Elauwit Connection, Inc. (ELWT) Earnings Call Transcript & Summary

Good day, and welcome to the IAccess Alpha Virtual Best Ideas Winter Investment Conference 2025. The next presenting company is Elauwit Connection, Inc. [Operator Instructions]. I'd now like to turn the floor over to today's host, Mr. Dan McDonough, Executive Chair with Elauwit Connection, Inc. Sir, the floor is yours.

Thank you very much, and welcome, everybody. Thanks for coming to hear a little bit about our company. This deck that we have here, you can retrieve at our Investors section of our website at elauwit.com. I will go through some of the slides rather quickly. So this way, if you want to do a bit more detail, you can dive through it that way. We are a company that is what I'd like to call 2.0. We did this once before. 2012, roughly, we had started an Internet Service Provider that focused on the student housing space where we were a managed bulk services provider. We sold that business in 2018 to Boingo, and for a host of reasons, things didn't work out, leadership changed there and the investment in the segment of the market that we were supposed to grow had changed. So after our non-competes expired, we got the band back together as one might say, and myself, Barry Rubens, who's our CEO, and Taylor Jones, who's our CTO and President, and we added Sean Arnette, our CFO. So we're a group of people who've done this once before, and we're excited to do it again, this time in the conventional multifamily space. We believe that we've really created a win-win-win opportunity here. And the way that works is for starters with the owners of these properties, we're able to create 200 to 300 basis points of NOI improvement. For those of you who know the real estate space, you understand that, that bit of an improvement in NOI can make or break deals for them. So our ability to generate additional cash for them is significant. So it's a win for the building owners. We generate 60% to 75% gross margin on our contracts, which makes it very much a win for Elauwit, and we're also targeting a highly fragmented and growing market. Most of the folks that we compete with have less than 1% share of the market. And the overwhelming portion of the market is served by incumbents -- the AT&T, Charter and such, who have different restrictions in terms of their franchise agreements and where they can be in the country, as well as just the sort of model of business that they are that prevent them from truly competing against us the way that we design our products. As of now, we have over 32,000 units under contract with a $36 million backlog. And we built this company to-date pretty much with just executive-led sales. We just hired our sales team right after the IPO. So they don't even have 2 months of time underneath their wings yet. So we still, despite that, have a robust pipeline, it translates to about $110 million, a little bit more than that in construction revenue, $110 million and more than $23 million in contracted ARR. The IPO proceeds that we got were very helpful both in terms of us building-out a sales operation so that we could scale this business, but also to allow us to fund Network-as-a-Service construction, something I'll get into in a little bit. For starters, the space is big. We see that the new property, new construction build-out over the next handful of years is about a $4.3 billion opportunity. The retrofit market, a market that in our first iteration and up until our IPO, we really had a hard time attracting, is a $21.5 billion market. These are properties that we've identified that have at least 100 units that would fit sort of the mold of our sweet spot. So a total market size of over $25 billion -- nearly $26 billion. Right now, as you can see on the right-hand side, 95% of that is being serviced by legacy providers with legacy business models and legacy contracts. This was something that was built when Internet was a fancy amenity. Well, Internet has gone from a fancy amenity to an important amenity, to a utility to one might argue the most important utility in an apartment right now. For instance, if your water was out for about 6 or 8 hours, you might be able to get by. But if your Internet is out for 6 or 8 hours, you might not be able to work, you might not be able to get your school work done, you certainly wouldn't be able to do all the streaming that you normally do. So the Internet has become very, very, very important, but the model for the legacy providers hasn't changed much at all. So our solution, I'd like to say that when we started this business, the conversation had always been about the last-mile. The last mile of the network was the most valuable. And we thought, well, if the last mile is very valuable, then the last 100 feet must be extremely valuable. So what we do is we build carrier grade -- enterprise-grade networks within an apartment building. It starts with us leasing a big pipe to the building, and most of the markets we're in, we put out an RFP to a dozen or dozens of potential circuit providers, fiber providers that are within the floor plan footprint of where the building is. We then take that carrier connection and attach it to a head-end and then our fiber distribution network within the building. The fiber ends up going to switches and then our switches run CAT6 to WiFi 6 access points that are property-wide. So think of it this way. In a typical apartment building that deals with legacy carriers, you might have 150 units each, with 150 different little mini networks using residential-grade technology. When you move into a property that has Elauwit Internet Service, it's one enterprise network property-wide. So it's not just covering your apartment, but all the common areas and such and your Internet connection roams throughout the whole facility. This works out really well for property owners for a handful of different reasons. First, is the financial impact. Like I mentioned, the legacy internet service providers take 100% of the wallet share. Maybe in some instances, they'll give a small door fee or they'll