Towerstream Corporation
Mar 18, 2013

Towerstream Reports Fourth Quarter and Year End 2012 Results

MIDDLETOWN, R.I., March 18, 2013 (GLOBE NEWSWIRE) -- Towerstream Corporation (Nasdaq:TWER) (the "Company"), a leading 4G and Small Cell Rooftop Tower company, announced results for the fourth quarter and year ended December 31, 2012.

Fourth Quarter and Annual Operating Highlights

Management Comments

"We are pleased to report another year of solid growth and stronger operating performance," noted Joseph Hernon, Chief Financial Officer. "We recently closed our fifth acquisition and are focused on bringing our fixed wireless business to cash flow profitability in the first half of 2013."

"We are excited to launch our new subsidiary, Hetnets Tower Corporation, in January which will offer a wide range of shared wireless infrastructure services and access," stated Jeffrey Thompson, President and Chief Executive Officer. "The explosion in mobile data in urban markets is driving a migration to small cell architecture, and the major carriers are presently focused on the densification of their network."

"Our fixed wireless, backhaul network and street-level rooftop locations enables us to quickly deliver solutions to the challenges associated with small cell deployments," added Mr. Thompson.

About Hetnets Tower Corporation

Since 2010, we have been exploring opportunities to leverage our fixed wireless network in major 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. In recent months, we have concluded 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. We believe that Wi-Fi will be an integral component of Small Cell architecture.

Hetnets plans to offer wireless technology solutions and services including (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.

Selected Financial Data and Key Operating Metrics      
(All dollars are in thousands except ARPU)      
  (Unaudited)
  Three months ended
  12/31/2012 9/30/2012 12/31/2011
Selected Financial Data      
Revenues $ 8,229 $ 8,127 $ 7,185
Gross margin 38% 45% 64%
Adjusted gross margin excluding non-core expenses 69% 69% 72%
Depreciation and amortization 3,605 3,399 2,651
Core operating expenses (1)(2) 5,767 5,664 5,103
Operating loss (1) (6,282) (5,380) (3,164)
Gain on business acquisition -- -- 1,186
Net loss (1) (6,442) (5,408) (2,080)
Adjusted EBITDA (2) (2,195) (1,424) (63)
Non-recurring expenses 87 55 200
Non-core expenses 3,770 2,973 1,490
Adjusted EBITDA excluding non-recurring and non-core expenses (2)  1,662 1,605 1,627
Capital expenditures      
Wireless broadband  $ 2,463 $ 2,416 $ 3,160
Rooftop tower sites 2,430 3,818 963
Key Operating Metrics      
Churn rate (2) 1.59% 1.54% 1.43%
ARPU (2) $ 717 $ 714 $ 710
ARPU of new customers (2) 542 560 612
       
  Years ended
  12/31/2012   12/31/2011
Selected Financial Data      
Revenues $ 32,279   $ 26,495
Gross margin 49%   69%
Adjusted gross margin excluding non-core expenses 69%   73%
Depreciation and amortization 13,634   9,138
Core operating expenses (1)(2) 23,012   18,331
Operating loss (1) (20,746)   (9,164)
Gain (loss) on business acquisition (40)   2,232
Net loss (1) (20,989)   (7,025)
Adjusted EBITDA (2) (5,023)   1,161
Non-recurring expenses 517   496
Non-core expenses 10,875   3,581
Adjusted EBITDA excluding non-recurring and non-core expenses (2)  6,370   5,238
Capital expenditures      
Wireless broadband  $ 13,224   $ 9,893
Rooftop tower sites 11,589   5,044
Key Operating Metrics      
Churn rate (2) 1.59%   1.45%
ARPU (2) $ 717   $ 710
ARPU of new customers (2) 531   599
       
(1) Includes stock-based compensation of $305, $438, $419, $1,658 and $1,081, respectively.       
(2) See Non-GAAP Measures below for a definition and reconciliation of Adjusted EBITDA, and definitions of Core Operating Expenses, Non-Core Expenses, Churn, ARPU and ARPU of new customers.

Operating Outlook and Guidance

Non-GAAP Measures

The terms "Adjusted EBITDA," "Churn," "Churn rate," "ARPU," and "Market Cash Flow" are measurements used by Towerstream to monitor business performance and are not recognized measures under generally accepted accounting principles ("GAAP"). Accordingly, investors are cautioned in using or relying upon these measures as alternatives to recognized GAAP measures. Our methods of calculating these measures may differ from other issuers and, accordingly, may not be comparable to similar measures presented by other issuers.

