News Column

Towerstream Reports First Quarter 2014 Results

May 12, 2014

MIDDLETOWN, R.I., May 12, 2014 (GLOBE NEWSWIRE) -- Towerstream Corporation (Nasdaq:TWER) (the "Company"), a leading 4G and Small Cell Rooftop Tower company, announced results for the first quarter ended March 31, 2014.

First Quarter Operating Highlights

HetNets Tower Corporation Subsidiary

• Revenues increased to $0.7 million in the first quarter 2014 compared to $0.2 million in the first quarter 2013.• Second rental based agreement signed with a leading international telecommunications firm focused on providing wireless services, including Wi-Fi access, in major metropolitan markets across the world. This agreement represents HetNets' second rental based agreement in New York City and its first in Chicago, San Francisco and Miami.• Signed small cell services teaming agreement with Alcatel-Lucent enabling a one-stop solution for carriers to deploy Small Cell wireless infrastructure

Towerstream Corporation

• Total customer ARPU totaled $758 during the first quarter 2014 as compared to $727 for the first quarter 2013.• Average revenue per user ("ARPU") of new customers totaled $636 during the first quarter 2014 as compared to $630 for the first quarter 2013.• New Cogent-like 100 Mbps service offering at $699 per month launched in first quarter 2014 generates strong interest from potential customers and multiple initial orders.

Management Comments

"We are pleased to sign a services agreement with one of the world's leading providers of Wi-Fi access in major urban markets," stated Jeffrey Thompson, President and CEO. "This represents our second, rent based customer contract for HetNets in New York and our first agreement in Chicago, San Francisco, and Miami."

"We launched a new, Cogent-like 100 megabyte offering targeted at buildings where our wireless technology has a significant cost advantage over fiber," noted Joseph Hernon, Chief Financial Officer. "Initial customer response has been encouraging and we believe that the program will contribute strongly to our fixed wireless segment during 2014."

Selected Financial Data and Key Operating Metrics
(All dollars are in thousands except ARPU)
 (Unaudited)
 Three months ended
 3/31/201412/31/20133/31/2013
       
Revenues$8,380$8,521$8,299
Gross margin      
Consolidated 30% 27% 40%
Fixed wireless 67% 64% 71%
Capital expenditures      
Fixed wireless$1,486$1,160$1,087
Shared wireless infrastructure 938 1,265 136
Corporate 113 909 104
Churn rate (1) 2.33% 1.78% 1.63%
ARPU (1)$758$761$727
ARPU of new customers (1) 636 752 630
Cash and cash equivalents 21,206 28,182 40,329
       
(1)  See Non-GAAP Measures below for the definitions of Churn, ARPU and ARPU of new customers.
 
Consolidated Statement of Operations (Unaudited)
(All dollars are in thousands except per share amounts)
     
 Three months ended March 31,
 20142013
    
Revenues$8,380$8,299
     
Operating Expenses    
Cost of revenues 5,856 4,981
Depreciation and amortization 3,695 3,871
Customer support 1,172 1,397
Sales and marketing 1,422 1,441
General and administrative 2,678 3,137
Total Operating Expenses 14,823 14,827
Operating Loss (6,443) (6,528)
Other Income (Expense)    
Gain on business acquisition -- 941
Interest income 7 --
Interest expense (70) (36)
Other income (expense), net (4) (3)
Total Other Income (Expense) (67) 902
Net Loss$(6,510)$(5,626)
     
Net loss per common share – basic and diluted$(0.10)$(0.09)
Weighted average common shares outstanding – basic and diluted 66,439 61,465
 
Statement of Operations - Segment Basis (Unaudited)
           
 Three months ended March 31, 2014
 Fixed WirelessShared Wireless InfrastructureCorporateEliminationsTotal
           
Revenues$7,686$740 $ --$(46)$8,380
           
Operating Expenses          
Cost of revenues 2,499 3,389 14 (46) 5,856
Depreciation and amortization 2,538 940 217 -- 3,695
Customer support 269 176 727 -- 1,172
Sales and marketing 1,263 77 82 -- 1,422
General and administrative 108 147 2,423 -- 2,678
Total Operating Expenses 6,677 4,729 3,463 (46) 14,823
           
Operating Income (Loss)$1,009$(3,989)$(3,463) $ --$(6,443)
Non-cash expenses (a) 2,612 1,014 500 -- 4,126
Adjusted EBITDA (b) 3,621 (2,975) (2,963) -- (2,317)
Less: Capital expenditures 1,486 938 113 -- 2,537
Net Cash Flow(b)$2,135$(3,913)$(3,076) $ --$(4,854)
           
