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Boingo Wireless (NASDAQ:WIFI)
Q1 2019 Earnings Call
May. 08, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings, and welcome to the Boingo Wireless first-quarter 2019 earnings conference call. [Operator instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Kim Orlando with investor relations. Ms.

Orlando, you may begin.

Kim Orlando -- Investor Relations

Thank you, and welcome to the Boingo Wireless first-quarter 2019 earnings conference call. By now, everyone should have access to the earnings press release, which was issued today at approximately 4:00 p.m. Eastern time. In addition, an earnings supplement has been made available on the investor relations portion of Boingo's website at boingo.com by clicking on the investor tab.

This call is being webcast and it is available for replay. In our remarks today, we will include statements that are considered forward-looking within the meaning of securities laws, including forward-looking statements about guidance and future results of operations, business strategies and plans, our relationships with our venue partners, new venue contracts and market and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today, May 8, 2019, and are subject to certain risks and uncertainties that may cause the actual result to differ materially from the forward-looking statements.

A detailed discussion of such risks and uncertainties are contained in our most recent Form 10-K for the year ended December 31, 2018, filed with the SEC on March 1, 2019 and our other filings with the SEC. The company undertakes no obligation to update any forward-looking statements. On this call, we will refer to non-GAAP measures such as adjusted EBITDA and free cash flow that when used in combination with GAAP results, provide us with additional analytical tools to understand our operations. We have provided reconciliations to the most directly comparable GAAP financial measures in our earnings press release, and which will be posted on the investor relations section of our website at boingo.com.

And with that, I'll hand the call over to Boingo's chief executive officer, Mike Finley.

Mike Finley -- Chief Executive Officer

Thanks, Kim, and thanks everyone for joining us today. Before I jump into our Q1 results, I want to start by taking a minute to share just how thrilled I am to join the Boingo team. Being on the board for the last five years, gave me a lot of insight into the company, and with 25 plus years of experience working at or with the carriers. The opportunity to lead Boingo into the 5G era was a natural fit.

So I had a long list of reasons why I was excited about becoming CEO. But these last six weeks have made me even more excited. I've had the opportunity to engage first time with the carriers, our key venues and partners, our customers and the investment community. What I've learned is that the opportunity in front of Boingo is even greater than I predicted.

I believe Boingo is in an amazing position at a transformative time in history. And we're poised to take advantage of the incredible changes that 5G will bring. So there's a lot to be excited about and I'm glad to be a part of it. Speaking of 5G, it seems like hardly a day goes by without a major announcement about 5G.

Verizon is now live with 5G in two markets and has announced plans for additional markets in 2019. Sprint has announced the launch of nine major markets in the first half of the year. AT&T announced it had surpassed 2 gigabits per second on their live commercial 5G network in Atlanta. And T-Mobile said that it plans to launch 5G on its 600-megahertz network in the second half of 2019.

In addition, the recent settlement between two of the major players and technology will only expedite the move to 5G. There is a huge push by all the U.S. carriers to be first in the world to 5G, void not only by the carrier's competition with each other but also by the administration's push to ensure the U.S. leads the way on the 5G platform.

Of course, all of this bodes extremely well for Boingo. As a neutral host provider with long-term wireless rights at key strategic locations throughout the country, we're able to deploy 5G networks in locations where our carriers' customers demand increase speeds and capacity. This is true of any wireless technology at the venues we serve, whether that's 5G, CBRS, Wi-Fi 6, LAA or any other technology coming down the pipe. Speaking of Wi-Fi 6.

You may have seen the announcement that Boingo successfully deployed Wi-Fi 6 at John Wayne Airport last month. The launch is part of a commercial trial to test next-generation Wi-Fi capabilities, and it marks the first known Wi-Fi 6 deployment at a major airport. Wi-Fi 6 is a new industry standard that was developed to enhance WiFi capabilities to effectively handle growing traffic demands. It introduces new features to deliver faster speeds, higher density, and faster throughput.

Airport staff at John Wayne were able to put the network through its paces by utilizing an early release of Samsung Galaxy devices with Wi-Fi 6 chipsets. Barry Rondinella, the airport director for John Wayne, reported that their team was getting "wireless connectivity with no lag, no buffering, and incredible speeds". We believe Wi-Fi 6 is a strategic pillar of Boingo's technology roadmap to equip airports and other large venues with cutting-edge connectivity solutions. We're proud to be among the first to put Wi-Fi 6 in action, and work alongside the team at John Wayne Airport to move the technology from lab to real world launch.

With that, let me jump into our Q1 results. I'm pleased to share that Boingo strong results and momentum continue. We've extended our streak of double-digit revenue growth to 18 consecutive quarters. First-quarter revenue was up 14.3% year over year to $66.5 million.

This top line growth is a result of consistent execution against our strategy to leverage the explosive growth of mobile data by acquiring long-term wireless rights at venues, building carrier great networks at those venues, and then monetizing the networks with our unique mix of products and services. Among those products and services, our three primary revenue drivers are DAS: wholesale WiFi, which includes carrier offload, and military multi-family. So let's take a deeper dive into each. For starters, DAS remains incredibly robust.

