Third Quarter Operating Highlights
Hetnets Tower Corporation Subsidiary
Management Comments
"We are pleased to report strong rent-based revenue growth for
"As the carriers complete their LTE upgrades, they are beginning to focus on the densification of their networks in major urban markets where the explosion of mobile data traffic is creating significant performance issues," stated
Selected Financial Data and Key Operating Metrics | |||
(All dollars are in thousands except ARPU) | |||
(Unaudited) | |||
Three months ended | |||
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Revenues |
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Gross margin | |||
Consolidated | 31% | 35% | 45% |
Fixed wireless | 66% | 69% | 70% |
Capital expenditures | |||
Fixed wireless |
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Shared wireless infrastructure | 681 | 233 | 3,818 |
Corporate | 200 | 46 | 340 |
Churn rate (1) | 1.81% | 2.37% | 1.54% |
ARPU (1) |
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ARPU of new customers (1) | 648 | 640 | 560 |
Cash and cash equivalents | 32,794 | 36,387 | 23,132 |
(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 | Nine months ended | |||
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2013 | 2012 | 2013 | 2012 | |
Revenues |
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Operating Expenses | ||||
Cost of revenues | 5,773 | 4,444 | 16,364 | 11,240 |
Depreciation and amortization | 3,846 | 3,399 | 11,653 | 10,029 |
Customer support | 893 | 1,173 | 3,028 | 3,574 |
Sales and marketing | 1,369 | 1,562 | 4,333 | 4,598 |
General and administrative | 2,600 | 2,929 | 8,374 | 9,073 |
Total Operating Expenses | 14,481 | 13,507 | 43,752 | 38,514 |
Operating Loss | (6,080) | (5,380) | (18,840) | (14,464) |
Other Income (Expense) | ||||
Gain on business acquisition | -- | -- | 1,004 | (40) |
Interest income | -- | 10 | 1 | 41 |
Interest expense | (60) | (37) | (155) | (76) |
Other income (expense), net | (3) | (1) | (11) | (8) |
Total Other Income (Expense) | (63) | (28) | 839 | (83) |
Net Loss | $ (6,143) | $ (5,408) | $ (18,001) | $ (14,547) |
Net loss per common share — basic and diluted | $ (0.09) | $ (0.10) | $ (0.28) | $ (0.27) |
Weighted average common shares outstanding — basic and diluted | 66,402 | 54,403 | 64,764 | 54,361 |
Statement of Operations - Segment Basis | |||||
Three months ended |
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Fixed Wireless |
Infrastructure |
Corporate | Eliminations | Total | |
Revenues |
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$ -- | $ (45) |
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Operating Expenses | |||||
Cost of revenues | 2,640 | 3,111 | 67 | (45) | 5,773 |
Depreciation and amortization | 2,755 | 857 | 234 | -- | 3,846 |
Customer support | 209 | 55 | 629 | -- | 893 |
Sales and marketing | 1,206 | 81 | 82 | -- | 1,369 |
General and administrative | 126 | 152 | 2,322 | -- | 2,600 |
Total Operating Expenses | 6,936 | 4,256 | 3,334 | (45) | 14,481 |
Operating Income (Loss) |
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$ (3,720) | $ (3,334) | $ -- | $ (6,080) |
Non-cash expenses (a) | 2,836 | 862 | 506 | -- | 4,204 |
Adjusted EBITDA (b) | 3,810 | (2,858) | (2,828) | -- | (1,876) |
Less: Capital expenditures | 1,243 | 681 | 200 | -- | 2,124 |
Net |
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$ (3,539) | $ (3,028) | $ -- | $ (4,000) |
Statement of Operations - Segment Basis | |||||
Nine months ended |
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Fixed Wireless |
Infrastructure |
Corporate | Eliminations | Total | |
Revenues |
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$ -- | $ (137) |
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Operating Expenses | |||||
Cost of revenues | 7,564 | 8,778 | 159 | (137) | 16,364 |
Depreciation and amortization | 8,411 | 2,633 | 609 | -- | 11,653 |
Customer support | 566 | 215 | 2,247 | -- | 3,028 |
Sales and marketing | 3,825 | 239 | 269 | -- | 4,333 |
General and administrative | 444 | 486 | 7,444 | -- | 8,374 |
Total Operating Expenses | 20,810 | 12,351 | 10,728 | (137) | 43,752 |
Operating Income (Loss) |
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$ (11,460) | $ (10,728) | $ -- | $ (18,840) |
Non-recurring expenses, primarily acquisition related | -- | -- | 113 | -- | 113 |
Non-cash expenses (a) | 8,689 | 2,641 | 1,549 | -- | 12,879 |
Adjusted EBITDA (b) | 12,037 | (8,819) | (9,066) | -- | (5,848) |
Less: Capital expenditures | 3,359 | 1,049 | 350 | -- | 4,758 |
Net |
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$ (9,868) | $ (9,416) | $ -- | $ (10,606) |
(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
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) | |
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Assets | ||
Current Assets | ||
Cash and cash equivalents |
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Other | 1,913 | 1,553 |
Total Current Assets | 34,707 | 16,705 |
Property and equipment, net | 38,186 | 41,982 |
Other assets | 7,356 | 8,423 |
Total Assets | 80,249 | 67,110 |