have a small marketing fee, which is a pittance compared to how much they're making off of the apartment building owners' tenants. With us, WiFi becomes a new revenue stream for them, and it's under-writable. For instance, when you're getting a marketing fee from a legacy ISP, you can't underwrite the entire amount from what we've come to learn. But when you are buying in bulk and selling at retail, that delta is -- you have the ability to underwrite it completely. So it adds a lot of not just NOI, but the increase in value in the property. The second element of why this is good for property owners is technology enablement. For instance, if you sign an easement with a legacy ISP such as AT&T. AT&T owns that network within your building and you're not allowed to use it. With us, you have access to that network. So you can use IoT devices on that network. That network services your property office and any other functions that you need. Third is the partnership and footprint. For instance, again, many of the legacy ISPs are restricted by franchise rights and rules that came from the breakup of Bell 100-plus years ago. The fact is with us, we are a nationwide turnkey provider. So if you're a major apartment building owner and you want one provider that covers you in all 50 states, we can do that, whereas a lot of the legacy ISPs cannot do that. And the last piece is that we're a capital partner now. So part of the value of us raising these funds in the IPO was that we'd be able to finance networks and buildings. I mentioned before that the new construction market was just about $5 billion, but that the existing properties, the retrofit opportunities was about $20 billion. In the past, when we would go -- in our first iteration as a company, when we would go to property owners, we would ask them if they'd like the service, what they would have to do is pay to install the network upfront, which they would own and then they would pay a service fee, monthly. The network construction element could cost $250,000 to $300,000. So when there was a new construction opportunity, when the balance sheet is open and when there's a credit facility, of construction loan, it's a lot easier to take that on that expense. But in a retrofit facility, bitting off of $250,000 to $300,000 is often a roadblock for those property owners. So we've had to just walk past them and not be able to talk to them about a deal. Now with our Network-as-a-Service option, which I will go into a little bit more detail soon, we can provide financing to those owners so that without any money down, they can have an Elauwit network in their building. Now the question is, how does this help the residents, too? At the end of the day, we see ourselves as empowering apartment building owners to be the hero to their tenants. So for starters, immediate connectivity. Anyone who has moved into a new home and had to get their internet service set up, knows what it's like. You call the carrier. They schedule an appointment for you, maybe next week in a window that's 4 hours, you have to take the day off of work to get it all set up. When you move into a property that has Elauwit internet, the moment you get your keys, you get your log on. So before your couch even moves in, your internet is working and your internet works throughout the whole property. Second, our response rates are amazing. So we've decided that as an organization, we want to be customer-centric. We want to have a very wildly amazing customer experience. We measure our hold time when you call our 800 number in seconds, not minutes or even hours in some instances for some of our competitors. So we've put a lot of energy and effort into maximizing how fast and responsive we can be for our tenants. Third is price clarity. When we charge the building, is pretty clear and the building owner includes this as an additional line item in their rent. So oftentimes, they call it a connectivity fee. There's no weird FCC fees, weird contracts or anything like that. It's just a part of your lease and it's straightforward low-cost pricing. In all instances, we're charging the property owner substantially less than what the market rate internet is, and the property owner is typically marking it up to be about 10% to 15% lower than the market rate internet. So my view, again, the property owner is delivering a superior service to their tenants at a lower cost. And the last element is that we're fiber-based. A lot of the legacy ISPs are still using copper, in some instances coax. We go in with a state-of-the-art network that's future-proof on day one, which puts the building owner in a good situation for using additional property technology. This I call our brag page. I won't go into too much detail about it, but just a couple of things I'd like to point out is the second item on the left-hand side, white glove account management. I cannot stress enough that the goal for us is to make property owners feel just delighted in our service. So for instance, if you own an apartment building and Comcast provides service in your building, oftentimes, you have no one to talk to if there's an outage on a floor because you're not the customer to Comcast. It's your tenant who's the customer to Comcast. With us, both the owners of the property have contact with our executives. The residents have an 800 number to call in other ways, e-mail, chat and such. But that middle section, which is the property manager, where a lot of things kind of coalesce. Those property managers get the cell phone number of an Account Manager at Elauwit so that they can escalate things very quickly at their property and get a higher level of attention that you wouldn't get from a legacy ISP. And the other point I'll point out at the bottom of this one is our average answer time, last month was 34 seconds. So 34 seconds from the time that you call our 800 number with the problem till the time that you get a human on the phone. And 80% of those calls get handled within the first touch. So we do put a lot of emphasis on a customer experience. This is where you can