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Boingo Wireless CEO Stresses Profitability

Stocks in this article: WIFI VZ

It is very expensive to build out, and your expenses seem to be going up. At what point do you see that leveling out or returning to normal?

Hagan: We're quite different than most recent IPO companies. We are very profitable. We have EBITDA earnings before interest, taxes, depreciation and amortization margins in the mid-20% range. We generate quite a bit of cash. So, we're actually a very strong, stable and profitable business. Our expenses rise as we grow but they don't grow as fast as we're growing so you know, over time we continue to generate more and more profits.

I know that your expenses are going to be rising most of the year though, right?

Hagan: Yes, but as a percentage of growth, slightly lower than growth. So we'll continue to increase our profitability over time.

Where you're growing is mostly in smartphones and tablets, but it seems the area that is not making as much money is PC subscribers. Right?

Hagan: We have slightly different pricing on, depending on what type of device the customer is signing up for but overall with the influx of tablets, with the iPad being the big driver of that business, we're seeing huge demand for our services. So, price is a little bit different but overall it's a real growth engine for business.

Do you think that eventually stabilizes?

Hagan: Yes, I think we're riding a trend and the types of devices that are now coming to market tend to be less PC oriented and more other types of devices coming, whether it's a tablet or smart phone or an e-reader or a camera that has a Wi-Fi chip in it.

All of those represent opportunities for us and we have different price points depending on what type of product that is. But the big message is the number of Wi-Fi enabled devices that are coming to market, which far, far expands our traditional business, which has been the laptop business for the last decade. So we've got this, you know, huge influx of new types of devices that have Wi-Fi chips imbedded and that's a big opportunity for Boingo.

How do you compete against free hotspots that are out there?

Hagan: We have incorporated free into our offering. We launched a product called Boingo WiFinder. It's an app. You can get it in all of the app stores and it helps the customer find and locate and then connect to free hotspots in addition to the Boingo pay network.

So, we actually embrace free. We think free is good for the business. It's going to be part of the ecosystem. And you are always going to have that. You are going to have some free locations; you are going to have some pay locations. But at Boingo, what we want to do is make sure it's easy for the customer to find whatever kind of hotspot that they need to get connected. What about the challenge from, I guess like a standard company, say an Optimum Online that offers their users mobile ability? You know, how are you going to compete against those bigger companies that are, that are jumping into your space?

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