News Column

Towerstream Reports Second Quarter 2014 Results

August 11, 2014

MIDDLETOWN, R.I., Aug. 11, 2014 (GLOBE NEWSWIRE) -- Towerstream Corporation (Nasdaq:TWER) (the "Company"), a leading 4G and Small Cell Rooftop Tower company, announced results for the second quarter ended June 30, 2014.

Second Quarter Operating Highlights

HetNets Tower Corporation Subsidiary

• Revenues increased to $0.7 million in the second quarter 2014 compared to $0.2 million in the second quarter 2013.• Expanded Wi-Fi locations for large cable company customer by approximately 20% over the twelve months ended June 30, 2014.• Signed Master Lease Agreement with a major US wireless carrier for small cell deployments.

Towerstream Corporation

• Total customer average revenue per user ("ARPU") totaled $760 during the second quarter 2014 as compared to $758 for the first quarter 2014 and $740 for the second quarter 2013.• Customer churn for the second quarter 2014 was 1.71% compared to 2.33% for the first quarter 2014 and 2.34% for the second quarter 2013.• New Cogent-like offering of 100 Mbps for $699 continues to gain traction with 13 customer installations and 9 buildings lit.

Management Comments

"Securing our first Master Lease Agreement with a US carrier was an important milestone for our subsidiary, Hetnets Tower Corporation," stated Jeffrey Thompson, President and CEO. "Our robust backhaul network, diverse portfolio of rooftop locations, and strong partnerships with equipment vendors will enable us to deliver a one stop, total solution to carriers as the densification begins over the next few quarters."

"Our new 100 megabit offering continues to gain traction and customer additions, and we have targeted additional buildings for deployment over the balance of the year," stated Joseph Hernon, Chief Financial Officer. "Our newly formed customer retention team has restored churn to our historical levels of approximately 1.7 percent which has been our average for the past 36 months."

Selected Financial Data and Key Operating Metrics
(All dollars are in thousands except ARPU)
       
 (Unaudited)
 Three months ended
 6/30/20143/31/20146/30/2013
       
Revenues$ 8,265$ 8,380$ 8,212
       
Gross margin      
Consolidated 26% 30% 37%
Fixed wireless 65% 67% 70%
Capital expenditures      
Fixed wireless$ 1,403$ 1,486$ 1,028
Shared wireless infrastructure 490 938 233
Corporate 205 113 46
Churn rate (1) 1.71% 2.33% 2.34%
ARPU (1)$ 760$ 758$ 740
ARPU of new customers (1) 626 636 640
Cash and cash equivalents 17,289 21,206 36,387
(All dollars are in thousands except ARPU)    
       
(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 June 30,Six Months Ended June 30,
 2014201320142013
         
Revenues  $ 8,265  $ 8,212  $ 16,645  $ 16,511
         
Operating Expenses        
Cost of revenues 6,102 5,166 11,958 10,147
Depreciation and amortization 3,281 3,936 6,976 7,807
Customer support 1,147 1,181 2,319 2,579
Sales and marketing 1,399 1,524 2,821 2,965
General and administrative 2,667 2,636 5,345 5,773
Total Operating Expenses 14,596 14,443 29,419 29,271
Operating Loss (6,331) (6,231) (12,774) (12,760)
Other Income/(Expense)        
Gain on business acquisition -- 63 -- 1,004
Interest expense, net (59) (59) (123) (94)
Other income (expense), net (4) (4) (7) (7)
Total Other Income/(Expense) (63) -- (130) 903
Net Loss  $ (6,394)  $ (6,231)  $ (12,904)  $ (11,857)
         
Net loss per common share – basic and diluted  $ (0.10)  $ (0.09)  $ (0.19)  $ (0.19)
Weighted average common shares outstanding – basic and diluted 66,479 66,371 66,459 63,931
 
Statement of Operations - Segment Basis (Unaudited)
           
 Three Months Ended June 30, 2014
 Fixed WirelessShared Wireless InfrastructureCorporateEliminationsTotal
           
Revenues  $ 7,572  $ 739 $ --   $ (46)  $ 8,265
           
Operating Expenses          
Cost of revenues 2,620 3,514 14 (46) 6,102
Depreciation and amortization 2,081 977 223 -- 3,281
Customer support 268 179 700 -- 1,147
Sales and marketing 1,252 63 84 -- 1,399
General and administrative 202 158 2,307 -- 2,667
Total Operating Expenses 6,423 4,891 3,328 (46) 14,596
           
