Towerstream Corporation
Aug 8, 2013

Towerstream Reports Second Quarter 2013 Results

Leading Cable Company Becomes First Major Customer of Neutral Host Network

MIDDLETOWN, R.I., Aug. 8, 2013 (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, 2013.

Second Quarter Operating Highlights

Hetnets Tower Corporation Subsidiary

Towerstream Corporation

Management Comments

"Securing the first anchor tenant for our neutral host network is a major milestone and validates our rent-based business model," stated Jeffrey Thompson, President and Chief Executive Officer. "We expect to continue to expand our Wi-Fi customer base over the balance of the year while preparing for the impending rollout of small cell."

"This contract, which began generating revenues in the third quarter, affirms our belief that carriers, cable and internet platform companies plan to utilize Wi-Fi on a long term basis," stated Joseph Hernon, Chief Financial Officer. "Small cell technologies, including Wi-Fi, will enable service providers and platform players to differentiate their offering, add new services, and improve the user experience in dense urban markets where demand levels are pressuring network capacity."

Selected Financial Data and Key Operating Metrics
(All dollars are in thousands except ARPU)
       
  (Unaudited)
  Three months ended
  6/30/2013 3/31/2013 6/30/2012
Revenues $8,212 $8,299 $8,103
Gross margin      
 Consolidated 35% 37% 54%
 Fixed wireless 69% 70% 69%
Capital expenditures      
 Fixed wireless  $1,028 $1,087 $4,261
 Shared wireless infrastructure 233 136 3,423
 Corporate 46 104 141
Churn rate (1) 2.37% 1.64% 1.65%
ARPU (1) $740 $727 $708
ARPU of new customers (1) 640 630 477
Cash and cash equivalents 36,387 40,329 31,416
(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,
  2013 2012 2013 2012
Revenues $8,212 $8,103 $16,511 $15,922
         
Operating Expenses        
 Cost of revenues  5,360 3,723 10,591 6,796
 Depreciation and amortization 3,936 3,348 7,807 6,629
 Customer support  987 1,238 2,135 2,400
 Sales and marketing  1,524 1,555 2,965 3,037
 General and administrative 2,636 2,953 5,773 6,144
 Total Operating Expenses 14,443 12,817 29,271 25,006
 Operating Loss (6,231) (4,714) (12,760) (9,084)
Other Income (Expense)        
 Gain on business acquisition 63 (40) 1,004 (40)
 Interest income -- 14 1 31
 Interest expense (59) (17) (95) (39)
 Other income (expense), net (4) (2) (7) (7)
 Total Other Income (Expense) -- (45) 903 (55)
 Net Loss $(6,231) $(4,759) $(11,857) $(9,139)
         
 Net loss per common share — basic and diluted $(0.09) $(0.09) $(0.19) $(0.17)
Weighted average common shares  outstanding — basic and diluted 66,371 54,369 63,931 54,341
         
           
Statement of Operations - Segment Basis 
           
  Three months ended June 30, 2013 (Unaudited)
  Fixed Shared Wireless      
   Wireless Infrastructure Corporate  Eliminations Total
           
Revenues $8,061 $196 $ -- $(45) $8,212
           
Operating Expenses          
 Cost of revenues  2,492 2,875 38  (45) 5,360
 Depreciation and amortization  2,837 911 188  -- 3,936
 Customer support  179 56 752 -- 987
 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)
           
           
Statement of Operations - Segment Basis 
           
  Six months ended June 30, 2013 (Unaudited)
  Fixed Shared Wireless      
  Wireless Infrastructure Corporate  Eliminations Total
           
Revenues $16,248 $354 $ -- $(91) $16,511
           
Operating Expenses          
 Cost of revenues  4,923 5,667 92 (91) 10,591
 Depreciation and amortization  5,657 1,775 375  -- 7,807
 Customer support  357 160 1,618 -- 2,135
 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, 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)
  June 30 2013 December 31, 2012
Assets    
Current Assets    
 Cash and cash equivalents $36,387 $15,152
 Other  1,876 1,553
 Total Current Assets 38,263 16,705
     
