represent the number of paying customers who are on a month-to-month subscription plan at a given period end.

 

Connects.  This metric shows how often individuals connect to our global Wi-Fi network in a given period. The connects include wholesale and retail customers in both customer pay locations and customer free locations where we are a paid service provider or receive sponsorship or promotion fees. We count each connect as a single connect regardless of how many times that individual accesses the network at a given venue during their 24 hour24-hour period. This measure is an indicator of paid activity throughout our network.

 

Revenue

 

Our revenue consists of DASmilitary/multifamily revenue, militaryretail revenue, retailDAS revenue, wholesale Wi-Fi revenue, and advertising and other revenue.

 

Military/multifamily and retail.  We generate revenue from sales to military and 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 multifamily revenue from property owners who pay us a recurring monthly fee for Wi-Fi services including building and maintaining the network that supports these services and providing support for residents and employees of the properties.

DAS.  We generate revenue from telecom operator partners that pay us network build-out fees, inclusive of network upgrades, and access fees for our DAS and small cell networks.

 

Military and retail.  We generate revenue from sales to military and retail individuals of month-to-month network access subscriptions that automatically renew, primarily through charge card transactions. We also generate revenue from sales of hourly, daily or other single-use access to military and retail individuals primarily through charge card transactions.

Wholesale—Wi-Fi.Wi-Fi.  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.

 

Advertising and other.  We generate revenue from 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. In addition, we receive revenue from partners in certain venues where we manage and operate the Wi-Fi network.

 

Results of Operations

 

The following tables set forth our results of operations for the specified periods:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2017

 

2016

 

2017

 

2016

 

 

Three Months Ended
March 31,

 

 

(unaudited)

 

 

2019

 

2018

 

 

(in thousands)

 

 

(unaudited)
(in thousands)

 

Consolidated Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

53,655

 

$

40,796

 

$

147,021

 

$

114,370

 

 

$

66,473

 

$

58,159

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network access

 

24,143

 

17,982

 

64,655

 

49,575

 

 

31,411

 

26,565

 

Network operations

 

11,625

 

10,698

 

34,556

 

31,566

 

 

14,142

 

12,846

 

Development and technology

 

6,817

 

5,394

 

19,814

 

16,014

 

 

8,999

 

7,425

 

Selling and marketing

 

5,201

 

4,553

 

15,188

 

14,103

 

 

5,867

 

5,463

 

General and administrative

 

8,006

 

6,701

 

27,372

 

22,553

 

 

8,294

 

7,699

 

Amortization of intangible assets

 

852

 

855

 

2,673

 

2,582

 

 

1,131

 

727

 

Total costs and operating expenses

 

56,644

 

46,183

 

164,258

 

136,393

 

 

69,844

 

60,725

 

Loss from operations

 

(2,989

)

(5,387

)

(17,237

)

(22,023

)

 

(3,371

)

(2,566

)

Interest and other expense, net

 

(84

)

(117

)

(126

)

(299

)

 

(1,676

)

(79

)

Loss before income taxes

 

(3,073

)

(5,504

)

(17,393

)

(22,322

)

 

(5,047

)

(2,645

)

Income tax expense

 

167

 

95

 

507

 

457

 

 

192

 

128

 

Net loss

 

(3,240

)

(5,599

)

(17,870

)

(22,779

)

 

(5,239

)

(2,773

)

Net income attributable to non-controlling interests

 

210

 

110

 

477

 

180

 

Net (loss) income attributable to non-controlling interests

 

(86

)

456

 

Net loss attributable to common stockholders

 

$

(3,450

)

$

(5,709

)

$

(18,347

)

$

(22,959

)

 

$

(5,153

)

$

(3,229

)

 

Depreciation and amortization expense included in costs and operating expenses:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2017

 

2016

 

2017

 

2016

 

 

Three Months Ended
March 31,

 

 

(unaudited)

 

 

2019

 

2018

 

 

(in thousands)

 

 

(unaudited)
(in thousands)

 

Network access

 

$

11,625

 

$

7,227

 

$

29,354

 

$

18,689

 

 

$

11,582

 

$

13,587

 

Network operations

 

3,987

 

3,733

 

12,273

 

10,183

 

 

4,386

 

4,256

 

Development and technology

 

2,375

 

1,881

 

6,840

 

5,172

 

 

2,779

 

2,508

 

General and administrative

 

258

 

252

 

777

 

757

 

 

262

 

255

 

Total(1)

 

$

18,245

 

$

13,093

 

$

49,244

 

$

34,801

 

 

$

19,009

 

$

20,606

 

 


(1)         The $5.2$1.6 million and $14.4 million increasedecrease in depreciation and amortization of property and equipment for the three and nine months ended September 30, 2017, respectively,March 31, 2019, as compared to the three and nine months ended September 30, 2016,March 31, 2018, is primarily a result of our increased fixed assets from ourdue to the $2.0 million decrease in depreciation expense related to certain DAS build-out projects Wi-Fi networks,that were depreciated over a longer estimated useful life resulting from the successful extension of certain venue agreements, which was partially offset by depreciation expense for new DAS build-out projects that were completed and software developmentlaunched in 20162018 and 2017.2019.

Stock-based compensation expense included in costs and operating expenses:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

(unaudited)

 

 

 

(in thousands)

 

Network operations

 

$

552

 

$

483

 

$

1,660

 

$

1,660

 

Development and technology

 

275

 

267

 

825

 

830

 

Selling and marketing

 

524

 

424

 

1,589

 

1,431

 

General and administrative

 

2,333

 

1,832

 

6,942

 

5,769

 

Total(2)

 

$

3,684

 

$

3,006

 

$

11,016

 

$

9,690

 

 

 

Three Months Ended
March 31,

 

 

 

2019

 

2018

 

 

 

(unaudited)
(in thousands)

 

Network operations

 

$

506

 

$

537

 

Development and technology

 

303

 

278

 

Selling and marketing

 

529

 

473

 

General and administrative

 

1,006

 

1,838

 

Total(2)

 

$

2,344

 

$

3,126

 

 


(2)         The $0.7$0.8 million and $1.3 million increasedecrease in stock-basedstock compensation expense for the three and nine months ended September 30, 2017,March 31, 2019, as compared to the three and nine months ended September 30, 2016,March 31, 2018, is primarily due primarily to the decrease in stock-based compensation expense related to the multi-year 2016 RSUs for our performance-based restricted stock units (“RSU”). We recognize stock-based compensation expense for performance-basedprevious Chief Executive Officer and Chief Financial Officer, which became fully vested in February 2019. No similar multi-year RSUs whenwere granted to any of our executives after 2016. During each of the three months ended March 31, 2019 and 2018, we believe that it is probable that the performance objectives will be met and based upon the expected achievement levels. We capitalized $0.2 million and $0.5 million of stock-based compensation expense the three and nine months ended September 30, 2017. We capitalized $0.2 million and $0.6 million of stock-based compensation expense the three and nine months ended September 30, 2016.expense.