Operating Income (Loss)  $ 1,149  $ (4,152)  $ (3,328) $ --   $ (6,331)
Non-recurring expenses, primarily acquisition related -- -- 91 -- 91
Non-cash expenses (a) 2,187 1,039 477 -- 3,703
Adjusted EBITDA (b) 3,336 (3,113) (2,760) -- (2,537)
Less: Capital expenditures 1,403 490 205 -- 2,098
Net Cash Flow (b)  $ 1,933  $ (3,603)  $ (2,965) $ --   $ (4,635)
           
 Three Months Ended June 30, 2013
 Fixed WirelessShared Wireless InfrastructureCorporateEliminationsTotal
           
Revenues  $ 8,061  $ 196 $ --   $ (45)  $ 8,212
           
Operating Expenses          
Cost of revenues 2,385 2,797 29 (45) 5,166
Depreciation and amortization 2,837 911 188 -- 3,936
Customer support 286 134 761 -- 1,181
Sales and marketing 1,322 111 91 -- 1,524
General and administrative 171 145 2,320 -- 2,636
Total Operating Expenses 7,001 4,098 3,389 (45) 14,443
           
Operating Income (Loss)  $ 1,060  $ (3,902)  $ (3,389) $ --   $ (6,231)
Non-recurring expenses, primarily acquisition related -- -- 47 -- 47
Non-cash expenses (a) 2,917 914 458 -- 4,289
Adjusted EBITDA (b) 3,977 (2,988) (2,884) -- (1,895)
Less: Capital expenditures 1,028 233 46 -- 1,307
Net Cash Flow (b)  $ 2,949  $ (3,221)  $ (2,930) $ --   $ (3,202)
   
 Six Months Ended June 30, 2014
 Fixed WirelessShared Wireless InfrastructureCorporateEliminationsTotal
           
Revenues  $ 15,258  $ 1,479 $ --   $ (92)  $ 16,645
           
Operating Expenses          
Cost of revenues 5,119 6,902 29 (92) 11,958
Depreciation and amortization 4,618 1,919 439 -- 6,976
Customer support 536 355 1,428 -- 2,319
Sales and marketing 2,515 140 166 -- 2,821
General and administrative 311 304 4,730 -- 5,345
Total Operating Expenses 13,099 9,620 6,792 (92) 29,419
           
Operating Income (Loss)  $ 2,159  $ (8,141)  $ (6,792) $ --   $ (12,774)
Non-recurring expenses, primarily acquisition related -- -- 91 -- 91
Non-cash expenses (a) 4,799 2,053 977 -- 7,829
Adjusted EBITDA (b) 6,958 (6,088) (5,724) -- (4,854)
Less: Capital expenditures 2,890 1,428 317 -- 4,635
Net Cash Flow (b)  $ 4,068  $ (7,516)  $ (6,041)$ --   $ (9,489)
           
 Six Months Ended June 30, 2013
 Fixed WirelessShared Wireless InfrastructureCorporateEliminationsTotal
           
Revenues  $ 16,248  $ 354  --   $ (91)  $ 16,511
           
Operating Expenses          
Cost of revenues 4,719 5,448 71 (91) 10,147
Depreciation and amortization 5,657 1,775 375 -- 7,807
Customer support 561 379 1,639 -- 2,579
Sales and marketing 2,619 158 188 -- 2,965
General and administrative 318 334 5,121 -- 5,773
Total Operating Expenses 13,874 8,094 7,394 (91) 29,271
           
Operating Income (Loss)  $ 2,374  $ (7,740)  $ (7,394) $  --  $ (12,760)
Non-recurring expenses, primarily acquisition related -- -- 113 -- 113
Non-cash expenses (a) 5,853 1,780 1,042 -- 8,675
Adjusted EBITDA (b) 8,227 (5,960) (6,239) -- (3,972)
Less: Capital expenditures 2,116 369 149 -- 2,634
Net Cash Flow (b)  $ 6,111  $ (6,329)  $ (6,388) $ --  $ (6,606)
           
(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)
 June 30, 2014December 31, 2013
Assets    
Current Assets    
Cash and cash equivalents  $ 17,289  $ 28,182
Other 2,166 1,537
Total Current Assets 19,455 29,719
     
Property and equipment, net 36,837 38,485
     
Other assets 5,878 6,713
     
Total Assets 62,170 74,917
     
Liabilities and Stockholders' Equity    
Current Liabilities    
Accounts payable and accrued expenses 3,401 3,774
Deferred revenues and other 2,117 2,247
Total Current Liabilities 5,518 6,021
     