Property and equipment, net 39,127 41,982
     
Other assets 8,281 8,423
     
 Total Assets 85,671 67,110
     
Liabilities and Stockholders' Equity    
Current Liabilities    
 Accounts payable and accrued expenses 2,543 4,149
 Deferred revenues and other 2,327 2,468
 Total Current Liabilities 4,870 6,617
     
 Long-Term Liabilities  2,446 2,689
 Total Liabilities 7,316 9,306
     
Stockholders' Equity    
 Common stock 66 54
 Additional paid-in-capital 153,515 121,118
 Accumulated deficit (75,226) (63,368)
 Total Stockholders' Equity 78,355 57,804
 Total Liabilities and Stockholders' Equity $85,671 $67,110
     
     
Summary Condensed Statement of Cash Flows (Unaudited)
  Six months ended June 30,
  2013 2012
Cash Flows from Operating Activities    
 Net loss $(11,857) $(9,139)
 Non-cash adjustments:    
 Depreciation & amortization 7,807 6,629
 Stock-based compensation  667 916
 Gain on business acquisition (1,004) 40
 Other 61 147
 Changes in operating assets and liabilities (2,402) (1,652)
Net Cash Used in Operating Activities (6,728) (3,059)
     
Cash Flows From Investing Activities    
 Acquisitions of property and equipment (2,120) (9,745)
 Acquisition of a business, net of cash acquired (223) --
 Other  (108) (399)
Net Cash Used in Investing Activities (2,451) (10,144)
     
Cash Flows From Financing Activities    
 Payments on capital leases (376) (275)
 Proceeds from stock issuances 291 222
 Net proceeds from sale of common stock 30,499 --
Net Cash Provided by (Used in) Financing Activities 30,414 (53)
     
Net Increase (Decrease) In Cash and Cash Equivalents 21,235 (13,256)
Cash and cash equivalents — beginning 15,152 44,672
Cash and cash equivalents — ending  $36,387 $31,416
     
     
Fixed Wireless Segment Market data for the three months ended June 30, 2013
(All dollars are in thousands)
            Adjusted
    Cost of     Operating Market
Market Revenues Revenues Gross Margin  Costs EBITDA
Los Angeles $2,047 $514 $1,533 75% $349 $1,184
Boston 1,628 383 1,245 76% 218 1,027
New York 1,940 649 1,291 67% 357 934
Chicago 820 272 548 67% 107 441
Miami 391 106 285 73% 86 199
Houston 180 57 123 68% 30 93
Las Vegas-Reno 274 156 118 43% 26 92
San Francisco 320 119 201 63% 111 90
Providence-Newport 114 50 64 56% 19 45
Seattle 94 54 40 43% 17 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 $2,492 $5,524 69% $1,405 $4,119
             
Fixed Wireless Segment Market data for the three months ended June 30, 2012 
(All dollars are in thousands)
            Adjusted 
    Cost of      Operating Market
Market Revenues Revenues Gross Margin  Costs  EBITDA
Boston $1,748 $366 $1,382 79% $224 $1,158
New York 1,842 576 1,266 69% 281 985
Los Angeles 1,926 635 1,291 67% 377 914
Chicago  938 278 660 70% 193 467
Miami 406 92 314 77% 95 219
San Francisco 410 121 289 70% 76 213
Las Vegas-Reno 397 153 244 61% 46 198
Providence-Newport 125 45 80 64% 33 47
Seattle 115 53 62 54% 22 40
Nashville 10 14 (4)  --% 9 (13)
Philadelphia 25 17 8 32% 23 (15)
Dallas-Fort Worth 161 92 69 43% 89 (20)
Total $8,103 $2,442 $5,661 70% $1,468 $4,193
             
             
Fixed Wireless Segment Market data for the six months ended June 30, 2013 
(All dollars are in thousands)
            Adjusted 
    Cost of      Operating  Market 
Market Revenues Revenues Gross Margin Costs EBITDA
Los Angeles $4,117 $1,073 $3,044 74% $732 $2,312
Boston  3,298 741 2,557 78% 406 2,151
New York 3,826 1,251 2,575 67% 691 1,884
Chicago  1,733 582 1,151 66% 216 935
Miami 768 205 563 73% 169 394
Las Vegas-Reno 662 307 355 54% 63 292
San Francisco 622 227 395 64% 189 206
Houston 233 80 153 66% 41 112
Providence-Newport 241 99 142 59% 37 105
Seattle 231 104 127 55% 52 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 $4,923 $11,233 70% $2,783 $8,450
             
