Boingo Wireless 10Q 2021 Q1 Quarterly report

Boingo Wireless (WIFI) 10-Q2021 Q1 Quarterly report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended March 31, 2021

☐

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	WIFI	The Nasdaq Stock Market LLC
(Title of each class)	(Trading symbol)	(Name of each exchange on which registered)

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 ⌧ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ⌧ No ☐

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 accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐		Smaller Reporting Company ☐

		Emerging Growth Company ☐

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. ☐

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

As of April 26, 2021, there were 44,751,010 shares of the registrant’s common stock outstanding.

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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	32

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	44

Item 4.	Controls and Procedures	44

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 6.	Exhibits	48

SIGNATURES		50

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Boingo Wireless, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share amounts)


	March 31,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	36,272	$	36,111
Marketable securities		—		4,565
Accounts receivable, net		38,899		27,716
Prepaid expenses and other current assets		7,272		8,388
Assets held for sale		8,746		—
Total current assets		91,189		76,780
Property and equipment, net		404,683		406,328
Operating lease right-of-use assets, net		12,295		12,876
Goodwill		58,579		58,579
Intangible assets, net		9,714		10,652
Other assets		11,268		11,264
Total assets	$	587,728	$	576,479

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	23,994	$	22,489
Accrued expenses and other liabilities		61,901		55,984
Deferred revenue		64,113		65,292
Current portion of operating leases		2,649		2,632
Current portion of long-term debt		778		778
Current portion of finance leases		132		573
Current portion of notes payable		24		95
Liabilities held for sale		4,436		—
Total current liabilities		158,027		147,843
Deferred revenue, net of current portion		172,352		159,462
Long-term portion of operating leases		13,749		14,487
Long-term debt		199,086		171,695
Deferred tax liabilities		1,034		984
Other liabilities		—		87
Total liabilities		544,248		494,558

Commitments and contingencies (Note 13)

Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000 shares authorized; 0 shares issued and outstanding		0		0
Common stock, $0.0001 par value; 100,000 shares authorized; 44,736 and 44,631 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		4		4
Additional paid-in capital		203,900		241,868
Accumulated deficit		(157,944)		(158,066)
Accumulated other comprehensive loss		(2,742)		(2,279)
Total common stockholders’ equity		43,218		81,527
Non-controlling interests		262		394
Total stockholders’ equity		43,480		81,921
Total liabilities and stockholders’ equity	$	587,728	$	576,479

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

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Boingo Wireless, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended
	March 31,
		2021	2020

Revenue	$	59,929	$	59,886
Cost of sales		29,702		28,759
Gross profit		30,227		31,127
Selling, general and administrative expenses		35,148		32,601
Amortization of intangible assets		937		1,111
Loss from operations		(5,858)		(2,585)
Interest expense and amortization of debt discount		(657)		(2,349)
Interest income and other expense, net		(2)		254
Loss before income taxes		(6,517)		(4,680)
Income tax expense		(119)		(45)
Net loss		(6,636)		(4,725)
Net loss attributable to non-controlling interests		(192)		(92)
Net loss attributable to common stockholders	$	(6,444)	$	(4,633)

Net loss per share attributable to common stockholders:
Basic	$	(0.14)	$	(0.10)
Diluted	$	(0.14)	$	(0.10)

Weighted average shares used in computing net loss per share attributable to common stockholders:
Basic		44,690		44,272
Diluted		44,690		44,272

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

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Boingo Wireless, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands)


	Three Months Ended
	March 31,
	2021		2020

Net loss	$	(6,636)	$	(4,725)
Other comprehensive loss, net of tax
Foreign currency translation adjustments		(402)		(891)
Unrealized loss on marketable securities		(1)		(60)
Comprehensive loss		(7,039)		(5,676)
Comprehensive loss attributable to non-controlling interest		(132)		(24)
Comprehensive loss attributable to common stockholders	$	(6,907)	$	(5,652)

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

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Boingo Wireless, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

(In thousands)


								Accumulated
	Common	Common		Additional				Other		Non-		Total
	Stock	Stock		Paid-in		Accumulated		Comprehensive		controlling		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Interests		Equity

Balance at December 31, 2020	44,631	$	4	$	241,868	$	(158,066)	$	(2,279)	$	394	$	81,921
Issuance of common stock under stock incentive plans	105		—		129		—		—		—		129
Shares withheld for taxes	—		—		(592)		—		—		—		(592)
Stock-based compensation expense	—		—		2,416		—		—		—		2,416
Cumulative effect of a change in accounting principle	—		—		(39,921)		6,566		—		—		(33,355)
Net loss	—		—		—		(6,444)		—		(192)		(6,636)
Other comprehensive (loss) income	—		—		—		—		(463)		60		(403)
Balance at March 31, 2021	44,736	$	4	$	203,900	$	(157,944)	$	(2,742)	$	262	$	43,480

Balance at December 31, 2019	44,224	$	4	$	234,638	$	(140,973)	$	(1,426)	$	1,238	$	93,481
Issuance of common stock under stock incentive plans	90		—		185		—		—		—		185
Shares withheld for taxes	—		—		(461)		—		—		—		(461)
Stock-based compensation expense	—		—		1,686		—		—		—		1,686
Non-controlling interest distributions	—		—		—		—		—		(262)		(262)
Net loss	—		—		—		(4,633)		—		(92)		(4,725)
Other comprehensive (loss) income	—		—		—		—		(1,019)		68		(951)
Balance at March 31, 2020	44,314	$	4	$	236,048	$	(145,606)	$	(2,445)	$	952	$	88,953

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

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Boingo Wireless, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Three Months Ended
	March 31,
	2021		2020
Cash flows from operating activities
Net loss	$	(6,636)	$	(4,725)
Adjustments to reconcile net loss including non-controlling interests to net cash provided by operating activities:
Depreciation and amortization of property and equipment		20,745		18,646
Amortization of intangible assets		937		1,111
Impairment loss, loss on disposal of fixed assets, net, and other		27		(30)
Stock-based compensation		2,277		1,537
Amortization of deferred financing costs and debt discount, net of amounts capitalized		421		2,343
Non-cash operating lease cost		567		639
Gains and amortization of premiums/discounts for marketable securities		64		(81)
Change in deferred income taxes		0		(12)
Changes in operating assets and liabilities:
Accounts receivable		(15,097)		(4,912)
Prepaid expenses and other assets		(1,171)		(1,071)
Accounts payable		688		(166)
Accrued expenses and other liabilities		3,165		(3,253)
Deferred revenue		13,700		9,801
Operating lease liabilities		(721)		(794)
Net cash provided by operating activities		18,966		19,033
Cash flows from investing activities
Purchases of marketable securities		—		(15,032)
Proceeds from maturities of marketable securities		4,500		25,965
Purchases of property and equipment		(22,140)		(22,592)
Net cash used in investing activities		(17,640)		(11,659)
Cash flows from financing activities
Proceeds from credit facility		—		100,000
Principal payments on credit facility		(194)		—
Proceeds from exercise of stock options		129		185
Payments of finance leases and notes payable		(511)		(1,285)
Payments of withholding tax on net issuance of restricted stock units		(592)		(461)
Payments to non-controlling interest		—		(262)
Net cash (used in) provided by financing activities		(1,168)		98,177
Effect of exchange rates on cash		3		(36)
Net increase in cash and cash equivalents		161		105,515
Cash and cash equivalents at beginning of period		36,111		40,401
Cash and cash equivalents at end of period	$	36,272	$	145,916
Supplemental disclosure of non-cash investing and financing activities
Property and equipment costs included in accounts payable, accrued expenses and other liabilities	$	41,054	$	39,754
Capitalized stock-based compensation included in property and equipment costs	$	140	$	149
Financed sale of intangible assets held for sale	$	184	$	277

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

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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 cellular and Wi-Fi offerings, which are targeted towards carriers, venues, and other wholesale partners, and military, retail, and advertising offerings, which are retail products targeted towards consumers. Wholesale offerings include distributed antenna systems (“DAS”), towers, and small cells, which are cellular extension networks, private networks and emerging technologies, multifamily, carrier offload, Wi-Fi roaming, value-added services, private label Wi-Fi, and location-based services. Retail products include Wi-Fi services for military personnel living in the barracks of U.S. Army, Air Force, and Marines bases around the world, and Wi-Fi subscriptions and day passes that provide access to 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, global consumer brands, and property owners, as well as troops stationed at military bases and Internet savvy consumers on the go.

Merger

On February 26, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with White Sands Parent, Inc., a Delaware corporation (the “Parent”) and White Sands Bidco, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of the Parent.

Under the terms of the Merger Agreement, at the Effective Time of the Merger, each share of common stock issued and outstanding as of immediately prior to the Effective Time (other than dissenting shares, shares held in the treasury of the Company or shares owned by Parent or Merger Sub) will be cancelled and automatically converted into the right to receive cash in an amount equal to $14.00, net of applicable withholding taxes and without interest thereon (the “Per Share Merger Consideration”). Company stock options will generally be cancelled at the Effective Time and converted into the right to receive an amount equal to (i) the excess, if any, of the Per Share Merger Consideration over the applicable exercise price multiplied by (ii) the number of shares of common stock subject to such stock option (less deductions and applicable withholdings). Restricted stock units (“RSUs”) (including any RSUs which are subject to performance conditions that have not been satisfied at the Effective Time, which shall be deemed satisfied in accordance with the terms of the applicable stock plan and award agreement) will generally be cancelled at the Effective Time and converted into the right to receive an amount equal to (i) the Per Share Merger Consideration multiplied by (ii) the number of shares of common stock subject to such RSU (less applicable deductions and withholdings).

Parent and Merger Sub have secured committed financing, which are subject to customary terms and conditions, consisting of a combination of equity financing from Digital Colony Partners II, LP and debt financing from Truist Bank and Truist Securities, Inc., The Toronto-Dominion Bank, New York Branch, TD Securities (USA) LLC and CIT Bank, N.A., the aggregate proceeds of which will be sufficient for Parent and Merger Sub to pay the aggregate merger consideration and all related fees and expenses. Parent and Merger Sub have committed to use their reasonable best efforts to obtain the financing on the terms and conditions described in the commitment letters entered into with such financing partners.

The consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including, without limitation, the absence of governmental orders resulting, directly or indirectly, in enjoining or otherwise prohibiting or making illegal the consummation of the Merger, the affirmative vote of the holders of a majority of the voting power of the outstanding shares of the Company’s common stock entitled to vote on the adoption of the Merger Agreement, and expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”). Boingo and Parent made the necessary filings under the HSR Act with the Federal Trade Commission and the Antitrust Division of the Department of Justice on March 12, 2021, the 30-day waiting period with respect to which all expired at 11:59 p.m. Eastern time on Monday, April 12, 2021.

The Company has made customary representations and warranties in the Merger Agreement and has agreed to customary covenants regarding the operation of the business of the Company and its Subsidiaries prior to the Effective Time. Following a 25-business day Go-Shop Period, the Company is also subject to customary restrictions on its ability to solicit alternative acquisition proposals from third parties and to provide non-public information to, and participate in discussions and engage in negotiations with

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third parties regarding alternative acquisition proposals, with customary exceptions for Superior Proposals. The Go-Shop Period expired on April 2, 2021.