Long-Term Liabilities 2,890 2,802
Total Liabilities 8,408 8,823
     
Stockholders' Equity    
Common stock 67 66
Additional paid-in-capital 154,744 154,172
Accumulated deficit (101,049) (88,144)
Total Stockholders' Equity 53,762 66,094
Total Liabilities and Stockholders' Equity  $ 62,170  $ 74,917
 
Summary Condensed Statement of Cash Flows
(Unaudited)Six Months Ended June 30,
 20142013
     
Cash Flows from Operating Activities    
Net loss  $ (12,904)  $ (11,857)
Non-cash adjustments:    
Depreciation & amortization 6,976 7,807
Stock-based compensation 555 667
Gain on business acquisition -- (1,004)
Other 279 61
Changes in operating assets and liabilities (1,644) (2,402)
Net Cash Used in Operating Activities (6,738) (6,728)
     
Cash Flows From Investing Activities    
Acquisitions of property and equipment (4,063) (2,120)
Acquisition of a business, net of cash acquired -- (223)
Lease incentive payment from landlord 380 --
Other (81) (108)
Net Cash Used in Investing Activities (3,764) (2,451)
     
Cash Flows From Financing Activities    
Payments on capital leases (409) (376)
Proceeds from stock issuances 22 291
Net proceeds from sale of common stock -- 30,499
Other (4) --
Net Cash (Used in) Provided by Financing Activities (391) 30,414
     
Net (Decrease) Increase In Cash and Cash Equivalents (10,893) 21,235
Cash and cash equivalents – beginning 28,182 15,152
Cash and cash equivalents – ending  $ 17,289  $ 36,387
 
Fixed Wireless Segment Market data for the three months ended June 30, 2014
(All dollars are in thousands)
             
           Adjusted
   Cost of      Operating Market
MarketRevenuesRevenuesGross Margin CostsEBITDA
Los Angeles  $ 1,996  $ 573  $ 1,423 71%  $ 469  $ 954
New York 1,950 702 1,248 64% 336 912
Boston 1,449 404 1,045 72% 190 855
Chicago 734 293 441 60% 128 313
Miami 381 118 263 69% 79 184
San Francisco 285 124 161 56% 58 103
Houston 174 66 108 62% 38 70
Las Vegas-Reno 225 122 103 46% 56 47
Seattle 75 48 27 36% 12 15
Dallas-Fort Worth 160 100 60 38% 46 14
Providence-Newport 65 51 14 22% 1 13
Philadelphia 32 19 13 41% 6 7
Total  $ 7,526  $ 2,620  $ 4,906  65%  $ 1,419  $ 3,487
 
Fixed Wireless Segment Market data for the three months ended June 30, 2013
(All dollars are in thousands)
             
           Adjusted
   Cost of      Operating Market
MarketRevenuesRevenuesGross MarginCostsEBITDA
Los Angeles$ 2,047$ 483$ 1,564 76%$ 380$ 1,184
Boston 1,628 356 1,272 78% 245 1,027
New York 1,940 634 1,306 67% 372 934
Chicago 820 266 554 68% 113 441
Miami 391 106 285 73% 86 199
Houston 180 57 123 68% 30 93
Las Vegas-Reno 274 141 133 49% 41 92
San Francisco 320 113 207 65% 117 90
Providence-Newport 114 50 64 56% 19 45
Seattle 94 47 47 50% 24 23
Philadelphia 40 19 21 53% 16 5
Dallas-Fort Worth 162 100 62 38% 66 (4)
Nashville 6 13 (7)  -- %  3 (10)
Total  $ 8,016$ 2,385$ 5,631 70%$ 1,512$ 4,119
 
Fixed Wireless Segment Market data for the six months ended June 30, 2014
(All dollars are in thousands)
             
           Adjusted
   Cost of    OperatingMarket
MarketRevenuesRevenuesGross MarginCostsEBITDA
Los Angeles  $ 4,036  $ 1,134  $ 2,902 72%  $ 937  $ 1,965
New York 3,866 1,321 2,545 66% 616 1,929
Boston 2,984 798 2,186 73% 387 1,799
Chicago 1,459 587 872 60% 269 603
Miami 750 221 529 71% 174 355
Houston 346 124 222 64% 56 166
San Francisco 561 251 310 55% 149 161
Las Vegas-Reno 481 243 238 49% 99 139
Providence-Newport 145 98 47 32% 3 44
Dallas-Fort Worth 327 194 133 41% 95 38
Seattle 140 96 44 31% 17 27
Philadelphia 69 39 30 43% 21 9
Nashville 2 13 (11) -- % 2 (13)
Total  $ 15,166  $ 5,119  $ 10,047 66%  $ 2,825  $ 7,222
 
