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Boingo Wireless Inc (NASDAQ:WIFI)
Q2 2020 Earnings Call
Aug 4, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Boingo Wireless Second Quarter Earnings Conference Call. [Operator Instructions]

It is now my pleasure to introduce your host, Kimberly Orlando, Addo Investor Relations. Thank you. You may begin.

Kimberly Orlando -- Investor Relations

Thank you, and welcome to the Boingo Wireless Second Quarter 2020 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, 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 Boingo's operations and financial performance, including due to COVID-19, strategic plans and transactions, future results of operations, business strategies and plans, our relationships with our venue partners, new venue and other contracts and market and potential growth opportunities. In addition, management may make forward-looking statements in response to your questions.

Forward-looking statements are based on management's current knowledge and expectations as of today, August 4, 2020, and are subject to certain risks and uncertainties that may cause actual results 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, 2019, filed with the SEC on March 2, 2020, Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May 8, 2020, and our other filings with the SEC, and such risks and uncertainties include the impact of health epidemics, including the recent COVID-19 pandemic on the company's business. 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 thank you to everyone for joining today. I hope you're all doing well and staying healthy. As an essential business, many of our employees have been in the field since this pandemic began, continuing to build out and support our networks and our customers. I would like to thank them and all the employees of Boingo for their focus on our customers and networks during this extraordinary time. Let's begin with a brief summary of the quarter. Revenue for the quarter was $58.7 million, a 2% decline versus Q1, largely due to advertising and retail, which were impacted by the historic downturn in passenger traffic due to COVID-19. However, the team has done an excellent job in managing expenses which led to a 13.7% increase in adjusted EBITDA over Q1 to $21.3 million. Like the rest of the world, we continue to live and work through extraordinary times. Over the last 150 days, we've seen dramatic changes in the way we interact with our family, friends, communities, jobs and colleagues. What remains constant is the critical role wireless connectivity plays in our daily lives. This need for connectivity demonstrates Boingo's resilience as an essential business as well as the durability of our business model. Despite broader economic challenges, we have continued to win new opportunities and build out new neutral host networks. The team has done an incredible job maintaining velocity in the business, and we applaud them for their efforts. RFP activity has remained high. In fact, we responded to more RFPs in the second quarter of 2020 than in the same period last year, with an impressive 67% win rate.

A few of the significant deals we closed in Q2, which I'll outline in detail a bit later include the new Major League Soccer Stadium in Austin, Texas; South Dakota State University; Massachusetts Port Authority; Metropolitan Washington Airports Authority, which includes Dulles and Reagan Airports as well as contract term extensions at London Heathrow Airport, Hollywood Bowl and International Airports in Dubai and Sao Paulo. These varied wins demonstrate the breadth of our technological capabilities and the depth of our innovative solutions. Another sign of Boingo's resilience is our strong balance sheet with ample liquidity to operate and grow the business. We follow a conservative approach to capital deployment for DAS builds by investing capital where we have strong carrier interest. While our core operations continue to generate positive cash flow, we still believe investing the majority of our cash flow from operations into network deployment is the best use of capital to drive long-term growth and greater recurring cash flows moving forward. The big picture is this, we believe we are in a great space. We are an essential business. We serve a critical function. We have a stable and resilient business model. We continue to innovate and to win. Our new business pipeline remains strong, and we are as busy as ever pursuing opportunities. It comes as no surprise to us that our key revenue drivers and the bulk of new business opportunities are aligned with the core part of our business, carrier services, military and multifamily.

Let me give you a few highlights from each of these. First, carrier services, which is primarily comprised of DAS, carrier offload and our emerging tower and small cell business. For Q2, we added 1,000 new live DAS nodes bringing our total number of DAS nodes live to 40,500 within another 11,100 in backlog. We also signed 11 new Tier one carrier contracts during the quarter. We added three new DAS venues in the second quarter, bringing us to a total of 137 DAS venues, 73 of those venues are now live, with another 64 in backlog. This backlog provides us a tremendous amount of runway. The first DAS win for the quarter was the new MLS stadium in Austin, home to Austin FC. We are thrilled to be their partner to bring a world-class fan experience to this incredible new tech-forward Soccer Stadium. Boingo will design, build and manage neutral host, 5G-ready DAS and Wi-Fi six networks throughout the stadium, including Bowl Seating, suites, club sections, concourses and field sections. I was able to visit the site a few weeks ago, and it's a beautiful new stadium, and we look forward to opening day next spring. The second DAS win for the quarter was a long-term agreement with South Dakota State University to provide campuswide coverage that includes the SDSU Jackrabbit's Football Stadium. We're excited to bring a greater connectivity to the students of South Dakota State. Massachusetts Port Authority was our third DAS win for Q2. The long-term agreement gives Boingo exclusive rights to design, build and operate a DAS network in Boston Seaport District. We're proud to bring our fiber connectivity solution to this thriving Boston community. Another deal you may have seen in the news was our recent announcement of the Hawaii Convention Center.

