Boingo Wireless gives us a peek under the kimono: It's rare to get hard, audited, under-threat-of-government-rules numbers in the Wi-Fi hotspot industry. Now we have some. Boingo fired up its operations in 2001, and has taken over nine years to reach profitability under accounting (GAAP) rules. The firm has nearly $35m on hand, which means that on a non-GAAP basis, they've been putting money into the bank for years.
The firm took in $46m in revenue in the first nine months of 2009 ($66m for the year), and $59m in the first nine months of 2010. In 2010 up to 30 September, Boingo made $5.3m after tax and before accounting munges. Boingo's closest public competitor, iPass, saw $171m in revenue but a $13m loss in 2009; iPass's revenue has declined slightly in each of the last several quarters, grossing $117m in the first nine months of 2010, losing $3m on that. iPass offers a suite of roaming and remote-office services, as well as hotspot aggregation.
But what I'm most interested in, of course, is subscribers and sessions. Page 31 has the detail. The company has 191,000 monthly subscribers, nearly 10 percent of which cancel a subscription each month. Boingo charges $10/mo in the US for laptops and $8/mo for mobile. The international subscription is much higher, but there's no breakout between US and international accounts. A 24-hour pass is $8.
The filing reports 5.8 million sessions from Jan. to Sept. 2010 (all subsequent numbers I rely on use that period of time). The revenue from subscribers was $17m, making the average monthly subscription fee $7.50 ($17m/191K subscribers). That seems off and must be due to 30-day trial subscriptions and other promotions. It also indicates a low percentage of international subscribers, which would skew the number much higher.
Revenue from single-use sessions is $13m, which would indicate well over 150,000 yearly single purchases, most of which I'd suspect are in airports. Boingo operates paid Wi-Fi and most of the largest airports that charge for service; the company also gets fees for managing Wi-Fi at some airports.
The wholesale number is fairly staggering at $25m. This comes from outfits that resell Boingo's service under their own name (so-called "white label" service), and mobile carriers like Verizon. Boingo, without mentioning Verizon, attributes $3m in this period from "a mid-2009" acquired wholesale customers. Verizon is providing a reasonable, but not substantial amount of wholesale revenue.
The figures show for-fee Wi-Fi to be much more robust than I'd suspected. Many other firms have come and gone trying to make money selling Wi-Fi as aggregators, airport operators, and other incarnations. Wayport was bought by AT&T, and the majority of AT&T's Wi-Fi is now at venues that charge nothing for the privilege.
The challenge for Boingo is to continue this expansion. Mobile service must be a large component of its growth based on average subscription price, and the clear necessity for mobile users to have easy mobile access. AT&T certainly gave Boingo a gift by switching from unlimited 3G plans for new subscribers as of last June to metered service plans. At $25/mo for 2GB with a smartphone or slate, and $10/GB for overage, an $8/mo hotspot plans sounds positively cheap as a cost-conservation measure.
Boingo will trade under WIFI on NASDAQ, a move that strikes me as slightly odd since the firm doesn't own the trademark to that. Perhaps stock tickers are exempt from that issue.
Disclaimer: None of the analysis in this post is intended as advice on whether or when to purchase or sell Boingo stock. I am not a stock analyst nor trader. I own no shares in Boingo and have no intent to buy shares.