Fixed Wireless Segment Market data for the six months ended June 30, 2013 
(All dollars are in thousands)
             
           Adjusted
   Cost of    OperatingMarket
MarketRevenuesRevenuesGross Margin CostsEBITDA
Los Angeles  $ 4,117  $ 1,013  $ 3,104 75%  $ 792  $ 2,312
Boston  3,298 686 2,612 79% 461 2,151
New York 3,826 1,233 2,593 68% 709 1,884
Chicago  1,733 572 1,161 67% 226 935
Miami 768 205 563 73% 169 394
Las Vegas-Reno 662 273 389 59% 97 292
San Francisco 622 214 408 66% 202 206
Houston 233 78 155 67% 43 112
Providence-Newport 241 99 142 59% 37 105
Seattle 231 92 139 60% 64 75
Philadelphia 80 37 43 54% 38 5
Dallas-Fort Worth 334 189 145 43% 142 3
Nashville 11 28 (17) -- % 7 (24)
Total  $ 16,156  $ 4,719  $ 11,437   71%   $ 2,987  $ 8,450


Operating Outlook and Guidance

• Revenues for the third quarter 2014 are expected to range between $7.4 million to $7.7 million for the Fixed Wireless segment.• Revenues for the third quarter 2014 are expected to range between $800,000 to $1.0 million for the Shared Wireless Infrastructure segment.• Adjusted EBITDA, on a segment basis, is expected to range between profitability of $3.1 million to $3.4 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 June 30,
 20142013
Adjusted Market EBITDA  $ 3,487  $ 4,119
Fixed wireless, non-market specific    
Other expenses (303) (267)
Depreciation and amortization (2,081) (2,837)
Shared wireless infrastructure, net (4,106) (3,857)
Corporate (3,328) (3,389)
Other income (expense) (63) --
Net loss  $ (6,394)  $ (6,231)
     
 For the six months ended June 30,
 20142013
Adjusted Market EBITDA  $ 7,222  $ 8,450
Fixed wireless, non-market specific    
Other expenses (537) (510)
Depreciation and amortization (4,618) (5,657)
Shared wireless infrastructure, net (8,049) (7,649)
Corporate (6,792) (7,394)
Other income (expense) (130) 903
Net loss  $ (12,904)  $ (11,857)
     
II. Adjusted EBITDA to Net Loss    
     
 For the three months ended June 30,
 20142013
Adjusted EBITDA  $ (2,537)  $ (1,895)
Depreciation and amortization (3,281) (3,936)
Stock-based compensation (263) (271)
Loss on property and equipment -- (17)
Loss on non-monetary transactions (68) (65)
Deferred rent (91) --
Non-recurring expenses (91) (47)
Operating Income (Loss)  $ (6,331)  $ (6,231)
Interest expense, net (59) (59)
Gain on business acquisition -- 63
Other income (expense), net (4) (4)
Net loss  $ (6,394)  $ (6,231)
     
 For the six months ended June 30,
 20142013
Adjusted EBITDA  $ (4,854)  $ (3,972)
Depreciation and amortization (6,976) (7,807)
Stock-based compensation (555) (667)
Loss on property and equipment -- (59)
Loss on non-monetary transactions (136) (142)
Deferred rent (162) --
Non-recurring expenses (91) (113)
Operating Income (Loss)  $ (12,774)  $ (12,760)
Interest expense, net (123) (94)
Gain on business acquisition -- 1,004
Other income (expense), net (7) (7)
Net loss  $ (12,904)  $ (11,857)
 
III. Net Cash Flow to Net Cash Used in Operating Activities
     
 For the three months ended June 30,
 20142013
Net cash flow  $ (4,635)  $ (3,202)
Capital expenditures 2,098 1,307
Non-recurring expenses (91) (47)
Changes in operating assets and liabilities, net 1,004 (266)
Other, net (24) (97)
Net cash used in operating activities  $ (1,648)  $ (2,305)
     
 For the six months ended June 30,
 20142013
Net cash flow  $ (9,489)  $ (6,606)
Capital expenditures 4,635 2,634
Non-recurring expenses (91) (113)
Changes in operating assets and liabilities, net (1,644) (2,402)
Other, net (149) (241)
Net cash used in operating activities  $ (6,738)  $ (6,728)


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 August 11, 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 August 18, 2014 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 72260570.

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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