 

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
September 30,

 

Nine Months Ended
September 30,

 

 

2017

 

2016

 

2017

 

2016

 

 

Three Months Ended
March 31,

 

 

(unaudited)

 

 

2019

 

2018

 

 

(as a percentage of revenue)

 

 

(unaudited)
(as a percentage of revenue)

 

Consolidated Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

100.0

%

100.0

%

100.0

%

100.0

%

 

100.0

%

100.0

%

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network access

 

45.0

 

44.1

 

44.0

 

43.3

 

 

47.3

 

45.7

 

Network operations

 

21.7

 

26.2

 

23.5

 

27.6

 

 

21.3

 

22.1

 

Development and technology

 

12.7

 

13.2

 

13.5

 

14.0

 

 

13.5

 

12.8

 

Selling and marketing

 

9.7

 

11.2

 

10.3

 

12.3

 

 

8.8

 

9.4

 

General and administrative

 

14.9

 

16.4

 

18.6

 

19.7

 

 

12.5

 

13.2

 

Amortization of intangible assets

 

1.6

 

2.1

 

1.8

 

2.3

 

 

1.7

 

1.3

 

Total costs and operating expenses

 

105.6

 

113.2

 

111.7

 

119.3

 

 

105.1

 

104.4

 

Loss from operations

 

(5.6

)

(13.2

)

(11.7

)

(19.3

)

 

(5.1

)

(4.4

)

Interest and other expense, net

 

(0.2

)

(0.3

)

(0.1

)

(0.3

)

 

(2.5

)

(0.1

)

Loss before income taxes

 

(5.7

)

(13.5

)

(11.8

)

(19.5

)

 

(7.6

)

(4.5

)

Income tax expense

 

0.3

 

0.2

 

0.3

 

0.4

 

 

0.3

 

0.2

 

Net loss

 

(6.0

)

(13.7

)

(12.2

)

(19.9

)

 

(7.9

)

(4.8

)

Net income attributable to non-controlling interests

 

0.4

 

0.3

 

0.3

 

0.2

 

Net (loss) income attributable to non-controlling interests

 

(0.1

)

0.8

 

Net loss attributable to common stockholders

 

(6.4

)%

(14.0

)%

(12.5

)%

(20.1

)%

 

(7.8

)%

(5.6

)%

 

Three Months ended September 30, 2017March 31, 2019 and 20162018

 

Revenue

 

 

Three Months Ended September 30,

 

 

Three Months Ended March 31,

 

 

2017

 

2016

 

Change

 

% Change

 

 

2019

 

2018

 

Change

 

% Change

 

 

(unaudited)

 

 

(unaudited)

 

 

(in thousands, except percentages)

 

 

(in thousands, except percentages)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Military/multifamily

 

$

25,897

 

$

15,854

 

$

10,043

 

63.3

 

DAS

 

$

21,755

 

$

15,959

 

$

5,796

 

36.3

 

 

24,095

 

23,645

 

450

 

1.9

 

Military

 

13,946

 

10,137

 

3,809

 

37.6

 

Wholesale—Wi-Fi

 

8,307

 

5,888

 

2,419

 

41.1

 

 

11,020

 

11,149

 

(129

)

(1.2

)

Retail

 

6,234

 

6,619

 

(385

)

(5.8

)

 

3,926

 

5,310

 

(1,384

)

(26.1

)

Advertising and other

 

3,413

 

2,193

 

1,220

 

55.6

 

 

1,535

 

2,201

 

(666

)

(30.3

)

Total revenue

 

$

53,655

 

$

40,796

 

$

12,859

 

31.5

 

 

$

66,473

 

$

58,159

 

$

8,314

 

14.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key business metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DAS nodes

 

22.2

 

17.7

 

4.5

 

25.4

 

 

31.1

 

24.2

 

6.9

 

28.5

 

Subscribers—military

 

133

 

86

 

47

 

54.7

 

 

147

 

142

 

5

 

3.5

 

Subscribers—retail

 

194

 

185

 

9

 

4.9

 

 

113

 

168

 

(55

)

(32.7

)

Connects

 

64,875

 

40,263

 

24,612

 

61.1

 

 

78,625

 

65,901

 

12,724

 

19.3

 

DAS.Military/multifamily.  DASMilitary/multifamily revenue increased $5.8$10.0 million, or 36.3%63.3%, for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016,March 31, 2018, due to a $5.3 million increase from new build-out projects in our managed and operated locations and a $0.5$7.4 million increase in access feesmultifamily revenues resulting from our telecom operators.

Military.  Military revenue increased $3.8 million, or 37.6%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, due toElauwit Networks, LLC acquisition in August 2018, and a $5.0$2.6 million increase in military subscriber revenue, which was driven primarily by the increase in military subscribers and a 3.0%11.9% increase in the average monthly revenue per military subscriber in 20172019 compared to 2016.2018.

DAS.  DAS revenue increased $0.5 million, or 1.9%, for the three months ended March 31, 2019, as compared to the three months ended March 31, 2018, due to a $1.4 million increase in access fees from our telecom operators. The increase was partially offset by a $1.2$0.9 million decrease from build-out projects in military single-use revenue.our managed and operated locations, which was primarily due to the successful renewal of certain of our customer contracts resulting in the reamortization of the remaining deferred build revenues over a longer contract term.