The Merger Agreement contains certain termination rights for the Company and Parent. Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Parent a termination fee of $19,600 in the event of other specified circumstances. Such circumstances include where the Merger Agreement is terminated (i) in connection with the Company entering into an agreement for a Superior Proposal after the Go-Shop Period, (ii) due to the Company Board’s change or withdrawal of its recommendation in favor of the Merger, or (iii) due to the Company willfully and materially breaching its obligations regarding solicitation of alternative acquisition proposals. Additionally, the Company is obligated to pay the termination fee if (i)(A) either party terminates because the Merger has not been consummated by the Outside Date (defined below) or due to the failure to obtain the required Company stockholder adoption of the Merger Agreement, or (B) Parent terminates due to the Company breaching its representations, warranties or covenants in a manner that would cause the related closing conditions to not be met, (ii) the Company receives an Acquisition Proposal to acquire at least 50.1% of the Company’s stock or assets that is not withdrawn prior to such termination, and (iii) the Company enters into a definitive agreement for, or completes, such an Acquisition Proposal within one year of termination. The Merger Agreement requires the Company to convene a special meeting of stockholders for purposes of obtaining approval of the adoption of the Merger Agreement and to prepare and file with the Securities and Exchange Commission (the “SEC”) a proxy statement with respect to such meeting. The Company filed its definitive proxy statement with the SEC on April 28, 2021 and the special meeting is scheduled to be held on June 1, 2021. A reimbursement of certain of Parent’s expenses, up to a maximum of $2,500 will also be payable if the Merger Agreement is terminated because the Company’s stockholders did not vote to adopt the Merger Agreement.

Upon termination of the Merger Agreement under other specified circumstances, Parent will be required to pay the Company a termination fee of $32,700. The termination fee by Parent will become payable if Parent fails to consummate the Merger after the applicable closing conditions are met. The Merger Agreement also provides that either party may specifically enforce the other party’s obligations under the Merger Agreement, provided that the Company may only cause Parent to close the transaction if the applicable conditions are satisfied and the proceeds of the debt financing are available.

In addition to the foregoing termination rights, and subject to certain limitations, the Company or Parent may terminate the Merger Agreement if the Merger is not consummated by August 26, 2021 (the “Outside Date”).

The representations, warranties and covenants of the Company contained in the Merger Agreement have been made solely for the benefit of Parent and Merger Sub. In addition, such representations, warranties and covenants (i) have been made only for purposes of the Merger Agreement, (ii) have been qualified by (a) subject to certain terms and conditions, matters specifically disclosed in the Company’s filings with the SEC prior to the date of the Merger Agreement and (b) confidential disclosures made to Parent and Merger Sub in the disclosure letter delivered in connection with the Merger Agreement, (iii) are subject to materiality qualifications contained in the Merger Agreement which may differ from what may be viewed as material by investors, (iv) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement and (v) have been included in the Merger Agreement for the purpose of allocating risk between the contracting parties rather than establishing matters as fact. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any other factual information regarding the Company or its business.

Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.

Impact of COVID-19 on our business

On March 12, 2020, the World Health Organization declared COVID-19 to be a pandemic (“COVID-19”). In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States, have imposed unprecedented restrictions on travel and business operations, and there have been business closures and a substantial reduction in economic activity in countries that have had significant outbreaks of COVID-19.

Uncertainty exists concerning the magnitude of the impact and duration of the COVID-19 pandemic. We initially experienced some negative impacts primarily related to travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. Specifically, the decrease in passenger traffic at our managed and operated venue locations directly contributed to a decline in new retail single-use access transactions and recurring monthly subscription sign-ups, a decline in revenues generated from wholesale Wi-Fi partners who pay usage-based fees, a decline in available advertising inventory, and a decline in revenue received from tenants at our managed and operated venue locations resulting from the cancellation of Wi-Fi and other services. As the

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pandemic continues, we have seen some improvements in passenger traffic at our managed and operated venue locations and remain hopeful that this trend will continue. Although we continue to close and launch new customer deals, we have also experienced an overall reduction in customer sales due to COVID-19.

Certain states, including California, issued executive orders requiring all workers to remain at home, unless their work is critical, essential, or life-sustaining. While some restrictions have been lifted in certain states, many restrictions continue to remain in place and some restrictions that have previously been lifted have been reinstituted. We transitioned our corporate employees to a work from home model and our employees have continued to efficiently perform their functions throughout the pandemic. While we are unable to determine or predict the nature, duration or scope of the overall impact that the COVID-19 pandemic will have on our business, results of operations, liquidity or capital resources, we will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, and stockholders.

2. Summary of significant accounting policies

Basis of presentation

The accompanying interim condensed consolidated financial statements and related notes for the three months ended March 31, 2021 and 2020 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 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, 2020 contained in our annual report on Form 10-K filed with the SEC on March 1, 2021, as amended through the Form 10-K/A filed with the SEC on April 28, 2021. 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 months ended March 31, 2021 and 2020, our cash flows for the three months ended March 31, 2021 and 2020, and our financial position as of March 31, 2021. 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 August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40), which eliminates the beneficial conversion and cash conversion accounting models for convertible instruments, amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions, and modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS calculation. The standard is effective for annual periods beginning after December 15, 2021, and interim periods within those reporting periods. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those reporting periods. The standard can be adopted under the modified retrospective method or the full retrospective method. We adopted ASU 2020-06 on January 1, 2021 under the modified retrospective method. Results for reporting periods beginning on January 1, 2021 are presented under ASU 2020-06, while prior period amounts are not adjusted.

Adoption of ASU 2020-06 required us to record a cumulative effect adjustment, net of tax, to accumulated deficit of $6,566 on January 1, 2021. In addition, the adoption of the standard resulted in the following changes to the consolidated balance sheet as of January 1, 2021:


	January 1, 2021		Adjustment for		January 1, 2021
	(Unadjusted)		Adoption		(Adjusted)
Property and equipment, net	$	406,328	$	(6,076)	$	400,252
Long-term debt	$	171,695	$	27,279	$	198,974
Additional paid-in capital	$	241,868	$	(39,921)	$	201,947

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On January 1, 2021, we also reversed $27,949 of gross deferred tax liabilities related to the equity component of our Convertible Notes. The adoption of ASU 2020-06 did not have any impact on our net deferred tax as of January 1, 2021 due to the valuation allowance. Effective January 1, 2021, we calculate the dilutive effect of the Convertible Notes on our diluted EPS using the if-converted method.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes. The standard removes certain ASC 740 exceptions to reduce the cost and complexity of its application including: i) the exception to the “with-and-without” approach for intraperiod tax allocation when there was a loss from continuing operations and income or a gain from other items such as discontinued operations of other comprehensive income; ii) two exceptions with respect to accounting for outside basis differences of equity method investments and foreign subsidiaries; and iii) the exception to limit the income tax benefit recognized in the interim period in cases where the year-to-date loss exceeded the anticipated loss for the year. The standard also clarified and amended existing guidance including, but not limited to: i) when a step-up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction; and ii) accounting for tax effects, both deferred and current, in the interim period that includes the enactment date. The standard is effective for annual periods beginning after December 15, 2020, and interim periods within those reporting periods. Early adoption is permitted with any adjustments reflected as of the beginning of the fiscal year of adoption. We adopted ASU 2019-12 on January 1, 2020 and the adoption of this standard did not have a material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other —Internal Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which requires customers to apply the same criteria for capitalizing implementation costs incurred in a cloud computing arrangement that is hosted by the vendor as they would for an arrangement that has a software license. The standard is effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The standard can be adopted prospectively or retrospectively. We adopted ASU 2018-15 on January 1, 2020 on a prospective basis for any new implementation costs incurred in a cloud computing arrangement that is hosted by the vendor. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments —Credit Losses (Topic 326), which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar investments) and net investments in leases recognized by the lessor in accordance with ASC 842 on leases. In addition, the standard made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities. Available-for-sale accounting recognizes that values may be realized either through collection of contractual cash flows or through the sale of the security. Therefore the amendments limit the amount of the allowance for credit losses to the amount by which fair value is below amortized cost because the classification as available-for-sale is premised on an investment strategy that recognizes that the investment could be sold at fair value, if cash collection would result in the realization of an amount less than fair value. The standard is effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The standard will be adopted under the modified-retrospective approach with the prospective transition approach required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. We adopted ASU 2016-13 on January 1, 2020 and the adoption of this standard did not have a material impact on our condensed consolidated financial statements.

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 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 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, 2021 and December 31, 2020, we had $0 and $4,565, respectively, in marketable securities.

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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 income and other expense, net.

For the three months ended March 31, 2021, we had no material realized gains or losses from investments in marketable securities classified as available-for-sale. As of December 31, 2020, we had $1 of cumulative unrealized gain, net of tax, which was $0 as of December 31, 2020 due to the full valuation allowance established against our deferred tax assets, in accumulated other comprehensive loss.

Segment and geographic information

In October 2020, we completed our restructuring activities, which were initiated in December 2019. Prior to the completion of the restructuring activities, we operated as 1 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 organizational structure and the manner in which operations are reviewed and managed by our Chief Executive Officer, the chief operating decision maker.

We currently have 5 reportable and operating segments: (i) carrier services for the provision of wireless and cellular services to our wireless customers (“Carrier Services”); (ii) military for the provision of wireless services on military bases (“Military”); (iii) private networks and emerging technologies for the provision of licensed, unlicensed, and shared spectrum services for our venue partners and non-telecom customers (“Private Networks and Emerging Technologies”); (iv) multifamily for the provision of wireless services for our multifamily property owners (“Multifamily”); and (v) legacy for the provision of our other services such as retail, advertising, and wholesale Wi-Fi services to enterprise customers (“Legacy”). Prior period segment results have been recast to conform to the current presentation.

We evaluate reportable and operating segment performance primarily based on revenues and income (loss) from operations, which is our segment operating performance measure. The income (loss) from operations of each reportable and operating segment include only those costs which are specifically related to each reportable and operating segment, which consist primarily of cost of sales, sales and marketing, depreciation, and the direct costs of employees within those reportable and operating segments. We do not allocate corporate overhead costs or non-operating income and expenses to reportable and operating segments, which include unallocable overhead costs associated with our corporate offices, certain executive compensation including stock compensation, costs related to our accounting, finance, legal, engineering, marketing, and human resources departments, among others.

Segment information under the new 5 reportable segment basis, with a reconciliation to the unaudited condensed consolidated statements of operations, is summarized as follows:


	Three Months Ended
	March 31,
	2021		2020
Revenue:
Carrier services	$	26,883	$	26,848
Military		20,645		18,002
Multifamily		5,304		5,224
Legacy		6,204		9,302
Private networks and emerging technologies		893		510
Total revenue	$	59,929	$	59,886

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	Three Months Ended
	March 31,
	2021		2020
Income (loss) from operations:
Carrier services	$	2,621	$	5,866
Military		7,265		4,800
Multifamily		(1,680)		(1,930)
Legacy		(307)		603
Private networks and emerging technologies		71		441
Unallocated overhead costs		(13,828)		(12,365)
Total loss from operations		(5,858)		(2,585)
Interest expense and amortization of debt discount		(657)		(2,349)
Interest income and other expense, net		(2)		254
Loss before income taxes	$	(6,517)	$	(4,680)

Assets allocated to each reportable and operating segment include property and equipment, net, goodwill, and intangible assets, net that are specifically identifiable for one of our reportable and operating segments. Our reportable and operating segments also present reporting units for goodwill impairment testing purposes. Unallocated assets are those assets not directly related to a specific reportable and operating segment. There have been no material changes to our assets allocated to each reportable and operating segment from the amount disclosed as of December 31, 2020 as contained in our annual report on Form 10-K filed with the SEC on March 1, 2021, as amended through the Form 10-K/A filed with the SEC on April 28, 2021.