see there are two products essentially. And calling them two products is a bit of a silly way of going about this because the fact is they're both the same product. We build the same network. We get the same carrier access. We provide the same customer experience. These are really just two different financial models. One is Managed Service, one is Network-as-a-Service. We put Managed Service with new builds because that's typically where folks will invest the money upfront and lower their operating costs, whereas we put Network-as-a-Service as brownfield because in those instances, they will most likely take advantage of our financing, have no upfront cost but have a higher operating cost. Now that's timing, right, new construction versus brownfield. But I also think that there's a differentiation between the two based on the type of apartment building owner that exists. For instance, a smaller one will most likely go with Network-as-a-Service, where a larger, more sophisticated apartment building owner with a big credit line and the ability to borrow money at a very low rate will most likely go at Managed Service because they can capitalize those networks. Either way, we have a financial model that serves them. You could see here some of the elements of it. The $250,000 that you would pay for Managed Services translates then into our per year Managed Service fee, basically units times -- monthly unit fee turns into $67,500 per year. Whereas in Network-as-a-Service, your upfront cost is significantly less, but the operating cost includes the amortization and interest for us to finance the network. In either instance, the property owner financial benefit is significant. The retail revenue to the property owner is $255,000 per year, and the NOI increase is significant in either instance, obviously higher in the Managed Service area. But I mean, the property value increase is what we always think is one of the most amazing financial selling points because when you take that NOI and handle it against the cap rate, you can see that in a Managed Services situation for this typical building, it's $3.1 million in increased value of the property or even in Network-as-a-Service, $2 million. So in either instance, we're able to provide a whole lot of financial value to the owner. So I won't go into a whole bunch of detail on this, but basically, the IPO funds helped us build out a sales organization. We brought on our Chief Growth Officer, Sebastian Shahvandi, who has a lot of experience at Dell, building sales organizations within Dell, and he's also run a couple of SaaS companies that we think that experience -- or we see that experience translate into building a pretty sustainable sales machine at Elauwit. We also brought in a VP of Marketing, who is highly qualified in the world of AI-enabled marketing. We just hired an AI-enabled marketing agency. We have one BDR already on the team that's generating results, and we have spots open for 1 AE and possibly 2 in the first quarter. So we got to this point with executive-led sales, and it's amazing to see the activity of building the sales organization is generating already. And we're excited sometime in March to start being able to quantify that and give some guidance as to what the sales activity will translate into. This is a case study, Gold Dollar. So before we even did our IPO, we met with a real estate owner called Gold Dollar, and we signed a Managed Services agreement with them for their properties, and we started with a 450-unit community located in Fort Wayne, Indiana. In that instance, we found a third-party financing outfit to be able to basically give a trial run to our Network-as-a-Service product, the financial model. Our investment was $0.5 million. The property level NOI increase was $200,000. We have $195,000 in annual gross profit for the services fees and the property value went up $3.1 million. Now that's an un-levered project IRR of 35%. We believe, and we're already trying to have these conversations that we can get appropriate leverage on this and get that number to 50% or more IRR. You can see that with a $20 billion market opportunity in the retrofit space, and mind you, those are just properties that we've identified that fit our sweet spot. If we can have that kind of project IRR for those properties, it's a big opportunity for us. And this is a snapshot of where we have been up through Q2 of this year. Yesterday, we released our Q3 earnings. Some highlights I can give you from that is we did $5.2 million in revenue in Q3. We're at $16.9 million in 9-months revenue for 2025. The thing that gets me the most excited is our contracted units are almost 33,000 versus 25,000, a year ago. So we're excited about that piece of it, in particular because contracted units is eventual revenue. And that for us is kind of like our key marker. But this slide simply shows our performance to-date. This is irrelevant at this moment. But just to wrap up before we go into some Q&A. We are excited about this business because it's a large, growing fragmented market. There's a huge, huge, huge opportunity there because most of it is controlled by legacy business systems. It's a disruptive service. Once again, we can come in and do things for the property owner that are somewhat magical compared to what the legacy ISPs are willing to do. We provide new cash flow for our building owners, and we make them look like heroes by providing a wild customer experience for their residents. The thing I like most about our business is it's long-term contracts. Our Managed Service contracts are 5 to 7 years. Our Network-as-a-Service contracts are 7 to 10 years. But beyond that, they're low churn and high margin. Low churn because once you set up the solution, it's the kind of thing that if it's not broken, you just stick with who you are -- who you're with. And the capital injection we got from our ISP is a clear catalyst for our accelerated growth. We're excited already to see the activity in the sales organization over the last 2 months. That being said, I'll pause here and move to questions.