Like Austin FC, we'll be providing neutral host 5G-ready DAS. This contract expands Boingo's DAS and WiFi footprint in Hawaii, which already covers five major airports, three military bases and a multifamily community. Beyond DAS, we have been making good progress on macro tower and small cell deployments at the military bases we serve. The initiative will provide enhanced coverage and services for our troops, and we are off to a promising start. Based on our long-term military contracts and the rights to deploy wireless network on bases, coupled with the work we've done with the JSS, the Joint Spectrum Command, we believe we are well positioned to turn up tower and small cell sites expeditiously. To date, we have already received more than 100 applications for tower and small cell sites from Tier one wireless carriers, which exceeds our initial expectations. With an average sale to completion cycle of 24 to 36 months, the macro tower business represents a longer-term revenue opportunity, and we are excited about our fast start. Turning now to offload. We recently signed an agreement with Google to provide WiFi offload to Google Phy devices. Using Passpoint technology, Google Fi devices will automatically connect to boingo Wi-Fi hotspots when they are in a passpoint enabled location. While this will be a trial to start, we believe it will grow over time and expand to new locations, much like our other offload agreements have. We're excited to have Google on board. Importantly, the vast majority of our carrier offload revenue is now under fixed contractual commitments. That means that although airport traffic was down significantly in Q2, we were only minimally impacted from a revenue perspective. With airports and passenger traffic in mind, we recently launched a solution to solve for a newly evolving macro trend in Q2, namely the touchless experience. Technology-enabled, touchless safety measures are part of the solution to help America get back to business in the wake of COVID-19.

In the transportation sector, Boingo has identified key use cases, we have company technologies and network requirements to help airports prepare for the new age of travel and to facilitate a new touchless passenger experience. This will help prepare airports to reopen on a wider scale while increasing passenger confidence. And airports are just one example. Such touchless applications can help entertainment and sports venues, commercial real estate, multifamily housing, retail locations and more. We believe Boingo is well positioned to lead the way here. Turning now to military. Revenue for the quarter was up 3.1% versus Q1, and ARPU was up 1.7%. While we did not add any new beds during the quarter, we focused our resources on supporting requests for additional private services due to the pandemic, which I'll share about more in a moment as well as network improvements to ensure our network quality in the barracks. As you can imagine, we saw a large uptick in network traffic due to the number of service men and women's sheltering in place. Overall penetration remained steady at 37.6%, largely due to reduced troop movement. WiFi has become increasingly important, not only for daily operations but for quality-of-life initiatives that the military wishes to provide. We currently have more than 11,000 beds under contract for what we refer to as bulk paid Wifi, and we anticipate more on the way. In addition, the military has seen the value of having complementary education networks available for students engaging in remote learning from their barracks. We believe these education networks represent an exciting market opportunity for us going forward. We have a number of proposals for education that works out now, and several have already come under contract.

Finally, we rolled out a new 100 megabits per second speed tier called Boingo Extreme at four bases during the quarter. Boingo extreme offers our fastest residential service yet, and the take rate during the trial has been very promising. The product allows us to provide an enhanced service to the troops and an increased to ARPU. We look forward to expanding the trial to additional bases in the third quarter of 2020. Now let's turn to multifamily, like DAS and military, we continue to actively build out new multifamily construction projects during the pandemic. We had two new properties go live during the second quarter. And we currently remain on schedule with the majority of our existing builds. Fall semester for many college campuses begins this month and approximately 85% of our student housing partners plan to reopen with social distancing protocols in place, with most campuses offering a hybrid of in-person and virtual classes, connectivity plays a critical role. We secured four new multifamily contracts during the quarter, two of which are conventional properties and two are student housing, located in Texas, Florida, Indiana and Washington. These new construction properties include 1,298 beds and all promote state-of-the-art wireless connectivity as a key feature for residents.

Three of the four contracts are network as a service, or NAS. Under a NAS approach, Boingo deploys a high-quality robust network throughout the property and enters into a long-term services agreement with the property owner to provide our services to all residents. The network-as-a-service model provides for increased and predictable recurring services revenues for our business and opens the door to monetize the network incrementally through additional solutions and use cases in the future. As you can see, it has been a busy, productive quarter for the core parts of our business. Before I conclude, I'd like to provide an update on our strategic process. As we announced a few months ago, we are engaged with multiple parties who have expressed interest in Boingo's unique position to drive value through our long-term wireless rights and neutral host converged network approach. While we are continuing to work through discussions with multiple parties, we do not have an update to share regarding the strategic process at this time.