 

WholesaleWi-Fi.  Wholesale Wi-Fi revenue increased $2.4decreased $0.1 million, or 41.1%,1.2% for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016, primarilyMarch 31, 2018, due to a $1.6$0.5 million increasedecrease in partner usage based fees, andwhich was partially offset by a $0.8$0.4 million increase in fees primarily earned from our venue partners who pay us to provide a Wi-Fi infrastructure that we install, manage and operate at their venues.

 

Retail.  Retail revenue decreased $0.4$1.4 million, or 5.8%26.1%, for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016, primarilyMarch 31, 2018, due to a $0.5$1.1 million decrease in retail subscriber revenue, which was driven primarily by the decrease in retail subscribers, and a $0.3 million decrease in retail single-use revenue.

 

Advertising and other.  Advertising and other revenue increased $1.2decreased $0.7 million , or 55.6%,30.3%  for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016, primarilyMarch 31, 2018, due to a $1.1$0.7 million increasedecrease in advertising sales at our managed and operated locations.locations resulting from an decrease in the number of premium ad units sold.

 

Costs and Operating Expenses

 

 

Three Months Ended September 30,

 

 

Three Months Ended March 31,

 

 

2017

 

2016

 

Change

 

% Change

 

 

2019

 

2018

 

Change

 

% Change

 

 

(unaudited)

 

 

(unaudited)

 

 

(in thousands, except percentages)

 

 

(in thousands, except percentages)

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network access

 

$

24,143

 

$

17,982

 

$

6,161

 

34.3

 

 

$

31,411

 

$

26,565

 

$

4,846

 

18.2

 

Network operations

 

11,625

 

10,698

 

927

 

8.7

 

 

14,142

 

12,846

 

1,296

 

10.1

 

Development and technology

 

6,817

 

5,394

 

1,423

 

26.4

 

 

8,999

 

7,425

 

1,574

 

21.2

 

Selling and marketing

 

5,201

 

4,553

 

648

 

14.2

 

 

5,867

 

5,463

 

404

 

7.4

 

General and administrative

 

8,006

 

6,701

 

1,305

 

19.5

 

 

8,294

 

7,699

 

595

 

7.7

 

Amortization of intangible assets

 

852

 

855

 

(3

)

(0.4

)

 

1,131

 

727

 

404

 

55.6

 

Total costs and operating expenses

 

$

56,644

 

$

46,183

 

$

10,461

 

22.7

 

 

$

69,844

 

$

60,725

 

$

9,119

 

15.0

 

 

Network access. Network access costs increased $6.2$4.8 million, or 34.3%18.2%, for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016.March 31, 2018. The increase is primarily due to a $4.4$6.1 million increase in direct cost of sales and a $0.7 million increase in other costs of revenue. The increases were partially offset by a $2.0 million decrease in depreciation expenseexpense. Network access costs include $6.2 million of expenses related to our increased fixed assets from our DAS build-out projects and a $1.5 million increasemultifamily operations, which we acquired in revenue share paid to venuesAugust 2018 in our managed and operated locations.the Elauwit acquisition.

 

Network operations. Network operations expenses increased $0.9$1.3 million, or 8.7%10.1%, for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016,March 31, 2018, primarily due to a $0.6$1.1 million increase in personnel related expenses and a $0.3 million increase in depreciation expensenetwork maintenance expenses. Network operations include $1.0 million of expenses related to our increased fixed assets.multifamily operations, which we acquired in August 2018.

 

Development and technology. Development and technology expenses increased $1.4$1.6 million, or 26.4%21.2%, for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016,March 31, 2018, primarily due to a $0.8$0.4 million increase in personnel related expenses, a $0.5$0.3 million in hardware and software maintenance expenses, a $0.3 million increase in depreciation expense related to our increased fixed assets, and a $0.2 million increase in cloud computingconsulting expenses. Development and technology expenses include $0.4 million of expenses related to our multifamily operations, which we acquired in August 2018.

Selling and marketing. Selling and marketing expenses increased $0.6$0.4 million, or 14.2%7.4%, for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016,March 31, 2018, primarily due to a $0.6$0.5 million increase in personnel related expenses. Selling and marketing expenses include $0.5 million of expenses related to our multifamily operations, which we acquired in August 2018.

General and administrative.  General and administrative expenses increased $1.3$0.6 million, or 19.5%7.7%, for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016,March 31, 2018, primarily due to a $1.1$0.3 million increase in personnel related expenses, which wasis inclusive of a $0.5the $0.8 million increasedecrease in stock-based compensation expense and a $0.3the federal, state, and local employment payroll taxes related to our RSUs that vested during the period. General and administrative expenses include $0.8 million increaseof expenses related to our multifamily operations, which we acquired in professional services fees.August 2018.

 

Amortization of intangible assets.  Amortization of intangible assets expense remained relatively consistentincreased $0.4 million, or 55.6% for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016.March 31, 2018, primarily due to the $0.6 million increase resulting from our Elauwit acquisition in August 2018.

 

Interest and Other Expense, Net

 

There were no significant changes in interestInterest and other expense netincreased $1.6 million, or 2,021.5%, for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016. We capitalized $0.2 million ofMarch 31, 2018, primarily due to interest expense forincurred related to the Convertible Notes we issued in October 2018, which was partially offset by increased interest income related to our higher cash and cash equivalents and marketable securities balances in 2019 compared to 2018. During the three months ended September, 30, 2017March 31, 2019 and 2016, respectively.2018, we capitalized $0.5 million and $0.1 million, respectively, of interest expense.

 

Income Tax Expense

 

IncomeThere were no significant changes in income tax expense and our effective tax rate remained relatively consistent for the three months ended September 30, 2017March 31, 2019, as compared to the three months ended and 2016.March 31, 2018.

 

Non-controlling Interests

 

There were no significant changes in non-controllingNon-controlling interests decreased $0.5 million, or 118.9% for the three months ended September 30, 2017,March 31, 2019, as compared to the three months ended September 30, 2016.March 31, 2018.

