(By Kevin Donovan)Our first question: How do you pronounce the name of this darn company? Does Boingo rhyme with "coin" (as in cash) or "growing" (as in growth stock) with an "o" at the end?
Both will do. Boingo Wireless Inc.
), a Wi-Fi software and services provider, has been raking in the coin and the pile is growing.
The investment questions are: What's the coin growth going forward and what price to pay for it. Boingo trades at hefty multiples, but we think the Los Angeles-based company has the potential to over-deliver and should benefit from the growing demand for mobile internet services.
Revenue growth has been impressive, but the real coin maker for Bingo has been margin expansion. In the first quarter of 2012, the company reported revenue of $24.2 million, compared to $21.0 million for the first quarter of 2011, an increase of 15%. Adjusted EBITDA, though, rose more than four times as fast in the quarter to $8.2 million from $5.0 million in the year-ago quarter.
Earnings per share were $0.05 vs. a loss of $0.03 in the year-ago quarter, which included accretion of convertible preferred stock.
David Hagan, president and CEO, attributed the performance to the company's "leverageable infrastructure and high margin, recurring revenue streams." Those streams swelled in the first quarter with deals providing wi-fi platforms for Denver International Airport, Chicago's U.S. Cellular Field and an agreement with Transit Wireless to manage and operate Wi-Fi networks for the New York City Subway System. The company expanded its Asia presence with the addition of Phuket International Airport in Thailand.
Mr. Hagan says the company has "an extremely robust pipeline of prospective venue launches that we expect will contribute meaningfully to our financial and competitive position in the quarters and years to come. We also look forward to continuing to expand our private label and roaming partner relationships, grow our installed base of software and expand our footprint internationally."
And this week, the company announced it was providing free hot spots at select Manhattan subway stations this summer, giving straphangers something to do underground other than perspire during the dog days.
The stock, currently just north of $11, is up about 28% this year. It has traded between $6.01 and $13.35 in the past 52 weeks.
For the second quarter, ending this month, Boingo is guiding to revenue in the range of $25.0 million to $26.0 million, adjusted EBITDA of $7.0 million to $8.0 million and EPS of $0.05 to $0.06.
For the full year, revenues are seen between $110.5 million and $114.5 million, adjusted EBITDA of $35.5 million to $38.5 million and EPS of $0.26-0.31. Revenue growth at the midpoint of guidance would represent 19% growth over 2011, faster than the 13% growth in sales last year.
Investors are paying a healthy price for this growth. Using EPS of $0.29 for the full year 2012, Boingo trades at a price to earnings multiple of 38. The trailing 12-months' PE is 61. Using the $112.5 million revenue projection, the current share price of $11.12 and shares outstanding of 34.71 million, we derive a price-to-sales multiple of 3.43. That's high for the sector but low, in our opinion, compared with growth expectations and the potential for upside surprises from growing demand and the company's record of using operating leverage to increase margins.
We're still trying to figure out how to pronounce the name, but we think it spells profit.