With that, let me turn it over to Pete, who will walk through our financial results for the quarter in more detail. Pete?

Peter Hovenier -- Chief Financial Officer

Thanks, Mike. Today, I'll review our financial results and key operating metrics for the second quarter ended June 30, 2020. Total revenue for the second quarter was $58.7 million, down 2% from the prior quarter and down 14.4% from the prior year period. The decline versus prior quarter was primarily driven by decreases in retail, advertising and other revenue, our legacy businesses, which were partially offset by modest gains in military/multifamily and DAS revenue. The year-over-year decline was primarily driven by decreases in DAS, retail and advertising and other revenue, and to a lesser extent, decreases in wholesale WiFi and military/multifamily revenue. While the decline in total revenue appears concerning on the surface, the year-over-year decline was generally in line with our expectations following our business realignment plan. DAS and military/multifamily both improved over the prior quarter, while retail and advertising and other revenue, which we consider to be noncore to our future were directly and materially impacted by COVID-19. As a percentage of total revenue across our diversified revenue streams compared to the prior year quarter, military/multifamily was 40%, up from 36%; DAS was 38%, down 40%; wholesale WiFi was 17%, up from 16%; retail was 4%, down from 6%, and advertising and other was 1%, down from 2%. In terms of total revenue contribution by category for the quarter, military/multifamily revenue was $23.7 million, representing an increase of 4.4% versus the prior quarter and a decrease of 2.8% versus the prior year period. In military, the improvement versus the prior quarter was primarily due to an increase in average monthly revenue per subscriber. The year-over-year decline was the result of reduced military subscribers, which was partially offset by an increase in average monthly revenue per subscriber. As of June 30, our total footprint of military beds totaled 359,000 beds across 64 military bases, which was unchanged from the prior quarter. We remain confident that the opportunities presented by the military vertical and has potential to drive long-term recurring cash flows.

In particular, we are encouraged by the continued interest and traction we are seeing for macro cell towers, small cell deployments and bulk service offerings on bases as we strive to meet the increasing connectivity needs of our military partners and carrier customers. In the multifamily vertical, second quarter revenue increased 8.8% versus the prior quarter and declined 3.4% year-over-year. The increase compared to the prior quarter was due to seasonal multifamily construction revenue trends, primarily from deploying new networks and upgrades in the student housing vertical. The year-over-year decline reflects reduced multifamily construction revenue due to the ongoing mix shift in the sales under our network-as-a-service model, which incorporates higher recurring services fees over a longer term. DAS revenue of $22.2 million was up modestly from the prior quarter and decreased 19.6% year-over-year. DAS revenue for the second quarter was comprised of $14 million of build-out project revenue and $8.2 million of access fee revenue. The decline in total DAS revenue over the prior year period was primarily due to decreased DAS build-out project revenue as a result of reamortization of deferred revenue balances from customer contract extensions in 2019 along with reduced access fees from our telecom operator partners. DAS access fee revenue in the prior year period included a $3 million onetime benefit from the amendment and contract extension of one of our carrier customers. When not including this onetime benefit, second quarter DAS access fee revenues would have improved 6.3% year-over-year. Wholesale WiFi revenue was $9.7 million, a slight decrease of 1.4% versus the prior quarter and a decrease of 9.4% compared to the prior year period.

Both the sequential and year-over-year declines were primarily due to lower partner usage-based fees from our comes with Boingo service offerings and our program with American Express is phased out. Importantly, we believe carrier offload will continue to be a stable driver of recurring cash flow moving forward. Retail revenue was $2.4 million, down 20% versus the prior quarter and down 38.4% year-over-year, primarily due to ongoing reductions in retail subscribers, which has been amplified by the declines in venue traffic we've experienced due to COVID-19. Advertising and other revenue of $700,000 decreased 70.6% versus the prior quarter and 66% over the prior year, primarily due to reductions in the number of premium add units sold due to the declines in video traffic as a result of COVID-19. Now turning to our second quarter costs and operating expenses. Network access costs totaled $27.9 million, representing a 3% decrease versus the prior quarter and a 6.4% decrease to the second quarter of 2019. The declines were primarily due to lower revenue share paid to our venue partners at our managed and operated locations and reduced customer usage at partner venues. The declines were partially offset by increased depreciation expense. Gross margin, which is defined as revenue less network access costs, was 52.5%, an improvement of 50 basis points compared to the prior quarter and a decline of 405 basis points versus the prior year period. The sequential improvement was largely due to reduced revenue share to our customer usage apartment venues on a year-over-year basis, the decline reflects a shift in the diversified revenue streams. Network operations costs totaled $13.5 million, an increase of 2% compared to the prior year quarter and a decrease of 4.9% year-over-year. The increase from the prior quarter was primarily due to increased depreciation and break fix fees at our managed and operated venues, which were partially offset by decreased personnel-related expenses. The year-over-year decrease was primarily due to reduced personnel-related expenses.