 

Net Loss Attributable to Common Stockholders

 

Our net loss attributable to common stockholders for the three months ended September 30, 2017 decreasedMarch 31, 2019 increased as compared to the three months ended September 30, 2016,March 31, 2018, primarily due to the $9.1 million increase in costs and operating expenses and the $1.6 million increase in interest and other expense, net. The increases were partially offset by the $8.3 million increase in revenues and the $0.5 million decrease in non-controlling interests. Our diluted net loss per share increased primarily as a result of the $12.9 million increase in revenues, which was partially offset by the $10.5 million increase in costs and operating expenses. Our diluted net loss per share decreased primarily as a result of the decrease in our net loss.

Nine Months ended September 30, 2017 and 2016

Revenue

 

 

Nine Months Ended September 30,

 

 

 

2017

 

2016

 

Change

 

% Change

 

 

 

(unaudited)

 

 

 

(in thousands, except percentages)

 

Revenue:

 

 

 

 

 

 

 

 

 

DAS

 

$

56,563

 

$

40,957

 

$

15,606

 

38.1

 

Military

 

40,029

 

28,969

 

11,060

 

38.2

 

Wholesale—Wi-Fi

 

22,438

 

16,031

 

6,407

 

40.0

 

Retail

 

19,007

 

20,100

 

(1,093

)

(5.4

)

Advertising and other

 

8,984

 

8,313

 

671

 

8.1

 

Total revenue

 

$

147,021

 

$

114,370

 

$

32,651

 

28.5

 

 

 

 

 

 

 

 

 

 

 

Key business metrics:

 

 

 

 

 

 

 

 

 

DAS nodes

 

22.2

 

17.7

 

4.5

 

25.4

 

Subscribers—military

 

133

 

86

 

47

 

54.7

 

Subscribers—retail

 

194

 

185

 

9

 

4.9

 

Connects

 

160,082

 

102,515

 

57,567

 

56.2

 

DAS.  DAS revenue increased $15.6 million, or 38.1%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, due to a $13.6 million increase from new build-out projects in our managed and operated locations and a $2.0 million increase in access fees from our telecom operators.

Military.  Military revenue increased $11.1 million, or 38.2%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, due to a $14.5 million increase in military subscriber revenue, which was driven primarily

by the increase in military subscribers partially offset by a 2.2% decrease in the average monthly revenue per military subscriber in 2017 compared to 2016. The increase was partially offset by a $3.4 million decrease in military single-use revenue.

WholesaleWi-Fi.  Wholesale Wi-Fi revenue increased $6.4 million, or 40.0%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to a $5.1 million increase in partner usage based fees and a $1.3 million increase in fees primarily earned from our venue partners who pay us to provide a Wi-Fi infrastructure that we install, manage and operate at their venues.

Retail.  Retail revenue decreased $1.1 million, or 5.4%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to a $1.2 million decrease in retail single-use revenue.

Advertising and other.  Advertising and other revenue increased $0.7 million, or 8.1%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to a $0.5 million increase in revenues from other service agreements.

Costs and Operating Expenses

 

 

Nine Months Ended September 30,

 

 

 

2017

 

2016

 

Change

 

% Change

 

 

 

(unaudited)

 

 

 

(in thousands, except percentages)

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

Network access

 

$

64,655

 

$

49,575

 

$

15,080

 

30.4

 

Network operations

 

34,556

 

31,566

 

2,990

 

9.5

 

Development and technology

 

19,814

 

16,014

 

3,800

 

23.7

 

Selling and marketing

 

15,188

 

14,103

 

1,085

 

7.7

 

General and administrative

 

27,372

 

22,553

 

4,819

 

21.4

 

Amortization of intangible assets

 

2,673

 

2,582

 

91

 

3.5

 

Total costs and operating expenses

 

$

164,258

 

$

136,393

 

$

27,865

 

20.4

 

Network access. Network access costs increased $15.1 million, or 30.4%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. The increase is due to a $10.7 million increase in depreciation expense related to our increased fixed assets from our DAS build-out projects and a $4.4 million increase in revenue share paid to venues in our managed and operated locations.

Network operations. Network operations expenses increased $3.0 million, or 9.5%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, due to a $2.1 million increase in depreciation expense related to our increased fixed assets, a $0.6 million increase in personnel related expenses, and a $0.6 million increase in other expenses. The increases were partially offset by a $0.3 million decrease in network connectivity expenses.

Development and technology. Development and technology expenses increased $3.8 million, or 23.7%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to a $1.7 million increase in depreciation expense related to our increased fixed assets, a $1.4 million increase in personnel related expenses, and a $0.6 million increase in cloud computing expenses.

Selling and marketing. Selling and marketing expenses increased $1.1 million, or 7.7%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to a $1.2 million increase in personnel related expenses.

General and administrative.  General and administrative expenses increased $4.8 million, or 21.4%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to a $2.8 million settlement expense accrual related to a claim from one of our venue partners recorded during the nine months ended September 30, 2017, a $2.0 million increase in personnel related expenses, which was inclusive of a $1.2 million increase in stock-based compensation, a $0.8 million increase in professional service fees expenses, a $0.5 million increase in outside service fees, and a $0.4 million increase in consulting expenses. The increases were partially offset by $1.4 million of costs we incurred during the nine months ended September 30, 2016 on our contested proxy election for the 2016 annual meeting of of stockholders.

Amortization of intangible assets.  Amortization of intangible assets expense remained relatively consistent for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016.

Interest and Other Expense, Net

There were no significant changes in interest and other expense, net, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. During the nine months ended September 30, 2017 and 2016, we capitalized $0.6 million and $0.7 million, respectively, of interest expense.

Income Tax Expense

Income tax expense and our effective tax rate remained relatively consistent for the nine months ended September 30, 2017 and 2016.

Non-controlling Interests

Non-controlling interests increased $0.3 million or 165.0%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, resulting from increased net income for a subsidiary from DAS build-out projects completed in 2017.

