Towerstream Corporation
Nov 12, 2013

Towerstream Reports Third Quarter 2013 Results

MIDDLETOWN, R.I., Nov. 12, 2013 (GLOBE NEWSWIRE) -- Towerstream Corporation (Nasdaq:TWER) (the "Company"), a leading 4G and Small Cell Rooftop Tower company, announced results for the third quarter ended September 30, 2013.

Third Quarter Operating Highlights

Hetnets Tower Corporation Subsidiary

Towerstream Corporation

Management Comments

"We are pleased to report strong rent-based revenue growth for Hetnets Tower Corporation which operates our shared wireless infrastructure segment," stated Jeffrey Thompson, President and Chief Executive Officer. "Network performance has been stellar and traffic volume has increased significantly since service was launched with a major cable company in the third quarter. We expect continued revenue growth as our relationships expand through the cable consortium."

"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 Joseph Hernon, Chief Financial Officer. "We believe that small cell and Wi-Fi, both onload and offload, will accelerate in 2014, providing our tower business with a diverse customer base and sustained revenue growth."

 
Selected Financial Data and Key Operating Metrics
(All dollars are in thousands except ARPU)
  (Unaudited)
  Three months ended
  9/30/2013 6/30/2013 9/30/2012
       
Revenues $8,401 $8,212 $8,127
Gross margin      
 Consolidated 31% 35% 45%
 Fixed wireless 66% 69% 70%
Capital expenditures      
 Fixed wireless  $1,243 $1,028 $2,076
 Shared wireless infrastructure 681 233 3,818
 Corporate 200 46 340
Churn rate (1) 1.81% 2.37% 1.54%
ARPU (1) $747 $740 $714
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 
  September 30, September 30,
  2013 2012 2013 2012
         
Revenues $8,401 $8,127 $24,912 $24,050
         
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 September 30, 2013 (Unaudited)
  Fixed
Wireless
Shared Wireless
Infrastructure
Corporate  Eliminations Total
           
Revenues $7,910 $536 $ --  $ (45) $8,401
           
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) $974  $ (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 Cash Flow (b) $2,567  $ (3,539)  $ (3,028) $ --  $ (4,000)
           
Statement of Operations - Segment Basis 
           
  Nine months ended September 30, 2013 (Unaudited)
  Fixed
Wireless
Shared Wireless
Infrastructure
Corporate  Eliminations Total
           
Revenues $24,158 $891 $ --  $ (137) $24,912
           
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) $3,348  $ (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 Cash Flow (b) $8,678  $ (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 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)
  September 30, 2013 December 31, 2012
Assets    
Current Assets    
 Cash and cash equivalents $32,794 $15,152
 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 $80,249 $67,110
 
Summary Condensed Statement of Cash Flows 
(Unaudited)
  Nine months ended September 30,
  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  $32,794 $23,132
 
Fixed Wireless Segment Market data for the three months ended September 30, 2013
(All dollars are in thousands)


Market


Revenues

Cost of
Revenues


Gross Margin 


Operating Costs
Adjusted
Market
EBITDA
Boston $1,633 $392 $1,241 76% $166 $1,075
Los Angeles 2,021 569 1,452 72% 399 1,053
New York 1,915 660 1,255 66% 270 985
Chicago 780 308 472 61% 112 360
Miami 383 124 259 68% 128 131
San Francisco 312 131 181 58% 77 104
Las Vegas-Reno 251 146 105 42% 33 72
Houston 154 66 88 57% 23 65
Providence-Newport 115 50 65 57% 11 54
Dallas-Fort Worth 174 102 72 41% 64 8
Seattle 83 54 29 35% 22 7
Nashville 5 15 (10) --% 2 (12)
Philadelphia 39 24 15 38% 31 (16)
Total $7,865 $2,641 $5,224 66% $1,338 $3,886
 
Fixed Wireless Segment Market data for the three months ended September 30, 2012 
(All dollars are in thousands)


Market


Revenues

Cost of
Revenues


Gross Margin

Operating
Costs
Adjusted
Market
EBITDA
Boston $1,698 $385 $1,313 77% $220 $1,093
Los Angeles 1,995 599 1,396 70% 399 997
New York 1,858 558 1,300 70% 319 981
Chicago  944 308 636 67% 171 465
Miami 413 119 294 71% 94 200
San Francisco 373 103 270 72% 76 194
Las Vegas-Reno 370 158 212 57% 29 183
Seattle 144 51 93 65% 33 60
Providence-Newport 132 65 67 51% 30 37
Nashville 12 14 (2)  --% 8 (10)
Dallas-Fort Worth 158 83 75 47% 90 (15)
Philadelphia 30 22 8 27% 32 (24)
Total $8,127 $2,465 $5,662 70% $1,501 $4,161
     
Fixed Wireless Segment Market data for the nine months ended September 30, 2013     
(All dollars are in thousands)          


Market


Revenues

Cost of
Revenues


Gross Margin

Operating
Costs
Adjusted
Market
EBITDA
Los Angeles $6,138 $1,642 $4,496 73% $1,131 $3,365
Boston  4,931 1,133 3,798 77% 572 3,226
New York 5,741 1,911 3,830 67% 960 2,870
Chicago  2,513 890 1,623 65% 328 1,295
Miami 1,152 329 823 71% 298 525
Las Vegas-Reno 913 453 460 50% 97 363
San Francisco 934 358 576 62% 267 309
Houston 387 146 241 62% 64 177
Providence-Newport 356 149 207 58% 48 159
Seattle 314 159 155 49% 72 83
Dallas-Fort Worth 507 290 217 43% 206 11
Philadelphia 119 61 58 49% 69 (11)
Nashville 16 43 (27)  --% 9 (36)
Total $24,021 $7,564 $16,457 69% $4,121 $12,336
     
Fixed Wireless Segment Market data for the nine months ended September 30, 2012     
(All dollars are in thousands)          


Market


Revenues

Cost of
Revenues


Gross Margin

Operating
Costs
Adjusted
Market
EBITDA
Boston $5,135 $1,145 $3,990 78% $710 $3,280
Los Angeles 5,888 1,803 4,085 69% 1,116 2,969
New York 5,349 1,635 3,714 69% 907 2,807
Chicago  2,743 844 1,899 69% 507 1,392
Miami 1,238 300 938 76% 290 648
Las Vegas-Reno 1,199 464 735 61% 115 620
San Francisco 1,160 319 841 73% 236 605
Seattle 375 163 212 57% 79 133
Providence-Newport 365 150 215 59% 93 122
Dallas-Fort Worth 488 257 231 47% 258 (27)
Nashville 31 42 (11)  --% 26 (37)
Philadelphia 79 55 24 30% 77 (53)
Total $24,050 $7,177 $16,873 70% $4,414 $12,459

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 Market EBITDA to Net Loss, Fixed Wireless Segment
     
  For the three months ended  For the nine months ended
  September 30, 2013 September 30, 2013
Adjusted Market EBITDA $3,886 $12,336
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
  September 30, 2012 September 30, 2012
Adjusted Market EBITDA $4,161 $12,458
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
  September 30, 2013 September 30, 2013
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 Cash Flow to Net Cash Used in Operating Activities
     
  For the three months ended For the nine months ended
  September 30, 2013 September 30, 2013
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, Jeff Thompson, and Chief Financial Officer, Joseph Hernon, will be held on November 12, 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 November 19, 2013 at 11:59 p.m. ET by dialing 800-585-8367 or 404-537-3406 (for international callers) using pass code 88982268.

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

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 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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