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

Revenue recognition

We generate revenue from several sources including: (i) telecom operators under long-term contracts for access to our DAS, macro tower, small cell, and Wi-Fi networks 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-use access plans, (iii) arrangements with property owners for multifamily properties that provide for network installation and monthly Wi-Fi services and support for residents and employees or network-as-a-service (“NaaS”), (iv) arrangements with wholesale Wi-Fi customers that provide software licensing, network access, and/or professional services fees, and (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, tower, small cell, 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, tower, small cell, 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, Revenue from Contracts with Customers. 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

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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 on a gross basis as we are primarily responsible for fulfilling the promises to provide the specified goods or services, we are responsible for paying all costs related to the goods or services before they have been transferred to the customer, and we have discretion in establishing prices for the 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 require 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, tower, small cell, 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 Legacy 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 Legacy wholesale Wi-Fi contracts and Multifamily network-as-a-service (“NaaS”) contracts that contain recurring fees with annual escalations are generally presented as contract assets as revenue is recognized prior to invoicing. Our Multifamily network construction, service and support 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, 2021 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. Contract costs are evaluated for impairment in accordance with ASC 310, Receivables.

Carrier services

DAS, towers, and small cells

We enter into long-term contracts with telecom operators for access to our DAS, tower, and small cell networks at our managed and operated locations. The initial term of our DAS, tower, and small cell contracts with telecom operators can range up 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, tower, and small cell customer contracts generally contain a single performance obligation—provide non-exclusive access to our DAS, tower, and small cell networks to provide telecom operators’ customers with access to the licensed wireless spectrum, together with providing telecom operators with construction,

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installation, optimization/engineering, maintenance services and agreed-upon storage space for the telecom operators’ transmission equipment, each related to providing such licensed wireless spectrum to the telecom operators. 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 contract fee structure generally includes a non-refundable upfront fee and we evaluated whether customer options 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 apply significant judgment in determining whether the customer options to renew services give rise to a material right that should be accounted for as a separate performance obligation. We believe that a material right generally does not exist for our DAS, tower, and small cell 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, tower, and small cell 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 with the venue as the telecom operators expect that the assets will continue to be serviced regardless of whether we will remain such exclusive DAS, tower, and small cell service provider. Our contracts also provide our DAS, tower, and small cell customers with the option to purchase additional future services such as upgrades or enhancements. This option is 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 DAS, tower, and small cell 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 or using a cost-to-cost method over the network installation period depending on when control is transferred to the customer.

Our contract fee structure may include varying components of an upfront build-out fee and recurring access, maintenance, 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, tower, and small cell networks are generally neutral-host networks that can accommodate multiple telecom operators. Some of our DAS customer contracts provide for credits 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 network. 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. The recurring fees are variable 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, tower, and small cell customer contracts monthly over the contract term once the customer may access the DAS, tower, and small cell network and we commence maintenance on the DAS, tower, and small cell network.

Wi-Fi offload

We enter into contracts with telecom operators to move traffic from their licensed cellular networks onto our Wi-Fi networks at our managed and operated locations. Our offload contracts generally contain a single performance obligation—provide non-exclusive rights to access our Wi-Fi networks to provide telecom operators’ end customers with access to the high-speed broadband network that 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 performance obligation to transfer each distinct service in the series to the customer. Our contract fee structure includes recurring fees

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that are accounted for as fixed consideration. We generally recognize revenue related to our single performance obligation for our offload customer contract monthly over the contract term once services have launched.

Military

Retail

Military 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 retail customer contracts generally contain a single performance obligation—provide 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 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 five 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 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 retail customers are paid monthly in advance. We provide refunds for our Military 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 retail single-use access is recognized when access is provided, and the performance obligation is satisfied.

Bulk services

We enter into short-term and long-term contracts with the U.S. government to provide network installation services and Wi-Fi services at specified locations on military bases on a bulk basis. The U.S. government may modify, curtail or terminate its contracts with us, either at its convenience or for default based on performance. Our Military bulk services customer contracts generally contain a single performance obligation—provide non-exclusive rights to access our Wi-Fi networks to provide military personnel with access to the high-speed broadband network that 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 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 contract fee structure generally includes a non-refundable upfront fee and we evaluated whether customer options 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 apply significant judgment in determining whether the customer options to renew services give rise to a material right that should be accounted for as a separate performance obligation. We believe that a material right generally exists for our Military bulk services customer contracts that contain renewal options because of our successful history of renewing our contracts with the U.S. government.

Our contract fee structure may include varying components of an upfront build-out fee and recurring access fees. The upfront build-out fee is generally structured as a firm-fixed price arrangement and becomes payable as certain contract and/or construction milestones are achieved. The recurring fees may include escalations and are variable consideration until the contract term becomes fixed. We generally recognize revenue related to our single performance obligation for our Military bulk services customer contract monthly on a straight-line basis, where applicable, over the contract term once the customer has accepted the network installation services, where applicable, and services have launched.

Private networks and emerging technologies

Our customer contracts for private networks and emerging technologies generally contain 2 performance obligations: (i) install the network required to provide licensed, unlicensed, and shared spectrum services; and (ii) provide management services for those installed networks. Our contracts may also provide our customers with the option to renew the agreement. 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

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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 contract fee structure generally includes a network installation fee and recurring service 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. Title to the equipment is generally owned by the customer once it is delivered and/or installed. We generally recognize revenue related to our network installation performance obligation using a cost-to-cost method over the network installation period.

The recurring fees commence once the network is launched with recurring fees generally based upon a fixed fee that may include annual escalations. We recognize revenue related to the recurring fees on a monthly basis over the contract term as the services are rendered and the performance obligation is satisfied.

Multifamily

We enter into long-term contracts with property owners for the installation of developer-owned or Boingo-owned Wi-Fi networks and the provisions of recurring Wi-Fi services and technical support once the Wi-Fi networks are constructed. The initial term of our contracts with property owners can range up to ten 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.

Developer-owned networks

Our customer contracts for developer-owned Wi-Fi networks that we construct and provide service and support for generally contain 2 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 generally 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.

Boingo-owned networks / NaaS

Our customer contracts for Boingo-owned Wi-Fi networks are generally structured as NaaS arrangements for the provision of Wi-Fi services and technical support for residents and employees at the property as our Boingo-owned Wi-Fi networks may be used by other retail and wholesale Wi-Fi customers. Our NaaS contracts generally contain a single performance obligation—provide non-

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exclusive rights to access our Wi-Fi networks to provide residents and employees of the property with access to the high-speed broadband network that may be bundled together with technical support services and/or performance of standard network 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 performance obligation to transfer each distinct service in the series to the customer. Our contract fee structure generally includes recurring fees that generally escalate on an annual basis that are accounted for as fixed considerations. We generally recognize revenue related to our single performance obligation for our NaaS contracts monthly on a straight-line basis, where applicable, over the contract term once services have launched.

Legacy

Comes with Boingo and Wholesale Wi-Fi

We 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. We also enter into long-term contracts with enterprise customers such as cable companies, technology companies, and enterprise software/services companies, that pay use usage-based Wi-Fi network access and software licensing fees to allow customers’ access to our footprint worldwide. The initial term of our contracts with Comes with Boingo and wholesale Wi-Fi customers generally range up to five 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 Comes with Boingo and wholesale Wi-Fi customer contracts generally contain a single performance obligation—provide 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 that 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 performance 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.

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 Comes with Boingo and 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 based on the actual usage during the period.

Comes with Boingo and wholesale Wi-Fi revenue is recognized as it is earned over the relevant contract term with variable consideration recognized when we have the contractual right to bill.

Retail

Revenue recognition for our Legacy retail customers is the same as for our Military retail customers. Refer to Military retail section for further information.

Tenant services

We offer our venue partners and their tenants the ability to implement a turnkey Wi-Fi solution through a Wi-Fi networks infrastructure that we install, manage, and operate. Our turnkey solutions for our venue partners include a variety of service models that are supported through a mix of wholesale Wi-Fi, retail, and advertising revenue. Our managed services and tenant services contracts generally contain a single performance obligation—provide non-exclusive rights to access our Wi-Fi networks to provide end customers with access to the high-speed broadband network that may be bundled together with 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 performance obligation to transfer each distinct service in the series to the customer. Our

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contract fee structure may include varying components of an upfront build-out fee and recurring access fees. The upfront build-out fee is generally structured as a firm-fixed price arrangement and becomes payable as certain contract and/or construction milestones are achieved. The recurring fees may include escalations and are variable consideration until the contract term becomes fixed. We generally recognize revenue related to our single performance obligation for our managed services and tenant services customer contract monthly on a straight-line basis, where applicable, over the contract term once the customer has accepted the network installation services, where applicable, and services have launched. 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 or using a cost-to-cost method over the network installation period depending on when control is transferred to the customer.

Advertising

We generally enter into short-term cancellable insertion orders with our advertising customers for advertising campaigns that are served at our managed and operated locations and other locations where we solely provide authorized 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 third 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 may 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 standalone selling price of each performance obligation.

Advertising revenue is recognized ratably over the service period based on actual units delivered subject to the maximums provided for in the insertion order.

Assets and liabilities held for sale

Our Company classifies long-lived assets or disposal groups to be sold as held for sale in the period in which all of the following criteria are met: management, having the authority to approve the action, commits to a plan to sell the asset or disposal group; the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets or disposal groups; an active program to locate a buyer and other actions required to complete the plan to sell the asset or disposal group have been initiated; the sale of the asset or disposal group is probable, and transfer of the asset or disposal group is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the asset or disposal group beyond one year; the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

We initially measure a long-lived asset or disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held-for-sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset or disposal group until the date of sale. We assess the fair value of a long-lived asset or disposal group less any costs to sell each reporting period it remains classified as held-for-sale and report any subsequent changes as an adjustment to the carrying value of the asset or disposal group, as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale.

Upon determining that a long-lived asset or disposal group meets the criteria to be classified as held for sale, the Company ceases depreciation and reports long-lived assets and/or the assets and liabilities of the disposal group, if material, in the line items assets held for sale and liabilities held for sale, respectively, in our condensed consolidated balance sheet.

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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 leases, and long-term portion of operating leases in our condensed consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of finance leases, and long-term portion of finance leases in our condensed consolidated balance sheets.

Operating and finance lease right-of-use (“ROU”) assets and ROU liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of our leases for which we are lessee 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 accounted for separately for the asset classes maintained. We exclude short-term leases with a lease term of 12 months or less at the commencement date from our condensed consolidated balance sheets.

Income taxes

We calculate our interim income tax provision in accordance with ASC 270, Interim Reporting, and ASC 740, Accounting for Income Taxes. At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws, rates, or tax 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 RSU vestings are recognized as an income tax benefit or expense in our 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.

As of March 31, 2021, we were in a net tested loss position in our subsidiaries located outside of the U.S. In the event that we generate earnings in these subsidiaries, our intention is to indefinitely reinvest these earnings outside the U.S. If we were to remit our foreign 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 any such tax liabilities resulting from the repatriation of foreign earnings are 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 March 31, 2021 and December 31, 2020, the Company had $(2,742) and $(2,280), respectively, of cumulative foreign currency translation adjustments, net of tax, which was $0 as of March 31, 2021 and December 31, 2020 due to the full valuation allowance established against our deferred tax assets, in accumulated other comprehensive loss.