Development and technology expenses of $6.5 million decreased 7% versus the prior quarter and 22.2% year-over-year primarily due to declines in personnel related and other expenses. Selling and marketing expenses were $5.9 million, an increase of 4.9% compared to the prior quarter and a decrease of 5.5% from the prior year period. The increase versus the prior quarter was primarily due to a onetime $1.1 million increase in the litigation loss contingency accruals in the second quarter of 2020 related to a claim of damages at one of our venues in Brazil. This increase, which was partially offset by reduced personnel-related expenses. The decrease compared to the prior year period was primarily due to reduced personnel-related and discretionary expenses. General and administrative expenses of $7.3 million increased 8% over the prior quarter and 3.9% over the prior year period, primarily due to nonrecurring expenses totaling $1.1 million associated with our strategic process, which were partially offset by reduced professional and related service provider fees and tax and licensing fees. Excluding the $2.2 million of nonrecurring fees incurred during the quarter, total second quarter costs and operating expenses of $60 million decreased $2.5 million or 3.9% from the prior quarter and $6.7 million or 10.1% year-over-year, reflecting the success of our business realignment plan as well as additional cost-saving initiatives. Now turning to our profitability measures for the quarter. Net loss attributable to common stockholders was $5.8 million or $0.13 per diluted share compared to a net loss of $4.6 million or $0.10 per diluted share in the first quarter of 2020. Net income of $200,000 or breakeven per diluted share in the second quarter of 2019.

Adjusted EBITDA, a non-GAAP measure, was $21.3 million, an increase of 13.7% over the prior quarter and a decrease of 2.6% compared to the prior year period. As a percentage of total revenue, adjusted EBITDA was 36.3%, up from 31.2% in the prior quarter and up from 31.9% in the prior year period. Now turning to our key metrics. Number of DAS nodes in our network for the second quarter were 40,500, up 2.5% from the first quarter of 2020 and up 15.1% from the prior year period. The number of DAS nodes in backlog, which represents the number of DAS nodes under contract but not yet active, as of the end of the second quarter, was 11,100, up 2.8% from the first quarter of 2020, and down 9.8% from the prior year period. Our military subscriber base was 135,000 subscribers at the end of the second quarter, which was consistent with the first quarter of 2020 and down 4.9% from the prior year period. Our retail subscriber base was 56,000 subscribers at the end of the second quarter, which was down 20% from the first quarter of 2020 and down 39.1% from the prior year period. Connects or paid usage on our worldwide network were approximately $13.8 million, down 79.3% from the first quarter of 2020 and down 84% from the prior year period. As anticipated, given the majority of our connects come from public venues, which have experienced significantly reduced passenger traffic as a result of COVID-19-related travel bans and restrictions, shelter-in-place orders and business shutdowns, we've seen connects continue to decline. Importantly, despite these headwinds, the durability of our business model has shown that we are still able to drive value to our customers with approximately 95% of our revenues being contractual or recurring in nature as opposed to usage base. Moving on to discuss our balance sheet. As of June 30, 2020, cash, cash equivalents and marketable securities totaled $172 million, down slightly from $175.2 million at March 31, 2020. We had a strong quarter of cash collections as evidenced by the $15.7 million reduction in our accounts receivable balance compared to March 31, 2020. Total debt was $270.4 million, up slightly from $269.5 million at March 31. As a reminder, we proactively drew down $100 million from $150 million revolving credit facility last quarter as a precaution to enable greater financial flexibility in response to COVID-19.

As of June 30, 2020, we have approximately $50 million remaining of borrowing capacity under our revolving line of credit, and we remain comfortable with our overall liquidity position. Capital expenditures were $29.1 million for the quarter, which included $21.5 million of DAS infrastructure build-out projects that are primarily reimbursed through revenue by our telecom operator partners. Our nonreimbursed capital expenditures were driven mainly by new network builds, managed and operated network upgrades and various infrastructure upgrades and enhancements. As a reminder, we estimate our annual maintenance capital requirements, which excludes all growth capital, to be approximately 3% to 5% of revenue. Free cash flow, a non-GAAP measure, was a negative $1.4 million for the second quarter compared to a negative $3.6 million for the first quarter of 2020 and a negative $32.2 million in the second quarter of 2019. As our core business continues to generate significant cash flow from operations, we continue to believe investing majority of our free cash flow in network infrastructure deployments, secured by long-term venue agreements is the best use of capital to drive growth, and to increase long-term recurring cash flows. Before I conclude, I wanted to note that we are continuing to engage with multiple interested parties regarding a potential strategic transaction as announced and discussed on prior earnings calls. As such, we are maintaining our suspension of forward-looking financial guidance until further notice.

