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Section 1: 10-Q (FORM 10-Q)

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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from               to              

Commission file number: 001-35155

BOINGO WIRELESS, INC.

(Exact name of registrant as specified in its charter)

Delaware

95-4856877

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

10960 Wilshire Blvd., 23rd Floor

Los Angeles, California

90024

(Address of principal executive offices)

(Zip Code)

(310) 586-5180

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.0001 par value

WIFI

The NASDAQ Stock Market LLC

(Title of each class)

(Trading symbol)

(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of July 26, 2019, there were 44,110,918 shares of the registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS

Page

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

3

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations

4

Condensed Consolidated Statements of Comprehensive Income (Loss)

5

Condensed Consolidated Statement of Stockholders’ Equity

6

Condensed Consolidated Statements of Cash Flows

7

Notes to the Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

Item 3.

Quantitative and Qualitative Disclosure about Market Risk

46

Item 4.

Controls and Procedures

46

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

47

Item 6.

Exhibits

48

SIGNATURES

49

2

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Boingo Wireless, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share amounts)

June 30, 

December 31, 

    

2019

    

2018

Assets

Current assets:

Cash and cash equivalents

$

27,381

$

149,412

Marketable securities

 

42,799

Accounts receivable, net

 

73,996

 

42,766

Prepaid expenses and other current assets

 

9,755

 

7,815

Total current assets

 

153,931

199,993

Property and equipment, net

 

350,172

 

314,179

Operating lease right-of-use assets, net

 

16,067

 

Goodwill

 

58,890

 

59,640

Intangible assets, net

 

16,890

 

19,152

Other assets

 

10,113

 

9,936

Total assets

$

606,063

$

602,900

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

21,351

$

21,543

Accrued expenses and other liabilities

 

61,444

 

62,653

Deferred revenue

 

61,620

 

80,383

Current portion of operating leases

2,708

Current portion of long-term debt

778

Current portion of finance leases

3,429

4,201

Current portion of notes payable

2,035

2,411

Total current liabilities

    

153,365

 

171,191

Deferred revenue, net of current portion

 

175,489

 

137,205

Long-term portion of operating leases

18,421

Long-term debt

158,469

151,670

Long-term portion of finance leases

1,790

3,293

Long-term portion of notes payable

683

1,618

Deferred tax liabilities

 

1,129

 

1,073

Other liabilities

1,268

 

6,728

Total liabilities

 

510,614

 

472,778

Commitments and contingencies (Note 14)

Stockholders’ equity:

Preferred stock, $0.0001 par value; 5,000 shares authorized; no shares issued and outstanding

 

 

Common stock, $0.0001 par value; 100,000 shares authorized; 44,107 and 42,669 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

4

 

4

Additional paid-in capital

 

230,391

 

259,132

Accumulated deficit

 

(134,867)

 

(129,930)

Accumulated other comprehensive loss

(1,212)

(1,295)

Total common stockholders’ equity

 

94,316

 

127,911

Non-controlling interests

 

1,133

 

2,211

Total stockholders’ equity

 

95,449

 

130,122

Total liabilities and stockholders’ equity

$

606,063

$

602,900

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Table of Contents

Boingo Wireless, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

Revenue

$

68,554

$

59,601

$

135,027

$

117,760

Costs and operating expenses:

Network access

 

29,802

 

24,088

61,213

50,653

Network operations

 

14,249

 

12,723

28,391

25,569

Development and technology

 

8,353

 

7,463

17,352

14,888

Selling and marketing

 

6,194

 

5,353

12,061

10,816

General and administrative

 

7,015

 

6,730

15,309

14,429

Amortization of intangible assets

 

1,131

 

668

2,262

1,395

Total costs and operating expenses

 

66,744

 

57,025

136,588

117,750

Income (loss) from operations

 

1,810

 

2,576

(1,561)

10

Interest and other expense, net

 

(1,662)

 

(50)

(3,338)

(129)

Income (loss) before income taxes

 

148

 

2,526

(4,899)

(119)

Income tax benefit (expense)

 

81

 

(16)

(111)

(144)

Net income (loss)

 

229

 

2,510

(5,010)

(263)

Net income (loss) attributable to non-controlling interests

 

13

 

395

(73)

851

Net income (loss) attributable to common stockholders

$

216

$

2,115

$

(4,937)

$

(1,114)

Net income (loss) per share attributable to common stockholders:

Basic

$

0.00

$

0.05

$

(0.11)

$

(0.03)

Diluted

$

0.00

$

0.05

$

(0.11)

$

(0.03)

Weighted average shares used in computing net income (loss) per share attributable to common stockholders:

Basic

 

44,041

 

41,961

43,786

41,645

Diluted

 

44,378

 

45,219

43,786

41,645

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Boingo Wireless, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

Net income (loss)

$

229

$

2,510

$

(5,010)

$

(263)

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments

 

70

 

(267)

36

(271)

Unrealized gain on marketable securities

29

45

Comprehensive income (loss)

 

328

 

2,243

(4,929)

(534)

Comprehensive income (loss) attributable to non-controlling interest

 

7

 

452

(75)

905

Comprehensive income (loss) attributable to common stockholders

$

321

$

1,791

$

(4,854)

$

(1,439)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Boingo Wireless, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

(In thousands)

    

    

    

    

    

Accumulated

    

    

Common

Common

Additional

Other

Non-

Total

Stock

Stock

Paid-in

Accumulated

Comprehensive

controlling

Stockholders’

Shares

Amount

Capital

Deficit

Loss

Interests

Equity

Balance at December 31, 2018

 

42,669

$

4

$

259,132

$

(129,930)

$

(1,295)

$

2,211

$

130,122

Issuance of common stock under stock incentive plans

 

1,310

 

 

6

 

 