The functional currency for our other foreign subsidiaries is the 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

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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, useful lives associated with property and equipment, valuation of ROU assets and ROU liabilities, valuation and useful lives of intangible assets, 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 equivalents, accounts receivable, accounts payable, and accrued expenses and other liabilities approximates fair value due to the short duration and nature of these financial instruments.

3. Cash and cash equivalents and marketable securities

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


	March 31,		December 31,
	2021		2020
Cash and cash equivalents:
Cash	$	7,809	$	15,286
Money market funds		28,463		20,825
Total cash and cash equivalents	$	36,272	$	36,111
Short-term marketable securities-available-for-sale:
Marketable securities	$	0	$	4,565
Total short-term marketable securities	$	0	$	4,565

For the three months ended March 31, 2021 and 2020, interest income was $10 and $296, respectively, which is included in interest income and other expense, net in the accompanying condensed consolidated statements of operations.

4. Assets and liabilities held for sale

The Company is exploring a potential divestiture of its Multifamily business to concentrate on its core business, independent of the Merger. As of March 31, 2021, the Company’s Multifamily segment met the criteria to be classified as held for sale. As the Multifamily segment met the criteria to be classified as held for sale, we are required to record their assets and liabilities at the lower of carrying value or fair value less any costs to sell and present the related assets and liabilities as separate line items in our condensed

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consolidated balance sheet. The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in our condensed consolidated balance sheet:


	March 31,
	2021
Accounts receivable, net	$	3,830
Prepaid expenses and other current assets		1,930
Property and equipment, net		2,728
Operating lease right-of-use assets, net		13
Other assets		245
Total assets held for sale	$	8,746

Accounts payable	$	(1,085)
Accrued expenses and other liabilities		(1,274)
Deferred revenue		(1,990)
Other liabilities		(87)
Total liabilities held for sale	$	(4,436)

We determined that the operations included in the table above did not meet the criteria to be classified as discontinued operations under the applicable guidance. NaN gain or loss was recorded from the classification as held for sale during the three months ended March 31, 2021. We expect to complete the sale within the next one-year period.

5. Contract assets and contract liabilities

The opening and closing balances of our contract asset, net, contract liability, net balances from contracts with customers for the three months ended March 31, 2021 were as follows:


	Contract		Contract
	Assets, Net		Liabilities, Net
Balance at December 31, 2020	$	547	$	224,754
Balance at March 31, 2021 (1)		473		236,465
Change	$	(74)	$	11,711

(1)

Excludes contract assets, net of $766 and contract liabilities, net of $1,990 classified as held for sale.

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, excluding amounts classified within assets and liabilities held for sale. Contract assets, net is generated from our Carrier Services and Legacy 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, 2021 and 2020, respectively, include the following:

As of March 31, 2021, the aggregate amount of the transaction price allocated to remaining service performance obligations for our Carrier Services contracts was $224,687. We expect to recognize this revenue as service is provided over the remaining contract

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term. As of March 31, 2021, our Carrier Services contracts have a remaining duration of less than one year to approximately thirteen years.

Certain of our Legacy 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, 2021, the aggregate amount of the transaction price allocated to remaining service performance obligations for certain of our Legacy wholesale Wi-Fi contracts with guaranteed minimum consideration was $5,139. We expect to recognize this revenue as service is provided over the remaining contract term. As of March 31, 2021, our Legacy wholesale Wi-Fi contracts have a remaining duration of less than one year to approximately thirteen 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 monthly service contracts.

6. Property and equipment

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


	March 31,		December 31,
	2021		2020
Leasehold improvements	$	626,712	$	596,242
Construction in progress		105,226		118,055
Software		65,948		65,532
Computer equipment		14,755		14,808
Furniture, fixtures and office equipment		2,040		2,506
Total property and equipment		814,681		797,143
Less: accumulated depreciation and amortization		(409,998)		(390,815)
Total property and equipment, net	$	404,683	$	406,328

Depreciation and amortization expense, which includes depreciation and amortization for property and equipment under finance leases, for the three months ended March 31, 2021 and 2020 amounted to $20,745 and $18,646, respectively.

7. Accrued expenses and other liabilities

Accrued expenses and other liabilities consisted of the following:


	March 31,		December 31,
	2021		2020
Customer liabilities	$	22,684	$	21,964
Construction in progress		16,898		13,679
Revenue share		5,686		5,514
Taxes		3,844		4,455
Professional fees		2,664		871
Salaries and wages		2,912		3,684
Partner network		692		651
Other		6,521		5,166
Total accrued expenses and other liabilities	$	61,901	$	55,984

8. Convertible Notes

In 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 cash at a rate of 1.00% per annum on April 1^st and October 1^st of each year. 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

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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 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.

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 (including the last 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, 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 the Company’s common stock upon conversion of the Convertible Notes and/or offset the potential cash payments that the 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:


	March 31,
	2021
Par value of the Convertible Notes	$	201,250
Unamortized debt issuance costs		(3,135)
Net carrying value of Convertible Notes	$	198,115

The fair value of our Convertible Notes was $198,483 as of March 31, 2021. The estimated fair value of Convertible Notes is based on market rates and the closing trading price of the Convertible Notes as of March 15, 2021 and is classified as Level 2 in the fair value hierarchy. There were no trades between March 16, 2021 and March 31, 2021. As of March 31, 2021, the if-converted value of the Convertible Notes did not exceed the principal amount.

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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 interest expense and amortization of debt discount in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2021. The following table sets forth interest expense related to the Convertible Notes for the three months ended March 31, 2021 and 2020:


	Three Months Ended
	March 31,
	2021			2020(2)
Contractual interest expense	$	503		$	503
Amortization of debt issuance costs		307			220
Amortization of debt discount		—			2,156
Total	$	810		$	2,879
Effective interest rate of the liability component		1.6	%		7.1	%

(2)

As noted above, prior period amounts have not been adjusted upon adoption of ASU 2020-06 under the modified retrospective method.

During the three months ended March 31, 2021 and 2020, we capitalized $433 and $650, respectively, of amortization and interest expense related to the Convertible Notes.

Amortization expense for our debt issuance costs through 2023 are as follows:


	Debt Issuance
	Costs
April 1, 2021―December 31, 2021	$	927
January 1, 2022―December 31, 2022		1,254
January 1, 2023―December 31, 2023		954
	$	3,135

9. Credit Facility

In February 2019, we entered into a Credit Agreement (the “Credit Agreement”) and related agreements 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 Barclays Bank PLC (the “Lenders”), for a secured credit facility in the form of a revolving line of credit of up to $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 assets, with certain exclusions.

As of March 31, 2021 and December 31, 2020, we had 0 amounts outstanding under the Revolving Line of Credit. As of March 31, 2021 and December 31, 2020, we had $1,749 and $1,944, respectively, outstanding under the Term Loan. Amounts borrowed under the Revolving Line of Credit and Term Loan will bear variable interest at the greater of LIBOR plus 1.75% - 2.75% or Lender’s Prime Rate plus 0.75% - 1.75% per year and we will pay a fee of 0.25% - 0.5% per year on any unused portion of the Revolving Line of Credit. The Term Loan requires quarterly payments of interest and principal until it is repaid in full on the maturity date 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.

The 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 cash on hand minimums. We complied with all such financial covenants through March 31, 2021.

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Principal payments due under our Term Loan through 2023 are as follows:


	Principal Payments
April 1, 2021―December 31, 2021	$	583
January 1, 2022―December 31, 2022		778
January 1, 2023―December 31, 2023		388
	$	1,749

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 expense and amortization of debt discount in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2021. Amortization and interest expense capitalized during the three months ended March 31, 2021 and 2020 amounted to $0 and $131, respectively. Amortization and interest expense expensed during each of the three months ended March 31, 2021 and 2020 amounted to $114, respectively. The interest rate for the Credit Facility for the three months ended March 31, 2021 was 2.0%.

Amortization expense for our debt issuance costs through 2023 are as follows:


	Amortization Expense
April 1, 2021―December 31, 2021	$	343
January 1, 2022―December 31, 2022		457
January 1, 2023―December 31, 2023		120
	$	920

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 seven years and our finance leases have remaining lease terms of less than one year. Some of our operating leases may include 1 or more options to renew and can extend the lease term from one year to ten 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 March 31, 2021, assets recorded under finance leases were $12,265 and accumulated depreciation and amortization associated with finance leases was $7,992. As of December 31, 2020, assets recorded under finance leases were $12,265 and accumulated depreciation and amortization associated with finance leases was $7,533.

The components of lease expense were as follows:


	Three Months Ended
	March 31,
	2021		2020
Operating lease expense	$	789	$	859
Finance lease expense:
Depreciation and amortization of assets included in property and equipment, net	$	459	$	538
Interest on lease liabilities		3		0
Total finance lease expense	$	462	$	538

Interest on lease liabilities capitalized during the three months ended March 31, 2021 and 2020, which is excluded from the above table, amounted to $0 and $24, respectively.

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Supplemental cash flow information related to leases was as follows:


	Three Months Ended
	March 31,
	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(943)	$	(1,056)
Operating cash flows from finance leases		(1)		(24)
Financing cash flows from finance leases		(441)		(818)
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		—		—

Other information related to leases was as follows:


	March 31, 2021
Weighted average remaining lease term:
Operating leases	5.0	years
Financing leases	0.1	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, 2021 were as follows:


	Operating		Finance
	Leases		Leases
April 1, 2021―December 31, 2021	$	2,454	$	132
January 1, 2022―December 31, 2022		3,692		0
January 1, 2023―December 31, 2023		3,645		0
January 1, 2024―December 31, 2024		3,655		0
January 1, 2025―December 31, 2025		3,707		0
January 1, 2026―December 31, 2026		1,343		0
Thereafter		185		0
Total future minimum lease payments		18,681		132
Less: Imputed interest		(2,283)		0
Total		16,398		132
Current portion of operating and finance leases		2,649		132
Long-term portion of operating and finance leases	$	13,749	$	0

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11. 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, 2021	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	28,463	$	0	$	0	$	28,463
Total assets	$	28,463	$	0	$	0	$	28,463


At December 31, 2020		Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	20,825	$	0	$	0	$	20,825
Marketable securities		0		4,565		0		4,565
Total assets	$	20,825	$	4,565	$	0	$	25,390

Our marketable securities utilize Level 1 and Level 2 inputs and consist primarily of corporate debt 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 various 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 maturity securities are classified as Level 2 securities. Our marketable securities are valued at amortized cost, which approximates fair value. 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 based upon available market observable data.

12. Income taxes

Income tax expense of $119 and $45 reflects an effective tax rate of 1.8% and 1.0% for the three months ended March 31, 2021 and 2020, respectively. Our effective tax rate differs from the statutory rate primarily due to our valuation allowance and minimum state taxes for the three months ended March 31, 2021 and 2020.

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 2017 and forward are subject to examination by the IRS and our tax years 2016 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.

13. 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 March 31, 2021, we have Letters of Credit totaling $12,895 that are scheduled to expire or renew over the next one-year period. There have been 0 drafts drawn under these Letters of Credit as of March 31, 2021.

