Towerstream Corporation
Aug 10, 2015

Towerstream Reports Second Quarter 2015 Results and Business Update

MIDDLETOWN, R.I., Aug. 10, 2015 (GLOBE NEWSWIRE) -- Towerstream Corporation (NASDAQ:TWER) (the "Company"), a Fixed Wireless Fiber Alternative provider, announced results for the second quarter ended June 30, 2015 and provided a business update.

Operating Highlights and Business Update

Shared Wireless Infrastructure

Fixed Wireless

Management Comments and Business Update

"We are pleased to announce the recent signing of a contract with a leading carrier for our shared wireless infrastructure subsidiary, HetNets Tower Corporation," said Jeffrey Thompson, President and Chief Executive Officer. "With multiple carriers focused on densifying their networks utilizing small cell architectures and numerous technology companies deploying Wi-Fi services and solutions, we believe our shared wireless locations are well positioned."

"Our On Net platform generated strong growth in the number of lit buildings and total square footage as well as new and potential customers within those buildings," noted Joseph Hernon, Chief Financial Officer. "Our new sales office has generated initial sales ahead of plan and our wholesale services platform is beginning to grow."

Selected Financial Data and Key Operating Metrics
(All dollars are in thousands except ARPU)

  (Unaudited)
  Three Months Ended
  6/30/2015 3/31/2015 6/30/2014
       
Revenues $ 7,857 $ 7,960 $ 8,265
Gross margin      
Consolidated 20% 20% 26%
Fixed wireless 62% 62% 65%
Capital expenditures      
Fixed wireless $ 2,422 $ 1,434 $ 1,403
Shared wireless infrastructure 56 119 490
Corporate 57 121 205
Churn rate (1) 1.84% 1.85% 1.71%
ARPU (1) $ 772 $ 773 $ 760
ARPU of new customers (1) 620 628 626
Cash and cash equivalents 26,117 32,267 17,289
       
(1)  See Non-GAAP Measures below for the definitions of Churn, ARPU and ARPU of new customers.

Consolidated Statements of Operations (Unaudited)
(All dollars are in thousands except per share amounts)

  Three Months Ended June 30, Six Months Ended June 30,
  2015 2014 2015 2014
         
Revenues  $ 7,857  $ 8,265  $ 15,817  $ 16,645
         
Operating Expenses        
Cost of revenues 6,320 6,102 12,720 11,958
Depreciation and amortization 3,408 3,281 6,788 6,976
Customer support 1,333 1,151 2,574 2,326
Sales and marketing 1,548 1,399 2,877 2,821
General and administrative 2,428 2,667 5,297 5,345
Total Operating Expenses 15,037 14,600 30,256 29,426
Operating Loss (7,180) (6,335) (14,439) (12,781)
Other Income/(Expense)        
         
Interest expense, net (1,671) (59) (3,335) (123)
Total Other Income/(Expense) (1,671) (59) (3,335) (123)
Net Loss  $ (8,851)  $ (6,394)  $ (17,774)  $ (12,904)
         
Net loss per common share - basic and diluted  $ (0.13)  $ (0.10)  $ (0.26)  $ (0.19)
Weighted average common shares outstanding - basic and diluted 67,924 66,479 67,891 66,459

Summary Condensed Balance Sheets 
(All dollars are in thousands)

  (Unaudited) (Audited)
  June 30, 2015 December 31, 2014
Assets    
Current Assets    
Cash and cash equivalents  $ 26,117  $ 38,028
Other 2,329 2,237
Total Current Assets 28,446 40,265
     
Property and equipment, net 31,522 33,905
     
Other assets 7,217 8,152
     
Total Assets 67,185 82,322
     
Liabilities and Stockholders' Equity    
Current Liabilities    
Accounts payable and accrued expenses 3,458 2,910
Deferred revenues and other 2,349 2,288
Total Current Liabilities 5,807 5,198
     
Long-Term Liabilities    
Long-term debt 33,415 32,101
Other 3,331 3,061
Total Long-Term Liabilities 36,746 35,162
     
