NEW YORK ( TheStreet) -- The market has not been kind to IPOs of late as investors have quit buying blindly and starting taking a microscope to the S-1 filing. Several companies lately have gone public with poor financial statements, choosing instead to promote growth in sales or subscribers over profits, and their stocks haven't fared well. LinkedIn ( LNKD) has been something of an exception with its shares managing to stay at comparatively lofty levels, despite falling from the heights reached on their first day of trading. Boingo Wireless ( WIFI) seems to have been caught in the downdraft. The Los Angeles-based mobile Wi-Fi company priced its debut at $13.50 per share, and closed Monday's regular session at $9.12, down 32%. The buzz was very high around the company when it launched on May 4, but the shares never cooperated, sliding in their very first session. The stock got a lift back to $10 when the quiet period ended, but hasn't been able to hold that level. Chief Executive Officer Dave Hagen spoke to TheStreet recently, talking about how his company's maturity level is very different from other IPOs of "concept" companies. For a start, Hagen stresses that Boingo Wireless brings in cash and is profitable. TheStreet: So are you surprised at the reaction to the stock? Hagan: Well, we entered into a tough market but fundamentally nothing has changed with the company. Boingo had a great first quarter. You know, we're right where we expect to be. Building the company over time, it's a marathon, not a sprint. We're excited about where the company is. We're excited to be public and continuing to grow the business. That brings up a point because it's very expensive to be a public company. Do you feel it was worth going through all that trouble and the added expense for the company? Hagan: Well, it is certainly expensive to operate as a public company but it's really the sort of the next phase of the company where we want to take Boingo. We needed additional funding to continue to build out WiFi networks and all sorts of new types of venues, new locations and it was part of the process. We've been around for a decade and we've done very well. We're a profitable company but we needed a little bit larger capital infusion to be able to be able to deliver all the things that we wanted to do over the next few years so it was the right thing for us to do at the right time to do it.
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?
Hagan: Sure. But in some cases we power their solutions so we have a wholesale business or a private label business where we partner with companies that want to provide Wi-Fi services to their end users. A couple examples would be Skype and Verizon ( VZ). We're a standalone Wi-Fi company so if someone wants to buy Wi-Fi services and they just want a Wi-Fi service plan without other things attached to it, we're the right place to go. If they want a bundled solution, maybe from their provider of cable or other telephony services, we can power those as well on a wholesale basis. So, in terms of how people get Wi-Fi services, we don't really care. We want to be a contributor to the overall ecosystem and we benefit from both wholesale and retail business. So that's explains why on my Verizon iPhone, I see a little Boingo symbol. Right? Hagan: That's correct. We power the Verizon Wi-Fi solution. What is then your outlook for the rest of the year? Hagan: So we're excited. Right. We're a newly hatched public company. We've got great growth prospects. The proliferation of Wi-Fi devices along with the bandwidth that people are now consuming on these devices because of all the app development. So people are finding new and interesting ways to use Wi-Fi networks and cellular networks and that's created a capacity crunch on the cellular networks. We've all experienced the issues where you're trying to do something with the data side, not the voice but data, with your cellular phone, your smartphone and it doesn't work very well. So that's created the need for more and more Wi-Fi networks. We're going to build out a lot of those Wi-Fi networks and then we will partner with other companies who are also building out Wi-Fi networks to make it easy for people with a smart phone or a tablet or a PC or a whatever device they may have to seek out and get easily connected to those networks, so we think we're at this incredible inflection point in the industry. In the past, Wi-Fi only made sense where people carry laptops. Now, Wi-Fi makes sense literally everywhere. Anywhere people are congregating. Right here in Times Square. Where there are a lot of people trying to take photos, upload it to Facebook, Wi-Fi is a great solution to carry that traffic.
And your revenue outlook going forward? Hagan: We obviously think we are going to continue to be a strong growth company. Similar kind of growth that we've been doing over the last few years. Edited for clarity and length. -- Written by Debra Borchardt in New York