In closing, I am very pleased with our consistent, strong operational execution in the second quarter of 2020, which led to improved financial performance over the prior quarter. Despite the slight sequential decline in total revenue, we demonstrated strong margin expansion along with cost reductions, which resulted in a 13.7% improvement in adjusted EBITDA compared to the first quarter of 2020. Our performance reflected strong cash generation, prudent expense management and positive momentum as we continue to win key customer contracts and new venues. Most importantly, given the durability and the resilience of our business model and the actions we have taken to ensure our financial flexibility, we believe we are well positioned to withstand these challenging times given our diverse revenue streams that are largely contractual or recurring in nature, our strong balance sheet and liquidity position and our conservative approach to capital deployment. We remain very excited about the near and long-term prospects ahead.

With that, I'll turn it back over to Mike for closing comments.

Mike Finley -- Chief Executive Officer

Thanks, Pete. The critical role that connectivity plays in our lives has never been more evident than it has been during this pandemic. Boingo is an essential business. Despite the challenges, we continue to win deals and build new neutral host networks. We have a large backlog of venues to deploy, plus our new business pipeline is robust. We have a strong balance sheet, and we believe we have ample liquidity to operate and grow the business. Our core operations continue to generate significant cash flow, allowing us to make capital investments secured by long-term venue agreements such as high-value projects like MTA East Side Access and Long Island railroad projects. For these reasons, we believe Boingo is well positioned with a durable business model. We remain confident in the immediate and long-term prospects of our business.

Operator, you may now open the call for questions. So please note that we will not be taking any questions regarding the strategic process at this time.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Anthony Stoss of Craig-Hallum. Please go ahead.

Anthony Stoss -- Craig-Hallum -- Analyst

Hi guys, Nice job navigating these tough times. Say, I didn't hear anything in your prepared remarks regarding the New York City MTA contracts. Can you update us on what you expect from a time line perspective and maybe share if your customers have secured funding for that? And then the second question, probably for Mike. You mentioned that the RFP activity has ranged really high. Can you elaborate a little bit more if that's more on the 5G side or Wi-Fi 6? Any color would be helpful.

Mike Finley -- Chief Executive Officer

Yes Tony, thanks, appreciate the questions. I'll start on Mt. I don't know if Pete wants to add something, then I'll cover the RFP question. Yes, MTA and that whole project is going along really well. I mean with COVID, there's not as much traffic and activity that's going on. So it's actually providing us a faster and better way to get our network built out. So we obviously want to see New York back. We want to see people back working. But on that side of it, that's actually been something that's fairly positive for us. As far as activity with the carriers and our partners, that's going very well. Nothing to say here today, but that's a key project, not only for us but for them. And as we continue to get closer to that opening, we'll obviously be able to talk more about that. Pete, I don't know if you have anything to add on that or?

Peter Hovenier -- Chief Financial Officer

Yes. The only thing really with that in, Tony, is on the MPA, it's important to remember there are two separate agreements, one for the Long Island Railroad portion and the other for the East Side access tunnel. As we've previously stated, we expect we will go live for the first phase of the Long Island railroad portion in 2020 with the carrier and that has not changed. So we're still seeing good traction. We're still building, and we expect to have a carrier live by end of the year.

Mike Finley -- Chief Executive Officer

And then on the RFP side, yes, I mean, it actually is I think it really describes the strength of Boingo. It's really across the board. As connectivity continues to be a major part of what our customers want, both in venues and transportation hubs, schools, military doses, it's really all of the capabilities and network that can be provided. We talked about this touchless activity. It really kind of exemplifies kind of what we're doing and who we are. It's going to require not just licensed but unlicensed spectrum together, CBRS, private networks, and when you look at the capabilities of that for things like concessions and point of sale that goes not only in airports but also in many other venues, first responder, cleaning and maintenance tracking of venues that can be robotics. So it really requires a big, robust network that is kind of a converged neutral host, which is what we do. So on the RFP side, that's what we're seeing. It's not one or another, it's really the converged network side of it.

Anthony Stoss -- Craig-Hallum -- Analyst

Okay. If I could sneak in one more for Pete, on the OpEx side of things. You guys have done a good job managing your costs. Is this kind of the new level? Or do you think it can go down a little bit more in Q3?

Peter Hovenier -- Chief Financial Officer

Yes. I think what you're seeing right now is a good run rate based upon where we are today with particularly with COVID-19 but as we always will say, we continue to monitor and look for cost-saving initiatives, and the team has done a great job of being frugal and prudent, and we will continue to be so.

