Towerstream Corporation
Mar 12, 2015

Towerstream Reports 2014 Financial Results and Corporate Update

MIDDLETOWN, R.I., March 12, 2015 (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, 2014.

2014 Operating Highlights and Corporate Update

HetNets Tower Corporation Subsidiary

Towerstream Corporation

Management Comments

"Our Shared Wireless segment demonstrated strong growth in 2014 with revenues doubling and the number of leasable locations increasing by 12% during the year," stated Jeffrey Thompson, President and CEO. "The carriers have been vocal in stating that they are focused on the densification of their networks and we expect initial deployments on our locations in the first half of this year."

"Our 100 megabyte service continues to gain traction and we will be adding buildings throughout 2015," stated Joseph Hernon, Chief Financial Officer. "The recent opening of our second sales center will substantially increase our sales force. We believe that these initiatives will drive our Fixed Wireless segment back into growth mode in 2015."

Selected Financial Data and Key Operating Metrics    
(All dollars are in thousands except ARPU)      
  (Unaudited)
Three Months Ended
  12/31/2014 9/30/2014 12/31/2013
       
Revenues  $ 8,090  $ 8,302  $ 8,521
Gross margin      
Consolidated 21% 25% 27%
Fixed wireless 63% 65% 66%
Capital expenditures      
Fixed wireless   $ 1,524  $ 1,154  $ 1,160
Shared wireless infrastructure 202 590 1,265
Corporate 43 22 909
Churn rate (1) 1.65% 1.69% 1.78%
ARPU (1)  $ 772  $ 769  $ 761
ARPU of new customers (1) 639 651 752
Cash and cash equivalents 38,028 11,891 28,182
       
    Years Ended
    12/31/2014 12/31/2013
Selected Financial Data      
Revenues    $ 33,036  $ 33,433
Gross margin      
Consolidated   26% 35%
Fixed wireless   65% 69%
Capital expenditures      
Fixed wireless     $ 5,568  $ 4,519
Shared wireless infrastructure   2,221 2,314
Corporate   382 1,259
Churn rate (1)   1.85% 1.86%
ARPU (1)    $ 772  $ 761
ARPU of new customers (1)   639 663
Cash and cash equivalents   38,028 28,182
       
(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 December 31,
(Audited)
Years Ended December 31,
  2014 2013 2014 2013
         
Revenues  $ 8,090  $ 8,521  $ 33,036  $ 33,433
         
Operating Expenses        
Cost of revenues  6,351 6,262 24,520 21,854
Depreciation and amortization 3,345 3,698 13,639 15,352
Customer support  1,233 1,084 4,796 4,883
Sales and marketing 1,396 1,446 5,570 5,779
General and administrative 2,610 2,659 10,337 11,033
Total Operating Expenses 14,935 15,149 58,862 58,901
Operating Loss (6,845) (6,628) (25,826) (25,468)
Other Income/(Expense)        
Gain on business acquisition -- -- -- 1,004
Interest expense, net (1,506) (64) (1,673) (218)
Other income (expense), net (3) (4) (14) (15)
Total Other Income/(Expense) (1,509) (68) (1,687) 771
Loss before income taxes (8,354) (6,696) (27,513) (24,697)
Provision for income taxes  (79) (78) (79) (78)
Net Loss  $ (8,433)  $ (6,774)  $ (27,592)  $ (24,775)
         
Net loss per common share - basic and diluted  $ (0.12)  $ (0.10)  $ (0.41)  $ (0.38)
Weighted average common shares outstanding - basic and diluted 67,642 66,419 66,804 65,181
           
Statement of Operations - Segment Basis           
           
  Three Months Ended December 31, 2014 (Unaudited)
  Fixed
Wireless
Shared Wireless
Infrastructure
Corporate Eliminations Total
           
Revenues  $ 7,308  $ 827 $ --  $ (45)  $ 8,090
           
Operating Expenses          
Cost of revenues  2,684 3,708 4 (45) 6,351
Depreciation and amortization  2,099 1,025 221  -- 3,345
Customer support  327 181 725  -- 1,233
Sales and marketing 1,274 51 71  -- 1,396
General and administrative  226 102 2,282  -- 2,610
Total Operating Expenses  6,610 5,067 3,303 (45) 14,935
           
