Towerstream Corporation
Nov 9, 2015

Towerstream Reports Third Quarter 2015 Results and Business Update

MIDDLETOWN, R.I., Nov. 09, 2015 (GLOBE NEWSWIRE) -- Towerstream Corporation (NASDAQ:TWER) (the "Company"), a Fixed Wireless Fiber Alternative provider, announced results for the third quarter ended September 30, 2015 and provided a business update.

Operating Highlights and Business Update

Shared Wireless Infrastructure

Fixed Wireless

Management Comments and Business Update

"Continued growth in our On Net program and the maturation of the sales force in our new South Florida office has positioned the Fixed Wireless segment for higher revenues in 2016, and possibly as soon as the fourth quarter of 2015," stated Joseph Hernon, Chief Financial Officer.  "Anticipated higher revenues and cost management initiatives are expected to drive cash burn lower in the fourth quarter of 2015 and continuing into 2016."

"Revenues for our Shared Wireless segment continue to grow as carriers have started to densify their networks," stated Jeffrey Thompson, Chief Executive Officer. "Our expansive network in Manhattan, the most congested city in the country, has significant capacity and is uniquely positioned for small cell deployments, Wi-Fi access and offload, and connectivity to support the continued growth of the Internet-of-Things."

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

  
 (Unaudited)
 Three Months Ended
  9/30/2015
  6/30/2015
  9/30/2014
               
Revenues$ 7,798  $ 7,857  $ 8,302 
Gross margin      
  Consolidated  21%   20%   25%
  Fixed wireless  61%   62%   65%
Capital expenditures      
  Fixed wireless $ 1,779  $ 2,422  $ 1,154 
  Shared wireless infrastructure    46    56    590 
  Corporate  32    57    22 
Churn rate (1)   1.87%   1.84%   1.69%
ARPU (1)$ 768  $ 772  $ 769 
ARPU of new customers (1)  627    620    651 
               
Cash and cash equivalents  20,309    26,117    11,891 
               

(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
September 30,
 Nine Months Ended
September 30,
  2015 2014    2015    2014 
           
Revenues $ 7,798  $   8,302  $ 23,615  $   24,946 
             
Operating Expenses            
 Cost of revenues   6,187      6,211    18,907     18,169 
 Depreciation and amortization   3,436      3,318    10,224      10,295 
 Customer support   1,310    1,248    3,884     3,574 
 Sales and marketing   1,514      1,353    4,391     4,174 
 General and administrative    2,195      2,382    7,492     7,726 
 Total Operating Expenses   14,642      14,512    44,898      43,938 
 Operating Loss   (6,844)   (6,210)   (21,283)    (18,992)
Other Expense            
                      
 Interest expense, net   (1,665)     (44)   (5,000)   (166)
 Total Other Expense   (1,665)   (44)   (5,000)   (166)
 Net Loss $ (8,509) $ (6,254) $ (26,283) $ (19,158)
             
Net loss per common share - basic and diluted $ (0.13) $  (0.09) $ (0.39) $ (0.29)
Weighted average common shares outstanding - basic and diluted    67,966    66,644    67,916    66,521 
             


Summary Condensed Balance Sheets
(All dollars are in thousands)

     
  (Unaudited)
September 30 , 2015
 (Audited)
December 31, 2014
Assets    
Current Assets    
  Cash and cash equivalents $ 20,309  $  38,028 
  Other   2,128      2,237 
  Total Current Assets   22,437    40,265 
       
Property and equipment, net   30,041    33,905 
       
Other assets   6,780    8,152 
       
  Total Assets   59,258    82,322 
       
Liabilities and Stockholders' Equity      
Current Liabilities      
  Accounts payable and accrued expenses   3,476     2,910 
  Deferred revenues and other   2,296     2,288 
  Total Current Liabilities   5,772    5,198 
       
Long-Term Liabilities      
 Long-term debt   34,061    32,101 
 Other   3,099    3,061 
  Total Long-Term Liabilities   37,160     35,162 
       
  Total Liabilities   42,932     40,360 
       
Stockholders' Equity      
  Common stock   67     67 
  Additional paid-in-capital   158,278     157,631 
  Accumulated deficit   (142,019)     (115,736)
  Total Stockholders' Equity   16,326     41,962 
  Total Liabilities and Stockholders' Equity $ 59,258  $  82,322 
           


Summary Condensed Statements of Cash Flows (Unaudited)