6

Shares withheld for taxes

 

 

 

(32,907)

 

 

(32,907)

Stock-based compensation expense

 

 

 

2,574

 

 

2,574

Net loss

(5,153)

(86)

(5,239)

Other comprehensive (loss) income

(22)

4

(18)

Balance at March 31, 2019

43,979

4

228,805

(135,083)

(1,317)

2,129

94,538

Issuance of common stock under stock incentive plans

128

74

74

Shares withheld for taxes

(759)

(759)

Stock-based compensation expense

2,271

2,271

Non-controlling interest distributions

(1,003)

(1,003)

Net income

216

13

229

Other comprehensive income (loss)

105

(6)

99

Balance at June 30, 2019

44,107

$

4

$

230,391

$

(134,867)

$

(1,212)

$

1,133

$

95,449

Balance at December 31, 2017

40,995

$

4

$

230,679

$

(131,967)

$

(898)

$

1,212

$

99,030

Issuance of common stock under stock incentive plans

758

4,228

4,228

Shares withheld for taxes

(6,340)

(6,340)

Stock-based compensation expense

3,312

3,312

Cumulative effect of a change in accounting principle

3,257

69

3,326

Net (loss) income

(3,229)

456

(2,773)

Other comprehensive loss

 

 

 

 

(1)

 

(3)

 

(4)

Balance at March 31,2018

 

41,753

4

231,879

(131,939)

(899)

1,734

100,779

Issuance of common stock under stock incentive plans

500

4,227

4,227

Shares withheld for taxes

(1,246)

(1,246)

Stock-based compensation expense

3,152

3,152

Non-controlling interest distributions

(614)

(614)

Net income

2,115

395

2,510

Other comprehensive (loss) income

(324)

57

(267)

Balance at June 30, 2018

42,253

$

4

$

238,012

$

(129,824)

$

(1,223)

$

1,572

$

108,541

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Boingo Wireless, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Six Months Ended

June 30, 

    

2019

    

2018

Cash flows from operating activities

Net loss

$

(5,010)

$

(263)

Adjustments to reconcile net loss including non-controlling interests to net cash provided by operating activities:

Depreciation and amortization of property and equipment

 

35,883

 

37,868

Amortization of intangible assets

 

2,262

 

1,395

Impairment loss, loss on disposal of fixed assets and intangible assets held for sale, net, and other

352

135

Stock-based compensation

4,380

6,072

Amortization of deferred financing costs and debt discount, net of amounts capitalized

4,381

Amortization of operating lease right-of-use assets

 

1,045

 

Gains and amortization of premiums/discounts for marketable securities

(425)

Changes in operating assets and liabilities:

Accounts receivable

 

(31,350)

 

(12,567)

Prepaid expenses and other assets

 

(376)

 

(22)

Accounts payable

 

95

 

704

Accrued expenses and other liabilities

 

3,661

 

1,018

Deferred revenue

 

19,521

 

(1,576)

Operating lease liabilities

(1,447)

Net cash provided by operating activities

 

32,972

 

32,764

Cash flows from investing activities

Purchases of marketable securities

(55,629)

Sales of marketable securities

13,300

Purchases of property and equipment

 

(73,852)

 

(42,918)

Net cash used in investing activities

 

(116,181)

 

(42,918)

Cash flows from financing activities

Debt issuance costs

(1,815)

Proceeds from credit facility

3,500

Principal payments on credit facility

(389)

(438)

Payments of acquisition related consideration

(1,952)

Proceeds from exercise of stock options

80

8,455

Payments of finance leases and notes payable

 

(3,586)

 

(2,865)

Payments of withholding tax on net issuance of restricted stock units

(33,666)

(7,586)

Payments to non-controlling interests

(1,003)

(614)

Net cash used in financing activities

 

(38,831)

 

(3,048)

Effect of exchange rates on cash

9

(23)

Net decrease in cash, cash equivalents, and restricted cash

 

(122,031)

 

(13,225)

Cash and cash equivalents at beginning of period

 

149,412

 

26,685

Cash, cash equivalents, and restricted cash at end of period

$

27,381

$

13,460

Supplemental disclosure of non-cash investing and financing activities

Property and equipment costs in accounts payable, accrued expenses and other liabilities

$

34,777

$

26,756

Purchase of equipment and prepaid maintenance services under capital financing arrangements

$

$

5,068

Capitalized stock-based compensation included in property and equipment costs

$

465

$

392

Purchase price for business acquisition included in accrued expenses and other liabilities

$

2,961

$

Financed sale of intangible assets held for sale

$

299

$

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Boingo Wireless, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except shares and per share amounts)

1. The business

Boingo Wireless, Inc. and its subsidiaries (collectively “we, “us”, “our” or “the Company”) is a leading global provider of wireless connectivity solutions for smartphones, tablets, laptops, wearables and other wireless-enabled consumer devices. Boingo Wireless, Inc. was incorporated on April 16, 2001 in the State of Delaware. We have a diverse monetization model that enables us to generate revenues from wholesale partnerships, retail sales, and advertising across these wireless networks. Wholesale offerings include distributed antenna systems (“DAS”) or small cells, which are cellular extension networks, multifamily, carrier offload, Wi-Fi roaming, value-added services, private label Wi-Fi, and location-based services. Retail products include Wi-Fi services for military personnel living in the barracks of U.S. Army, Air Force and Marine bases around the world, and Wi-Fi subscriptions and day passes that provide access to over 1.3 million commercial hotspots worldwide. Advertising revenue is driven by Wi-Fi sponsorships at airports, hotels, cafes and restaurants, and public spaces. Our customers include some of the world’s largest carriers, telecommunications service providers, global consumer brands, and property owners, as well as troops stationed at military bases and Internet savvy consumers on the go.