Anthony Stoss -- Craig-Hallum -- Analyst

Thanks guys. Thanks, Anthony.

Operator

Our next question comes from Tim Horan of Oppenheimer. Please go ahead.

Tim Horan -- Oppenheimer -- Analyst

Thanks guys. The 95% of revenue, are you kind of implying that this is a relatively good run rate of revenue that we've kind of bottomed out, I guess, that you have some visibility in the next year or so. And I guess related to that, are you including kind of construction revenue in that and maybe the WiFi usage-based revenue, just so we understand both of those.

Mike Finley -- Chief Executive Officer

Tim, you broke up for just the very first part of that. I missed the very first part of your question. I'm sorry.

Tim Horan -- Oppenheimer -- Analyst

Yes, sure. So I think you guys are saying 95% of revenue is recurring. Can you just give us a little bit more color around how you think about that 95% of revenue. Does that provide you with visibility on that this is basically a relatively good revenue run rate next couple of years?

Peter Hovenier -- Chief Financial Officer

Yes. No, thanks for the clarity. So yes, just to be clear, what we said is 95% is recurring or contractual. So what we're really trying to point out there is that our business model, it is solid. We're providing value, and it does give us a good level of predictability. Our but we are seeing in certain parts of the business, particularly what we consider our legacy business, advertising and retail. Retail is recurring, but it has seen some steep declines. Now we don't think it's core to our future, but it does generate good recurring cash flow that benefits the company. So while we're it's not a key focus, we will absolutely enjoy that cash flow for as long as it continues. But more importantly, I think what you're really thinking is how does this go as a run rate? And as you look at the core parts, specifically DAS, military in particular, those should continue to grow, and they should continue to throw off incremental recurring cash. And run rate is absolutely the way to think about that business.

Tim Horan -- Oppenheimer -- Analyst

All right, thanks.

Operator

Our next question comes from James Breen of William Blair & Co. Please go ahead.

James Breen -- William Blair & Co -- Analyst

Thanks for taking the question. Just a couple, Pete. I think can you clarify what you talked about in terms of lot and how that brakes progressed maybe sequentially and year-over-year? And then just strategically looking forward, I think we understand the impacts around the pandemic. But as you think about the large carriers and the move toward 5G, how will that manifest itself? Will that be new RFPS? Or will those be sort of add-on to existing contracts that you have with carriers going forward?

Peter Hovenier -- Chief Financial Officer

So I'll start off with the multifamily. I think Mike will go into the other. So on multifamily, so we did see a step-up in Q2 from Q1 sequentially. And we typically expect that trend to continue, particularly as the multifamily business still has a skewing toward a student housing vertical. We are seeing more and more sales in the conventional market. And so becoming less and less reliant in student housing, but that is still a core part of that business. So you typically will see growth throughout the first three quarters and then typically a drop in Q4 from a seasonality standpoint. Our network-as-a-service platform is doing better. So that program has helped us get more recurring cash flows. Now it does mean absolute revenues will come down as there's less construction revenue that's coming in the current quarter immediately, but and that revenue is recognized more over time. But we will do that trade all day long because it's a longer-term relationship, and it gives us better recurring cash flows over time.

Mike Finley -- Chief Executive Officer

Yes, Jim, it's Mike. Thanks for the question. Yes, on 5G, for us, it's really both, I think, to your question. In all of our existing venues, we would just like we did with 4G adding to our 3G network, we'll be adding 5G in a number of those locations. We've announced some of them already, but that's something that continues to go forward. And of course, it's part of the converged network that we have and are continuing to grow out. In new locations, it's really the same. We're building out four G. We still brought out 3G networks even in some new locations. But of course, adding that with WiFi, Wi-Fi 6, soon to be Wi-Fi six coming in the it's really a combination of all. And when you talk about things like a touchless experience and gambling and things like that as arenas start to fill up and airport transportation comes back, it's going to enable us and the operators as partners to be in a really good spot to provide connectivity to customers as they come back through.

James Breen -- William Blair & Co -- Analyst

And I just want to follow up to building out some of these venues that you have in backlog in a lot of states, construction work is considered essential. Are you able to continue to work on some of these contracts, even if some of the sports aren't happening stating you closed?

Mike Finley -- Chief Executive Officer

Yes, we are. And happen. I think throughout the whole pandemic, I think there's really only been about a week that was kind of shut down in New York. And other than that, we've had a great ability to continue to build. And I mentioned Austin in my comments, I was there a couple of weeks ago, and that continues to get built out. And in a lot of ways, that's a new stadium, but in a lot of ways with people not in the stadiums, transportation hubs, it's actually enabling us to get some work done faster and to upgrade some things faster. So...