Legal proceedings regarding the Merger

On April 12, 2021, April 16, 2021, April 21, 2021, and April 22, 2021, April 29, 2021, and April 30, 2021, lawsuits were filed alleging that the Preliminary Proxy Statement filed on April 9, 2021 and/or the Proxy Statement filed on April 28, 2021, relating to the Merger omitted material information that rendered them false or misleading. The lawsuits, each filed by a purported stockholder of Boingo in an individual capacity and/or on behalf of all others similarly situated, are captioned Stein v. Boingo Wireless, Inc., et al., 1:21-cv-03152 (S.D.N.Y.), Ladin v. Boingo Wireless, Inc., et al., 1-21-cv-02076 (E.D.N.Y.), Redfield v. Boingo Wireless, Inc., et al., 1:21-cv-03536 (S.D.N.Y.), Felts v. Boingo Wireless, Inc., et al., 1-21-cv-03591 (S.D.N.Y), Normand v. Boingo Wireless, Inc., et al., 2:21-cv-03626 (C.D. Cal), and Patrick v. Boingo Wireless, Inc., et al., 1:21-cv-03859 (S.D.N.Y). As a result of the alleged omissions, the lawsuits seek to hold Boingo and/or its directors liable for violating Sections 14(a) and 20(a) of the Exchange Act, including Rule 14a-9 promulgated thereunder, and for breaching their fiduciary duty. The lawsuits seek, among other relief, an order enjoining

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completion of the merger, rescission of the merger in the event it is consummated, and damages. Boingo has not yet responded to the complaints filed in the lawsuits. While Boingo believes that the lawsuits are meritless, there can be no assurance that it will ultimately prevail in the lawsuits. Additionally, similar lawsuits may be, or have been, filed before the stockholder meeting.

Other 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 other 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 1 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 settlement discussions with our venue partner. As of March 31, 2021, 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.

14. 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 March 31, 2021, options to purchase approximately 96,000 shares of common stock and RSUs covering approximately 1,673,000 shares of common stock were outstanding under the 2011 Plan.

NaN 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. As of March 31, 2021, 0 options to purchase shares of common stock were outstanding under the 2001 Plan.

Stock-based compensation expense for the three months ended March 31, 2021 and 2020 amounted to $2,277 and $1,537, respectively. During the three months ended March 31, 2020, the Company recorded certain out-of-period adjustments that decreased stock-based compensation expense and net loss attributable to common stockholders by $481. The impact of these out-of-period adjustments is not considered material, individually, and in the aggregate, to any of the current or prior periods.

During the three months ended March 31, 2021 and 2020, we capitalized $140 and $149, respectively, of stock-based compensation expense.

Stock option awards

We previously granted stock option awards to both employees and non-employee directors. A summary of the activity for stock option activity if as follows:


		Weighted		Weighted-Average
	Number of	Average		Remaining	Aggregate
	Options	Exercise		Contract	Intrinsic
	(000’s)	Price		Life (years)	Value
Outstanding at December 31, 2020	109	$	7.75	1.8	$	559
Exercised	(13)	$	9.64
Canceled/forfeited	—	$	—
Outstanding and exercisable at March 31, 2021	96	$	7.48	1.7	$	630

Restricted stock unit awards

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

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We grant performance based RSUs to executive personnel. These awards vest subject to certain performance objectives based on the Company’s revenue, segment revenue, Adjusted EBITDA, and/or relative total stockholder return performance goals 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 and achievement of the performance conditions. We recognize stock-based compensation expense for performance-based RSUs when performance targets are defined and the grant date is established and we believe that it is probable that the performance objectives will be met.

A summary of the RSU activity is as follows:


		Weighted Average
	Number of Shares	Grant-Date Fair
	(000’s)	Value
Non-vested at December 31, 2020	951	$	14.30
Granted(3)	893	$	11.55
Vested	(134)	$	15.86
Canceled/forfeited(3)	(37)	$	12.18
Non-vested at March 31, 2021	1,673	$	12.75

(3)

The performance based RSUs granted to our executive officers in 2019, 2020 and 2021 were subject to the satisfaction of specified service based and performance based conditions over a three-year performance period. Achievement of the revenue and Adjusted EBITDA goals for the performance based RSUs is based upon the budgets established for each of the years in the three-year performance period. In March 2021, our Compensation Committee determined actual achievement of the 2020 revenue and EBITDA goals for the 2019 and 2020 performance-based RSUs at 58.4% and 97.4%, respectively, resulting in the cancellation of RSUs in 2021 for the achievement below target. As the Company approves budgets on an annual basis, the performance targets for the performance based RSUs related to the revenue and Adjusted EBITDA goals for two years out of the three-year performance period were not considered defined as of the date these awards were awarded by the Compensation Committee. The grant date requirements of ASC 718, Compensation-Stock Compensation, are therefore not met until such approval is obtained. During the three months ended March 31, 2021, the Company’s Compensation Committee approved the 2021 revenue and Adjusted EBITDA performance targets for the 2019 and 2020 performance based RSUs resulting in additional RSUs granted of approximately 107,000 at a grant-date fair value of $11.54 per share. As of March 31, 2021, 75,000 2020 performance based RSUs and 177,000 2021 performance based RSUs have been excluded from RSU shares granted and non-vested as the performance targets have not yet been defined.

During the three months ended March 31, 2021, approximately 134,000 shares of RSUs vested. The Company issued approximately 92,000 shares and the remaining shares were withheld to pay minimum statutory federal, state, and local employment payroll taxes on those vested awards.

At March 31, 2021, the total remaining stock-based compensation expense for unvested RSU awards is $17,639, which is expected to be recognized over a weighted average period of 2.2 years.

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15. 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
	March 31,
	2021		2020

	(in thousands)
Numerator:
Net loss attributable to common stockholders, basic and diluted	$	(6,444)	$	(4,633)
Denominator:
Weighted average common stock, basic and diluted		44,690		44,272
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.14)	$	(0.10)

For the three months ended March 31, 2021 and 2020, 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 periods. Prior to the adoption of ASU 2020-06, diluted EPS for our Convertible Notes was calculated under the treasury method in accordance with ASC 260, Earnings Per Share, as we had the intent and ability to settle the principal amount of the Convertible Notes in cash. Accordingly, no shares associated with the Convertible Notes were included in the weighted average number of common stock outstanding for any periods presented. Subsequent to the adoption of ASU 2020-06, diluted EPS for our Convertible Notes is calculated under the if-converted method. For the three months ended March 31, 2021 and 2020, we excluded the shares that would be issuable assuming conversion of all the Convertible Notes and the shares for the capped call as their effect would be anti-dilutive under both the if-converted method and the treasury method, respectively.

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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, 2020, filed with the Securities Exchange Commission on March 1, 2021, as amended through the Form 10-K/A filed with the SEC on April 28, 2021.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on our current expectations, estimates and projections about our operations, industry, financial condition, performance, results of operations, and liquidity. Statements containing words such as “may," "could,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “project,” “projections,” “business outlook,” “estimate,” or similar expressions constitute forward-looking statements. These forward-looking statements include, but are not limited to, statements about future financial performance; revenues; metrics; operating expenses; operations and financial performance due to COVID-19; market trends, including those in the markets in which we compete; operating and marketing efficiencies; liquidity; cash flows and uses of cash; dividends; capital expenditures; depreciation and amortization; tax payments; foreign currency exchange rates; hedging arrangements; our ability to repay indebtedness, pay dividends and invest in initiatives; our products and services; pricing; competition; strategies; and new business initiatives, products, services, and features. Potential factors that could affect the matters about which the forward-looking statements are made include, among others, the factors disclosed in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and additional factors that accompany the related forward-looking statements in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2020, as amended through the Form 10-K/A filed with the SEC on April 28, 2021. 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/arenas, military bases, multifamily properties, universities, convention centers, and office campuses; we build high-quality public and private wireless networks such as distributed antenna systems (“DAS”), towers, 5G, small cells, Citizens Broadband Radio Services (“CBRS”), and Wi-Fi at those venues; and we monetize the wireless networks through a number of products and services.

We believe we are unique in the market in several important ways:

●

Our experience building multi-service converged technology networks gives us a unique ability to build complex networks in the 5G era.

●

Our economic engine is driven by shared infrastructure investment and multiple revenue streams that drive long-term, recurring cash flows.

●

Our “neutral host” approach to building and operating wireless networks is designed to provide a solution that accommodates all carriers and offers all venue guests or enterprise employees enhanced coverage, regardless of their cellular provider.

With 76 DAS networks containing approximately 41,500 DAS nodes, we believe we are the largest operator of indoor DAS networks in the world. Our Wi-Fi network includes locations we manage and operate ourselves (our “managed and operated locations”) as well as networks managed and operated by third-parties with whom we contract for access (our “roaming” networks) to commercial Wi-Fi hotspots around the world. Our Passpoint connectivity enables carriers to seamlessly and securely offload cellular traffic onto our carrier-grade Wi-Fi networks.

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Our business is organized into five segments and we derive revenue from various products and services sold to customers within each segment. Our core segments are Carrier Services, Military, and Private Networks and Emerging Technologies. We also provide connectivity access to customers through our Multifamily and Legacy businesses.

Our Carrier Services business is targeted toward helping wireless carriers, large venues and enterprises meet growing needs for enhanced wireless connectivity. We generate revenue from wireless carriers that pay us build-out fees and/or recurring access fees so that their cellular customers may use our DAS, tower, small cell, or Wi-Fi networks at locations where we manage and operate the wireless networks. For the three months ended March 31, 2021, revenue from our Carrier Services business accounted for approximately 45% of our revenue.

Our Military business is primarily focused on providing a wireless broadband solution to soldiers on military bases. Revenue from our military business, which is driven by military personnel who purchase Wi Fi services on military bases and short-term and long-term contracts with the U.S. government to provide network installation services and Wi-Fi services at specified locations on military bases on a bulk basis, accounted for approximately 34% of our total revenue for the three months ended March 31, 2021. As of March 31, 2021, our military subscriber base was approximately 137,000, a 1.5% increase over the prior year comparative period.

Our Private Networks and Emerging Technologies business is primarily focused on providing a converged wireless solution to venues and non-carrier customers in verticals such as airports, logistics/fulfillment, industrial manufacturing, sports stadiums, hospitals, on and off campus student housing, and military bases. Our Private Networks and Emerging Technologies business offers a suite of products and services including the design and installation of converged networks for licensed, unlicensed, and shared spectrum including the provision of network-as-a-service (“NaaS”), professional services, and data services that are focused on delivering our core products for those converged networks. Our private LTE networks are reliable carrier-grade cellular networks that provide greater capacity, higher bandwidth, lower latency, and cellular grade network and data security at lower cost than traditional DAS networks. Our private LTE networks support multiple carriers and offer network segmenting options to localize user traffic management based on types of devices connecting. For the three months ended March 31, 2021, revenue from our Private Networks and Emerging Technologies business accounted for approximately 2% of our revenue.

Our Multifamily business is primarily focused on providing a wireless broadband solution to multi-dwelling properties including student housing, condominiums, apartments, senior living, and hospitality properties throughout the U.S. Multifamily revenue, which is driven by these multi-dwelling properties who purchase network installation services and recurring monthly Wi-Fi services and support or NaaS, accounted for approximately 9% of our revenue for the three months ended March 31, 2021.

Our Legacy business is comprised of other product and service offerings to wholesale and retail customers that are no longer considered core to our business. We generate revenue from wholesale customers such as cable companies, technology companies, and enterprise software/services companies, who pay us usage-based Wi Fi network access and software licensing fees to allow their customers’ access to our worldwide footprint, financial institutions and other enterprise customers who provide Boingo as a value added service for their customers, retail consumers who purchase a recurring monthly subscription plan or one-time Wi Fi access, advertisers that seek to reach consumers via sponsored Wi Fi access, and venue partners and their tenants that require a turnkey Wi-Fi solution through a Wi-Fi network infrastructure that we install, manage and operate. For the three months ended March 31, 2021, revenue from our Legacy business accounted for approximately 10% of our revenue.