2. Summary of significant accounting policies

Basis of presentation

The accompanying interim condensed consolidated financial statements and related notes for the three and six months ended June 30, 2019 and 2018 are unaudited. The unaudited interim condensed consolidated financial information has been prepared in accordance with the rules and regulations of the SEC for interim financial information. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”) for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2018 contained in our annual report on Form 10-K filed with the SEC on March 1, 2019. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of our results of operations for the three and six months ended June 30, 2019 and 2018, our cash flows for the six months ended June 30, 2019 and 2018, and our financial position as of June 30, 2019. The year-end balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by GAAP. Interim results are not necessarily indicative of the results to be expected for an entire year or any other future year or interim period.

In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which eliminates the separate accounting model for nonemployee share-based payment awards and generally requires companies to account for share-based payment transactions with nonemployees in the same way as share-based payment transactions with employees. The accounting remains different for attribution, which represents how the equity-based payment cost is recognized over the vesting period, and a contractual term election for valuing nonemployee equity share options. The standard is effective for interim and annual periods beginning after December 15, 2018. We adopted ASU 2018-07 on January 1, 2019 and the adoption of this standard did not have a material impact on our condensed consolidated financial statements.

In February 2016, the FASB issued a new standard related to leases, which was codified into Accounting Standards Codification (“ASC”) 842, Leases. ASC 842 requires lessees to recognize assets and liabilities for all leases with lease terms of more than 12 months on the balance sheet. Under ASC 842, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or operating lease. On January 1, 2019, we adopted ASC 842 using the modified retrospective transition approach. ASC

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842 permits two methods of adoption and we elected to apply the guidance to each lease that had commenced as of January 1, 2019 with a cumulative-effect adjustment to the opening balance of retained earnings as of that date. ASC 842 permits various optional transition practical expedients. The discount rate used to calculate the present value of the future payments was determined as of January 1, 2019 for existing lease contracts and was generally based on our incremental borrowing rate as of January 1, 2019 commensurate with the remaining lease term. We also elected the package of practical expedients which included the following: (i) an entity need not reassess whether any expired or existing contracts are or contain leases; (ii) an entity need not reassess the lease classification for any expired or existing leases; and (iii) an entity need not reassess initial direct costs for any existing leases. The standard had a material impact on our condensed consolidated balance sheet but did not have an impact on our condensed consolidated statement of operations and our condensed consolidated statement of cash flows. The most significant impact was the recognition of right-of-use (“ROU”) assets and liabilities related to our operating leases, while our accounting for finance leases remained substantially unchanged. Adoption of the new standard resulted in the recording of $16,916 of operating lease ROU assets and $22,338 of operating lease ROU liabilities as of January 1, 2019.

Principles of consolidation

The unaudited condensed consolidated financial statements include our accounts and the accounts of our majority owned subsidiaries. We consolidate our 70% ownership of Chicago Concourse Development Group, LLC and our 75% ownership of Boingo Holding Participacoes Ltda. in accordance with ASC 810, Consolidation. Other parties’ interests in consolidated entities are reported as non-controlling interests. All intercompany balances and transactions have been eliminated in consolidation.

Marketable securities

Our marketable securities consist of available-for-sale securities with original maturities exceeding three months. According to ASC 320, Investments—Debt and Equity Securities, we have classified securities, which have readily determinable fair values and are highly liquid, as short-term because such securities are expected to be realized within a one-year period. At June 30, 2019, we had $42,799 in marketable securities. We had no marketable securities at December 31, 2018.

Marketable securities are reported at fair value with the related unrealized gains and losses reported as other comprehensive income (loss) until realized or until a determination is made that an other-than-temporary decline in market value has occurred. No significant unrealized gains and losses have been reported during the periods presented. Factors considered by us in assessing whether an other-than-temporary impairment has occurred include the nature of the investment, whether the decline in fair value is attributable to specific adverse conditions affecting the investment, the financial condition of the investee, the severity and the duration of the impairment and whether we have the ability to hold the investment to maturity. When it is determined that an other-than-temporary impairment has occurred, the investment is written down to its market value at the end of the period in which it is determined that an other-than-temporary decline has occurred. The cost of marketable securities sold is based upon the specific identification method. Any realized gains or losses on the sale of investments are reflected as a component of interest and other expense, net.

For the three and six months ended June 30, 2019, we had no significant realized or unrealized gains or losses from investments in marketable securities classified as available-for-sale. As of June 30, 2019, we had $45 of cumulative unrealized gains, net of tax, which was $0 as of June 30, 2019 due to the full valuation allowance established against our deferred tax assets, in accumulated other comprehensive loss.

Segment and geographic information

We operate as one reportable segment; a service provider of wireless connectivity solutions across our managed and operated network and aggregated network for mobile devices such as laptops, smartphones, tablets and other wireless-enabled consumer devices. This single segment is consistent with the internal organization structure and the manner in which operations are reviewed and managed by our Chief Executive Officer, the chief operating decision maker.

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All significant long-lived tangible assets are held in the United States of America. We do not disclose sales by geographic area because to do so would be impracticable.

The following is a summary of our revenue disaggregated by product offerings:

                                                                                                                                                                              

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

Revenue:

DAS

$

27,622

$

21,885

$

51,717

$

45,530

Military/multifamily

24,396

16,735

50,293

32,589

Wholesale—Wi-Fi

 

10,718

 

13,530

21,738

24,679

Retail

3,847

4,566

7,773

9,876

Advertising and other

 

1,971

 

2,885

3,506

5,086

Total revenue

$

68,554

$

59,601

$

135,027

$

117,760

Revenue recognition

We generate revenue from several sources including: (i) DAS customers that are telecom operators under long-term contracts for access to our DAS at our managed and operated locations, (ii) military and retail customers under subscription plans for month-to-month network access that automatically renew, and military and retail single-use access from sales of hourly, daily or other single-use access plans, (iii) arrangements with property owners for multifamily properties that provide for network installation and monthly Wi-Fi services and support for residents and employees, (iv) arrangements with wholesale Wi-Fi customers that provide software licensing, network access, and/or professional services fees, and (v) display advertisements and sponsorships on our walled garden sign-in pages. Software licensed by our wholesale platform services customers can only be used during the term of the service arrangements and has no utility to them upon termination of the service arrangement.