We are coming off a solid venue acquisition here including the significant MTA deal. We added three new DAS deals in the first quarter, bringing us to a total of 133 DAS venues under contract with 31,100 DAS nodes live. As a reminder, we have more DAS venues under contract yet to be deployed 74 and we have live venues with 59. So we have a lot of DAS runway ahead of us.

Of course, with the build out of these DAS venues, our carrier access fees continue to grow. We saw very strong growth in carrier access fees for the quarter with an increase of more than 28% year over year. We're pleased with the strong growth and anticipate it will continue to be robust throughout the year. Now let's turn to wholesale WiFi, which includes carrier offload.

First quarter offload connects were up 25% year over year and offload traffic was up 54% year over year. This is due both to the unrelenting growth in mobile data traffic we see across the network, as well as the fact that we now have both Sprint and AT&T live on the majority of our network. As discussed on our last call, AT&T is now offloading traffic at more than 80 of our venues, including military bases, as part of their strategic network management initiative to help accommodate rising mobile data traffic. We believe that with continued mobile data growth, all carriers will need to utilize WiFi to meet their customer usage demands which is less expensive on a cost per bit basis compared to licensed spectrum, in order to drive down the traffic on their cellular networks.

As we've said many times in the past, we believe it's not a question of if, but when. Finally, you may have seen the announcement about our recent WiFi launch at Heathrow Airport. We're excited about this launch, because we've not only enabled WiFi offload at Heathrow for select U.S. carriers, we anticipate being able to pursue awful contracts for international carriers as well.

Now let's turn to our military multi-family product. For military, we added 2,000 beds in the quarter for an addressable market of 346,000 bed. We improved subscriber penetration to 42.5%, which is up from 40.1% a year end. Our focus for military in 2019 is growing ARPU and I'm pleased to share we're meeting that objective nicely.

ARPU for the quarter was up 11.9% year over year and we expect to push ARPU even higher in the coming quarters as the price and speed increases are rolled out to all bases. The good news is we've been able to increase price with very little impact the sales future. Our military experience over the last five years has prepared us well to expand into the multi-family space. And we've been working hard for the past three quarters to integrate best practices from both Boingo and our 2018 acquisition Elauwit Networks into our new multi-family product line.

We currently have 228 properties live with another 15 under contract. While growing a new business it always takes time. We remain incredibly excited about this vertical and its growth potential and we look forward to later this month when the brand transition from Elauwit to Boingo is fully complete. As we've shared on the past few calls, there is a lot to be excited about in the Multi-family segment.

It represents a huge addressable market and it's highly fragmented. But more than that, this is important and this is important to understand, is that this is a market that is going through a connectivity transformation. This creates a win, win, win scenario. The REITs and property owners win by increasing the value of their properties and delivering an excellent customer experience.

The end user wins by having high-speed Internet immediately available to them, and Boingo wins by delivering on this promise for both. Forward thinking REITs and property owners understand that connectivity is the fourth utility. And that they can leverage connectivity transform their businesses. We believe this connectivity has the potential to not only transform the resident experience, but property operations and even the properties net operating income and valuation.

From a personal perspective, if you've ever had to go through the process of getting Internet or TV service setup as I have recently you know how frustrating that can be. You have to get on the phone to order service. You have to book an appointment and probably takeoff work to be there. You have to wait for the installer to show up.

There is equipment to worry about on and on it goes. What we offer the properties we serve is a revolutionary customer experience. We took everything people hate about the incumbents and created a brand-new kind of internet service with no waiting on hold to place an order and no waiting around for the installer. Just instant on Wi-Fi it's ready to go when you are and works everywhere throughout the property.

This means residents don't have to be tethered to their apartment to be online or stream their favorite shows. They can hang out by the pool, the dog park, even the laundry room and still be connected. This makes the entire property feel like home and enhances the resident experience. But beyond delivering a great experience for the resident, we're able to power a network that can radically transform the property itself.

The wireless network can be used to power an entire suite of IoT devices from digital thermostats to keyless locks to automated lighting and security systems. This puts control back in the owner's hands and enables experiences that property owners have only dreamed of to this point. Imagine being able to show an available apartment without the property manager ever having to be there. You can grant temporary secure access to an available apartment, automatically turn on lights and set the temperature and all at a time of day that is convenient for the prospective resident.

This is the kind of digital transformation that we believe the multi-family space is right for and we believe we are the perfect partners to accomplish it. In addition, we can help property owners in ways as others provide or simply can't. We know 92% of renters say they demand reliable cell reception in their apartment and 78% won't rent without it. Our experience delivering cellular connectivity puts us in the unique position of being able to solve those problems for a property owner and further increases the value we can extract out of a property.

Beyond our technology knowhow we also have a leg up on the cable companies and smaller operators because we are not limited by geography or franchise. We can deploy in any community, in any state and even worldwide. This makes us an incredibly valuable partner for the larger REITs and we're in a deep partnership discussion with several of them. Clearly a win, win, win.