James Breen -- William Blair & Co -- Analyst

All right. Thank you.

Mike Finley -- Chief Executive Officer

Thanks, Jim.

Operator

Our next question comes from Kyle McNealy of Jefferies. Please go ahead.

Kyle McNealy -- Jefferies -- Analyst

Hi, thanks a lot for the question. This is a pace of deployment question. It's similar to the one you just answered, but can you help us understand, in total, across all of your current projects that are ongoing. Can you help us understand how much activity you're seeing from the venues trying to use this time where there's lower foot traffic in the real estate to get their construction projects done? And how might that be negatively offset by any uncertainty around when their higher traffic levels would eventually resume? I guess what I'm trying to get at is how can we think about either current project and whether they're either accelerated or slowed down in terms of the broader and grand scheme of things? That would be helpful.

Mike Finley -- Chief Executive Officer

Yes. I'll start. Maybe Pete can add on. I would say for the most part, this is all I hate to say it in this period of time, but it's all pretty positive in that regard in getting work done. I think I'm very optimistic in general, but I think a lot of the locations we're working with, even though it's a very difficult time. I do I think airports believe traffic will come back, cities believe work will come back and people will come back and getting this work done really continues. And I think some of that's highlighted as well in the RFPs that continue to come and contracts that continue to get signed and upgrades to continue to grow. And I think you've heard from the operators in there, their earnings calls as well that they're continuing to build. So we're seeing that activity continue as we sit here today.

Peter Hovenier -- Chief Financial Officer

Yes. The only thing really, I feel like I should add here is, I think as most people know, and Kyle, now you know, we still have a very conservative capital deployment strategy. So we build, but we typically build once we have a carrier committed to join the venue. Now that doesn't necessarily mean they paid us a large fee upfront. Sometimes, it's a commitment to pay us over time, which is fine. But what you don't see us do a lot of is building and hope the carriers will come. We are doing that at the MTA project, which we talked about at length, and we feel very, very confident that we won't get carriers live on the MTA network. But on other locations, we take a very cautious, I'd say, conservative capital deployment strategy. So that has not changed.

Kyle McNealy -- Jefferies -- Analyst

Okay. That's helpful. And then on the multifamily side, I would expect that Boingo multifamily would see a tailwind from work from home and distance learning. You talked about it a bit in the prepared remarks. And the end customer subscribers would see more importance that they should place on the broadband WiFi connectivity. Are you seeing any acceleration in the time line that multifamily customers are thinking about initiating new projects and upgrades? Like is your pipeline building and the imbalance that you've got from customers? Has it increased since the start of COVID and how should we think about how Boingo multifamily might offset some of other pressures with advertising and retail and other pieces that have been COVID impacted?

Mike Finley -- Chief Executive Officer

Yes. I'll start. I don't know if Pete wants to add. Yes, there is some, but I'll separate it between two. The student housing side and the conventional multifamily we're really kind of just beginning into the conventional multifamily side. And those builds are generally longer and a little bit more into the future. We've been seeing the desire on the builders and the property owners to want to have robust connected neutral host networks for their property. So it's not new. I think COVID has, obviously, only strengthened that need as they move forward. Getting some of the existing buildings moved over to those types of projects, I think we'll continue to see some velocity there. And then on the student housing, that is a little bit on the existing projects, at least a little more year-to-year. And with so much activity going on with school, we're I think as we stated, there's 85% schools that we have are coming back. I can tell you from personal experience, I have kids in college, and they all want to go back and they're all going back so that I know. So I think there's room to believe that, that number is accurate.

Kyle McNealy -- Jefferies -- Analyst

One last quick one. T-Mobile-Sprint in that merger caused a little bit of slowness toward the end of the year last year. Are you starting to see them pick back up toward normal levels or better? What's the outlook there that you could share?

Mike Finley -- Chief Executive Officer

Yes. I would just say this. Look, I it's hard to believe what they've done by combining those two companies right in the middle of this pandemic. But there's a lot of activity going on there. They've done a great job working through the two companies coming together and I think the activity will begin to pick up. We have a lot of different work that we're doing with them, both today and then more broadly as we go into the future. So that's probably the best I can say about that right now.

Kyle McNealy -- Jefferies -- Analyst

Okay, thanks a lot.

Operator

[Operator Instructions] Our next question comes from Scott Searle of Roth Capital. Please go ahead.