Total Liabilities 42,553 40,360
     
Stockholders' Equity    
Common stock 67 67
Additional paid-in-capital 158,075 157,631
Accumulated deficit (133,510) (115,736)
Total Stockholders' Equity 24,632 41,962
Total Liabilities and Stockholders' Equity  $ 67,185  $ 82,322

Summary Condensed Statements of Cash Flows (Unaudited)

  Six Months Ended June 30,
  2015 2014
Net Cash Used in Operating Activities  $ (7,822)  $ (5,871)
Net Cash Used in Investing Activities (3,614) (4,631)
Net Cash Used in Financing Activities (474) (391)
Net Decrease in Cash and Cash Equivalents  $ (11,910)  $ (10,893)

Statements of Operations - Segment Basis (Unaudited)

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.

  Three Months Ended June 30, 2015
  Fixed
Wireless
Shared Wireless
Infrastructure

Corporate

Eliminations

Total
           
Revenues  $ 7,081  $ 826 $ --   $ (50)  $ 7,857
           
Operating Expenses          
Cost of revenues 2,684 3,673 13 (50) 6,320
Depreciation and amortization 2,175 1,015 218 -- 3,408
Customer support 361 197 775 -- 1,333
Sales and marketing 1,428 43 77 -- 1,548
General and administrative 181 95 2,152 -- 2,428
Total Operating Expenses 6,829 5,023 3,235 (50) 15,037
           
Operating Income (Loss)  $ 252  $ (4,197)  $ (3,235)  $ --  $ (7,180)
Non-recurring expenses, primarily acquisition related -- -- 162 -- 162
Non-cash expenses (a) 2,281 1,026 416 -- 3,723
Adjusted EBITDA (b) 2,533 (3,171) (2,657) -- (3,295)
Less: Capital expenditures 2,422 56 57 -- 2,535
Net Cash Flow (b)  $ 111  $ (3,227)  $ (2,714) $ --  $ (5,830)
           
  Three Months Ended June 30, 2014
  Fixed
Wireless
Shared Wireless
Infrastructure

Corporate

Eliminations

Total
           
Revenues  $ 7,572  $ 739  $ --  $ (46)  $ 8,265
           
Operating Expenses          
Cost of revenues 2,620 3,514 14 (46) 6,102
Depreciation and amortization 2,081 977 223 -- 3,281
Customer support 272 179 700 -- 1,151
Sales and marketing 1,252 63 84 -- 1,399
General and administrative 202 158 2,307 -- 2,667
Total Operating Expenses 6,427 4,891 3,328 (46) 14,600
           
Operating Income (Loss)  $ 1,145  $ (4,152)  $ (3,328) $ --  $ (6,335)
Non-recurring expenses, primarily acquisition related -- -- 91 -- 91
Non-cash expenses (a) 2,187 1,039 477 -- 3,703
Adjusted EBITDA (b) 3,332 (3,113) (2,760) -- (2,541)
Less: Capital expenditures 1,403 490 205 -- 2,098
Net Cash Flow (b)  $ 1,929  $ (3,603)  $ (2,965) $ --  $ (4,639)
           
  Six Months Ended June 30, 2015
  Fixed
Wireless
Shared Wireless
Infrastructure

Corporate

Eliminations

Total
           
Revenues  $ 14,298  $ 1,614 $ --  $ (95)  $ 15,817
           
Operating Expenses          
Cost of revenues 5,406 7,379 30 (95) 12,720
Depreciation and amortization 4,302 2,047 439 -- 6,788
Customer support 687 357 1,530 -- 2,574
Sales and marketing 2,638 87 152 -- 2,877
General and administrative 301 203 4,793 -- 5,297
Total Operating Expenses 13,334 10,073 6,944 (95) 30,256
           