As I stated at the beginning, there's a lot to be excited about. The multi-family product in 5G upgrades represent huge opportunities for Boingo going forward. Our DAS, military and offload products continue to be robust. We're excited about our Q1 results and believe the year is off to a great start.

With that, let me turn it over to Pete, who will walk you through the quarter in more detail. Pete.

Pete Hovenier -- Chief Financial Officer

Thanks, Mike. I will begin by reviewing our financial results and key operating metrics for the first quarter ended March 31, 2019, and will conclude with our financial outlook for the second quarter of full year of 2019. Total revenue for the first quarter was 6 and a half million, an increase of 14.3% year over year. Revenue growth reflected strong performance in military multi-family and DAS, partially offset by year-over-year declines in wholesale Wi-Fi, retail and advertising and other revenue.

As a percentage of total revenue across our diversified revenue streams, compared to the prior-year quarter, military multi-family was 39%, up from 27%, DAS was 36% down from 41%, wholesale Wi-Fi was 17% down from 19%, Retail was 6% down from 9% and the advertising and other was 2% down from 4%. In terms of total revenue contribution by category for the quarter, military multi-family revenue was 63.3% year-over-year increase to 25.9 million. Growth was primarily driven by a 7.4 million increase in multi-family revenue from our acquisition of Elauwit Networks and an increase in average monthly revenue per subscriber and total military subscribers. As Mike mentioned earlier, we increased both speed and price in our service offering during the first quarter and we are pleased with the growth of our military ARPU.

During the quarter, we built out the network to cover an additional 2,000 beds bringing our total military footprint to 346,000 beds as of March 31. DAS revenue was 24.1 million, which is an increase slightly by 1.9% year over year. Total DAS revenue was comprised of 17.7 million of build-out project revenue and 6.4 million of access fee revenue. Importantly, DAS access fee revenue from telecom operating partners show continued strength by increasing 28% year over year.

However, the vast improvement was partially offset by a decline in buildup project revenue, primarily from the reamortization and deferred revenue balances related to the extension of certain customer contracts from venues located in the Greater New York City area. Also, the prior-year period included a one-time benefit from the adoption of ASC 606 which added $4.3 million of DAS build-out project revenue from the first quarter of 2018. Wholesale WiFi revenue of 11 million decreased slightly by 1.2% year over year, primarily due to lower partner usage-based fees, partially offset by an increase of managed service fees from our venue partners who pay us to install, manage and operate the network infrastructure at their venues. The decrease in partner usage-based fees was driven primarily by a decrease in fees from our Comes with Boingo program.

Further, we expect Comes with Boingo to decline over the year as our program with American Express will be phasing out over the balance of 2019. While this contract had positively contributed to wholesale WiFi revenue in the past, we'd not use such agreements as core to our long-term strategy rather it's been a way for us to leverage our existing network to generate incremental revenue. That said, we continue to expect wholesale Wi-Fi revenue will be a strong driver of recurring cash flow but we remain encouraged by our traction with carrier offload. Retail revenue of 3.9 million, increased 26.1% year over year primarily due to a decline in retail subscribers to retail single-use revenue.

Advertising and other revenue of 1.5 million increased 30.3% year over year primarily due to the declining number of premium ad units sold. Now turning to our quarterly costs and operating expenses. Network access costs was 31.4 million, an 18.2% increase over the first quarter of 2018, primarily related to higher direct cost of sales, which included the cost of equipment installed on our multi-family deployments, as well as higher other costs of revenue. These increases were partially offset by a decrease in depreciation expense.

Gross margin, which is defined as revenue less network access cost was 52.7%, down approximately 160 basis points from the prior period. The declining gross margin largely reflects, the shift into the first diversified revenue streams due primarily by the increase in our lower margin multi-family revenue, partially offset by increases in higher margin military revenues. If you were to exclude the impact of our August 2018 acquisition of Elauwit Networks had on our gross margin, it would have increased by approximately 300 basis points year over year. Network operations expenses were 14.1 million, an increase of 10.1% year over year primarily due to higher personnel related network maintenance expenses.

Development and technology expenses were 9 million, an increase of 21.2% for the prior-year period due primarily to increases in personnel related hardware and software maintenance, depreciation and consulting expenses. Selling and marketing expenses were 5.9 million, an increase of 7.4% year over year primarily due to higher personnel related expenses. General and administrative expenses were 8.3 million, an increase of 7.7% year over year, also mainly due to higher personnel related expenses. Now turning to our profitability measures for the quarter.

Net loss attributable to common stockholders was 5.2 million or $0.12 per diluted share compared to a net loss of 3.2 million or $0.08 per diluted share in the first quarter of 2018. Adjusted EBITDA on non-GAAP measure was 19.1 million, a decrease of 12.7% year over year. As a percentage of total revenue, adjusted EBITDA was 28.8% down from 37.6% of revenue in the prior-year quarter. Now turning to our key metrics.