 Three months ended March 31, 2013
 Fixed WirelessShared Wireless InfrastructureCorporateEliminationsTotal
           
Revenues$8,187$158 $ --$(46)$8,299
           
Operating Expenses          
Cost of revenues 2,334 2,651 42 (46) 4,981
Depreciation and amortization 2,820 864 187 -- 3,871
Customer support 275 245 877 -- 1,397
Sales and marketing 1,297 47 97 -- 1,441
General and administrative 147 190 2,800 -- 3,137
Total Operating Expenses 6,873 3,997 4,003 (46) 14,827
           
Operating Income (Loss)$1,314$(3,839)$(4,003) $ --$(6,528)
Non-recurring expenses, primarily acquisition related -- -- 65 -- 65
Non-cash expenses (a) 2,936 867 584 -- 4,387
Adjusted EBITDA (b) 4,250 (2,972) (3,354) -- (2,076)
Less: Capital expenditures 1,087 136 104 -- 1,327
Net Cash Flow(b)$3,163$(3,108) ($3,458) $ --$(3,403)
           
(a) Includes depreciation and amortization, stock-based compensation, deferred rent expense, loss on property and equipment, and loss on nonmonetary transactions.
           
(b) See Non-GAAP Measures below for a definition and reconciliation of (i) Adjusted EBITDA to Net Loss and (ii) Net Cash Flow to Net Cash Used in Operating Activities.


Effective January 1, 2013, the Company has two reportable segments. The Fixed Wireless segment provides fixed wireless broadband services to commercial customers and delivers access over a wireless network transmitting over both regulated and unregulated radio spectrum. The Shared Wireless Infrastructure segment offers a range of rental options on street level rooftops related to (i) the installation of customer owned Small Cells, (ii) Wi-Fi access and the offloading of mobile data, and (iii) backhaul, power and other related telecommunications.

The Corporate group includes corporate overhead and centralized activities which support our overall operations. Corporate overhead includes administrative personnel, including executive management, and other support functions such as information technology and facilities. Centralized operations include network operations, customer care, and the management of network assets. Corporate costs are not allocated to the segments because such costs are managed on a centralized basis. Management also believes that not allocating these centralized costs provides a better reflection of the direct operating performance of each segment.

Summary Condensed Balance Sheet
(All dollars are in thousands)
 (Unaudited)(Audited)
 March 31, 2014December 31, 2013
Assets    
Current Assets    
Cash and cash equivalents$21,206$28,182
Other 2,551 1,537
Total Current Assets 23,757 29,719
     
Property and equipment, net 37,912 38,485
     
Other assets 6,052 6,713
     
Total Assets 67,721 74,917
     
Liabilities and Stockholders' Equity    
Current Liabilities    
Accounts payable and accrued expenses 2,592 3,774
Deferred revenues and other 2,228 2,247
Total Current Liabilities 4,820 6,021
     
Long-Term Liabilities 3,014 2,802
Total Liabilities 7,834 8,823
     
Stockholders' Equity    
Common stock 66 66
Additional paid-in-capital 154,475 154,172
Accumulated deficit (94,654) (88,144)
Total Stockholders' Equity 59,887 66,094
Total Liabilities and Stockholders' Equity$67,721$74,917
 
Summary Condensed Statement of Cash Flows (Unaudited)
 Three months ended March 31,
 20142013
Cash Flows from Operating Activities    
Net loss$(6,510)$(5,626)
Non-cash adjustments:    
Depreciation & amortization 3,695 3,871
Stock-based compensation 292 397
Gain on business acquisition -- (941)
Other 81 12
Changes in operating assets and liabilities (2,648) (2,136)
Net Cash Used in Operating Activities (5,090) (4,423)
     
Cash Flows From Investing Activities    
Acquisitions of property and equipment (2,013) (697)
Acquisition of a business, net of cash acquired -- (223)
Lease incentive payment from landlord 380 --
Other (56) (56)
Net Cash Used in Investing Activities (1,689) (976)
     
Cash Flows From Financing Activities    
Payments on capital leases (208) (192)
Proceeds from stock issuances 11 268
Net proceeds from sale of common stock -- 30,500
Net Cash (Used in) Provided by Financing Activities (197) 30,576
     
Net (Decrease) Increase In Cash and Cash Equivalents (6,976) 25,177
Cash and cash equivalents – beginning 28,182 15,152
Cash and cash equivalents – ending$21,206$40,329
 