Operating Income (Loss) $ 698 $ (4,240) $ (3,303) $ -- $ (6,845)
Non-recurring expenses, primarily acquisition related  --  --  28 -- 28
Non-cash expenses (a) 2,227 1,079 432  -- 3,738
Adjusted EBITDA (b) 2,925 (3,161) (2,843)  -- (3,079)
Less: Capital expenditures 1,524 202 43  -- 1,769
Net Cash Flow (b)  $ 1,401  $ (3,363)  $ (2,886) $ --  $ (4,848)
           
           
  Three Months Ended December 31, 2013 (Unaudited)
  Fixed
Wireless
Shared Wireless
Infrastructure
Corporate Eliminations Total
           
Revenues  $ 7,917  $ 650 $ --  $ (46)  $ 8,521
           
Operating Expenses          
Cost of revenues  2,704 3,575 29 (46) 6,262
Depreciation and amortization  2,652 875 171 -- 3,698
Customer support  343 198 543 -- 1,084
Sales and marketing 1,302 63 81 -- 1,446
General and administrative  148 182 2,329 -- 2,659
Total Operating Expenses  7,149 4,893 3,153 (46) 15,149
           
Operating Income (Loss)  $ 768  $ (4,243)  $ (3,153) $ --  $ (6,628)
Non-cash expenses (a) 2,988 1,308 399 -- 4,695
Adjusted EBITDA (b) 3,756 (2,935) (2,754) -- (1,933)
Less: Capital expenditures 1,160 1,265 909 -- 3,334
Net Cash Flow (b)  $ 2,596  $ (4,200)  $ (3,663) $ --  $ (5,267)
           
           
  Year Ended December 31, 2014
  Fixed
Wireless
Shared Wireless
Infrastructure
Corporate Eliminations Total
           
Revenues  $ 30,119  $ 3,100 $ --  $ (183)  $ 33,036
           
Operating Expenses          
Cost of revenues  10,435 14,220 48 (183) 24,520
Depreciation and amortization  8,697 3,958 984  -- 13,639
Customer support  1,205 683 2,908  -- 4,796
Sales and marketing 5,029 229 312  -- 5,570
General and administrative  601 569 9,167  -- 10,337
Total Operating Expenses  25,967 19,659 13,419 (183) 58,862
           
Operating Income (Loss)  $ 4,152  $ (16,559)  $ (13,419) $ --  $ (25,826)
Non-recurring expenses, primarily acquisition related  --  -- 120  -- 120
Non-cash expenses (a) 9,123 4,216 1,909  -- 15,248
Adjusted EBITDA (b)  13,275  (12,343)  (11,390)  --  (10,458)
Less: Capital expenditures 5,568 2,221 382  -- 8,171
Net Cash Flow (b)  $ 7,707  $ (14,564)  $ (11,772) $ --  $ (18,629)
           
           
  Year Ended December 31, 2013
  Fixed
Wireless
Shared Wireless
Infrastructure
Corporate Eliminations Total
           
Revenues  $ 32,076  $ 1,540 $ --  $ (183)  $ 33,433
           
Operating Expenses          
Cost of revenues  9,934 11,979 124 (183) 21,854
Depreciation and amortization  11,063 3,509 780  -- 15,352
Customer support  1,243 785 2,855 -- 4,883
Sales and marketing 5,128 301 350 -- 5,779
General and administrative  592 669 9,772 -- 11,033
Total Operating Expenses  27,960 17,243 13,881 (183) 58,901
           
Operating Income (Loss)  $ 4,116  $ (15,703)  $ (13,881) $ --  $ (25,468)
Non-recurring expenses, primarily acquisition related  -- -- 113 -- 113
Non-cash expenses (a) 11,678 3,949 1,947 -- 17,574
Adjusted EBITDA (b) 15,794  (11,754)  (11,821)  --  (7,781)
Less: Capital expenditures 4,519 2,314 1,259 -- 8,092
Net Cash Flow (b)  $ 11,275  $ (14,068)  $ (13,080) $ --  $ (15,873)
           
(a) Includes depreciation and amortization, stock-based compensation, deferred rent expense, 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.