Net Loss Attributable to Common Stockholders

Our net loss for the nine months ended September 30, 2017 decreased as compared to the nine months ended September 30, 2016, primarily as a result of the $32.7 million increase in revenues, which was partially offset by the $27.9 million increase in costs and operating expenses. Our diluted net loss per share decreased primarily as a result of the decrease in our net loss.

 

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 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 the United States (“GAAP”) financial measures to supplement their 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) settlement expense related to our claim from one of our venue partners and charges related to our contested proxy election for the 2016 annual meeting of stockholders because they represent non-recurring charges and are not indicative of the underlying performance of our business operations.awards.

 

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
September 30,

 

Nine Months Ended
September 30,

 

 

2017

 

2016

 

2017

 

2016

 

 

Three Months Ended
March 31,

 

 

(unaudited)

 

 

2019

 

2018

 

 

(in thousands)

 

 

(unaudited)
(in thousands)

 

Net loss attributable to common stockholders

 

$

(3,450

)

$

(5,709

)

$

(18,347

)

$

(22,959

)

 

$

(5,153

)

$

(3,229

)

Depreciation and amortization of property and equipment

 

18,245

 

13,093

 

49,244

 

34,801

 

 

19,009

 

20,606

 

Stock-based compensation expense

 

3,684

 

3,006

 

11,016

 

9,690

 

 

2,344

 

3,126

 

Amortization of intangible assets

 

852

 

855

 

2,673

 

2,582

 

 

1,131

 

727

 

Income tax expense

 

167

 

95

 

507

 

457

 

 

192

 

128

 

Interest and other expense, net

 

84

 

117

 

126

 

299

 

 

1,676

 

79

 

Non-controlling interests

 

210

 

110

 

477

 

180

 

 

(86

)

456

 

Contested proxy election expense

 

 

 

 

1,440

 

Settlement expense

 

 

 

2,807

 

 

Adjusted EBITDA

 

$

19,792

 

$

11,567

 

$

48,503

 

$

26,490

 

 

$

19,113

 

$

21,893

 

 

Adjusted EBITDA was $19.8$19.1 million for the three months ended September 30, 2017, an increaseMarch 31, 2019, a decrease of 71.1%12.7% from $11.6$21.9 million recorded in the three months ended September 30, 2016.March 31, 2018. As a percent of revenue, Adjusted EBITDA was 36.9%28.8% for the three months ended September 30, 2017, upMarch 31, 2019, down from 28.4%37.6% of revenue for the three months ended September 30, 2016.March 31, 2018. The Adjusted EBITDA increasedecrease was due primarily to the $5.1$1.9 million increase in depreciation and amortization expense, the $2.3 million decrease in our net loss attributable to common stockholders, and the $0.7 million increase in stock-based compensation expenses for the three months ended September 30, 2017 compared to the three months ended September 30, 2016.

Adjusted EBITDA was $48.5 million for the nine months ended September 30, 2017, an increase of 83.1% from $26.5 million recorded in the nine months ended September 30, 2016. As a percent of revenue, Adjusted EBITDA was 33.0% for the nine months ended September 30, 2017, up from 23.2% of revenue for the nine months ended September 30, 2016. The Adjusted EBITDA increase was due primarily to the $14.5 million increase in depreciation and amortization expense, the $4.6 million decrease in our net loss attributable to common stockholders, the $1.3$1.2 million decrease in depreciation and amortization expense, the $0.8 million decrease in stock based compensation expense and the $0.5 million decrease in non-controlling interests, which were partially offset by the $1.6 million increase in stock-based compensation expenses,interest and the $0.3 million increase in non-controlling interestsother expense for the ninethree months ended September 30, 2017March 31, 2019 compared to the ninethree months ended September 30, 2016. Adjusted EBITDA for the nine months ended September 30, 2017 excludes $2.8 million of settlement expense accrual related to a claim from one of our venue partners. Adjusted EBITDA for the nine months ended September 30, 2016 excludes $1.4 million of expenses that we incurred on our contested proxy election for the 2016 annual meeting of stockholders.March 31, 2018.

 

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 facility.facilities. Our primary sources of liquidity as of September 30, 2017March 31, 2019 consisted of $21.6$69.0 million of cash and cash equivalents, and $64.8$36.9 million of marketable securities, $150.0 million available for borrowing under our credit facility, $6.3Credit Facility, $12.5 million of which is reserved for our outstanding Letter of Credit Authorization agreements. As of March 31, 2019, we had $3.3 million outstanding under the Term Loan, and we had no amounts outstanding under the Revolving Line of Credit.

 

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 ninethree months ended September 30, 2017March 31, 2019 were $54.7$32.4 million, of which $33.6$24.6 million was reimbursed through revenue for DAS build-out projects from our telecom operators.

We haveIn February 2019, we entered into a Credit Agreement (the “Credit Agreement”) and related agreements as amended with Bank of America, N.A. acting as agent for lenders named therein, including Bank of America, N.A., Silicon Valley Bank, Bank of the West, Zions Bancorporation, N.A. dba California Bank & Trust, and CitizensBarclays Bank N.A.PLC (the “Lenders”), for a secured credit facility in the form of a revolving line of credit up to $69.8$150.0 million with an option to increase the available amount to $86.5 million upon the satisfaction of certain conditions (the “Revolving Line of Credit”) and a term loan of $3.5 million (the “Term Loan” and together with the Revolving Line of Credit, the “Credit Facility”). Both the Term Loan and Revolving Line ofOur Credit Facility will mature on November 21, 2018.April 3, 2023. Amounts borrowed under the Revolving Line of Credit and Term Loan will bear at our election, a variable interest at the greater of LIBOR plus 2.5%1.75% - 3.5%2.75% or Lender’s Prime Rate plus 1.5%0.75% - 2.5%1.75% per year and we will pay

a fee of 0.375%0.25% - 0.5% per year on any unused portion of the Revolving Line of Credit. As of September 30, 2017, $1.1 million was outstanding under the Term Loan and $5.0 million was outstanding under the Revolving Line of Credit. The Term Loan requires quarterly payments of interest and principal, amortizing fully over the four-year-term such that it is repaid in full on the maturity date of November 21, 2018. The interest rate for our Credit Facility for the nine months ended September 30, 2017 ranged from 3.5% to 3.8%.