Revenues are recognized when a contract with a customer exists and control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services and the identified performance obligation has been satisfied. Contracts entered into at or near the same time with the same customer are combined and accounted for as a single contract if the contracts have a single commercial objective, the amount of consideration is dependent on the price or performance of the other contract, or the services promised in the contracts are a single performance obligation. Contract amendments are routine in the performance of our DAS, wholesale Wi-Fi, and advertising contracts. Contracts are often amended to account for changes in contract specifications or requirements or expand network access services. In most instances, our DAS and wholesale Wi-Fi contract amendments are for additional goods or services that are distinct, and the contract price increases by an amount that reflects the standalone selling price of the additional goods or services; therefore, such contract amendments are accounted for as separate contracts. Contract amendments for our advertising contracts are also generally for additional goods or services that are distinct; however, the contract price does not increase by an amount that reflects the standalone selling price of the additional goods or services. Advertising contract amendments are therefore generally accounted for as contract modifications under the prospective method. Contract amendments to transaction prices with no change in remaining services are accounted for as contract modifications under the cumulative catch-up method.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606, Revenue from Contracts with Customers. A contract’s transaction price is allocated to each distinct performance obligation and is recognized as revenue when, or as, the performance obligation is satisfied, which typically occurs when the services are rendered. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers. Judgment may be used to determine the standalone selling prices for items that are not sold separately, including services provided at no additional charge. Most of our performance obligations are satisfied over time as services are provided. We generally recognize revenue on a gross

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basis as we are primarily responsible for fulfilling the promises to provide the specified goods or services, we are responsible for paying all costs related to the goods or services before they have been transferred to the customer, and we have discretion in establishing prices for the specified goods or services. Revenue is presented net of any sales and value added taxes.

Payment terms vary on a contract-by-contract basis, although terms generally require payment within 30 to 60 days for non-recurring payments, the first day of the monthly or quarterly billing cycle for recurring payments for DAS and wholesale Wi-Fi contracts, and the first day of the month prior to the month that services are provided for multifamily contracts. We apply a practical expedient for purposes of determining whether a significant financing component may exist for our contracts if, at contract inception, we expect that the period between when we transfer the promised good or service to the customer and when the customer pays for that good or service will be one year or less. In instances where the customer pays for a good or service one year or more in advance of the period when we transfer the promised good or service to the customer, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is not to receive financing from our customers or to provide customers with financing but rather to maximize our profitability on the customer contract. Specifically, inclusion of non-refundable upfront fees in our long-term customer contracts increases the likelihood that the customer will be committed through the end of the contractual term and ensures recoverability of the capital outlay that we incur in expectation of the customer fulfilling its contractual obligations. We may also provide service credits to our customers if we fail to meet contractual monthly system uptime requirements and we account for the variable consideration related to these service credits using the most likely amount method.

For contracts that include variable consideration, we estimate the amount of consideration at contract inception under the expected value method or the most likely amount method and include the amount of variable consideration that is not considered to be constrained. Significant judgment is used in constraining estimates of variable consideration. We update our estimates at the end of each reporting period as additional information becomes available.

Timing of revenue recognition may differ from the timing of invoicing to customers. We record unbilled receivables (contract assets) when revenue is recognized prior to invoicing, deferred revenue (contract liabilities) when revenue is recognized after invoicing, and receivables when we have an unconditional right to consideration to invoice and receive payment in the future. We present our DAS, multifamily, and wholesale Wi-Fi contracts in our condensed consolidated balance sheet as either a contract asset or a contract liability with any unconditional rights to consideration presented separately as a receivable. Our other customer contracts generally do not have any significant contract asset or contract liability balances. Generally, a significant portion of the billing for our DAS contracts occurs prior to revenue recognition, resulting in our DAS contracts being presented as contract liabilities. In contrast, our wholesale Wi-Fi contracts that contain recurring fees with annual escalations are generally presented as contract assets as revenue is recognized prior to invoicing. Our multifamily contracts can be presented as either contract liabilities or contract assets primarily as a result of timing of invoicing for the network installations.

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain sales incentive programs meet the requirements to be capitalized. Total capitalized costs to obtain a contract were immaterial during the three and six months ended June 30, 2019 and are included in prepaid expenses and other current assets and non-current other assets on our condensed consolidated balance sheets. We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less, the most significant of which relates to sales commissions related to obtaining our advertising customer contracts. Contract costs are evaluated for impairment in accordance with ASC 310, Receivables.