Fixed Wireless Segment Market data for the three months ended March 31, 2014
(All dollars are in thousands)
           Adjusted
   Cost of    Operating Market
MarketRevenuesRevenuesGross MarginCostsEBITDA
New York$1,916$619$1,297 68%$280$1,017
Los Angeles 2,040 561 1,479 73% 468 1,011
Boston 1,534 394 1,140 74% 197 943
Chicago 725 294 431 59% 141 290
Miami 369 102 267 72% 95 172
Houston 173 58 115 66% 18 97
Las-Vegas-Reno 256 121 135 53% 42 93
San Francisco 276 128 148 54% 91 57
Providence-Newport 80 47 33 41% 2 31
Dallas-Fort Worth 167 93 74 44% 49 25
Seattle 65 48 17 26% 6 11
Philadelphia 37 21 16 43% 15 1
Nashville 2 13 (11) -% 2 (13)
Total$7,640$2,499$5,141 67%$1,406$3,735
 
Fixed Wireless Segment Market data for the three months ended March 31, 2013
(All dollars are in thousands)
           Adjusted
   Cost of   Operating Market 
MarketRevenuesRevenuesGross Margin CostsEBITDA
Los Angeles$2,070$530$1,540 74%$411$1,129
Boston 1,669 330 1,339 80% 215 1,124
New York 1,886 599 1,287 68% 336 951
Chicago 913 305 608 67% 114 494
Las Vegas-Reno 388 132 256 66% 57 199
Miami 377 99 278 74% 84 194
San Francisco 303 101 202 67% 86 116
Providence-Newport 127 49 78 61% 18 60
Seattle 137 46 91 66% 39 52
Houston 53 21 32 60% 13 19
Dallas-Fort Worth 171 89 82 48% 75 7
Philadelphia 40 18 22 55% 23 (1)
Nashville 6 15 (9) - 4 (13)
Total$8,140$2,334$5,806 71%$1,475$4,331


Operating Outlook and Guidance

• Revenues for the second quarter 2014 are expected to range between $7.5 million to $7.8 million for the Fixed Wireless segment.• Revenues for the second quarter 2014 are expected to range between $800,000 to $900,000 for the Shared Wireless Infrastructure segment.• Adjusted EBITDA, on a segment basis, is expected to range between profitability of $3.4 million to $3.6 million for the Fixed Wireless segment.

Non-GAAP Measures and Reconciliations to GAAP Measures

We use certain Non-GAAP measures to monitor the Company's business performance and that of our segments. These Non-GAAP measures are not recognized under generally accepted accounting principles ("GAAP"). Accordingly, investors are cautioned about using or relying on these measures as alternatives to recognized GAAP measures. Our methods of calculating these measures may not be comparable to similar measures presented by other companies.

A definition of the Non-GAAP measures that we employ, and how we use them to monitor business performance, are as follows:

"Adjusted EBITDA" represents net income (loss) before interest, income taxes, depreciation and amortization expenses, excluding, when applicable, stock-based compensation, deferred rent expense, other non-operating income or expenses, as well as gain or loss on (i) disposal of property and equipment, (ii) nonmonetary transactions, and (iii) business acquisitions. 

"Adjusted Market EBITDA" also excludes corporate overhead expenses and other centralized costs. We believe that Adjusted Market EBITDA trends are insightful indicators of our markets' relative performance, and whether our markets are able to produce sufficient market cash flow to fund working capital and capital expenditure needs.

"ARPU" refers to the monthly average revenue per user, or customer, being generated from those customers under contract at the end of each indicated period. We calculate ARPU by dividing our monthly recurring revenue ("MRR") at the end of a period by the number of customers generating that MRR.

"ARPU of new customers" is calculated in the same manner but only includes new customers who entered into contracts during the indicated period.

"Churn" and "Churn rate" refer to the percent of revenue lost on a monthly basis from customers disconnecting from our network or reducing the amount of their bandwidth.

"Corporate" includes corporate overhead and centralized activities which support our overall operations.

"EBITDA" represents net income (loss) before interest, income taxes, depreciation and amortization.  

"Market Cash Flow" represents the amount of cash generated in a market after deducting a market's direct operating expenses from that market's revenues. Market Cash Flow does not include (i) centralized costs which support all markets collectively or (ii) any network related capital expenditures incurred in a market.

"Net Cash Flows" represents Adjusted EBITDA less capital expenditures.

"Shared Wireless Infrastructure, Net" represents the net operating results for that business segment.