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) Wi-Fi access and 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 (Audited)    
(All dollars are in thousands)    
     
  December 31, 2014 December 31, 2013
Assets    
Current Assets    
Cash and cash equivalents  $ 38,028  $ 28,182
Other  2,237 1,537
Total Current Assets 40,265 29,719
     
Property and equipment, net 33,905 38,485
     
Other assets 8,152 6,713
     
Total Assets 82,322 74,917
     
Liabilities and Stockholders' Equity    
Current Liabilities    
Accounts payable and accrued expenses 2,910 3,774
Deferred revenues and other 2,288 2,247
Total Current Liabilities 5,198 6,021
     
Long-Term Liabilities     
Long-term debt  32,101 --
Other 3,061 2,802
Total Long-Term Liabilities 35,162 2,802
     
Total Liabilities 40,360 8,823
     
Stockholders' Equity    
Common stock 67 66
Additional paid-in-capital 157,631 154,172
Accumulated deficit (115,736) (88,144)
Total Stockholders' Equity 41,962 66,094
Total Liabilities and Stockholders' Equity  $ 82,322  $ 74,917
     
Summary Condensed Statement of Cash Flows (Audited)     
     
  Years Ended December 31,
  2014 2013
Net Cash Used in Operating Activities  $ (13,413)  $ (9,484)
Net Cash Used in Investing Activities (7,037) (7,562)
Net Cash Provided by Financing Activities 30,296 30,076
Net Increase In Cash and Cash Equivalents  $ 9,846  $ 13,030

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, deferred rent expense, 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. 

"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.  

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

A reconciliation of non-GAAP measures to GAAP financial measures is as follows (amounts in thousands):

I. Adjusted EBITDA to Net Loss    
     
  Three Months Ended December 31,
  2014 2013
Adjusted EBITDA  $ (3,079)  $ (1,933)
Depreciation and amortization (3,345) (3,698)
Non-recurring expenses (28) --
Stock-based compensation (220) (314)
Loss on property and equipment -- (39)
Loss on nonmonetary transactions (68) (68)
Deferred rent (105) (576)
Operating Income (Loss)  $ (6,845)  $ (6,628)
Interest expense, net (1,506) (64)
Other income (expense), net (3) (4)
Provision for income taxes (79) (78)
Net loss  $ (8,433)  $ (6,774)
     
  Year Ended December 31,
  2014 2013
Adjusted EBITDA  $ (10,458)  $ (7,781)
Depreciation and amortization (13,639) (15,352)
Non-recurring expenses (120) (113)
Stock-based compensation (960) (1,254)
Loss on property and equipment -- (121)
Loss on nonmonetary transactions (272) (272)
Deferred rent (377) (575)
Operating Income (Loss)  $ (25,826)  $ (25,468)
Interest expense, net (1,673) (218)
Gain on business acquisition -- 1,004
Other income (expense), net (14) (15)
Provision for income taxes (79) (78)
Net loss  $ (27,592)  $ (24,775)
     
II. Net Cash Flow to Net Cash Used in Operating Activities  
     
  Three Months Ended December 31,
  2014 2013
Net cash flow  $ (4,848)  $ (5,267)
Capital expenditures 1,769 3,334
Non-recurring expenses (28) --
Changes in operating assets and liabilities, net 601 849
Other, net (866) (34)
Net cash used in operating activities  $ (3,372)  $ (1,118)
     
  Year Ended December 31,
  2014 2013
Net cash flow  $ (18,629)  $ (15,873)
Capital expenditures 8,171 8,092
Non-recurring expenses (120) (113)
Changes in operating assets and liabilities, net (1,781) (1,170)
Other, net (1,054) (420)
Net cash used in operating activities  $ (13,413)  $ (9,484)

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 12, 2015 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 19, 2015 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 84829903.

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

         917-861-0089

         todd@indicatemedia.com

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Source: Towerstream Corporation

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