DAS

We enter into long-term contracts with telecom operators at our managed and operated locations. The initial term of our contracts with telecom operators generally range from five to twenty years and the agreements generally contain renewal options. Some of our contracts provide termination for convenience clauses that may or may not include substantive termination penalties. We apply judgment in determining the contract term, the period during which we have present and enforceable rights and obligations. Our DAS customer contracts generally contain a single performance

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obligationprovide non-exclusive access to our DAS or small cell networks to provide telecom operators’ customers with access to the licensed wireless spectrum, together with providing telecom operators with construction, installation, optimization/engineering, maintenance services and agreed-upon storage space for the telecom operators’ transmission equipment, each related to providing such licensed wireless spectrum to the telecom operators. The performance obligation is considered a series of distinct services as the performance obligation is satisfied over time and the same time-based input method would be used to measure our progress toward complete satisfaction of the performance obligation to transfer each distinct service in the series to the customer. Our contract fee structure generally includes a non-refundable upfront fee and we evaluated whether customer options to renew services give rise to a material right that should be accounted for as a separate performance obligation because of those non-refundable upfront fees. We believe that a material right generally does not exist for our DAS customer contracts that contain renewal options because the telecom operators’ decision to renew is highly dependent upon our ability to maintain our exclusivity as the DAS service provider at the venue location and our limited operating history with venue and customer renewals. The telecom operators will make the decision to incur the capital improvement costs at the venue location irrespective of our remaining exclusivity period with the venue as the telecom operators expect that the assets will continue to be serviced regardless of whether we will remain such exclusive DAS service provider. Our contracts also provide our DAS customers with the option to purchase additional future services such as upgrades or enhancements. This option is not considered to provide the customer with a material right that should be accounted for as a separate performance obligation since the cost of the additional future services depends entirely on the market rate of such services at the time such services are requested and we are not automatically obligated to stand ready to deliver these additional goods or services as the customer may reject our proposal. Periodically, we install and sell DAS networks to customers where we do not have service contracts or remaining obligations beyond the installation of those networks and we recognize build-out fees for such projects as revenue when the installation work is completed, and the network has been accepted by the customer.

Our contract fee structure may include varying components of an upfront build-out fee and recurring access, maintenance, and other fees. The upfront build-out fee is generally structured as a firm-fixed price or cost-plus arrangement and becomes payable as certain contract and/or construction milestones are achieved. Our DAS and small cell networks are neutral-host networks that can accommodate multiple telecom operators. Some of our DAS customer contracts provide for credits that may be issued to existing telecom operators for additional telecom operators subsequently joining the DAS network. The credits are generally based upon a fixed dollar amount per additional telecom operator, a fixed percentage amount of the original build-out fee paid by the telecom operator per additional telecom operator, or a proportionate share based upon the split among the relevant number of telecom operators for the actual costs incurred by all telecom operators to construct the DAS network. In most cases, there is significant uncertainty on whether additional telecom operator contracts will be executed at inception of the contract with the existing telecom operator. We believe that the upfront build-out fee is fixed consideration once the build-out is complete and any subsequent credits that may be issued would be accounted for in a manner similar to a contract modification under the prospective method because (i) the execution of customer contracts with additional telecom carriers is at our sole election and (ii) we would not execute agreements with additional telecom carriers if it would not increase our revenues and gross profits at the venue level. Further, the credits issued to the existing telecom operator changes the transaction price on a go-forward basis, which corresponds with the decline in service levels for the existing telecom operator once the neutral-host DAS network can be accessed by the additional telecom operator. The recurring access, maintenance, and other fees generally escalate on an annual basis. The recurring fees are variable consideration until the contract term and annual escalation dates are fixed. We estimate the variable consideration for our recurring fees using the most likely amount method based on the expected commencement date for the services. We evaluate our estimates of variable consideration each period and record a cumulative catch-up adjustment in the period in which changes occur for the amount allocated to satisfied performance obligations.

We generally recognize revenue related to our single performance obligation for our DAS customer contract monthly over the contract term once the customer may access the DAS network and we commence maintenance on the DAS network.

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Military and retail

Military and retail customers must review and agree to abide by our standard “Customer Agreement (With Acceptable Use Policy) and End User License Agreement” before they are able to sign up for our subscription or single-use Wi-Fi network access services. Our military and retail customer contracts generally contain a single performance obligationprovide non-exclusive access to Wi-Fi services, together with performance of standard maintenance, customer support, and the Wi-Finder app to facilitate seamless connection to the Company’s Wi-Fi network. The performance obligation is considered a series of distinct services as the performance obligation is satisfied over time and the same time-based input method would be used to measure our progress toward complete satisfaction of the performance obligation to transfer each distinct service in the series to the customer. Our contracts also provide our military and retail subscription customers with the option to renew the agreement when the subscription term is over. We do not consider this option to provide the customer with a material right that should be accounted for as a separate performance obligation because the customer would not receive a discount if it decided to renew and the option to renew is cancellable with 5 days’ notice prior to the end of the then current term by either party.

The contract transaction price is determined based on the subscription or single-use plan selected by the customer. Our military and retail service plans are for fixed price services as described on our website. From time to time, we offer promotional discounts that result in an immediate reduction in the price paid by the customer. Subscription fees from military and retail customers are paid monthly in advance. We provide refunds for our military and retail services on a case-by-case basis. Refunds and credit card chargeback amounts are not significant and are recorded as contra-revenue in the period the refunds are made, or chargebacks are received.

Subscription fee revenue is recognized ratably over the subscription period. Revenue generated from military and retail single-use access is recognized when access is provided, and the performance obligation is satisfied.

Multifamily

We enter into long-term contracts with property owners. The initial term of our contracts with property owners generally range from three to five years and the contracts may contain renewal options. Some of our contracts provide termination for convenience clauses that may or may not include substantive termination penalties. We apply judgment in determining the contract term, which is the period during which we have present and enforceable rights and obligations. Our customer contracts generally contain two performance obligations: (i) install the network required to provide Wi-Fi services; and (ii) provide Wi-Fi services and technical support to the residents and employees. Our contracts may also provide our property owners with the option to renew the agreement. We do not consider this option to provide the property owner with a material right that should be accounted for as a separate performance obligation because the property owner would not receive a discount if it decided to renew and the option to renew is generally cancellable by either party subject to the notice of non-renewal requirements specified in the contract. Our contracts may also provide our customers with the option to purchase additional future services. We do not consider this option to provide the customer with a material right that should be accounted for as a separate performance obligation since the cost of the additional future services are generally at market rates for such services and we are not automatically obligated to stand ready to deliver these additional goods or services because the customer may reject our proposal.