Liabilities and Stockholders' Equity | ||
Current Liabilities | ||
Accounts payable and accrued expenses | 3,166 | 4,149 |
Deferred revenues and other | 2,293 | 2,468 |
Total Current Liabilities | 5,459 | 6,617 |
Long-Term Liabilities | 2,249 | 2,689 |
Total Liabilities | 7,708 | 9,306 |
Stockholders' Equity | ||
Common stock | 66 | 54 |
Additional paid-in-capital | 153,844 | 121,118 |
Accumulated deficit | (81,369) | (63,368) |
Total Stockholders' Equity | 72,541 | 57,804 |
Total Liabilities and Stockholders' Equity |
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Summary Condensed Statement of Cash Flows (Unaudited) |
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Nine months ended |
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2013 | 2012 | |
Cash Flows from Operating Activities | ||
Net loss | $ (18,001) | $ (14,547) |
Non-cash adjustments: | ||
Depreciation & amortization | 11,653 | 10,029 |
Stock-based compensation | 939 | 1,353 |
Gain on business acquisition | (1,004) | 40 |
Other | 65 | 216 |
Changes in operating assets and liabilities | (2,018) | (2,110) |
Net Cash Used in Operating Activities | (8,366) | (5,019) |
Cash Flows From Investing Activities | ||
Acquisitions of property and equipment | (3,897) | (15,997) |
Acquisition of a business, net of cash acquired | (223) | -- |
Other | (148) | (501) |
Net Cash Used in Investing Activities | (4,268) | (16,498) |
Cash Flows From Financing Activities | ||
Payments on capital leases | (571) | (385) |
Proceeds from stock issuances | 348 | 397 |
Net proceeds from sale of common stock | 30,499 | -- |
Other | -- | (35) |
Net Cash Provided by (Used in) Financing Activities | 30,276 | (23) |
Net Increase (Decrease) In Cash and Cash Equivalents | 17,642 | (21,540) |
Cash and cash equivalents — beginning | 15,152 | 44,672 |
Cash and cash equivalents — ending |
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Fixed Wireless Segment Market data for the three months ended |
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(All dollars are in thousands) | ||||||
Market |
Revenues |
Cost of Revenues |
Gross Margin |
Operating Costs |
Adjusted Market EBITDA |
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76% |
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2,021 | 569 | 1,452 | 72% | 399 | 1,053 |
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1,915 | 660 | 1,255 | 66% | 270 | 985 |
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780 | 308 | 472 | 61% | 112 | 360 |
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383 | 124 | 259 | 68% | 128 | 131 |
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312 | 131 | 181 | 58% | 77 | 104 |
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251 | 146 | 105 | 42% | 33 | 72 |
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154 | 66 | 88 | 57% | 23 | 65 |
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115 | 50 | 65 | 57% | 11 | 54 |
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174 | 102 | 72 | 41% | 64 | 8 |
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83 | 54 | 29 | 35% | 22 | 7 |
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5 | 15 | (10) | --% | 2 | (12) |
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39 | 24 | 15 | 38% | 31 | (16) |
Total |
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66% |
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Fixed Wireless Segment Market data for the three months ended |
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(All dollars are in thousands) | ||||||
Market |
Revenues |
Cost of Revenues |
Gross Margin |
Operating Costs |
Adjusted Market EBITDA |
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77% |
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1,995 | 599 | 1,396 | 70% | 399 | 997 |
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1,858 | 558 | 1,300 | 70% | 319 | 981 |
Chicago | 944 | 308 | 636 | 67% | 171 | 465 |
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413 | 119 | 294 | 71% | 94 | 200 |
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373 | 103 | 270 | 72% | 76 | 194 |
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370 | 158 | 212 | 57% | 29 | 183 |
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144 | 51 | 93 | 65% | 33 | 60 |
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132 | 65 | 67 | 51% | 30 | 37 |
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12 | 14 | (2) | --% | 8 | (10) |
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158 | 83 | 75 | 47% | 90 | (15) |
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30 | 22 | 8 | 27% | 32 | (24) |
Total |
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70% |
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Fixed Wireless Segment Market data for the nine months ended |
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(All dollars are in thousands) | ||||||
Market |
Revenues |
Cost of Revenues |
Gross Margin |
Operating Costs |
Adjusted Market EBITDA |
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73% |