A reconciliation of non-GAAP measures to GAAP financial measures is as follows (amounts in thousands):

I. Adjusted Market EBITDA to Net Loss, Fixed Wireless Segment
     
 For the three months ended March 31,
 20142013
Adjusted Market EBITDA$3,735$4,331
Fixed wireless, non-market specific    
Other expenses (234) (243)
Depreciation and amortization (2,538) (2,820)
Shared wireless infrastructure, net (3,943) (3,793)
Corporate (3,463) (4,003)
Other income (expense) (67) 902
Net loss$(6,510)$(5,626)
     
II. Adjusted EBITDA to Net Loss
     
 For the three months ended March 31,
 20142013
Adjusted EBITDA$(2,317)$(2,076)
Depreciation and amortization (3,695) (3,871)
Non-recurring expenses -- (65)
Stock-based compensation (292) (397)
Loss on property and equipment -- (42)
Loss on non-monetary transactions (68) (77)
Deferred rent (71) --
Operating Income (Loss)$(6,443)$(6,528)
Interest income 7 --
Interest expense (70) (36)
Gain on business acquisition -- 941
Other income (expense), net (4) (3)
Net loss$(6,510)$(5,626)
     
     
III. Net Cash Flow to Net Cash Used in Operating Activities
 For the three months ended March 31,
 20142013
Net cash flow$(4,854)$(3,403)
Capital expenditures 2,537 1,327
Non-recurring expenses -- (65)
Changes in operating assets and liabilities, net (2,648) (2,136)
Other, net (125) (146)
Net cash used in operating activities$(5,090)$(4,423)


Conference Call and Webcast

A conference call led by President and Chief Executive Officer, Jeff Thompson, and Chief Financial Officer, Joseph Hernon, will be held on May 12, 2014 at 5:00 p.m. ET to review our financial results and provide an update on current business developments. Interested parties may participate in the conference by dialing 877-755-7423 or 678-894-3069 (for international callers). A telephonic replay of the conference may be accessed approximately two hours after the call through May 19, 2014 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 29420962.

The call will also be webcast and can be accessed in a listen-only mode on the Company's website at http://ir.towerstream.com/events.cfm.

About Towerstream Corporation

Towerstream (Nasdaq:TWER) is a leading 4G and Small Cell Rooftop Tower company. The company owns, operates, and leases Wi-Fi and Small Cell rooftop tower locations to cellular phone operators, tower, Internet and cable companies and hosts a variety of customers on its network. Towerstream was originally founded in 2000 to deliver fixed-wireless high-speed Internet access to businesses and to date offers broadband services in 12 urban markets including New York City, Boston, Los Angeles, Chicago, Philadelphia, the San Francisco Bay area, Miami, Seattle, Dallas-Fort Worth, Houston, Las Vegas-Reno, and the greater Providence area. For more information on Towerstream services, please visit www.towerstream.com and/or follow us @Towerstream.

The Towerstream Corporation logo is available at: http://www.globenewswire.com/newsroom/prs/?pkgid=6570

About HetNets Tower Corporation

HetNets Tower Corporation ("HetNets") was formed in January 2013 as a wholly owned subsidiary of Towerstream Corporation (Nasdaq:TWER), and offers a neutral host, shared wireless infrastructure solution, either independently or as a turnkey service. Its wireless communications infrastructure is available to wireless carriers, cable and Internet companies in major urban markets where the explosion in mobile data is creating significant demand for additional capacity and coverage. HetNets offers a carrier-class Wi-Fi network for Internet access and the offloading of mobile data.  Its street level rooftop locations are ideal for the installation of customer owned small cells including DAS, Metro and Pico cells. Other solutions provided by HetNets include backhaul, power, and related small cell requirements. More information is available at http://www.hetnets.com.

Safe Harbor

Certain statements contained in this press release are "forward-looking statements" within the meaning of applicable federal securities laws, including, without limitation, anything relating or referring to future financial results and plans for future business development activities, and are thus prospective. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified based on current expectations. Such risks and uncertainties include, without limitation, the risks and uncertainties set forth from time to time in reports filed by the Company with the Securities and Exchange Commission, including, without limitation, risk related to our ability to deploy and expand small cell rooftop tower locations in the New York City and other key markets. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements contained herein. The Company undertakes no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise.

CONTACT: INVESTOR CONTACT: Monica GouldThe Blueshirt Group 212-871-3927 monica@blueshirtgroup.com MEDIA CONTACT: Todd Barrish Indicate Media 917-861-0089 todd@indicatemedia.com



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Source: Towerstream Corporation


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