Our contract fee structure includes a network installation fee and recurring Wi-Fi service and support fees. The network installation fee is generally structured as a firm-fixed price arrangement and becomes payable as certain contract and/or installation milestones are achieved. We generally estimate variable consideration for unpriced change orders using the most likely amount method based on the expected price for those services. If network installations are not completed by specified dates, we may be subject to network installation penalties. We estimate the variable consideration for our network installation fees using the most likely amount method based on the amount of network installation penalties we expect to incur. Title to the network generally transfers to the property owner once installation is completed and the network has been accepted. We generally recognize revenue related to our network installation performance obligation using a cost-to-cost method over the network installation period. We may provide latent defect warranties for materials and installation labor services related to our network installation services. Our warranty obligations are generally not accounted for as separate performance obligations as warranties cannot be separately purchased and warranties do not provide a service in addition to the assurance that the network will function as expected.

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The recurring fees commence once the network is launched with recurring fees generally based upon a fixed or variable occupancy rate. The recurring Wi-Fi service fees may be adjusted prospectively for changes in circuit and/or video content costs, and Wi-Fi support fees may escalate on an annual basis. We estimate the variable consideration for our recurring fees using the expected value method with the exception of the variable consideration related to actual occupancy rates, which we record when we have the contractual right to bill. We evaluate our estimates of variable consideration each period and record a cumulative catch-up adjustment in the period in which changes occur for the amount allocated to satisfied performance obligations. We recognize revenue related to the recurring fees on a monthly basis over the contract term as the Wi-Fi services and support is rendered, and the performance obligation is satisfied.

Wholesale Wi-Fi

We enter into long-term contracts with enterprise customers such as telecom operators, cable companies, technology companies, and enterprise software/services companies, that pay us usage-based Wi-Fi network access and software licensing fees to allow their customers' access to our footprint worldwide. We also enter into long-term contracts with financial institutions and other enterprise customers who provide access to our Wi-Fi footprint as a value-added service for their customers. The initial term of our contracts with wholesale Wi-Fi customers generally range from one to three years and the agreements generally contain renewal options. Some of our contracts provide termination for convenience clauses that may or may not include substantive termination penalties. We apply judgment in determining the contract term, the period during which we have present and enforceable rights and obligations. Our wholesale Wi-Fi customer contracts generally contain a single performance obligation-provide non-exclusive rights to access our Wi-Fi networks to provide wholesale Wi-Fi customers' end customers with access to the high-speed broadband network that may be bundled together with integration services, support services, and/or performance of standard maintenance. The performance obligation is considered a series of distinct services as the performance obligation is satisfied over time and the same time-based input method or usage-based output method would be used to measure our progress toward complete satisfaction of the performance obligation to transfer each distinct service in the series to the customer. Our contracts may also provide our enterprise customers with the option to renew the agreement. This option is not considered to provide the customer with a material right that should be accounted for as a separate performance obligation because the customer would not receive a discount if it decided to renew and the option to renew is generally cancellable by either party subject to the notice of non-renewal requirements specified in the contract. Our contracts may also provide our wholesale Wi-Fi customers with the option to purchase additional future services. We do not consider this option to provide the customer with a material right that should be accounted for as a separate performance obligation since the cost of the additional future services are generally at market rates for such services and we are not automatically obligated to stand ready to deliver these additional goods or services because the customer may reject our proposal. Periodically, we install and sell Wi-Fi networks to customers where we do not have service contracts or remaining obligations beyond the installation of those networks and we recognize build-out fees for such projects as revenue when the installation work is completed, and the network has been accepted by the customer.

Our contract fee structure may include varying components of a minimum fee and usage-based fees. Minimum fees represent fixed price consideration while usage-based fees represent variable consideration. With respect to variable consideration, our commitment to our wholesale Wi-Fi customers consists of providing continuous access to the network. It is therefore a single performance obligation to stand ready to perform and we allocate the variable fees charged for usage when we have the contractual right to bill. The variable component of revenue is recognized based on the actual usage during the period.

Wholesale Wi-Fi revenue is recognized as it is earned over the relevant contract term with variable consideration recognized when we have the contractual right to bill.

Advertising

We generally enter into short-term cancellable insertion orders with our advertising customers for advertising campaigns that are served at our managed and operated locations and other locations where we solely provide authorized access to a partner’s Wi-Fi network through sponsored and promotional programs. Our sponsorship advertising arrangements are generally priced under a cost per engagement structure, which is a set price per click or engagement, or

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a cost per install structure for third party application downloads. Our display advertising arrangements are priced based on cost per thousand impressions. Insertion orders may also include bonus items. Our advertising customer contracts may contain multiple performance obligations with each distinct service. These distinct services may include an advertisement video or banner impressions in the contract bundled with the requirement to provide network, space on the website, and integration of customer advertisement onto the website, and each is generally considered to be its own performance obligation. The performance obligations are considered a series of distinct services as the performance obligations are satisfied over time and the same action-based output method would be used to measure our progress toward complete satisfaction of the performance obligation to transfer each distinct service in the series to the customer.

The contract transaction price is comprised of variable consideration based on the stated rates applied against the number of units delivered inclusive of the bonus units subject to the maximums provided for in the insertion order. It is customary for us to provide additional units over and above the amounts contractually required; however, there are a number of factors that can also negatively impact our ability to deliver the units required by the customer such as service outages at the venue resulting from power or circuit failures and customer cancellation of the remaining undelivered units under the insertion order due to campaign performance or budgetary constraints. Typically, the advertising campaign periods are short in duration. We therefore use the contractual rates per the insertion orders and actual units delivered to determine the transaction price each period end. The transaction price is allocated to each performance obligation based on the standalone selling price of each performance obligation.