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 monthly liquiditycash on hand minimums.We were in compliance with all such financial covenants as of September 30, 2017 and through the date of this report. We are subject to certain non-financial covenants, and we were also in compliance with all such non-financial covenants as of September 30, 2017 and through the date of this report. The Credit Facility provides us with significant additional flexibility and liquidity forto pursue our strategic objectives involvingfor capital expenditures and acquisitions that we may pursue from time to time.

 

In October 2018, we sold, through the initial purchasers, convertible senior notes (“Convertible Notes”) to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended, for gross proceeds of $201.25 million. The Convertible Notes are senior, unsecured obligations with interest payable semi-annually in cash at a rate of 1.00% per annum on April 1st and October 1st of each year, beginning on April 1, 2019. The Convertible Notes will mature on October 1, 2023 unless they are redeemed, repurchased or converted prior to such date. Prior to April 1, 2023, the Convertible Notes are convertible at the option of holders only during certain periods and upon satisfaction of certain conditions. Thereafter, the Convertible Notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Convertible Notes may be settled in shares of our common stock, cash or a combination of cash and shares of our common stock, at our election.

The Convertible Notes have an initial conversion rate of 23.6323 shares of common stock per $1,000 principal amount of the Convertible Notes, which will be subject to customary anti-dilution adjustments in certain circumstances. This represents an initial effective conversion price of approximately $42.31 per share, which represents a premium of approximately 30% to the $32.55 per share closing price of our common stock on October 2, 2018, the day we priced the offering.

We may redeem all or any portion of the Convertible Notes, at our option, on or after October 5, 2021, at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of our stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide written notice of redemption.

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 who elect to convert their Convertible Notes in connection with such corporate event or notice of redemption.

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 $65.10 per share of our common stock, representing a premium of 100% above the closing price of $32.55 per share of our common stock on October 2, 2018, and is subject to certain adjustments under the terms of the capped call transactions. The capped call transactions are expected generally to reduce potential dilution to our common stock upon conversion of the Convertible Notes and/or offset the potential cash payments that we could be required to make in excess of the principal amount of any converted Convertible Notes upon conversion thereof, with such reduction and/or offset subject to a cap based on the cap price.

We believe that our existing cash and cash equivalents, marketable securities, 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. There can be no assurance, however, that future industry-specific or other developments, general economic trends, or other matters will not adversely affect our operations or our ability to meet our future cash requirements. Our future capital requirements will depend on many factors, including our rate of revenue growth and corresponding timing of cash collections, the timing and size of our managed and operated location expansion efforts, the timing and extent of spending to support product development efforts, the timing of introductions of new solutions and enhancements to existing solutions and the continuing market acceptance of our solutions. We expect our capital expenditures for the remainder of 20172019 will range from $4.0$100.0 million to $9.0$120.0 million, excludingincluding $75.0 million to $90.0 million of capital expenditures for DAS build-out projects which are reimbursed through revenue from our telecom operator customers. We anticipate the majority of our remaining 20172019 capital expenditures will be used to build out and upgrade Wi-Fi and DAS networks at our managed and operated venues and to build out residential broadband and IPTV networks for troops stationed on military bases pursuant to ourvenues.

We have contracts with the U.S. government. The investment of these resources will occur in advance of experiencing any direct benefit from them including generation of revenues. The U.S. government may modify, curtail or terminate its contracts with us, either at its convenience or for default based on performance. Any such modification, curtailment, or termination of one or more of our government contracts could have a material adverse effect on our earnings, cash flow and/or financial position. We may also enter into other acquisitions of complementary businesses, applications or technologies, which could require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us, or at all.

 

We are subject to customary covenants, including a minimum quarterly consolidated leverage ratio, a maximum quarterly consolidated fixed charge coverage ratio, and monthly liquidity minimums. We were in compliance with all such financial covenants as of March 31, 2019 and through the date of this report. We are subject to certain non-financial covenants, and we were also in compliance with all such non-financial covenants as of March 31, 2019 and through the date of this report. The Credit Facility provides us with significant additional flexibility and liquidity for our strategic objectives involving capital expenditures and acquisitions that we may pursue from time to time.

The following table sets forth cash flow data for the ninethree months ended September 30:March 31:

 

 

2019

 

2018

 

 

2017

 

2016

 

 

(unaudited)

 

 

(unaudited)

 

 

(in thousands)

 

 

(in thousands)

 

 

 

 

 

 

Net cash provided by operating activities

 

$

67,424

 

$

93,598

 

 

$

23,743

 

$

17,270

 

Net cash used in investing activities

 

(55,841

)

(92,045

)

 

(69,055

)

(21,117

)

Net cash used in financing activities

 

(9,439

)

(3,086

)

 

(35,087

)

(3,781

)

 

Net Cash Provided by Operating Activities

 

For the ninethree months ended September 30, 2017,March 31, 2019, we generated $67.4$23.7 million of net cash from operating activities, a decreasean increase of $26.2$6.5 million from the prior year comparative period.2018. The decreaseincrease is primarily due to a $47.5an $8.4 million non-cash change in our operating assets and liabilities.liabilities, which is primarily driven by a higher rate of cash collections and invoicing for our DAS build-out projects and a $2.3 million increase in the addback for amortization of deferred financing costs and debt discounts. The change waschanges were partially offset by a $14.4$2.5 million increase in our net loss, a $1.2 million decrease in depreciation and amortization expenses, related to our recent increased fixed assets from our DAS build-out projects, Wi-Fi networks, and software development, a $4.9$0.8 million decrease in our net loss, a $1.3 million increase in stock-based compensation expenses and a $0.4 million increase in impairment losses and losses on disposal of fixed assets, net.2019.

 

Net Cash Used in Investing Activities

 

For the ninethree months ended September 30, 2017,March 31, 2019, we used $55.8$69.1 million in investing activities, a decreasean increase of $36.2$47.9 million from the prior year comparative period.2018. The decreaseincrease is due to a $37.4$36.7 million decreaseincrease in purchases of marketable securities and an $11.3 million increase in purchases of property and equipment, which was partially offset by $1.2 million of cash paid for a caching technology intangible asset, which we acquired in November 2016.equipment.