Thanks, Dan. So we've had a few questions coming in while you were talking. The one of the first ones, obviously, everybody is very focused on growth as a new IPO company. So one of the first questions was how should we think about revenue growth in 2026 as newly funded projects from the IPO begin rolling out?

Yes. So there's a couple of constituent components to us analyzing that. For starters, you'll see the metrics that we use internally, which we're encouraging folks to use externally as well, is where the units fit in certain buckets. So when we sign a contract with a property owner, we call them contracted units. Those are -- we'll produce revenue at some point. The second bucket is activated units. And the third bucket is build units. The reason why there's a separation between units that we've activated and units we're building for is, because with all of our owners, we give them a 12-month ramp. So when we initiate service in their building, we expect that some of the folks there have a legacy ISP. And when their lease renews, that's the time that they move on to our service. So in month 1 of a new property's activation, we're building 1/12 of the units, month 2, 1/6 of the units and so forth. So that's the difference between activated and build units. Now how does something go from constructed to activated is, in theory, dependent on how fast we can build the network after we contract it. But in almost all instances, the timing of that is dependent on the building owner and their general contractor. So a lot of times, we don't have a lot of control over that. But I will say that for new construction, usually when we sign a contract, it can be up to a year, maybe even a little bit more before we're activated. For Network-as-a-Service, we expect that to be a lot faster. I'm hesitant to give any guidance on what that will do revenue-wise for next year because we just don't have enough data. We've announced that in March, in our next quarterly earnings, we will have some guidance because we'll have a lot more data in that regard. So I can't really speak to what it will do revenue-wise next year. I can just say that our current growth rate in terms of contracted units is steady and growing. So I expect our growth to be consistent with what we've experienced.

Excellent. And another question is from the earnings release, the company has almost 11,000 build units and another 17,000 activated units. Do you expect those activated units would be on board in the next 12 months? Or could there be longer time to bring those fully on board and add to the 10,000 units?

I hate to speak in absolutes. So I'm going to give myself a little bit of an out here, but I would say 98% of the time, when we activate a building within 12 months, all of the units in that building are built. Again, keeping in mind that we give a 12-month ramp. But by month 12, we're building for 100% of the units in the building. There may be some weird anomalies. There may be a property or two where we've agreed to something different, but in the overwhelming percentage of these cases, within 12 months, an activated unit becomes a build unit.