Advertising revenue is recognized ratably over the service period based on actual units delivered subject to the maximums provided for in the insertion order.

Leases

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, current portion of operating and finance leases, and long-term portion of operating and finance leases in our condensed consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of operating and finance leases, and long-term portion of operating and finance leases in our condensed consolidated balance sheets.

Operating and finance lease ROU assets and ROU liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are accounted for separately for the asset classes maintained. We exclude short-term leases with a lease term of 12 months or less at the commencement date from our condensed consolidated balance sheets.

Income taxes

We calculate our interim income tax provision in accordance with ASC 270, Interim Reporting, and ASC 740, Accounting for Income Taxes. At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws, rates, or tax status is recognized in the interim period in which the change occurs. Excess windfall tax benefits and tax deficiencies related to our stock option exercises and restricted stock unit (“RSU”) vesting are recognized as an income tax benefit or expense in our condensed consolidated statements of operations in the period they are deducted on the income tax return. Excess windfall tax benefits and tax deficiencies are therefore not anticipated when determining the annual effective tax rate and are instead recognized in the interim period in which those items occur.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment, including the expected operating income (loss) for the year, projections of the proportion of income

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(loss) earned and taxed in various states, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained, or as the tax environment changes.

As of June 30, 2019, we had an immaterial amount of unremitted earnings in our subsidiaries located outside of the U.S. for which state taxes have not been paid. Our intention is to indefinitely reinvest these earnings outside the U.S. If we were to remit our foreign earnings, we would be subject to state income taxes or withholding taxes imposed on actual distributions, or currency transaction gains (losses) that would result in taxation upon remittance. However, the amounts of any such tax liabilities resulting from the repatriation of foreign earnings are not material.

Foreign currency translation

Our Brazilian subsidiary uses the Brazilian Real as its functional currency. Assets and liabilities of our Brazilian subsidiary are translated to U.S. dollars at period-end rates of exchange, and revenues and expenses are translated at average exchange rates prevailing for each month. The resulting translation adjustments are made directly to a separate component of other comprehensive loss, which is reflected in stockholders’ equity in our condensed consolidated balance sheets. As of June 30, 2019 and December 31, 2018, the Company had $(1,257) and $(1,295), respectively, of cumulative foreign currency translation adjustments, net of tax, which was $0 as of June 30, 2019 and December 31, 2018 due to the full valuation allowance established against our deferred tax assets, in accumulated other comprehensive loss.

The functional currency for our other foreign subsidiaries is the U.S. dollar. Gains and losses from the revaluation of foreign currency transactions and monetary assets and liabilities are included in the condensed consolidated statements of operations.

Use of estimates

The preparation of accompanying condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the accompanying condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Assets and liabilities which are subject to significant judgment and the use of estimates include the allowance for doubtful accounts, recoverability of goodwill and long-lived assets, valuation allowances with respect to deferred tax assets, useful lives associated with property and equipment, valuation of ROU assets and ROU liabilities, valuation and useful lives of intangible assets, valuation of contingent consideration, contract assets and contract liabilities including estimates of variable consideration, and the valuation and assumptions underlying stock-based compensation and other equity instruments. On an ongoing basis, we evaluate our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities.

Fair value of financial instruments

Fair value is defined as the price that would be received from selling an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market in which it would transact, and we consider assumptions that market participants would use when pricing the asset or liability.

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The accounting guidance for fair value measurement also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2—Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amount reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, other assets, accounts payable, accrued expenses and other liabilities, and deferred revenue approximates fair value due to the short duration and nature of these financial instruments.

Recent accounting pronouncements

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which requires customers to apply the same criteria for capitalizing implementation costs incurred in a cloud computing arrangement that is hosted by the vendor as they would for an arrangement that has a software license. The standard is effective for interim and annual periods beginning after December 15, 2019 and early adoption is permitted. The standard can be adopted prospectively or retrospectively. We are currently evaluating the expected impact of this new standard.

3. Acquisitions

Elauwit Networks, LLC

On August 1, 2018, we acquired the assets of Elauwit Networks, LLC (“Elauwit”) for $28,000 plus other contingent consideration. Elauwit provides data and video services to multi-unit dwelling properties including student housing, condominiums, apartments, senior living, and hospitality industries throughout the U.S. In addition, Elauwit builds and maintains the network that supports these services for property owners and managers and provides support for residents and employees.

The acquisition has been accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. As such, the assets acquired and liabilities assumed are recorded at their acquisition-date fair values. The total purchase price was $29,537, which includes contingent consideration fair valued at $961. At the closing date, we paid cash of $15,576. $13,000 of the purchase price was held back for the following: (i) $11,000 held back for third-party consents not obtained at closing for certain customer agreements, which are released as Elauwit delivers third-party consents with respect to such customer agreements; and (ii) a $2,000 indemnification holdback that is being retained for a period of 12 months following the closing of the acquisition. In 2018, we paid $9,048 of the amounts held back for third-party consents. We paid the remaining $1,952 for amounts held back for third-party consents in January 2019. The contingent consideration could require payments in the aggregate amount of up to $15,000 that would be due and payable subject to certain conditions and the successful achievement of annual revenue targets for the acquired business during the 2019 and 2020 fiscal years. The contingent consideration is subject to acceleration under certain corporate events.

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The fair value of the contingent consideration is based on Level 3 inputs. Further changes in the fair value of the contingent consideration will be recorded through operating income (loss). The contingent consideration was valued at the date of acquisition using the Monte Carlo method reflecting the average expected monthly revenue, an annual risk-free rate of 2.78%, and an annual revenue volatility rate of 40%.