Net Cash Used in Financing Activities

 

For the ninethree months ended September 30, 2017,March 31, 2019, we used $9.4$35.1 million of cash in financing activities, an increase of $6.4$31.3 million from the prior year comparative period.2018. This changeincrease is primarily due to a $5.2$26.6 million increase in payments on our Credit Facility, a $5.0 million decrease in proceeds from our Credit Facility, a $1.4 million increase in cash used to payfor federal, state, and local employment payroll taxes related to our RSUs that vested during the period, and a $1.1$4.2 million decrease in proceeds from exercise of stock options, a $2.0 million increase in cash paid for business acquisitions, a $1.7 million increase in cash paid for debt issuance costs, and a $0.4 million increase in principal payments for our capitalfinance leases and notes payable. The changes were partially offset by a $6.0$3.5 million increase in proceeds from exercise of stock options.our Credit Facility.

Contractual Obligations and Commitments

 

The following table sets forth our contractual obligations and commitments as of September 30, 2017:March 31, 2019:

 

 

 

Payments Due By Period

 

 

 

 

 

Less than

 

 

 

 

 

More than

 

 

 

Total

 

1 Year

 

2 - 3 Years

 

4 - 5 Years

 

5 Years

 

 

 

(in thousands)

 

Venue revenue share minimums(1)

 

$

36,677

 

$

8,349

 

$

10,738

 

$

9,774

 

$

7,816

 

Operating leases for office space and other(2)

 

29,983

 

3,809

 

6,520

 

6,603

 

13,051

 

Open purchase commitments(3)

 

25,859

 

22,759

 

3,100

 

 

 

Credit Facility(4)

 

6,094

 

875

 

5,219

 

 

 

Capital leases for equipment and software(5)

 

5,745

 

3,118

 

2,627

 

 

 

Unrecognized tax benefits(6)

 

229

 

229

 

 

 

 

Notes payable(7)

 

2,164

 

1,231

 

933

 

 

 

Total

 

$

106,751

 

$

40,370

 

$

29,137

 

$

16,377

 

$

20,867

 

 

 

Payments Due by Period

 

 

 

 

 

Less than

 

 

 

 

 

More than

 

 

 

Total

 

1 Year

 

2 - 3 Years

 

4 - 5 Years

 

5 Years

 

 

 

(in thousands)

 

Venue revenue share minimums(1)

 

$

48,043

 

$

12,951

 

$

16,178

 

$

10,754

 

$

8,160

 

Operating and finance leases(2)

 

27,969

 

6,579

 

7,788

 

6,076

 

7,526

 

Open purchase commitments(3)

 

34,936

 

34,710

 

226

 

 

 

Convertible Notes(4)

 

201,250

 

 

 

201,250

 

 

Credit Facility(5)

 

3,306

 

778

 

1,556

 

972

 

 

Notes payable(6)

 

3,352

 

2,204

 

1,148

 

 

 

Total

 

$

318,856

 

$

57,222

 

$

26,896

 

$

219,052

 

$

15,686

 

 


(1)         Payments under exclusive long-term, non-cancellable contracts to provide wireless communications network access to venues such as airports. Expense is recorded on a straight-line basis over the term of the lease.

 

(2)         Office spaceNon-cancellable operating leases for office and other under non-cancellable operating leases.spaces and finance leases for equipment, primarily for data communication equipment and database software.

 

(3)         Open purchase commitments are for the purchase of property and equipment, supplies and services. They are not recorded as liabilities on our condensed consolidated balance sheet as of September 30, 2017March 31, 2019 as we have not received the related goods or services.

 

(4)         Long-term debt associated with our Convertible Notes are based on contractual terms and intended timing of repayments of long-term debt.

(5)         Debt associated with our Credit Agreement with Bank of America N.A. Payments are based on contractual terms and intended timing of repayments of long-term debt.

(5)         Leased equipment, primarily for data communication and database software, under non-cancellable capital leases.repayments.

 

(6)         The unrecognized tax benefits are related to uncertain tax positions taken in our income tax return that would impact the effective tax rate or additional paid-in capital, if recognized, (refer to Note 6 to the accompanying condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q).

(7)         Notes payable assumed in our acquisition of Endeka Group, Inc. in 2013 and loansPayments under notes payable related to financed equipment andpurchases of prepaid maintenance service purchases.service.

 

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.

 

Critical Accounting Policies and Estimates

 

Leases

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, current portion of operating and finance leases, and long-term portion of operating and finance leases in our condensed consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of operating and finance leases, and long-term portion of operating and finance leases in our condensed consolidated balance sheets.

Operating and finance lease ROU assets and ROU liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for separately. We exclude short-term leases with a lease term of 12 months or less at commencement date from our condensed consolidated balance sheets.

There have been no other material changes to our critical accounting policies and estimates from the information provided for the year ended December 31, 20162018 in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our annual report on Form 10-K filed by us with the SEC on March 13, 2017.1, 2019.

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.

Item 3.   Quantitative and Qualitative Disclosure about Market Risk

 

We are exposed to various market risks including: (i) interest rateMarket risk and (ii) foreign currency exchange rate risk.represents the potential loss arising from adverse changes in the value of financial instruments. The risk of loss is assessed based on the likelihood of adverse changes in fair values, cash flows or future earnings.We are exposed to various market risks including: (i) investment portfolio risk, (ii) interest rate risk, and (iii) foreign currency exchange rate risk.

Investment portfolio risk.  We have established guidelines relative to the diversification and maturities of investments to maintain safety and liquidity. These guidelines are reviewed periodically and may be modified depending on market conditions. Although investments may be subject to credit risk, our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer, or type of investment. At March 31, 2019, our market risk sensitive instruments consisted of marketable securities available-for-sale, which are comprised of highly rated short-term commercial paper, corporate debt instruments and US treasury and agencies obligations.

