| Summary of significant accounting policies | 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) 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 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. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes 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 In June 2016, the FASB issued ASU 2016-13, Financial Instruments —Credit Losses (Topic 326) 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 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 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 one reportable segment—a service provider of wireless connectivity solutions across our managed and operated network and aggregated network for mobile devices such as laptops, smartphones, tablets and other wireless-enabled consumer devices. This single segment is consistent with the internal 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 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. 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 five 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 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 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 — 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 — 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 — 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 — 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 two 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 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 two performance obligations: (i) install the network required to provide Wi-Fi services; and (ii) provide Wi-Fi services and technical support to the residents and employees. Our contracts may also provide our property owners with the option to renew the agreement. We do not consider this option to provide the property owner with a material right that should be accounted for as a separate performance obligation because the property owner would not receive a discount if it decided to renew and the option to renew is generally cancellable by either party subject to the notice of non-renewal requirements specified in the contract. Our contracts may also provide our customers with the option to purchase additional future services. We do not consider this option to provide the customer with a material right that should be accounted for as a separate performance obligation since the cost of the additional future services are generally at market rates for such services and we are not automatically obligated to stand ready to deliver these additional goods or services because the customer may reject our proposal. Our contract fee structure 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 sep |