The identifiable intangible assets were primarily valued using the excess earnings, relief from royalty, and loss-of-revenue methods using discount rates ranging from 8.0% to 21.0% and a 1.0% royalty rate, where applicable, except for certain backlog intangible assets held for sale that were valued at fair value less costs to sell using a discount rate of 8%. The amortizable intangible assets held for use are being amortized on a straight-line basis over their estimated useful lives. Intangible assets held for sale are not amortized. We allocated the excess of the purchase price over the fair value of assets acquired and liabilities assumed to goodwill, which is deductible for tax purposes. The goodwill arising from the Elauwit acquisition is attributable primarily to expected synergies and other benefits, including the acquired workforce, from combining Elauwit with us.

ASC 805 provides for a measurement period not to exceed one year from the acquisition date to adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. During the six months ended June 30, 2019, we recorded a measurement period adjustment to increase the value of backlog intangible assets held for sale and decrease goodwill by $750 as a result of the identification of additional assets that were acquired. Intangible assets held for sale are included within prepaid expenses and other current assets on the condensed consolidated balance sheets. To date, we have not recorded any other material measurement period adjustments. The following summarizes the preliminary purchase price allocation:

    

    

Weighted Average

Estimated

Estimated Useful

 Fair Value

Life (years)

Consideration:

 

  

 

  

Cash paid

$

15,576

 

  

Holdback consideration

 

13,000

 

  

Contingent consideration

 

961

 

  

Total consideration

$

29,537

 

  

Recognized amounts of identifiable assets acquired and liabilities assumed:

 

  

 

  

Accounts receivable

$

4,494

 

  

Prepaid expenses and other current assets

 

1,687

 

  

Property and equipment

 

195

 

  

Other non-current assets

177

Accounts payable

 

(2,049)

 

  

Accrued expenses and other liabilities

 

(683)

 

  

Deferred revenue

 

(3,854)

 

  

Other non-current liabilities

 

(307)

 

  

Net tangible liabilities acquired

 

(340)

 

  

Backlog

 

7,030

 

5.0

Backlog-held for sale

750

Customer relationships

 

2,490

 

10.0

Partner relationships

 

1,200

 

10.0

Transition services agreement

 

540

 

2.0

Non-compete agreement

 

1,380

 

3.0

Goodwill

 

16,487

 

  

Total purchase price

$

29,537

 

  

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The following table presents the results of Elauwit included in the Company’s revenue and net loss:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2019

    

2018

    

2019

    

2018

(Unaudited)

Revenue

$

5,884

$

$

13,304

$

Net loss

 

(1,659)

 

 

(4,016)

 

Pro forma results (Unaudited)

The following table presents the unaudited pro forma results of the Company for the three and six months ended June 30, 2018 as if the acquisition of Elauwit had occurred on January 1, 2017 and therefore includes Elauwit’s revenue and net income (loss), as adjusted, for such period. These results are not intended to reflect the actual operations of the Company had the acquisition occurred on January 1, 2017. Income taxes were calculated based on the projected annual effective tax rate excluding discrete items as of June 30, 2018. Acquisition transaction costs have been excluded from the pro forma net income (loss).

Three Months Ended

Six Months Ended

    

June 30, 2018

    

June 30, 2018

Revenue

$

68,422

$

132,968

Net income (loss)

 

2,033

 

(1,358)

Net income (loss) attributable to common stockholders

1,628

(2,212)

Net income (loss) per share attributable to common stockholders

Basic

$

0.04

$

(0.05)

Diluted

$

0.04

$

(0.05)

4. Cash and cash equivalents and marketable securities

Cash and cash equivalents and marketable securities consisted of the following:

                                                                                                                                                                                    

    

June 30, 

    

December 31, 

2019

2018

Cash and cash equivalents:

Cash

$

4,398

$

11,689

Money market accounts

 

22,983

 

137,723

Total cash and cash equivalents

$

27,381

$

149,412

Short-term marketable securities-available-for-sale:

Marketable securities

$

42,799

$

Total short-term marketable securities

$

42,799

$

All contractual maturities of marketable securities were less than one year at June 30, 2019. Marketable securities consist primarily of debt securities which include commercial paper and debt instruments including notes issued by foreign or domestic industrial and financial corporations and governments which pay in U.S. dollars and carry a rating of A or better. For the three months and six months ended June 30, 2019, interest income was $540 and $1,254, respectively. For the three and six months ended June 30, 2018, interest income was $11 and $19, respectively. Interest income is included in interest and other expense, net in the accompanying condensed consolidated statements of operations.

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5. Contract assets and contract liabilities

The opening and closing balances of our contract asset, net and contract liability, net balances from contracts with customers for the six months ended June 30, 2019 are as follows:

Contract

Contract

    

Assets, Net

    

Liabilities, Net

Balance at December 31, 2018

$

468

$

217,733

Balance at June 30, 2019

756

237,109

Change

$

288

$

19,376

The current and non-current portions of our contract assets, net are included within prepaid expenses and other current assets and other assets, respectively, and current and non-current portions of our contract liabilities, net are included within deferred revenue and deferred revenue, net of current portion, respectively, in our condensed consolidated balance sheets. Contract assets, net is generated from our multifamily and wholesale Wi-Fi contracts and the change in the contract assets, net balance includes activity related to amounts invoiced offset by revenue recognized from performance obligations satisfied in the current reporting period.

Contract liabilities are recorded when fees are collected, or we have an unconditional right to consideration (a receivable) in advance of delivery of goods or services. The change in contract liabilities, net balance is related to customer activity associated with each of our product offerings including the receipt of cash payments and the satisfaction of our performance obligations. Revenues for the three and six months ended June 30, 2019 include the following:

Three Months Ended

Six Months Ended

    

June 30, 2019

    

June 30, 2019

Amounts included in the beginning of period contract liability balance

$