Our marketable available-for-sale securities are carried at fair value and are intended for use in meeting our ongoing liquidity needs. Unrealized gains and losses on available-for-sale securities, which are deemed temporary, are reported as a separate component of stockholders’ equity, net of tax. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The amortization, along with realized gains and losses, would be included in interest and other expense, net.

 

Interest rate risk.  Our Revolving LineConvertible Notes bear a coupon rate of 1.00% per annum. Our Credit and Term LoanFacility bears at our election, interest at a variable interest rate equal to the greater of LIBOR plus 2.5%1.75% - 3.5%2.75% or the Lender’s Prime Rate plus 1.5%0.75% - 2.5%1.75% per year. The interest rate on the Term Loan resets at the end of each three month period. Our use of variable rate debt exposes us to interest rate risk. A 100 basis100-basis point increase in the LIBOR or Lender’s Prime Rate as of September 30, 2017March 31, 2019 would not have a material impact on net loss and cash flow.

 

Foreign currency exchange rate risk.  We are exposed to foreign currency exchange rate risk inherent in conducting business globally in numerous currencies, of which the most significant to our operations for the ninethree months ended September 30, 2017March 31, 2019 was the Brazilian Real. We are primarily exposed to foreign currency fluctuations related to the operations of our subsidiary in Brazil whose financial statements are not denominated in the U.S. dollar. Our foreign operations are not material to our operations as a whole. As such, we currently do not enter into currency forward exchange or option contracts to hedge foreign currency exposures.

 

Item 4.   Controls and Procedures

 

Disclosure Controls and Procedures. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness, as of September 30, 2017,March 31, 2019, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

 

Changes in Internal Control over Financial Reporting. During the three months ended September 30, 2017, there wereMarch 31, 2019, in order to facilitate the adoption of the new lease accounting standard on January 1, 2019, we implemented internal controls to help ensure we properly evaluate our lease contracts and assess the impact to our consolidated financial statements. There have been no other changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.reporting during the quarter ended March 31, 2019.

 

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PART II. OTHER INFORMATION

 

Item 1.      Legal Proceedings

 

The information set forth in Note 814 “Commitments and Contingencies,” to the unaudited condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q, is incorporated herein by this reference.

 

Item 1A.   Risk Factors

 

Certain Factors Affecting Boingo Wireless, Inc.

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20162018 filed with the SEC on March 13, 2017, 1, 2019,

which we incorporate by reference into this Quarterly Report on Form 10-Q, which could materially affect our business, results of operations, cash flows, or financial condition. The risks described in our Annual Report on Form 10-K are not the only risks facing our company.Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or future results. There have been no material changes in the risk factors contained in our Annual Report on Form 10-K.

 

Items 2, 3 and 4 are not applicable and have been omitted.

 

Item 6.  Exhibits

 

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q:

 

Exhibit

 

 

 

Incorporated by Reference

 

Filed

No.

 

Description

 

Form

 

Date

 

Number

 

Herewith

3.1

 

Amended and Restated Certificate of Incorporation.

 

S-1

 

03/21/2011

 

3.2

 

 

 

 

 

 

 

 

 

 

 

 

 

3.2

 

Certificate of Amendment to the Certificate of Incorporation.

 

8-K

 

06/09/2017

 

3.1

 

 

 

 

 

 

 

 

 

 

 

 

 

3.3

 

Amended and Restated Bylaws.

 

8-K

 

06/09/2017

 

3.2

 

 

 

 

 

 

 

 

 

 

 

 

 

31.1

 

Certification of David Hagan, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

31.2

 

Certification of Peter Hovenier, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

32.1

 

Certifications of David Hagan, Chief Executive Officer, and Peter Hovenier, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

Exhibit

Incorporated by Reference

Filed

No.

Description

Form

Date

Number

Herewith

101

The following financial information from the Quarterly Report on Form 10-Q of Boingo Wireless, Inc. for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016 for Boingo Wireless, Inc.; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016 for Boingo Wireless, Inc.; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 and 2016 for Boingo Wireless, Inc.; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 for Boingo Wireless, Inc.; (v) Condensed Consolidated Statement of Stockholders’ Equity for Boingo Wireless, Inc.; and (vi) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

X

Exhibit

 

 

 

Incorporated by Reference

 

Filed

No.

 

Description

 

Form

 

Date

 

Number

 

Herewith

3.1

 

Amended and Restated Certificate of Incorporation.

 

S-1

 

03/21/2011

 

3.2

 

 

 

 

 

 

 

 

 

 

 

 

 

3.2

 

Certificate of Amendment to the Certificate of Incorporation.

 

8-K

 

06/09/2017

 

3.1

 

 

 

 

 

 

 

 

 

 

 

 

 

3.3

 

Amended and Restated Bylaws.

 

8-K

 

06/09/2017

 

3.2

 

 

 

 

 

 

 

 

 

 

 

 

 

31.1

 

Certification of Michael Finley, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

31.2

 

Certification of Peter Hovenier, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

32.1

 

Certifications of Michael Finley, Chief Executive Officer, and Peter Hovenier, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

101

 

The following financial information from the Quarterly Report on Form 10-Q of Boingo Wireless, Inc. for the quarter ended March 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at March 31, 2019 and December 31, 2018 for Boingo Wireless, Inc.; (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018 for Boingo Wireless, Inc.; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2019 and 2018 for Boingo Wireless, Inc.; (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 for Boingo Wireless, Inc.; (v) Condensed Consolidated Statement of Stockholders’ Equity for Boingo Wireless, Inc.; and (vi) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

 

 

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

BOINGO WIRELESS, INC.

 

 

Date: November 8, 2017May 10, 2019

By:

/s/ DAVID HAGANMICHAEL FINLEY

 

 

David HaganMichael Finley

 

 

ChairmanChief Executive Officer and Member of the Board and Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

 

BOINGO WIRELESS, INC.

 

 

Date: November 8, 2017May 10, 2019

By:

/s/ PETER HOVENIER

 

 

Peter Hovenier

 

 

Chief Financial Officer

 

 

(Principal Financial and Accounting Officer)

 

3139