Scott Searle -- Roth Capital -- Analyst

Hey, good afternoon and thanks for taking my question. Mike, just a quick follow up on some of the U.S. operator activity. DISH has got a time line to start to get their 5G network built, and we finally started to see them releasing some of the winners, at least as it relates to some of the core capabilities and other vendors. Are you starting to see them pick up in the pipeline as well? And then maybe to just layer on top of that, as it relates to 5G. And Mike, I think in the past, you've talked some of the opportunities to deliver more value, not necessarily one plus one equals 2, but one plus one equal something greater than one, but it delivers a lot more share. And based on your win rate, it seems like some of that's in effect. So I'm kind of wondering the 5G pricing strategy is working out, bringing everything into your umbrella, and then I had a couple of follow-ups on CBRS.

Mike Finley -- Chief Executive Officer

Yes. So yes, yes, I think DISH has become obviously very active. I believe they've had some announcements in the last couple of weeks. So we've been very engaged with DISH, and we'll work with them as we move forward, and they continue to develop their plans. On the 5G side, I'm not sure that I understood the question, Scott.

Scott Searle -- Roth Capital -- Analyst

Sorry. Just in terms of the pricing, it's not certainly a full-priced incremental node, but you talked about basically being able to provide a broader regional set of services and suite of services across 3G, 4G, 5G CBRS. I'm just kind of wondering how the overall pricing is working out there. It seems like from a gross margin standpoint, at least in the early going, it's good, but what are you kind of seeing? What are the expectations from a carrier standpoint on the pricing front?

Mike Finley -- Chief Executive Officer

Yes. I think probably what I've said in the past and is actually we're executing against and working quite well is really having a broader, more when I say global, but broader overall strategy with the carriers and all of the various projects and technologies that they have and want to deploy. So we obviously have instead of looking at kind of venue by venue, we're looking and working with them in total. So 5G becomes a big part of that, adding new venues becomes a big part of that and adding on to the existing as we talk about touchless experience or other new capabilities that are coming, we're essentially providing the network and the converged network to enable those types of things. Some of those are services that operators and others will be able to deliver to our combined customers, i.e. venues.

Scott Searle -- Roth Capital -- Analyst

Got you. And maybe lastly, if I could, on the CBRS front. We've got auction 105 going on right now. It seems like there's a high level of interest across operators, MSOs and enterprises. First, from an existing venue standpoint, I'm wondering, are all new venues that are being built supporting CBRS and do some of the legacy, for lack of a better word, legacy venues also support CBRS. Are you seeing that interest level kind of coming in from the carriers and are you seeing interest from new players as well? Are the MSOs starting to engage with you for things like that? And maybe to just throw on the back end of that, private networks, big opportunity as well. You guys have the neutral host capabilities to do something like that. And even with CBRS, you've got guys like John Darin there who are bidding on some spectrum. I'm wondering if you're seeing are there more enterprise-centric types of opportunities as it relates to CBRS?

Mike Finley -- Chief Executive Officer

Yes. Thanks. Great question, actually. There's a lot there. But yes, the auctions, I think everybody anticipated that, that would be a valuable and robust auction. And then I'll kind of combine, I think, the rest of the existing buildings, legacy buildings, new buildings, yesh. I mean we look at CBRS as just another part of the spectrum that we can incorporate into our neutral host converged network that is going to provide robust services for multiple. So take a big airport or transportation hyper venue. We're serving a lot of customers in that regard. We serve the people that come through those venues with their devices. We serve the venues themselves.

We work with our partners and the operators to we support them and work with them. And I think CBRS and some of the new opportunities that are coming forward and private networks and things like that, we'll have a combination of that. So some of those things will occur in our existing locations. So there'll be private services that can occur in our existing locations. And then I think as you mentioned, the private networking and the additional entities that are coming forward and seeing those as opportunities, we'll be in a great position to work with as well. So foundationally, our strategy supports everything you've highlighted there, and we're working toward that.

Scott Searle -- Roth Capital -- Analyst

Thank you.

Mike Finley -- Chief Executive Officer

Thanks, Scott.

Operator

There are no further questions at this time. I would like to turn the floor back over to the presenters for closing comments.

Mike Finley -- Chief Executive Officer

Thank you, Ariel. And thanks, everybody, for joining on the call, really appreciate the time. We believe Boingo is well positioned to not just weather these challenges presented by the unprecedented time in our history, but to thrive. Connectivity is more important than ever and our long-term wireless rights and strategic venues, our long-standing relationships with the carriers, and our durable resilient business model allows Boingo to maintain velocity. We're excited about what lies ahead for our business. Thank you all again for joining today and stay healthy. Thanks.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Kimberly Orlando -- Investor Relations

Mike Finley -- Chief Executive Officer

Peter Hovenier -- Chief Financial Officer

Anthony Stoss -- Craig-Hallum -- Analyst

Tim Horan -- Oppenheimer -- Analyst

James Breen -- William Blair & Co -- Analyst

Kyle McNealy -- Jefferies -- Analyst

Scott Searle -- Roth Capital -- Analyst

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