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May 09, 2013
Towerstream Reports First Quarter 2013 Results

MIDDLETOWN, R.I., May 9, 2013 (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, 2013.

First Quarter Operating Highlights

  • Revenue increased 6% to $8.3 million during the first quarter 2013 compared to the first quarter 2012 and increased 1% compared to the fourth quarter 2012.
  • Customer churn for the first quarter 2013 was 1.64% compared to 1.58% for the first quarter 2012 and 1.59% for the fourth quarter 2012. Customer churn remained within the Company's target range of 1.4% to 1.7% for the fourteenth consecutive quarter.
  • Average revenue per user ("ARPU") of new customers (excluding acquisitions) increased to $630 during the first quarter 2013 compared to $545 for the first quarter 2012 and $542 for the fourth quarter 2012.
  • Total ARPU of all customers increased for the fifth consecutive quarter to $727.
  • Recognized gain of $941,457 related to the acquisition of Delos Internet which closed in February 2013. This transaction brings us into Houston, Texas and expands our national presence to thirteen markets, including nine of the eleven largest business markets in the United States.
  • Formed Hetnets Tower Corporation, a wholly owned subsidiary, which will provide a range of shared wireless infrastructure, services and access.
  • Strong financial position with cash and cash equivalents totaling $40.3 million at March 31, 2013.

Management Comments

"We built Towerstream's fixed wireless business from the ground up and achieved cash flow profitability," stated Jeffrey Thompson, President and Chief Executive Officer. "This is a very exciting milestone for the company and we believe we can attain the same result with Hetnets, our tower subsidiary, while addressing a much larger market opportunity. We are very encouraged by the acceleration we are seeing in small cell business activity for Wi-Fi colocation, which gives us confidence in our strategy and market position."

"Beginning this quarter, we are reporting on a Segment Basis so that investors can clearly understand the operating performance of our two businesses," stated Joseph Hernon, Chief Financial Officer. "Our Fixed Wireless business continues to perform strongly and reached cash flow profitability in the first quarter under our prior reporting method which was a goal that we had previously established and communicated to investors."

Selected Financial Data and Key Operating Metrics
(All dollars are in thousands except ARPU)
  Three months ended
  3/31/2013 12/31/2012 3/31/2012
Revenues $8,299 $8,229 $7,819
Gross margin      
 Consolidated 37% 38% 61%
 Fixed wireless 70% 69% 71%
Capital expenditures      
 Fixed wireless  $1,087 $2,337 $2,630
 Shared wireless infrastructure 136 2,430 1,918
 Corporate 104 126 1,313
Churn rate (1) 1.64% 1.59% 1.58%
ARPU (1) $727 $717 $706
ARPU of new customers (1) 630 542 545
Cash and cash equivalents $40,329 $15,152 $38,675

(1) See Non-GAAP Measures below for the definitions of Churn, ARPU and ARPU of new customers.