We focus on Adjusted EBITDA as a principal indicator of the operating performance of our business. EBITDA represents net income (loss) before interest, income taxes, depreciation and amortization. We define Adjusted EBITDA as net income (loss) before interest, income taxes, depreciation and amortization expenses, excluding, when applicable, stock-based compensation, other non-operating income or expenses, non-core 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.

The term "Core Operating Expenses" includes customer support services, sales and marketing, and general and administrative expenses, and excludes cost of revenues, depreciation and amortization.

The term "Non-Core Expenses" includes costs related to the efforts to develop other wireless technology solutions and services. 

The terms "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. The term "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.

The Non-GAAP measure, Adjusted EBITDA, excluding non-recurring and non-core expenses, has been reconciled to Net loss as follows:

(All dollars are in thousands)       
  Three months ended
  12/31/2012 9/30/2012 12/31/2011
Reconciliation of Non-GAAP to GAAP:      
Adjusted EBITDA, excluding non-recurring and non-core expenses $ 1,662 $ 1,605 $ 1,627
Depreciation and amortization (3,605) (3,399) (2,651)
Non-recurring expenses, primarily acquisition-related (87) (55) (200)
Non-core expenses (3,770) (2,973) (1,490)
Stock-based compensation (305) (438) (419)
Loss on property and equipment (99) (48) (16)
Loss on nonmonetary transactions (78) (71) (15)
Interest expense (29) (37) (8)
Gain on business acquisition -- -- 1,186
Other income (expense), net (6) (2) (1)
Interest income 1 10 25
Provision for income taxes (126) -- (118)
Net loss $ (6,442) $ (5,408) $ (2,080)
       
  Years ended
  12/31/2012   12/31/2011
Reconciliation of Non-GAAP to GAAP:      
Adjusted EBITDA, excluding non-recurring and non-core expenses $ 6,370   $ 5,238
Depreciation and amortization (13,634)   (9,138)
Non-recurring expenses, primarily acquisition-related (517)   (496)
Non-core expenses (10,875)   (3,581)
Stock-based compensation (1,658)   (1,081)
Loss on property and equipment (172)   (65)
Loss on nonmonetary transactions (260)   (41)
Interest expense (105)   (22)
Gain (loss) on business acquisition (40)   2,232
Other income (expense), net (14)   (10)
Interest income 42   57
Provision for income taxes (126)   (118)
Net loss $ (20,989)   $ (7,025)
         
Summary Condensed Consolidated Financial Statements        
(All dollars are in thousands except per share amounts)        
         
Statement of Operations  (Unaudited) (Audited)
  Three months ended
December 31,
Years ended
December 31,
  2012 2011 2012 2011
         
Revenues $ 8,229 $ 7,185 $ 32,279 $ 26,495
         
Operating Expenses        
Cost of revenues (exclusive of depreciation) 5,139 2,595 16,379 8,190
Depreciation and amortization 3,605 2,651 13,634 9,138
Customer support services 1,136 1,043 4,709 3,557
Sales and marketing  1,536 1,287 6,134 5,362
General and administrative 3,095 2,773 12,169 9,412
Total Operating Expenses 14,511 10,349 53,025 35,659
Operating Loss (6,282) (3,164) (20,746) (9,164)
Other Income (Expense)        
Gain (loss) on business acquisition -- 1,186 (40) 2,232
Interest income 1 25 42 57
Interest expense (29) (8) (105) (22)
Other income (expense), net (6) (1) (14) (10)
Total Other Income (Expense) (34) 1,202 (117) 2,257
Loss before income taxes (6,316) (1,962) (20,863) (6,907)
Provision for income taxes (126) (118) (126) (118)
Net Loss $ (6,442) $ (2,080) $ (20,989) $ (7,025)
         
Net loss per common share — basic and diluted $ (0.12) $ (0.04) $ (0.39) $ (0.15)
Weighted average common shares outstanding — basic and diluted 54,648 53,580 54,434 47,506
     
Balance Sheet (Audited)    
(All dollars are in thousands)    
     
  December 31, 2012 December 31, 2011
Assets    
Current Assets    
Cash and cash equivalents $ 15,152 $ 44,672
Other  1,553 1,216
Total Current Assets 16,705 45,888
     
Property and equipment, net 41,982 27,531
     
Other assets 8,423 10,218
     
Total Assets 67,110 83,637
     
Liabilities and Stockholders' Equity    
Current Liabilities    
Accounts payable and accrued expenses 4,149 3,359
Deferred revenues and other 2,468 2,297
Total Current Liabilities 6,617 5,656
     