The number of DAS nodes in our network for the first quarter was 31,100, up 28 and a half percent for the prior-year period, 4% in the fourth quarter of 2018. The number of DAS nodes in backlog, which represents a number of DAS nodes under contract but not yet active as of the end of the first quarter were 13,700, up 20.2% from the prior-year period, and down 0.7% from the fourth quarter of 2018. Our military subscriber base was 147,000 subscribers at the end of the first quarter, up three and a half percent from the prior-year period, and up six and a half percent from the fourth quarter of 2018. Our retail subscriber base was 113,000 at the end of the first quarter, which was down 32.7% from the prior period, and down 7.4% from the fourth quarter of 2018.

Next, paid users in our worldwide network were approximately 78.6 million, up 19.3% from the prior-year period and up 17.1% from the fourth quarter of 2018. Moving on to discuss our balance sheet. As of March 31, 2019, cash, cash equivalents and marketable securities totaled 105.9 million, down 43 and a half million from our balance at December 31, 2018. The reduction in our cash balance was primarily due to 32.9 million used to pay employee withholding taxes for vested restricted stock units, the shares of which we issued on a settlement basis.

This net settlement of restricted stock units is similar to a repurchase of common stock or buyback plan as it reduces total shares outstanding. Total debt was 169.9 million and we had a 150 million available on our credit facility as of March 31, 2019. I'd also like to note at the beginning of the first quarter of 2019 we adopted a new lease accounting standard ASC 822. As a result, approximately 16 and a half million of operating leased assets and 21.7 million of operating leased liability were recognized on our March 31, 2019 balance sheet due to the adoption of the standard.

The adoption of ASC 822 did not have a material impact on our condensed consolidated statement of operations or cash books. Capital expenditures were 32.4 million for the first quarter, which included 24.6 million utilized for DAS infrastructure build-out projects that are primarily reimbursed through revenue by our telecom operating partners. Our non-reimbursed capital expenditures were driven mainly by new network builds, manage and operate network upgrades and various infrastructure upgrades and enhancements. As a reminder, we estimate our annual maintenance capital requirements, which excludes our growth capital to be approximately 3 to 5% around them.

Free cash flow and non-GAAP measure was a negative 8.6 million for the first quarter versus a negative 3.8 million in the first quarter of 2018. As a reminder of we plan to invest majority of our free cash flow into network expansion opportunities to drive future growth. Turning to our outlook, the second quarter and in June 30, 2019, we are initiating guidance as follows. We expect total revenue to be the range of 66 to 71 million, net loss attributable to the common stockholders is expected to be in the range of 4 to 1 million or a loss of $0.09, $0.02 per diluted share and adjusted EBITDA is expected to be the range of 20 to 24 million.

For the full year ended December 31, 2019, we are reiterating our guidance as follows. We expect total revenue to be in the range of 270 to 280 million representing year-over-year growth of approximately 9.6% at the midpoint of the range. It's important to note that the reamortization of the deferred revenue from contract extensions in 2019 represents the reduction equal to 7.2 points year over year growth. Net loss attributable to common stockholders is expected in the range of 20 to 50 million or a loss of $0.45 to $0.34 per share.

And adjusted EBITDA is expected to be in the range of 80 to 87 million which implies that EBITDA margin of 30.4% at the midpoint of the range. Similar to the impact of revenue, the extended deferred revenue amortization period of pressure adjustment EBITDA in the near term and will result in a reduction equal to 19.6 points of year-over-year growth. So it will not impact future cash flow generation. We will maintain our tax valuation allowance, and as such do not expect to accrue material tax benefits, or tax expenses on our income statement through 2019.

We continue to expect a nominal full-year tax rate, as well as fully diluted shares outstanding of approximately 44 million. In addition, I'm rehydrating our non-DAS annual capital expenditure guidance to be approximately 25 to 30 million for 2019, with majority allocated to support new network builds and upgrades at our managed and operated venues. We continue to expect our annual capital expenditures from deployment and upgrades of DAS networks and managed operated venues to be in the range of 75 to 90 million. As a reminder, virtually all of our DAS network deployments are success-based builds, meaning we have commitments and guaranteed payments from our carrier customers.

In summary, we deliver an excellent first quarter marked by solid financial performance and strong operational execution. Looking ahead, we believe the strength in our core growth drivers DAS also Wi-Fi including carrier offload. Military multi-family will continue to propel our business forward and cement our position as the leading provider of indoor wireless networks. Now more than ever, Boingo is extremely well-positioned to capitalize on the many opportunities presented by the role of 5G technology.

And with the deep wireless industry knowledge and carrier relationships, I'm confident Mike is uniquely qualified, and the right individual to successfully Boingo going forward. We believe the best years are ahead of us. With that, I'll turn it back over to Mike for closing remarks.

Mike Finley -- Chief Executive Officer

Thanks Pete. All in all, we feel great about the quarter and are very excited about the year ahead. With that, let's open it up for questions. Operator?

Questions & Answers:


Operator

[Operator instructions] Our first question is from Mark Argento, Lake Street Capital Markets. Please proceed with your question. Mark, your line is now live.