Excellent. And then in terms of lead time for an installation, the two business models of Managed Service and Network-as-a-Service, how long does it typically take for an installation under each of those business models?

Sure. So the Elauwit-constraint construction, I'll say, right? So in a retrofit facility, we can have a network built and operational within 60 to 90 days, depending on the property. Obviously, density makes it a little bit faster for us. If it's a big sprawling garden-style place, it might take us a little bit longer, but between 60 and 90 days. With new construction, we're constrained pretty much by the GC. So we kind of have to wait until there are certain milestones are met for us to do the parts that we're responsible for. So that can vary a lot -- a much greater variation. But if everything were going smoothly from the time that we get started on it, to the time where we can activate our network would similarly be 60 to 90 days.

And I think kind of following from this question, on the earnings call, you referenced that the new sales team is exploding the pipeline of opportunities. Can you give us a little bit more color on that in contrast to your historical sales activity, which you described as executive-led?

Sure. Yes. So our executive-led sales really focused -- there were 3 of us essentially, 3.5 of us focused on core relationships that we carried over from the past, maybe a universe of 20 organizations that own apartment buildings. The beauty of our sales organization is that we can scale this to reach everybody, the total addressable market can be hit by us. And that's the system that we're building. Some anecdotal information I can give you is that our Chief Growth Officer, already is having conversations with organizations that have upwards of 30,000 units. And what we find is that the best sales that we can make are organizations like that, where we might get one or two properties as an opener. But if we perform well, which we almost always do, we get a meaningful portion of the portfolio over time. Another anecdote I can give you is that we brought this BDR on. And one of the first things we did was look at what we're currently doing and how to get more leverage out of it from a sales perspective. When we would have Taylor go to -- our CTO go to our conference, he'd go to the conference to speak and then try to meet with a couple of people ad-hoc. We had our BDR now setting up appointments and Taylor goes to a conference now, and he has 9 to 12 appointments set up before he even gets there. So this is scratching the surface kind of things. There's a lot more sophistication that will come out over the next few months in our sales organization to help us really, really scale this up. But I thought those anecdotes were worth sharing.

Yes, we have just about 2 minutes left here. One of the questions kind of going from that, you mentioned you're talking to some units that are -- or some organizations that are really, really large, 30,000-type units. The question was how big would a top 10 or top 20 account be? I'm assuming to talk about national property owner accounts. And are you talking to any of those size of accounts?

We are talking to many of those size accounts. And I mean, to put it in perspective, we have 33,000 units contracted today. Any one of those could double that like almost immediately. So those are important conversations we're having. But I also don't want to leave out the reality that the companies that we do really, really well with, are the ones that have 2,000 to 5,000 units, and they're growing fast because we can come in and be a real partner to them out of the gates and grow with them. So I don't lose sight of the fact that there's a lot of market opportunity out there, not just the big boys.

Absolutely. And then in terms of markets, you had a slide that showed you're in a really diverse cross-section of the states already. Are there any key markets that you prioritize to enter that you're not in today?

So we haven't prioritized markets. We've kind of gone where our customers take us. Naturally, what has happened is those markets that are growing significantly, Atlanta, Charlotte, Dallas, D.C. area are areas where we have a lot of concentration. And the beauty is that when we do get concentration in an area, we get quite efficient. And the more concentrated, the more efficient we become. So that's something we're paying attention to and being careful to take advantage of those efficiencies.

Outstanding. And we're coming right up on time. So thank you for volunteering time today to present the company and to do questions from our investors. And of course, investors if they would like to follow-up, they can reach out to us through the Investor Relations e-mail on the press releases, and we're happy to set up one-on-one calls or Q&A sessions as needed to answer questions with people.

Thank you, Matt. Thank you, everyone, for listening.

Thank you. This concludes the Elauwit Connection Inc, presentation. You may now disconnect.