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Boston | 4,931 | 1,133 | 3,798 | 77% | 572 | 3,226 |
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5,741 | 1,911 | 3,830 | 67% | 960 | 2,870 |
Chicago | 2,513 | 890 | 1,623 | 65% | 328 | 1,295 |
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1,152 | 329 | 823 | 71% | 298 | 525 |
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913 | 453 | 460 | 50% | 97 | 363 |
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934 | 358 | 576 | 62% | 267 | 309 |
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387 | 146 | 241 | 62% | 64 | 177 |
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356 | 149 | 207 | 58% | 48 | 159 |
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314 | 159 | 155 | 49% | 72 | 83 |
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507 | 290 | 217 | 43% | 206 | 11 |
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119 | 61 | 58 | 49% | 69 | (11) |
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16 | 43 | (27) | --% | 9 | (36) |
Total |
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69% |
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Fixed Wireless Segment Market data for the nine months ended |
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(All dollars are in thousands) | ||||||
Market |
Revenues |
Cost of Revenues |
Gross Margin |
Operating Costs |
Adjusted Market EBITDA |
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78% |
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5,888 | 1,803 | 4,085 | 69% | 1,116 | 2,969 |
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5,349 | 1,635 | 3,714 | 69% | 907 | 2,807 |
Chicago | 2,743 | 844 | 1,899 | 69% | 507 | 1,392 |
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1,238 | 300 | 938 | 76% | 290 | 648 |
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1,199 | 464 | 735 | 61% | 115 | 620 |
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1,160 | 319 | 841 | 73% | 236 | 605 |
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375 | 163 | 212 | 57% | 79 | 133 |
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365 | 150 | 215 | 59% | 93 | 122 |
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488 | 257 | 231 | 47% | 258 | (27) |
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31 | 42 | (11) | --% | 26 | (37) |
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79 | 55 | 24 | 30% | 77 | (53) |
Total |
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70% |
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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
"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 Market EBITDA to Net Loss, Fixed Wireless Segment | ||
For the three months ended | For the nine months ended | |
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Adjusted Market EBITDA |
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Fixed wireless, non-market specific | ||
Other expenses | (203) | (714) |
Depreciation and amortization | (2,754) | (8,411) |
Shared wireless infrastructure, net | (3,675) | (11,323) |
Corporate | (3,334) | (10,728) |
Other income (expense) | (63) | 839 |
Net loss | $ (6,143) | $ (18,001) |
For the three months ended, | For the nine months ended | |
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Adjusted Market EBITDA |
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Fixed wireless, non-market specific | ||
Other expenses | (228) | (615) |
Depreciation and amortization | (2,594) | (8,103) |
Non-core expenses | (2,803) | (6,026) |
Corporate | (3,916) | (12,178) |
Other income (expense) | (28) | (83) |
Net loss | $ (5,408) | $ (14,547) |
II. Adjusted EBITDA to Net Loss | ||
For the three months ended | For the nine months ended | |
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Adjusted EBITDA | $ (1,876) | $ (5,848) |
Depreciation and amortization | (3,846) | (11,653) |
Non-recurring expenses | -- | (113) |
Stock-based compensation | (272) | (939) |
Loss on property and equipment | (23) | (82) |
Loss on non-monetary transactions | (63) | (205) |
Operating Income (Loss) | $ (6,080) | $ (18,840) |
Interest income | -- | 1 |
Interest expense | (60) | (155) |
Gain on business acquisition | -- | 1,004 |
Other income (expense), net | (3) | (11) |
Net loss | $ (6,143) | $ (18,001) |
III. Net |
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For the three months ended | For the nine months ended | |
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Net cash flow | $ (4,000) | $ (10,606) |
Capital expenditures | 2,124 | 4,758 |
Non-recurring expenses | -- | (113) |
Changes in operating assets and liabilities, net | 383 | (2,018) |
Other, net | (145) | (387) |
Net cash used in operating activities | $ (1,638) | $ (8,366) |
Conference Call and Webcast
A conference call led by President and Chief Executive Officer,
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
The
About
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
CONTACT: INVESTOR CONTACT:Source: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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