Mark Argento -- Lake Street Capital Markets -- Analyst

I just had a couple of questions around the opportunity for more of a strategic enterprise level deal. Any progress so far, I know it's only been a month or so since you've taken the CEO seat there, but just wanted to get your opinion on that opportunity, and then more of a technical question in terms of what's the impact to your existing, some of the offload agreements at the airports with some technology starting to roll over to 5G. You've got to upgrade the nodes there, what does that mean for your deployed infrastructure? Thanks.

Mike Finley -- Chief Executive Officer

On the enterprise deals, I mean we've been working with all the operators and the venues and I think the, one of the things that I spent a lot time on actually I'm very excited about is the multi-family business student housing obviously is a big deal and as we get into the apartment side, you heard my comments that being a win, win, win for the property owners, the end users and for Boingo. So I think it's you know we'll maintain our acquirable monetize and we're full speed ahead with that. On the offload, I would just highlight that we've also spent a lot of time with the operators and I think the way I would look at it is it's really all technology, there's a lot of talk about 5G and it is going to be I think a significant technology but it's just going to be another, I think a piece of the puzzle that with Wi-Fi 6, LAA, CBRS, 4G continuing, the offload piece is still going to be present, data is continuing to explode, it will, I think just keep going. We had a lot of the same questions in the industry with 4G and what would the applications be and a lot of the stuff that came out after 4G was in existence, we didn't even know about.

If you think about 4G, Uber, Lyft, Netflix streaming didn't exist when 4G came out. So I think those types of things will happen with 5G and the needs for offload and all of the connectivity options are going to be just as valid as they are today.

Mark Argento -- Lake Street Capital Markets -- Analyst

Just a quick follow-up, any additional thoughts on capital deployment. Obviously, you get peaked up balance sheet now, but how does the guidance relative to capital deployment play out?

Pete Hovenier -- Chief Financial Officer

Yes, Mark. So we've already provided guidance on capital deployment for the year, so we've said we will deploy between 75 and 90 million of DAS capex and between 25 and 30 million for non-DAS. Our guidance implies those levels of capex numbers. We would be happy to invest more if it's all tied to more business.

It's important to remember that when we deploy capital, there's ongoing commitment from our carrier customers and along with that capital deployment. So think about that as success based capital deployment, we are more than happy to do more than that, but our guidance today implies that call it a 100 to 130 million of capital deployment for the year.

Mark Argento -- Lake Street Capital Markets -- Analyst

Thanks, guys.

Operator

Our next question comes from James Breen, William Blair. Please proceed with your question.

James Breen -- William Blair and Company -- Analyst

Thanks for taking the question. Could you just talk a little bit about the wholesale WiFi segment and what's going on there, may be the different segments of it, it was kind of flattish from the fourth quarter down a little, but you know how do you see that progressing throughout the year offload versus with the rest of the core wholesale business? Thanks.

Pete Hovenier -- Chief Financial Officer

Sure. I'll take this Jim. So wholesale WiFi is you know has a mix of quite by carry offloading comes with Boingo and then what we call legacy roaming which is you know historically been really you know companies working our network with traffic on. Wi-Fi offloading is the largest portion of our wholesale Wi-Fi portion.

For wholesale Wi-Fi revenue we expect Wi-Fi offloading to continue to grow throughout 2019, we call it in the mid to upper teens to low 20s in terms of you know year-over-year revenue growth. We do see pressure coming from – comes with Boingo as we've talked about in the prepared comments that American Express deal will be phasing out through the balance of 2019. And then the legacy roaming that has had you know pressure over the last few years. So we've continually seen that be under a bit of pressure.

But all that being said you know you should be thinking of wholesale WiFi throughout you know 2019 growing around 10% year over year. I'm sorry, we're encouraged by what we're seeing with wholesale offloading connect as well megabit traffic. And you know as Mike commented on, we're seeing nice growth in terms of overall megabytes consumed in overall next consumed by our carrier customers.

James Breen -- William Blair and Company -- Analyst

Is there seasonality in that business, 1Q being weaker and the second and fourth being stronger just because of the traffic?

Pete Hovenier -- Chief Financial Officer

There is some seasonality, yes and is predominantly driven by where we have offloaded, what's interesting is on the airport footprint you'll see it's dominated in the summer and in the holiday seasons toward the end of the year. But on the military footprint, actually we don't have the same level of seasonality. So all-in-all, it's – there's some, but for the most part we should see it's increasing up throughout the year is what we anticipate.

James Breen -- William Blair and Company -- Analyst

And then just secondly on the military side, you had the price increase kick in this quarter. So is that fully baked in now? So going forward, as we look at sort of thinking about growth sequentially for military, they'll drop down a little bit as we just move quarter to quarter at a higher ARPU level?

Pete Hovenier -- Chief Financial Officer

Yes, there will be a little bit of incremental ARPU contribution here in Q2, mainly because we did this phase-out throughout Q1. So, it wasn't a flash cut, because it was a service increase, as well as a price increase. We went base by base, because in some cases we had to upgrade circuits or upgrade some equipment. But here we are in Q2 and we're predominantly done, and this is predominantly behind us.