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

●

Leverage our neutral host business model to grow DAS, tower, small cell, and wholesale roaming partnerships;

●

Deploy Wi-Fi 6 and 5G networks with current and future venue partners;

●

Expand our carrier offload relationships; and

●

Expand our footprint of managed, operated and private networks.

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Merger

On February 26, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with White Sands Parent, Inc., a Delaware corporation (“Parent”) and White Sands Bidco, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), providing for the merger of Merger Sub with and into our Company (the “Merger”), with our Company surviving the Merger as a wholly owned subsidiary of Parent.

Under the terms of the agreement, our stockholders will receive $14.00 in cash for each share of common stock they hold on the transaction closing date. The obligations of the parties to consummate the acquisition is subject to customary closing conditions, including the approval of the transaction by our stockholders at a special meeting of the stockholders and the absence of legal restraints and prohibitions against the transaction, among other conditions. Following a 25-business day go-shop period, we are subject to customary restrictions on or ability to solicit alternative acquisition proposals from third parties and to provide non-public information to, and participate in discussions and engage in negotiations with, third parties regarding alternative acquisition proposals, with customary exceptions for superior proposals. The go-shop period expired on April 2, 2021. The Merger Agreement requires the Company to convene a special meeting of stockholders for purposes of obtaining approval of the adoption of the Merger Agreement and to prepare and file with the Securities and Exchange Commission (the “SEC”) a proxy statement with respect to such meeting. The Company filed its definitive proxy statement with the SEC on April 28, 2021 and the special meeting is scheduled to be held on June 1, 2021. For a summary of the transaction, please refer to Note 22—Subsequent Events in our annual report on Form 10-K and to our Form 8-K filed with the SEC on March 1, 2021. Our annual report on Form 10-K was amended through the Form 10-K/A filed with the SEC on April 28, 2021.

Impact of COVID-19 on Our Business

Key Business Metrics

In addition to monitoring traditional financial measures, we also monitor our operating performance using key performance indicators. Our key performance indicators follow:

DAS nodes.This metric represents the number of active DAS nodes as of the end of the period. A DAS node is a single communications endpoint, typically an antenna, which transmits or receives radio frequency signals wirelessly. This measure is an indicator of the reach of our DAS network.

Subscribers— military. These metrics represent the number of paying Military customers who are on a month-to-month subscription plan at a given period end.

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Revenue

Our revenue is generated from our Carrier Services, Military, Private Networks and Emerging Technologies, Multifamily, and Legacy businesses.

Carrier services. We generate revenue from telecom operator partners that pay us network build-out fees, inclusive of network upgrades, and access fees for our DAS, tower, and small cell networks. We also generate revenue from telecom operator partners that pay us to move traffic from their licensed cellular networks onto our Wi-Fi networks at our managed and operated locations.

Military. We generate revenue from sales to Military retail individuals of month-to-month network access subscriptions that automatically renew and hourly, daily or other single-use access, primarily through charge card transactions. We also generate revenue from the U.S. government for network installation services and Wi-Fi services at specified locations on military bases on a bulk basis.

Private networks and emerging technologies. We generate revenue from venue owners and non-telecom operator partners that pay us network build-out fees and professional, management, and data service fees.

Multifamily. We generate Multifamily revenue from property owners 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.

Legacy. We generate revenue from wholesale Wi-Fi partners that license our software and pay usage-based monthly network access fees to allow their customers to access our global Wi-Fi network. Usage-based network access fees may be measured in minutes, connects, megabytes, or gigabytes, and in most cases are subject to minimum volume commitments. Other wholesale Wi-Fi partners pay us monthly fees to provide a Wi-Fi infrastructure that we install, manage and operate at their venues for their customers under a service provider arrangement. We also generate revenue from sales to Legacy retail individuals of month-to-month network access subscriptions that automatically renew and hourly, daily or other single-use access, primarily through charge card transactions, advertisers that seek to reach visitors to our landing pages at our managed and operated network locations with online advertising, promotional and sponsored programs and at locations where we solely provide authorized access to a partner’s Wi-Fi network through sponsored access and promotional programs, and partners in certain venues where we manage and operate the Wi-Fi network.

Results of Operations

In December 2019, the Company approved and adopted a plan to restructure the Company’s business operations to drive long term sustainable revenue growth, better align resources, improve operational efficiencies and to increase profitability. We completed our restructuring activities in October 2020. Prior to the completion of the restructuring activities, we operated 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 was consistent with the internal organizational structure and the manner in which operations were reviewed and managed by our Chief Executive Officer, the chief operating decision maker.

We currently have five reportable and operating segments: (i) carrier services for the provision of wireless and cellular services to our wireless customers (“Carrier Services”); (ii) military for the provision of wireless services on military bases (“Military”); (iii) private networks and emerging technologies for the provision of licensed, unlicensed, and shared spectrum services for our venue partners and non-telecom customers (“Private Networks and Emerging Technologies”); (iv) multifamily for the provision of wireless services for our multifamily property owners (“Multifamily”); and (v) legacy for the provision of our other services such as retail, advertising, and wholesale Wi-Fi services to enterprise customers (“Legacy”). Prior period segment results have been recast to conform to the current presentation.

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	January 1, 2021		Adjustment for		January 1, 2021
	(Unadjusted)		Adoption		(Adjusted)
Property and equipment, net	$	406,328	$	(6,076)	$	400,252
Long-term debt	$	171,695	$	27,279	$	198,974
Additional paid-in capital	$	241,868	$	(39,921)	$	201,947

The changes to the consolidated balance sheet as of January 1, 2021 were primarily due to the following factors: (i) reclassification of the equity component of our Convertible Notes related to the cash conversion feature to a liability thereby eliminating the debt discount; (ii) reclassification of the debt issuance costs for the equity component of our Convertible Notes to a liability; (iii) adjustment of the amount of interest expense capitalized as part of our property and equipment; and (iv) reversal of $5,686 of income tax benefit related to the equity component of the Convertible Notes that was recorded as additional paid-in capital. On January 1, 2021, we also reversed $27,949 of gross deferred tax liabilities related to the equity component of our Convertible Notes. The adoption of ASU 2020-06 did not have any impact on our net deferred tax as of January 1, 2021 due to the valuation allowance. Effective January 1, 2021, we calculate the dilutive effect of the Convertible Notes on our diluted EPS using the if-converted method.

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


	Three Months Ended
	March 31,
	2021		2020(1)

	(unaudited)
	(in thousands)
Consolidated Statements of Operations Data:
Revenue	$	59,929	$	59,886
Cost of sales		29,702		28,759
Gross profit		30,227		31,127
Selling, general and administrative expenses		35,148		32,601
Amortization of intangible assets		937		1,111
Loss from operations		(5,858)		(2,585)
Interest expense and amortization of debt discount		(657)		(2,349)
Interest income and other expense, net		(2)		254
Loss before income taxes		(6,517)		(4,680)
Income tax expense		(119)		(45)
Net loss		(6,636)		(4,725)
Net loss attributable to non-controlling interests		(192)		(92)
Net loss attributable to common stockholders	$	(6,444)	$	(4,633)
Depreciation and amortization expense included in the above line items:
Depreciation and amortization expense	$	20,745	$	18,646
Stock‑based compensation expense included in the above line items:
Stock-based compensation expense	$	2,277	$	1,537

(1)	As noted above, prior period amounts have not been adjusted upon adoption of ASU 2020-06 under the modified retrospective method.

Depreciation and amortization expense

Depreciation and amortization of property and equipment increased $2.1 million, or 11.3% for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily as a result of our increased fixed assets from our DAS build-out projects, Wi-Fi networks, and software development in 2020 and 2021.

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Stock-based compensation expense

Stock-based compensation expense increased $0.7 million, or 48.1% for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. During the three months ended March 31, 2020, the Company recorded certain out-of-period adjustments that decreased stock-based compensation expense and net loss attributable to common stockholders by $0.5 million. The impact of these out-of-period adjustments is not considered material, individually and in the aggregate, to any of the current or prior annual periods. For each of the three months ended March 31, 2021 and 2020, we capitalized $0.1 million, respectively.

The following table sets forth our results of operations for the specified periods as a percentage of our revenue for those periods:


	Three Months Ended
	March 31,
	2021		2020(2)

	(unaudited)
	(as a percentage of revenue)
Consolidated Statements of Operations Data:
Revenue	100.0	%	100.0	%
Cost of sales	49.6		48.0
Gross profit	50.4		52.0
Selling, general and administrative expenses	58.6		54.4
Amortization of intangible assets	1.6		1.9
Loss from operations	(9.8)		(4.3)
Interest expense and amortization of debt discount	(1.1)		(3.9)
Interest income and other expense, net	(0.0)		0.4
Loss before income taxes	(10.9)		(7.8)
Income tax expense	(0.2)		(0.1)
Net loss	(11.1)		(7.9)
Net loss attributable to non-controlling interests	(0.3)		(0.2)
Net loss attributable to common stockholders	(10.8)	%	(7.7)	%

(2)	As noted above, prior period amounts have not been adjusted upon adoption of ASU 2020-06 under the modified retrospective method.

Three Months ended March 31, 2021 and 2020

Revenue


	Three Months Ended March 31,
	2021		2020		Change		% Change

	(unaudited)
	(in thousands, except percentages)
Revenue:
Carrier services	$	26,883	$	26,848	$	35	0.1
Military		20,645		18,002		2,643	14.7
Multifamily		5,304		5,224		80	1.5
Legacy		6,204		9,302		(3,098)	(33.3)
Private networks and emerging technologies		893		510		383	75.1
Total revenue	$	59,929	$	59,886	$	43	0.1
Key business metrics:
DAS nodes		41.5		39.5		2.0	5.1
Subscribers—military		137		135		2	1.5

Carrier services. Carrier Services revenue remained relatively consistent for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. Build-out revenues for the three months ended March 31, 2020 includes a $1.1 million short-term build project that included the sale of equipment that was completed during this period.

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Military. Military revenue increased $2.6 million, or 14.7%, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to a $1.6 million increase in military retail revenue, which was driven primarily by the increase in military subscribers and a 7.6% increase in the average monthly revenue per military subscriber in 2021 compared to 2020. The remaining increase in attributable to a $1.0 million increase in bulk services sold to the military.

Multifamily. Multifamily revenue remained relatively consistent for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020.

Legacy. Legacy revenue decreased $3.1 million, or 33.3%, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to a $1.3 million decrease in retail revenue primarily due to a decrease in retail subscribers, a $1.1 million decrease in advertising sales at our managed and operated locations primarily due to a decline in the number of premium ad units sold, and a $0.8 million decrease in fees earned from our venue partners who pay us to provide a Wi-Fi infrastructure that we install, manage, and operate at their venues. The decreases in retail and advertising revenue have been exacerbated by the significant declines in venue traffic due to COVID-19.

Private networks and emerging technologies. Private networks and emerging technologies revenue increased $0.4 million, or 75.1%, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, due to a $0.4 million increase in network installation revenues for venue owned build projects.