Consolidated Statement of Operations 
(All dollars are in thousands except per share amounts) (Unaudited)
  Three months ended March 31,
  2013 2012
Revenues $8,299 $7,819
Operating Expenses    
Cost of revenues  5,231 3,073
Depreciation and amortization 3,871 3,281
Customer support  1,147 1,162
Sales and marketing  1,441 1,482
General and administrative 3,137 3,191
Total Operating Expenses 14,827 12,189
Operating Loss (6,528) (4,370)
Other Income (Expense)    
Gain on business acquisition 941 --
Interest income -- 17
Interest expense (36) (22)
Other income (expense), net (3) (5)
Total Other Income (Expense) 902 (10)
Net Loss  $ (5,626)  $ (4,380)
Net loss per common share — basic and diluted  $ (0.09)  $ (0.08)
Weighted average common shares outstanding — basic and diluted 61,465 54,312
Statement of Operations - Segment Basis 
  Three months ended March 31, 2013 (Unaudited)
  Fixed Wireless Shared Wireless Infrastructure Corporate  Eliminations Total
Revenues $8,187 $158 $ --  $ (46) $8,299
Operating Expenses        
Cost of revenues  2,431 2,793 53 (46)  5,231
Depreciation and amortization  2,820 864 187  --  3,871
Customer support  178  103 866 --  1,147
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, 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) 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, 2013 December 31, 2012
Current Assets    
Cash and cash equivalents $40,329 $15,152
Other  1,964 1,553
Total Current Assets 42,293 16,705
Property and equipment, net 40,974 41,982
Other assets 9,211 8,423
Total Assets 92,478 67,110
Liabilities and Stockholders' Equity    
Current Liabilities    
Accounts payable and accrued expenses 3,048 4,149
Deferred revenues and other 2,407 2,468
Total Current Liabilities 5,455 6,617
 Long-Term Liabilities  2,610 2,689
Total Liabilities 8,065 9,306
Stockholders' Equity    
Common stock 66 54
Additional paid-in-capital 153,342 121,118
Accumulated deficit (68,995) (63,368)
Total Stockholders' Equity 84,413 57,804
Total Liabilities and Stockholders' Equity $92,478 $67,110
Summary Condensed Statement of Cash Flows (Unaudited)    
  Three months ended March 31,
  2013 2012
Cash Flows from Operating Activities    
Net loss  $ (5,626)  $ (4,380)
Non-cash adjustments:    
Depreciation & amortization 3,871 3,281
Stock-based compensation  397 524
Gain on business acquisition (941) --
Other 12 21
Changes in operating assets and liabilities (2,136) (1,820)
Net Cash Used in Operating Activities (4,423) (2,374)
Cash Flows From Investing Activities    
Acquisitions of property and equipment (697) (3,434)
Acquisition of a business, net of cash acquired (223) --
Other  (56) (126)
Net Cash Used in Investing Activities (976) (3,560)
Cash Flows From Financing Activities    
Payments on capital leases (192) (131)
Proceeds from stock issuances 268 68
Net proceeds from sale of common stock 30,500 --
Net Cash Provided by (Used in) Financing Activities 30,576 (63)
Net Increase (Decrease) In Cash and Cash Equivalents 25,177 (5,997)
Cash and cash equivalents — beginning 15,152 44,672
Cash and cash equivalents — ending  $40,329 $38,675
Fixed Wireless Segment Market data for the three months ended March 31, 2013
(All dollars are in thousands)
Market Revenues Cost of Revenues Gross Margin  Operating Costs Adjusted Market EBITDA
Los Angeles $2,070 $559 $1,511 73% $382 $1,129
Boston 1,669 358 1,311 79% 187 1,124
New York 1,886 602 1,284 68% 333 951
Chicago 913 310 603 66% 109 494
Las Vegas-Reno 388 151 237 61% 38 199
Miami 377 99 278 74% 84 194
San Francisco 303 107 196 65% 80 116
Providence-Newport 127 49 78 61% 18 60
Seattle 137 51 86 63% 34 52
Houston 53 23 30 57% 11 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 $2,431 $5,709 70% $1,378 $4,331
Fixed Wireless Segment Market data for the three months ended March 31, 2012 
(All dollars are in thousands)
Market Revenues Cost of Revenues Gross Margin Operating Costs Adjusted Market EBITDA
Los Angeles $1,967 $569 $1,398 71% $340 $1,058
Boston  1,689 394 1,295 77% 266 1,029
New York 1,648 501 1,147 70% 306 841
Chicago  861 257 604 70% 144 460
Las Vegas-Reno 432 153 279 65% 40 239
Miami 419 88 331 79% 102 229
San Francisco 377 96 281 75% 84 197
Providence-Newport 108 40 68 63% 30 38
Seattle 116 60 56 48% 24 32
Dallas-Fort Worth 169 83 86 51% 78 8
Nashville 9 13 (4)  --% 9 (13)
Philadelphia 24 16 8 33% 22 (14)
Total $7,819 $2,270 $5,549 71% $1,445 $4,104

Operating Outlook and Guidance

  • Revenues for the second quarter 2013 are expected to range between $8.3 million to $8.5 million.
  • Adjusted EBITDA, on a segment basis, is expected to range between profitability of $4.2 million to $4.4 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:

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

"Adjusted EBITDA" represents net income (loss) before interest, income taxes, depreciation and amortization expenses, excluding, when applicable, stock-based compensation, 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.