So you'll see some step up in Q2 but nothing material, the biggest step you are seeing.

James Breen -- William Blair and Company -- Analyst

Great. Thanks.

Operator

Our next question comes from Greg Gibas, Northland Capital. Please proceed with your question.

Greg Gibas -- Northland Capital -- Analyst

Thanks for taking my questions. First, are you still targeting or expecting to deploy approximately 30 or so DAS venues in 2019? And how should we think about the quarterly timing of these going live?

Mike Finley -- Chief Executive Officer

Yes. So we have a very large backlogs. We have 74 venues in backlog, and we-as we have been saying, we expect on average a DAS network takes 18 months to 24 months from when we win the initial venue to getting the network up and running in live with the anchor tenant. We do expect a significant number of venues go live in 2019.

It's definitely going to be, call it, the 20s to 30 venue range in the year. We are encouraged by what we're seeing. And most of it will really be happening in the second half of the year, we took one the new live in Q1, but there is a lot coming on the pipe. There is a ton of building going on.

And as you saw the capital, the capex expenditures that we had in the quarter, it's one of our higher quarters to date, and that will continue throughout the year as well.

Greg Gibas -- Northland Capital -- Analyst

And then I guess as a follow-up, within the multi-family segment, how should we think about the timing of those properties going live on a quarterly basis? Typically, how long does it take to build those wins out? I think you said it's 15 backlog right now.

Mike Finley -- Chief Executive Officer

Yes. So the multi-family properties, they typically will go live quicker or they can go live quicker, but it depends where they-what they're planning is in a timeline. So in some cases, it's as quick as six months. In other cases, it can be a multi-year process depending on the overall construction timeline of the property.

But we're deploying a brand-new property, we're really going to be launching as soon as the property goes live. So you'll see a bigger amount go live here by the end of Q3 because a big portion of our business today is still student housing, and there's a bigger push through the summer time period when the students are away. But you'll see multi-family properties being built throughout the year but with a push primarily over the summer.

Greg Gibas -- Northland Capital -- Analyst

And then last quick one from me. Have you initiated any discussions with any of the large multi-family property management companies just for strategic agreements?

Mike Finley -- Chief Executive Officer

Yes, we have. That's one of the things I'm probably most excited about that was quite honestly it was an action before I joined the CEO. But as I think I commented; I've spent quite a bit of time there. We've met with a large number of them, a lot of the big ones.

And what's most impressive Greg for me there is, there's-there's obviously some benefit for the property owners and their financials and sometimes. But they're actually very bought into the connectivity transformation that's going on and they want to be a part of it. They want to lead it. They know that's what their users want.

And what's interesting to me is, they're so focused on customer satisfaction. It's very impressive actually for how they operate. And so, we're looking forward to meeting more with them and we're in, we're in a pretty good trajectory I think right now.

Greg Gibas -- Northland Capital -- Analyst

Thanks guys.

Operator

Our next question comes from Jon Hickman, Ladenburg Thalmann. Please proceed with your question.

Jon Hickman -- Ladenburg Thalmann -- Analyst

Just quickly, could you talk about how you market on the multi-family side and student housing?

Mike Finley -- Chief Executive Officer

It's the question market to the property owners or market to with them to the end user?

Jon Hickman -- Ladenburg Thalmann -- Analyst

Well, first the property owners like do you have a dedicated sales force there which –

Mike Finley -- Chief Executive Officer

Yes, we do. Yes, great question, sorry, I did not understand it, yes. So we-we've had a lot of experience as Boingo, if you will with the military, so we've got a lot of experience there and of course all the experience we've had with all the connectivity and being a neutral host in providing license and on license spectrum. And the venues that we have, military is probably it is as great a comparison to multi-family as we have.

Obviously when we acquired Elauwit last year who was one of the top performing companies in that space you know that group is totally focused on that. We've added you know some of the expertise that we've had here prior to the acquisition I would say for Boingo. So that's now combined the integration is going very well. Elauwit part of our purpose of that acquisition was to enable us to get into the multi-family which that's happened.

And you know for the previous question, our ability to have conversations with a lot of the big property owners is based on a lot of the success at Elauwit had. And so, we're dedicated to that space. We have people dedicated to it. We have a lot of background in it.

We think it's made in some of the comments. It's really a win, win, win for all of us. The property owners win for what I mentioned; the end-user wins for sure because they're not waiting for anything. They're on the second they walk in, and they get the benefit of it and of course us being able to provide our expertise and connectivity is going to vote very well in that sector.

Jon Hickman -- Ladenburg Thalmann -- Analyst

And then Pete, can you talk about so the gross margin differential there in that piece business. Is that going to close up as you integrate Elauwit?

Mike Finley -- Chief Executive Officer

Yes, so John, so it's less about integration. So the reason we have historically I'll say outsized margins is shared infrastructure. And so as we have been you and layer on additional products and services on top of that existing infrastructure, that's why we get outsized margins. So today when we you know initially when we did the acquisition, it was selling a broadband solution or you know or a TV solution to the property owner.