Cost of Sales and Gross Profit


	Three Months Ended March 31,
	2021		2020		Change		% Change

	(unaudited)
	(in thousands, except percentages)
Cost of sales:
Carrier services	$	17,737	$	16,175	$	1,562	9.7
Military		4,757		4,505		252	5.6
Multifamily		3,905		3,732		173	4.6
Legacy		3,035		4,336		(1,301)	(30.0)
Private networks and emerging technologies		268		11		257	2,336.4
Total cost of sales	$	29,702	$	28,759	$	943	3.3


	Three Months Ended March 31,
	2021			2020			Change			% Change

	(unaudited)
	(in thousands, except percentages)
Gross profit:
Carrier services		34.0	%		39.8	%		(5.7)	%	(14.4)
Military		77.0			75.0			2.0		2.6
Multifamily		26.4			28.6			(2.2)		(7.6)
Legacy		51.1			53.4			(2.3)		(4.3)
Private networks and emerging technologies		70.0			97.8			(27.9)		(28.5)
Total gross profit		50.4	%		52.0	%		(1.5)	%	(3.0)

Carrier services. Carrier Services cost of sales increased $1.6 million, or 9.7%, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to a $2.0 million increase in depreciation expense resulting from our increased fixed assets from our build-out projects. The increase was partially offset by a $0.4 million decrease in direct and other cost of revenue. Other costs of revenue for the three months ended March 31, 2020 included $0.9 million of costs directly related to a short-term project that was completed during this period. Carrier Services gross profit decreased 570 basis points for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to the increase in depreciation expense.

Military. Military cost of sales increased $0.3 million, or 5.6%, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to a $0.6 million increase in revenue share paid to our military bases, partially offset by $0.3 million decrease in direct and other cost of revenue. Military gross profit increased 200 basis points for the three months

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ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to the increase in our average monthly revenue per military subscriber in 2021 compared to 2020.

Multifamily. Multifamily cost of sales and gross profit remained relatively consistent for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020.

Legacy. Legacy cost of sales decreased $1.3 million, or 30.0%, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to a $0.4 million decrease in revenue share paid to venues in our managed and operated locations, a $0.4 million decrease in direct and other cost of revenue, a $0.3 million decrease in depreciation expense, and a $0.2 million decrease from customer usage at partner venues. Legacy gross profit decreased 230 basis points for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to the decrease in our higher margin retail subscriber revenue.

Private networks and emerging technologies. Private networks and emerging technologies cost of sales increased $0.3 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, due to a $0.3 million increase in construction costs for our network installation projects. Private networks and emerging technologies gross profit decreased to 70.0% in 2021, as compared to 97.8% for the three months ended March 31, 2020 primarily due to higher costs incurred on these network installation projects.

Selling, General and Administrative Expenses


	Three Months Ended March 31,
	2021		2020		Change		% Change

	(unaudited)
	(in thousands, except percentages)
Selling, general and administrative expenses
Carrier services	$	6,334	$	4,552	$	1,782	39.1
Military		8,493		8,568		(75)	(0.9)
Multifamily		2,503		2,779		(276)	(9.9)
Legacy		3,436		4,280		(844)	(19.7)
Private networks and emerging technologies		550		60		490	816.7
Corporate		13,832		12,362		1,470	11.9
Total selling, general and administrative expenses	$	35,148	$	32,601	$	2,547	7.8

Carrier services. Carrier services selling, general and administrative expenses increased $1.8 million, or 39.1%, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to a $0.7 million increase in marketing and advertising expenses, a $0.4 million increase in depreciation expense, a $0.4 million increase in personnel related expenses, and a $0.2 million increase in network maintenance expenses.

Military. Military selling, general and administrative expenses decreased slightly for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to a $0.4 million increase in depreciation expense and a $0.4 million increase in personnel related expenses, which were partially offset by a $0.3 million decrease in hardware and software maintenance expenses and a $0.2 million decrease in cloud services.

Multifamily. Multifamily selling, general and administrative expenses decreased $0.3 million, or 9.9%, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, due to a $0.1 million decrease in consulting expense, a $0.1 million decrease in rent and facilities, and a $0.1 million decrease in cloud services.

Legacy. Legacy selling, general and administrative expenses decreased $0.8 million, or 19.7% for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to a $0.3 million decrease in depreciation expense, a $0.3 million decrease in cloud services, and a $0.2 million decrease in network maintenance expenses.

Private networks and emerging technologies. Private networks and emerging technologies selling, general and administrative expenses increased $0.5 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to an increase in personnel related expenses.

Corporate. Corporate selling, general and administrative expenses increased $1.5 million, or 11.9%, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to a $3.2 million increase in transaction costs, which was partially offset by a $1.3 million decrease in personnel related expenses, a $0.3 million decrease in depreciation expense, and a $0.2 million decrease in outside services fees.

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Amortization of Intangible Assets

Amortization of intangible assets expense remained relatively consistent for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020.

Interest Expense and Amortization of Debt Discount

Interest expense and amortization of debt discount decreased $1.7 million, or 72.0%, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to the adoption of ASU 2020-06 effective January 1, 2021. During the three months ended March 31, 2021 and 2020, we capitalized $0.4 million and $0.8 million, respectively, of interest expense.

Interest Income and Other Expense, Net

Interest income and other expense, net decreased $0.3 million, or 100.8% for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to a decrease in interest income related to our marketable securities balances in 2021.

Income Tax Expense

There were no significant changes in income tax expense for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. The change in our effective tax rate to 1.8% for the three months ended March 31, 2021, as compared to 1.0% for the three months ended March 31, 2020, is primarily due to minimum state taxes.

Non-controlling Interests

Non-controlling interests remained relatively consistent for the three months ended March 31, 2021, as compared to the three month ended March 31, 2020.

Net Loss Attributable to Common Stockholders

Net loss attributable to common stockholders increased $1.8 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, primarily due to the $2.5 million increase in selling, general and administrative expenses, the $0.9 million increase in cost of sales, and the $0.3 million decrease in interest income and other expense, net. The charges were partially offset by the $1.7 million decrease in interest expense and amortization of debt discount. Our diluted net loss per share increased primarily as a result of the increase 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 expense and amortization of debt discount, interest income and other expense, net, non-controlling interests, and excludes charges or gains that are non-recurring, infrequent, or unusual.

We believe that Adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that:

●

Adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance, facilitates period-to-period comparisons of operations and facilitates comparisons with other companies, many of which use similar non-generally accepted accounting principles in 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) transaction costs because they represent non-recurring charges and are not indicative of the underlying performance of our business operations.

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We use Adjusted EBITDA in conjunction with traditional GAAP measures as part of our overall assessment of our performance, for planning purposes, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance.

We do not place undue reliance on Adjusted EBITDA as our only measure of operating performance. Adjusted EBITDA should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using non-GAAP financial measures, including that other companies may calculate these measures differently than we do.

We compensate for the inherent limitations associated with using Adjusted EBITDA through disclosure of these limitations, presentation of our financial statements in accordance with GAAP and reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net loss attributable to common stockholders.

The following provides a reconciliation of net loss attributable to common stockholders to Adjusted EBITDA:


	Three Months Ended
	March 31,
	2021		2020(3)

	(unaudited)
	(in thousands)
Net loss attributable to common stockholders	$	(6,444)	$	(4,633)
Depreciation and amortization of property and equipment		20,745		18,646
Stock-based compensation expense		2,277		1,537
Amortization of intangible assets		937		1,111
Income tax expense		119		45
Interest expense and amortization of debt discount		657		2,349
Interest income and other expense, net		2		(254)
Non-controlling interests		(192)		(92)
Transaction costs		3,204		—
Adjusted EBITDA	$	21,305	$	18,709

(3)	As noted above, prior period amounts have not been adjusted upon adoption of ASU 2020-06 under the modified retrospective method.

Adjusted EBITDA was $21.3 million for the three months ended March 31, 2021, an increase of 13.9% from $18.7 million recorded in the three months ended March 31, 2020. As a percent of revenue, Adjusted EBITDA was 35.6% for the three months ended March 31, 2021, up from 31.2% of revenue for the three months ended March 31, 2020. The Adjusted EBITDA increase was primarily due to the $3.2 million increase in transaction costs, the $2.1 million increase in depreciation and amortization of property and equipment, and the $0.7 million increase in stock based compensation expense. The changes were partially offset by the $1.8 million increase in net loss attributable to common stockholders and the $1.7 million decrease in interest expense and amortization of debt discount.

Liquidity and Capital Resources

We have financed our operations primarily through cash provided by operating activities and borrowings under our Convertible Notes (defined below) and credit facilities. Our primary sources of liquidity as of March 31, 2021 consisted of $36.3 million of cash and cash equivalents and $150.0 million available for borrowing under our Credit Facility, $12.9 million of which is reserved for our outstanding Letter of Credit Authorization agreements.

Our principal uses of liquidity have been to fund our operations, working capital requirements, capital expenditures and acquisitions. We expect that these requirements will be our principal needs for liquidity over the near term. Our capital expenditures in the three months ended March 31, 2021 were $22.1 million, of which $18.5 million will be reimbursed through revenue for Carrier Services build-out projects from our telecom operators.

In February 2019, we entered into a Credit Agreement (the “Credit Agreement”) and related agreements 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 Barclays Bank PLC (the “Lenders”), for a secured credit facility in the form of a revolving line of credit up to $150.0 million (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”). Our Credit Facility will mature on April 3, 2023. Amounts borrowed under the Revolving Line of Credit and Term Loan will bear variable interest at the greater of LIBOR plus 1.75% - 2.75%

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or Lender’s Prime Rate plus 0.75% - 1.75% per year and we will pay a fee of 0.25% - 0.5% per year on any unused portion of the Revolving Line of Credit. As of March 31, 2021, we had $1.7 million outstanding under the Term Loan, and we had no amounts outstanding under the Revolving Line of Credit. The Term Loan requires quarterly payments of interest and principal, amortizing fully over the term such that it is repaid in full on the maturity date of April 3, 2023. For the three months ended March 31, 2021, the interest rate for our Credit Facility was 2.0%.

Repayment of amounts borrowed under the Credit Facility may be accelerated in the event that we are in violation of the representation, warranties and covenants made in the Credit Agreement, including certain financial covenants set forth therein, and under other specific default events including, but not limited to, non-payment or inability to pay debt, breach of cross default provisions, insolvency provisions, and change in control. We are subject to customary covenants, including a minimum quarterly consolidated senior secured leverage ratio, a minimum quarterly consolidated total leverage ratio, a maximum quarterly consolidated fixed charge coverage ratio, and cash on hand minimums. We complied with all such financial and non-financial covenants through the date of this report. The Credit Facility provides us with significant additional flexibility and liquidity to pursue our strategic objectives for capital expenditures and acquisitions that we may pursue from time to time.

In 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. 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.

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, 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, cash flow from operations and availability under the Credit Facility will be sufficient to fund our operations and planned capital expenditures for at least the next 12 months from the date of issuance of our financial statements. Specifically, the Company generally has long-term contracts with its customers that generate significant recurring cash flows that can be used to fund operations and the Company has $150.0 million available for borrowing under the Credit Facility as of March 31, 2021. One of the Company’s largest uses of cash is for capital expenditures, which are generally discretionary in nature. 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

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solutions. We expect our capital expenditures for 2021 will range from $125.0 million to $140.0 million, including $100.0 million to $110.0 million of capital expenditures for Carrier Services build-out projects which are reimbursed through revenue from our telecom operator customers. We anticipate the majority of our 2021 capital expenditures will be used to build out and upgrade Wi-Fi and DAS networks at our managed and operated venues.