             
Fixed Wireless Segment Market data for the six months ended June 30, 2012 
(All dollars are in thousands)
            Adjusted 
    Cost of      Operating  Market 
Market Revenues Revenues Gross Margin Costs EBITDA
Boston $3,436 $759 $2,677 78% $490 $2,187
Los Angeles 3,893 1,204 2,689 69% 717 1,972
New York 3,490 1,077 2,413 69% 588 1,825
Chicago  1,799 536 1,263 70% 337 926
Miami 825 180 645 78% 197 448
Las Vegas-Reno 829 306 523 63% 86 437
San Francisco 787 217 570 72% 160 410
Providence-Newport 233 85 148 64% 63 85
Seattle 231 113 118 51% 45 73
Dallas-Fort Worth 331 174 157 47% 168 (11)
Nashville 20 28 (8)  --% 18 (26)
Philadelphia 48 33 15 31% 44 (29)
Total $15,922 $4,712 $11,210 70% $2,913 $8,297
             

Operating Outlook and Guidance

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, 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.

"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 June 30,
  2013 2012
Adjusted Market EBITDA $4,119 $4,193
Fixed wireless, non-market specific    
 Other expenses (267) (242)
 Depreciation and amortization (2,837) (2,722)
Shared wireless infrastructure, net (3,857) (1,923)
Corporate (3,389) (4,020)
Other income (expense) -- (45)
Net loss $(6,231) $(4,759)
     
  For the six months ended June 30,
  2013 2012
Adjusted Market EBITDA $8,450 $8,297
Fixed wireless, non-market specific    
 Other expenses (510) (387)
 Depreciation and amortization (5,657) (5,509)
Shared wireless infrastructure, net (7,649) (3,223)
Corporate (7,394) (8,262)
Other income (expense) 903 (55)
Net loss $(11,857) $(9,139)
     
   
II. Adjusted EBITDA, Segment Basis to Net Loss
   
For the three months ended June 30, 2013
   
Adjusted EBITDA $(1,895)
Depreciation and amortization (3,936)
Non-recurring expenses (47) 
Stock-based compensation (271)
Loss on property and equipment (17)
Loss on non-monetary transactions (65)
Operating Income (Loss) $(6,231)
Interest expense (59)
Gain on business acquisition 63
Other income (expense), net (4)
Net loss $(6,231)
   
For the six months ended June 30, 2013
   
Adjusted EBITDA $(3,972)
Depreciation and amortization (7,807)
Non-recurring expenses  (113) 
Stock-based compensation (667)
Loss on property and equipment (59)
Loss on non-monetary transactions (142)
Operating Income (Loss) $(12,760)
Interest income 1
Interest expense (95)
Gain on business acquisition 1,004
Other income (expense), net (7)
Net loss $(11,857)
   
 
III. Net Cash Flow, Segment Basis to Net Cash Used in Operating Activities
   
For the three months ended June 30, 2013
   
Net cash flow, segment basis $(3,202)
Capital expenditures 1,307
Non-recurring expenses (47)
Changes in operating assets and liabilities, net (266)
Other, net (97)
Net cash used in operating activities $(2,305)
   
For the six months ended June 30, 2013
   
Net cash flow, segment basis $(6,606)
Capital expenditures 2,634
Non-recurring expenses (113)
Changes in operating assets and liabilities, net (2,402)
Other, net (241)
Net cash used in operating activities $(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 8, 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 August 15, 2013 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 16703135.

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.
 

CONTACT: INVESTOR CONTACT:

         Monica Gould

         The Blueshirt Group

         212-871-3927

         monica@blueshirtgroup.com



         MEDIA CONTACT:

         Todd Barrish

         Indicate Media

         646-396-6090

         todd@indicatemedia.com

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Source: Towerstream Corporation

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