Operating Income (Loss)  $ 964  $ (8,459)  $ (6,944) $ --  $ (14,439)
Non-recurring expenses, primarily acquisition related -- -- 398 -- 398
Non-cash expenses (a) 4,519 2,107 845 -- 7,471
Adjusted EBITDA (b) 5,483 (6,352) (5,701) -- (6,570)
Less: Capital expenditures 3,856 175 178 -- 4,209
Net Cash Flow (b)  $ 1,627  $ (6,527)  $ (5,879) $ --  $ (10,779)
           
  Six Months Ended June 30, 2014
  Fixed
Wireless
Shared Wireless
Infrastructure

Corporate

Eliminations

Total
           
Revenues  $ 15,258  $ 1,479 $ --  $ (92)  $ 16,645
           
Operating Expenses          
Cost of revenues 5,119 6,902 29 (92) 11,958
Depreciation and amortization 4,618 1,919 439 -- 6,976
Customer support 543 355 1,428 -- 2,326
Sales and marketing 2,515 140 166 -- 2,821
General and administrative 311 304 4,730 -- 5,345
Total Operating Expenses 13,106 9,620 6,792 (92) 29,426
           
Operating Income (Loss)  $ 2,152  $ (8,141)  $ (6,792) $ --  $ (12,781)
Non-recurring expenses, primarily acquisition related -- -- 91 -- 91
Non-cash expenses (a) 4,799 2,053 977 -- 7,829
Adjusted EBITDA (b) 6,951 (6,088) (5,724) -- (4,861)
Less: Capital expenditures 2,890 1,428 317 -- 4,635
Net Cash Flow (b)  $ 4,061  $ (7,516)  $ (6,041) $ --  $ (9,496)
           
(a) Includes depreciation and amortization, stock-based compensation, deferred rent expense 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.

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) nonmonetary transactions, and (ii) 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 June 30,
  2015 2014
Adjusted EBITDA  $ (3,295)  $ (2,541)
Depreciation and amortization (3,408) (3,281)
Stock-based compensation (211) (263)
Loss on nonmonetary transactions (67) (68)
Non-recurring expenses (162) (91)
Deferred rent (37) (91)
Operating Income (Loss)  $ (7,180)  $ (6,335)
Interest expense, net (1,671) (59)
Net loss  $ (8,851)  $ (6,394)
     
  Six Months Ended June 30,
  2015 2014
Adjusted EBITDA  $ (6,570)  $ (4,861)
Depreciation and amortization (6,788) (6,976)
Stock-based compensation (422) (555)
Loss on nonmonetary transactions (133) (136)
Non-recurring expenses (398) (91)
Deferred rent (128) (162)
Operating Income (Loss)  $ (14,439)  $ (12,781)
Interest expense, net (3,335) (123)
Net loss  $ (17,774)  $ (12,904)

II. Net Cash Flow to Net Cash Used in Operating Activities

  Three Months Ended June 30,
  2015 2014
Net cash flow  $ (5,830)  $ (4,639)
Capital expenditures 2,535 2,098
Non-recurring expenses (162) (91)
Changes in operating assets and liabilities, net 659 1,004
Other, net (1,133) (20)
Net cash used in operating activities  $ (3,931)  $ (1,648)
     
  Six Months Ended June 30,
  2015 2014
Net cash flow  $ (10,779)  $ (9,496)
Capital expenditures 4,209 4,635
Non-recurring expenses (398) (91)
Changes in operating assets and liabilities, net 1,420 (777)
Other, net (2,274) (142)
Net cash used in operating activities  $ (7,822)  $ (5,871)

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 10, 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 August 17, 2015 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 83104178.

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 Corporation (Nasdaq:TWER) is a leading Fixed Wireless Fiber Alternative company delivering high-speed Internet access to businesses. To date the company offers its 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. In 2014, Towerstream launched its On-Net fixed wireless service offering building owners and property managers a redundant and reliable dense urban network that directly connects with Towerstream's fiber backbone. On-Net building tenants have access to 100 Mbps of dedicated, symmetrical Internet connectivity, with a premier SLA, for an industry-leading price of $699/month. 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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