We have contracts with the U.S. government. 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.

The following table sets forth cash flow data for the three months ended March 31:


	2021		2020

	(unaudited)
	(in thousands)
Net cash provided by operating activities	$	18,966	$	19,033
Net cash used in investing activities		(17,640)		(11,659)
Net cash (used in) provided by financing activities		(1,168)		98,177

Net Cash Provided by Operating Activities

For the three months ended March 31, 2021, we generated $19.0 million of net cash from operating activities, a decrease of $0.1 million from 2020. The decrease is primarily due to a $1.9 million decrease in amortization of debt discount and a $1.9 million increase in our net loss. These changes were offset by a $2.1 million increase in depreciation and amortization expense, a $1.0 million increase in our operating assets and liabilities, and a $0.7 million increase in stock based compensation expense.

Net Cash Used in Investing Activities

For the three months ended March 31, 2021, we used $17.6 million in investing activities, an increase of $6.0 million from 2020. The increase is due to a $6.4 million decrease in net proceeds from maturities of marketable securities, which was partially offset by a $0.4 million decrease in purchases of property and equipment in 2021.

Net Cash (Used in) Provided by Financing Activities

For the three months ended March 31, 2021, we used $1.2 million of cash in financing activities, compared to $98.2 million of cash provided by financing activities in 2020. This change is primarily due to a $100.0 million decrease in proceeds from our Credit Facility, which was partially offset by a $0.8 million decrease in principal payments for our finance leases and notes payable.

Contractual Obligations and Commitments

We have the following contractual obligations and commitments as of March 31, 2021: (i) payments under exclusive long-term, non-cancellable contracts to provide wireless communications network access to venues such as airports; (ii) non-cancellable operating leases for office and other spaces and finance leases for equipment, primarily for data communication equipment and database software; (iii) open purchase commitments are for the purchase of property and equipment, supplies and services; (iv) long-term debt associated with our Convertible Notes are based on contractual terms and intended timing of repayments of long-term debt; (v) debt associated with our Credit Agreement with Bank of America N.A. Payments are based on contractual terms and intended timing of repayments; and (vi) payments under notes payable related to purchases of prepaid maintenance services. Payments to our venues and open purchase commitments are not recorded as liabilities on our condensed consolidated balance sheet as of March 31, 2021 as these are not lease arrangements accounted for in accordance with ASC 842, Leases, and we have not received the related goods or services. As of March 31, 2021, we have $34.5 million of commitments to our venues that will primarily be paid to our venue partners over the next seven years and $39.0 million of purchase commitments that will primarily be paid to our suppliers over the next one-year period.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet financing arrangements and we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided for the year ended December 31, 2020 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 1, 2021, as amended through the Form 10-K/A filed with the SEC on April 28, 2021.

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

Market 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) interest rate risk, and (ii) foreign currency exchange rate risk.

Interest rate risk. Our Convertible Notes bear a coupon rate of 1.00% per annum. We do not have economic interest rate exposure on our Convertible Notes due to the fixed rate nature. However, the values of the Convertible Notes are exposed to interest rate risk. Generally, the fair value of our fixed interest rate Convertible Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair values of the Convertible Notes are affected by our stock price. The fair value of the Convertible Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines in value. Additionally, we carry the Convertible Notes at face value less unamortized discount and issuance costs on our condensed consolidated balance sheet, and we disclose their fair value in the financial statements. See Footnote 10 in the notes to our condensed consolidated financial statements for the fair value disclosure.

Our Credit Facility bears interest at a variable rate equal to the greater of LIBOR plus 1.75% - 2.75% or the Lender’s Prime Rate plus 0.75% - 1.75% per year. Our use of variable rate debt exposes us to interest rate risk. A 100-basis point increase in the LIBOR or Lender’s Prime Rate as of March 31, 2021 would not have a material impact on our net loss and cash outflow.

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 three months ended March 31, 2021 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. We translate all assets and liabilities denominated in foreign currency into U.S. dollars using the exchange rate as of the end of the reporting period. Gains and losses resulting from translating assets and liabilities from our subsidiary’s functional currency to U.S. dollars are recognized in other comprehensive income (loss). Foreign currency exchange rate fluctuations affect our reported net loss and can make comparisons from period to period more difficult. 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 March 31, 2021, 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, our 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 March 31, 2021, there were no 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.

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.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth in Note 13 “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, 2020 filed with the SEC on March 1, 2021, 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, as amended are not the only risks facing our 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. Other than the risk factors set forth below, we do not believe that there have been material changes in the risk factors contained in our Annual Report on Form 10-K, as amended.

Risks Related to Our Merger with White Sands Parent, Inc.

Failure to complete or delays in completing, the potential Merger with White Sands Parent, Inc. and White Sands Bidco, Inc. announced on March 1, 2021 and disruptions in our business caused by the potential Merger could materially and adversely affect our results of operations, business, financial results and/or stock price.

On February 26, 2021, we entered into the Merger Agreement with Parent and Merger Sub pursuant to which, if all of the conditions to closing are satisfied or waived, we will become a wholly-owned subsidiary of Parent, pursuant to the Merger. Consummation of the Merger is subject to certain closing conditions, a number of which are not within our control. Any failure to satisfy these required conditions to closing may prevent, delay or otherwise materially adversely affect the completion of the transaction. We cannot predict with certainty whether or when any of the required closing conditions will be satisfied or if another uncertainty may arise and cannot assure you that we will be able to successfully consummate the proposed Merger as currently contemplated under the Merger Agreement or at all.

Our efforts to complete the Merger could cause substantial disruptions in, and create uncertainty surrounding, our business, which may materially adversely affect our results of operation and our business. Uncertainty as to whether the Merger will be completed may affect our ability to recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the transaction is pending because employees may experience uncertainty about their roles following the transaction. Uncertainty as to our future could adversely affect our business and our relationship with suppliers, customers, regulators and other business partners. For example, potential customers may defer decisions about working with us or seek to change existing business relationships with us. Additionally, the adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement. Changes to, or termination of, existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock. The adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement.

Risks related to the failure of the proposed Merger to be consummated include, but are not limited to, the following:

●

under some circumstances, we may be required to pay a termination fee to Parent of $19.6 million;

●

we will remain liable for significant transaction costs, including legal, accounting, financial advisory and other costs relating to the Merger regardless of whether the Merger is consummated;

●

the trading price of our common stock may decline to the extent that the current market price for our stock reflects a market assumption that the Merger will be completed;

●

the attention of our management and employees may have been diverted to the Merger rather than to our own operations and the pursuit of other opportunities that could have been beneficial to us;

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●

we are subject to litigation and could be subject to additional litigation related to the Merger, which may delay or prevent us from completing the Merger;

●

the potential loss of key personnel during the pendency of the Merger as employees and other service providers may experience uncertainty about their future roles with us following completion of the Merger; and

●

under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger, which restrictions could adversely affect our ability to conduct our business as we otherwise would have done if we were not subject to these restrictions.

The occurrence of any of these events individually or in combination could materially and adversely affect our results of operations, business, and our stock price.

We cannot be sure if or when the Merger will be completed.

The consummation of the Merger is subject to the satisfaction or waiver of various conditions, including the authorization of the Merger by our stockholders. We cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied. If we are unable to satisfy the closing conditions or if other mutual closing conditions are not satisfied. Parent and Merger Sub will not be obligated to complete the Merger. Under certain circumstances, we would be required to pay Parent a termination fee of $19.6 million.

If the Merger is not completed, our board of directors, in discharging its fiduciary obligations to our stockholders, will evaluate our strategic direction.

Until the Merger is completed, the Merger Agreement restricts us from taking specified actions without the consent of the other party, and, in regards to us, generally requires us to operate in the ordinary course of business consistent with past practice. These restrictions may prevent us from making appropriate changes to our respective businesses or pursuing attractive business opportunities that may arise prior to the completion of the Merger.

The consideration received at the time of the Merger may be lower than the public trading value of shares of our common stock when we entered into the Merger Agreement.

The Merger Agreement provides that each share of our common stock issued and outstanding immediately prior to the Effective Time (other than any shares of our to be canceled or to remain outstanding pursuant to the terms of the Merger Agreement) shall be canceled and shall be converted automatically into the right to receive an amount in cash, net of applicable withholding taxes and without interest, equal to $14.00. If the public trading value of shares of our common stock increases over the period of time required to satisfy the Merger’s closing conditions, the consideration received at the time of the Merger may be lower than the public trading value of shares of our common stock when we entered into the Merger Agreement.

The Merger Agreement contains provisions that, following expiration of a go-shop period, limit our ability to pursue alternatives to the Merger, could discourage a potential competing acquirer of us from making an alternative transaction proposal and, in specified circumstances, could require us to pay a termination fee of up to $19.6 million.

Following a 25-business day go-shop period, which expired on April 2, 2021, the Merger Agreement provides that we shall not, and requires us to refrain from permitting our representatives to, among other things, solicit, participate in negotiations with respect to or approve or recommend any third party proposal for an alternative transaction, subject to exceptions set forth in the Merger Agreement relating to the receipt of certain unsolicited proposals. Further, while our board of directors is permitted to make a recommendation change to our stockholders with respect to the Merger under certain circumstances, unless the Merger Agreement is terminated and a termination fee is paid per the requirements of the Merger Agreement, we will be required to submit the proposals to a stockholder vote at a special meeting.

These provisions could discourage a potential third-party acquirer or merger partner that might have an interest in acquiring all or a significant portion of us or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share cash or market value than the consideration in the Merger, or might result in a potential third-party acquirer or merger partner proposing to pay a lower price to our stockholders than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.

If the Merger Agreement is terminated and we determine to seek another business combination, we may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger.

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Lawsuits have been filed against us and the members of our board of directors arising out of the proposed merger, and additional such lawsuits may be filed in the future, which may delay or prevent the proposed Merger.

Putative stockholder complaints, including stockholder class action complaints, and other complaints have been filed against us, or our board of directors, and others in connection with the transactions contemplated by the Merger Agreement, and additional such lawsuits may be filed in the future. The outcome of litigation is uncertain, and we may not be successful in defending against any such claims or future claims. These lawsuits could delay or prevent the Merger, divert the attention of our management and employees from our day-to-day business, result in substantial costs to us, and otherwise adversely affect our business, results of operations, and financial condition.

Items 2, 3, 4 and 5 are not applicable and have been omitted.

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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
2.1	Agreement and Plan of Merger, dated as of February 26, 2021, by and among White Sands Parent, Inc., White Sands Bidco, Inc. and the Registrant.	8-K	03/01/2021	2.1

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

3.4	Amendment No. 1 to the Amended and Restated Bylaws of the Registrant.	8-K	03/01/2021	3.1

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, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020 for Boingo Wireless, Inc.; (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 for Boingo Wireless, Inc.; (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020 for Boingo Wireless, Inc.; (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 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

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Exhibit				Incorporated by Reference						Filed
No.		Description		Form		Date		Number		Herewith
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)								X

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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: May 10, 2021	By:	/s/ MICHAEL FINLEY
		Michael Finley
		Chief Executive Officer and Member of the Board
		(Principal Executive Officer)

	BOINGO WIRELESS, INC.

Date: May 10, 2021	By:	/s/ PETER HOVENIER
		Peter Hovenier
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. junior Avg

Three Months Ended

March 31,

Amounts included in the beginning of period contract liability balance

Amounts associated with performance obligations satisfied in previous periods