As we can layer on other services such as Wi-Fi care offloading, small cells and maybe in some situations DAS and doing more and more with that network things that we can think of is IoT and other devices that can plug into the network. So the more we can layer on top that's how we're going to see outsized margins. So, we not just see a lot of that come to fruition in 2019 but it is a key focus of our company is to get the elevate cost structure and say more in line with where we are and their margins more in line. But it's important member, it's a wholesale relationship.

So their margins are in line with wholesale, but we've like is having to step up.

Jon Hickman -- Ladenburg Thalmann -- Analyst

OK. Thank you.

Operator

Our next question comes from Walter Piecyk with BTIG. Please proceed with your question.

Walter Piecyk -- BTIG -- Analyst

Thanks for giving the reimbursable capex stuff in the prepared comments, it's helpful. I'm curious if ASCA 42 the lease accounting change to that have any impact on the deferred revenue balance for this quarter?

Pete Hovenier -- Chief Financial Officer

No. They didn't impact deferred revenue Walt.

Walter Piecyk -- BTIG -- Analyst

So we look at the increase in deferred revenue on the balance in aggregate short and long-term, it was up basically flattish sequentially. You've had that reimbursable capex associate with the carriers were like 70 million and then you, then you put 14 6 back into the top line. So that would, that would I guess imply I'm thinking that maybe the projects were like as a one carrier type projects for the first quarter because it didn't seem a third there was a lot of incremental cash revenue booked in that the operator carrier funded DAS revenue line for this quarter. So this is just like an investment-like one of the more earlier stage investment price you hope to get more operators on it across the course of the year?

Pete Hovenier -- Chief Financial Officer

Well, it's good to think that the, what goes into the revenue, that's going to be the payments we receive from our carrier customers so you're absolutely right there. The expenditure is to put all customers. So in some cases, we are building while we have under the funded model, we don't have any deferred revenue inflows coming in at all we'll get payments coming over the life of the contract. And so, as we do more and more under our funding model, I have a commitment from the carriers but it's not going to be a source of deferred revenue.

Walter Piecyk -- BTIG -- Analyst

Right, I'm just looking at the ones that are fund because obviously you're still doing a portion of that, but the majority of that – with this carrier funded in terms of reimbursable capexe, right. So, are those projects where it just maybe a timing of payment and we'll see more incremental cash revenue come in, in the June quarter?

Pete Hovenier -- Chief Financial Officer

It's important that what we broke out was not necessarily what's funded versus non-funded, what we commented on, what's DAS and non-DAS that didn't break out between the – what is funded of the DAS capex versus both non-funded.

Mike Finley -- Chief Executive Officer

And the reason being is the capital deployed supports the network build, not necessarily capital for individual carrier. Does that make sense?

Walter Piecyk -- BTIG -- Analyst

I guess we can maybe address all of it more offline. I just have one other question now.

Mike Finley -- Chief Executive Officer

Sure.

Walter Piecyk -- BTIG -- Analyst

If you like to have cash flow statement, you have this tax withholding on RSUs it was $33 million for the quarter. Obviously, that had a big impact on your cash for the quarter. That's not a typical run rate. Was that related to executive departure or is that going into like a restricted cash budget or is that basically 33 million of cash just off the balance sheet?

Pete Hovenier -- Chief Financial Officer

So, what it was if there was a very large RSU grant that happened-a few years ago that had a three-year cliff and that three-year cliff came up in Q1 and – as that that RSUs as they divested, the portion to cover taxes was 33 million.

Walter Piecyk -- BTIG -- Analyst

Perfect just like an award for a bunch of employees that came do this quarter?

Pete Hovenier -- Chief Financial Officer

It was multiple executives that came do this quarter.

Walter Piecyk -- BTIG -- Analyst

So that's cash like gone off the balance sheet, there's no offset that's going to occur at some point, right the fact and restricted cash?

Pete Hovenier -- Chief Financial Officer

No, its cash that that came off and really the way to think about it is it reduces the shares, fully diluted shares outstanding. So what I'd like to say is effectively it just like a buyback, otherwise we'd have additional shares on fully diluted and the employee would be writing a check to cover the taxes.

Walter Piecyk -- BTIG -- Analyst

Understood and there, so just to know going forward, is there any other large cliff like that expected to hit over the next year or two?

Pete Hovenier -- Chief Financial Officer

No, this was unique and there's nothing – similar to this, historically it is you know call it 8 to 10 million a year and that will have a normal run rate.

Walter Piecyk -- BTIG -- Analyst

Yes. I mean that's where you are budgeting, that's why I was little surprising to see that big of a number. OK, thank you, Pete. Appreciate it.

Operator

[Operator instructions] Our next question comes from Kyle McNealy, Jefferies. Please proceed with your question.