"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.

"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.

"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.

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

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

"Non-Core Expenses" relate to our efforts in 2012 to develop other wireless technology solutions and services, and primarily consisted of rent payments for street level rooftops, costs associated with constructing an offload network and payroll costs for employees working on these projects.

"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 EBITDA, Fixed Wireless Segment Markets to Net Loss
 For the three months ended March 31, 2013
Adjusted Market EBITDA $4,331
Fixed Wireless, non-market specific  
 Other expenses (243)
 Depreciation and amortization (2,820)
Shared wireless infrastructure, net (3,793)
Corporate (4,003)
Other income (expense) 902
Net loss  $ (5,626)
For the three months ended March 31, 2012
Adjusted market EBITDA $4,104
Fixed wireless, non-market specific  
 Other expenses (144)
 Depreciation and amortization (2,787)
Non-core expenses (1,300)
Corporate (4,243)
Other income (expense) (10)
Net loss  $ (4,380)
II. Adjusted EBITDA, Segment Basis to Net Loss
 For the three months ended March 31, 2013
Adjusted EBITDA  $ (2,076)
Depreciation and amortization (3,871)
Non-recurring expenses (65) 
Stock-based compensation (397)
Loss on property and equipment (42)
Loss on non-monetary transactions (77)
Operating Income (Loss)  $ (6,528)
Interest expense (36)
Gain on business acquisition 941
Other income (expense), net (3)
Net loss  $ (5,626)
III. Net Cash Flow, Segment Basis to Net Cash Used in Operating Activities
For the three months ended March 31, 2013
Net cash flow, segment basis  $ (3,403)
Capital expenditures 1,327
Non-recurring expenses (65)
Changes in operating assets and liabilities, net (2,136)
Other, net (146)
Net cash used in operating activities  $ (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 9, 2013 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 16, 2013 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 53209923.

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 over 13 urban markets including New York City, Boston, Los Angeles, Chicago, Philadelphia, the San Francisco Bay area, Miami, Seattle, Dallas-Fort Worth, Houston, Nashville, 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

In early 2013, we formed a wholly owned subsidiary, Hetnets Tower Corporation ("Hetnets"). Since 2010, the Company has been exploring opportunities to leverage our fixed wireless network in urban markets to provide other wireless technology solutions and services.  Over the past few years, a significant increase in mobile data generated by smartphones, tablets, and other devices has placed tremendous demand on the networks of the carriers.  The Company believes that the wireless communications industry is experiencing a fundamental shift from its current, macro-cellular architecture to hyper-densified Small Cell architecture where existing cell sites will be supplemented by many smaller base stations operating near street level.  The Company also believes that Wi-Fi will be an integral component of Small Cell architecture.

We have effectively transferred certain assets to Hetnets, which is the operating entity for our shared wireless infrastructure segment. Hetnets plans to generate the majority of its revenue from (i) rental of space on street level rooftops for the installation of customer owned Small Cells which includes Wi-Fi antennae, DAS, and Metro and Pico cells, (ii) rental of a channel on Hetnets' Wi-Fi network for the offloading of mobile data, (iii) rental of cabinets, switch ports, interconnection services, including backhaul or transport, and (iv) rental of power and power backup. 

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.


         Terry McGovernVision Advisors



         Monica GouldThe Blueshirt Group




         Todd Barrish

         Indicate Media



Towerstream Corporation Logo

Source: Towerstream Corporation

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