Long-Term Liabilities  2,689 836
Total Liabilities 9,306 6,492
     
Stockholders' Equity    
Common stock 54 54
Additional paid-in-capital 121,118 119,470
Accumulated deficit (63,368) (42,379)
Total Stockholders' Equity 57,804 77,145
Total Liabilities and Stockholders' Equity $ 67,110 $ 83,637
     
Statement of Cash Flows (Audited) Years ended December 31,
  2012 2011
Cash Flows From Operating Activities    
Net loss $ (20,989) $ (7,025)
Non-cash adjustments:    
Depreciation & amortization 13,634 9,138
Stock-based compensation  1,658 1,081
(Gain) loss on business acquisition 40 (2,232)
Other 413 349
Changes in operating assets and liabilities (2,835) (609)
Net Cash (Used in) Provided By Operating Activities (8,079) 702
     
Cash Flows From Investing Activities    
Acquisitions of property and equipment (20,723) (13,620)
Acquisition of business -- (4,400)
Other  (620) (198)
Net Cash Used in Investing Activities (21,343) (18,218)
     
Cash Flows From Financing Activities    
Repayment of capital leases (492) (175)
Proceeds from stock issuances 428 355
Net proceeds from sale of common stock -- 38,835
Other (34) --
Net Cash (Used in) Provided By Financing Activities (98) 39,015
     
Net (Decrease) Increase In Cash and Cash Equivalents (29,520) 21,499
Cash and Cash Equivalents — Beginning 44,672 23,173
Cash and Cash Equivalents — Ending  $ 15,152 $ 44,672
         
Market data for the three months ended December 31, 2012        
(All dollars are in thousands)          
             
Market Revenues Cost of
Revenues(1)
Gross Margin (1) Operating
Costs
Adjusted
Market
EBITDA
Los Angeles $ 2,058 $ 538 $ 1,520 74% $ 361 $ 1,159
New York 1,938 655 1,283 66% 383 900
Boston 1,688 376 1,312 78% 207 1,105
Chicago 961 339 622 65% 161 461
Miami 424 111 313 74% 80 233
San Francisco 382 118 264 69% 80 184
Las Vegas-Reno 347 150 197 57% 35 162
Dallas-Fort Worth 155 88 67 43% 84 (17)
Providence-Newport 124 57 67 53% 23 44
Seattle 110 51 59 54% 23 36
Philadelphia 34 18 16 46% 28 (12)
Nashville 8 16 (8) --% 10 (18)
Total $ 8,229 $ 2,517 $ 5,712 69% $ 1,475 $ 4,237
             
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure        
Adjusted market EBITDA         $ 4,237
Centralized costs (1)           (861)
Corporate expenses           (1,957)
Non-core expenses           (3,791)
Depreciation and amortization         (3,605)
Stock-based compensation         (305)
Other income (expense)         (34)
Provision for income taxes         (126)
Net loss           $ (6,442)
             
Market data for the three months ended December 31, 2011         
(All dollars are in thousands)          
           
Market Revenues Cost of
Revenues(1)
Gross Margin(1) Operating
Costs
Adjusted
Market
EBITDA
Boston  $ 1,687 $ 381 $ 1,306 77% $ 226 $ 1,080
New York  1,617 465 1,152 71% 288 864
Los Angeles 1,387 309 1,078 78% 246 832
Chicago  858 251 607 71% 140 467
Las Vegas-Reno 434 181 253 58% 53 200
San Francisco 386 73 313 81% 87 226
Miami 381 76 305 80% 96 209
Dallas-Fort Worth 166 89 77 46% 61 16
Seattle 126 54 72 57% 25 47
Providence-Newport 108 43 65 61% 19 46
Philadelphia 26 16 10 39% 22 (12)
Nashville 9 31 (22)  --% 8 (30)
Total $ 7,185 $ 1,969 $ 5,216 73% $ 1,271 $ 3,945
             
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure        
             
Adjusted market EBITDA         $ 3,945
Centralized costs (1)           (790)
Corporate expenses           (1,757)
Non-core expenses           (1,492)
Depreciation and amortization         (2,651)
Stock-based compensation         (419)
Other income (expense)         1,202
Provision for income taxes         (118)
Net loss           $ (2,080)
             
(1)  Certain expenses are reported as Cost of Revenues for financial statement purposes but are included in other line items in the Market Data table, either because they are not specific to any market or they relate to non-core expenses. 

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 March 18, 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 March 25, 2013 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 18993014.

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

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:

         Terry McGovern

         Vision Advisors

         415-902-3001

         mcgovern@visionadvisors.net



         MEDIA CONTACT:

         Todd Barrish

         Indicate Media

         646-396-6038

         todd@indicatemedia.com

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Source: Towerstream Corporation

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