Kyle McNealy -- Jefferies -- Analyst

Thanks a lot. I wonder if you're seeing any new activity for upgrade opportunities with your existing venue customers. There's a number of new technologies you've referenced and have been out there in the market and you've made press releases on WiFi 6 CBRS, LTE Advanced eventually 5G. How should we think about how these might enter the model with your existing footprint? And I know some venues, there's a big bulk of them that are numerous, they might not be past their useful life yet.

But how should we think about whether you might get some uptick in upgrade opportunities going forward?

Mike Finley -- Chief Executive Officer

Yeah, I'll start and then I'll turn over to Pete. Yeah, anytime there's a new G, it creates great opportunities for upgrades. And so, there's a lot of, a lot of excitement over 5G, and as I mentioned in my remarks there's a lot of announcements coming from the operators. But when you put it in perspective, 2019 is going to be the launch of 5G, and really big picture it's in a small number of markets.

Fortunately for us, they tend to be the markets, the larger markets and there are also markets where there's venues and airports and things like that. So we're obviously working very diligently there. Wi-Fi 6 is another fantastic opportunity but there it's a little bit of a chicken and egg in a way it does, you need a piece to have Wi-Fi 6 and then you need devices that have that capability as well, usually which comes first. But that's now well in progress, and I think you're going to start seeing more of that.

Of course, the other technologies that are coming down the pike here with CBRS and the advancement with LAA and things like that every one of those for venues that wants faster throughput and more capability for their end users, they're going to want to do. And for the most part everybody wants to do that and end users' kind of want to experience that. So, over the next one, two, three years that's give you a pretty good upgrade I think upgrade cycle technology wise.

Pete Hovenier -- Chief Financial Officer

Yes, the only thing I really add to that, what Mike said Kyle it's important to remember when we do these upgrades, again they're success-based. So it is tied to a carrier coming to wash the restaurant, the carrier saying we'd like to do an upgrade at this venue and we're making a nice margin on that incremental fees so it is success-based there. And same thing we think of things like Wi-Fi 6, it's allowing us to deliver a higher quality user experience, but also, it's tied to the incremental revenue and cash flow. So we put this additional capital to work, it needs to meet our return thresholds.

And that's something we're very, very focused on.

Kyle McNealy -- Jefferies -- Analyst

And have you seen an uptick in activity related to these new technologies or is this still out in the future like what should we think about the timing of these?

Mike Finley -- Chief Executive Officer

So, the requests are coming as you can imagine. So we're already having carriers talk to us about 5G. There is discussions going on already about Wi-Fi 6. So it is, I'd say, in the early stages, and so from a 2019 standpoint, I don't expect a lot of contribution and there's not a lot of contribution in our 2019 guidance, but we absolutely see this as being an important revenue stream over the next few years.

Yes case in point, we're still doing 4G upgrades today and that will continue to happen. We think 5G is going to be a long upgrade cycle, but really, we'll start to flow through the P&L and call 2020 with further impact beyond.

Kyle McNealy -- Jefferies -- Analyst

And when do you think you might be in a position to announce a 5G network? Or how should we think about the relative timing of that? I know it might be gated by the technology and the equipment availability, and when that's ready to deploy a network? But similar to the John Wayne Airport with Wi-Fi 6, when do you think we might be able to see a kind of a test venue build out of 5G?

Mike Finley -- Chief Executive Officer

Very soon.

Kyle McNealy -- Jefferies -- Analyst

And one last one, switching to Elauwit. How should we think about the growth drivers for that business? You mentioned 228 properties, 15 under contract that aren't built yet. Is this a new property kind of growth story or is there a penetration play here, too? I know some I think you mentioned in the past that some properties have the venue. The real estate owner puts it into the rent and it might be kind of paid for implied in the contract, but maybe summer uptake on the part of the actual unit dweller.

How should we think about what the growth drivers are for Elauwit?

Mike Finley -- Chief Executive Officer

Yes, so the primary growth drivers really adding new venues. And we'll continue to look for new services to layer on top of the existing venues, but the bulk of the growth is going to be come from in this particular case the 15 venues that are in backlog. Then our team is going out and winning additional venues that we can take throughout the year. So that's the key growth driver.

Operator

We have reached the end of the question-and-answer session and I will now turn the call back over to Mike Finley for closing remarks.

Mike Finley -- Chief Executive Officer

Thank you, operator, and thanks to everyone for the questions. As a reminder, next week, we'll be in Boston presenting at the JP Morgan 47th Annual Technology Media and Telecom conference and in Minneapolis at the end of the month for the 16th Annual Craig Hallum Institutional Investor Conference. We hope to see many of you there. Have a great day.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Kim Orlando -- Investor Relations

Mike Finley -- Chief Executive Officer

Pete Hovenier -- Chief Financial Officer

Mark Argento -- Lake Street Capital Markets -- Analyst

James Breen -- William Blair and Company -- Analyst

Greg Gibas -- Northland Capital -- Analyst

Jon Hickman -- Ladenburg Thalmann -- Analyst

Walter Piecyk -- BTIG -- Analyst

Kyle McNealy -- Jefferies -- Analyst

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