    
   Nine Months Ended September 30,
   2015 2014
Net Cash Used in Operating Activities   $ (11,643) $ (9,174)
Net Cash Used in Investing Activities    (5,347)   (6,547)
Net Cash Used in Financing Activities    (729)   (570)
Net Decrease in Cash and Cash Equivalents  $ (17,719) $ (16,291)
             

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 September 30, 2015  
  Fixed
Wireless
 Shared Wireless
Infrastructure
 Corporate Eliminations Total 
            
Revenues $6,996 $ 850  $ -  $ (48) $ 7,798  
                 
Operating Expenses                
  Cost of revenues    2,735   3,484    16    (48)   6,187  
  Depreciation and amortization   2,214   1,006    216    -    3,436  
  Customer support  379   179     752    -    1,310  
  Sales and marketing  1,401   36    77    -    1,514  
  General and administrative   110   100    1,985    -    2,195  
  Total Operating Expenses    6,839   4,805    3,046    (48)   14,642  
                 
Operating Income (Loss) $157 $ (3,955) $ (3,046) $ -  $ (6,844) 
  Non-recurring expenses, primarily acquisition related  -   -    8    -    8  
  Non-cash expenses (a)  2,309   1,002    396    -    3,707  
Adjusted EBITDA (b)  2,466   (2,953)   (2,642)   -    (3,129) 
  Less: Capital expenditures  1,779    46    32    -    1,857  
Net Cash Flow (b) $687 $ (2,999) $  (2,674) $ -  $ (4,986) 
                         


    
  Three Months Ended September 30, 2014 
  Fixed
Wireless
 Shared Wireless
Infrastructure
 Corporate Eliminations Total 
            
Revenues $7,554 $  794  $  -   $  (46) $  8,302  
                 
Operating Expenses                
  Cost of revenues    2,632    3,610     15     (46)    6,211  
  Depreciation and amortization    1,981    1,014     323     -      3,318  
  Customer support    346    147     755     -      1,248  
  Sales and marketing   1,239    38     76     -      1,353  
  General and administrative    64    163     2,155     -      2,382  
  Total Operating Expenses    6,262    4,972     3,324     (46)    14,512  
                  
Operating Income (Loss) $1,292  $  (4,178) $  (3,324)  $  -  $ (6,210) 
  Non-cash expenses (a)  2,096    1,084     501      -     3,681  
Adjusted EBITDA (b)   3,388    (3,094)    (2,823)     -      (2,529) 
  Less: Capital expenditures   1,154    590     22      -     1,766  
Net Cash Flow (b) $2,234 $  (3,684) $  (2,845) $   -  $  (4,295) 
                         


    
  Nine Months Ended September 30, 2015  
  Fixed
Wireless
 Shared Wireless
Infrastructure
 Corporate Eliminations Total 
            
Revenues $21,294 $ 2,464  $ -  $ (143) $ 23,615  
                 
Operating Expenses                
  Cost of revenues   8,141   10,863    46    (143)   18,907  
  Depreciation and amortization   6,516   3,053    655    -     10,224  
  Customer support  1,066   536    2,282     -    3,884  
  Sales and marketing  4,039   123    229    -    4,391  
  General and administrative   411   303    6,778    -    7,492  
  Total Operating Expenses    20,173   14,878    9,990    (143)   44,898  
                 
Operating Income (Loss) $1,121 $ (12,414) $ (9,990) $ -  $ (21,283) 
  Non-recurring expenses, primarily acquisition related  -   -    406    -    406  
  Non -cash expenses (a)  6,828   3,109    1,241    -    11,178  
Adjusted EBITDA (b)  7,949   (9,305)   (8,343)   -    (9,699) 
  Less: Capital expenditures  5,635   221    210    -    6,066  
Net Cash Flow (b) $2,314 $ (9,526) $ (8,553) $ -  $ (15,765) 
                         


    
   Nine Months Ended September 30, 2014 
  Fixed
Wireless
 Shared Wireless
Infrastructure
 Corporate  Eliminations Total 
             
Revenues $ 22,811 $  2,273  $  -   $  (138) $ 24,946  
                 
Operating Expenses                 
  Cost of revenues    7,751    10,512     44     (138)    18,169  
  Depreciation and amortization    6,599    2,933     763     -      10,295  
  Customer support   890    502     2,182      -      3,574  
  Sales and marketing   3,754    178     242     -      4,174  
  General and administrative    374    467     6,885     -      7,726  
  Total Operating Expenses     19,368    14,592     10,116     (138)    43,938  
                 
Operating Income (Loss) $ 3,443  $  (12,319) $  (10,116)  $   -  $  (18,992) 
  Non-recurring expenses, primarily acquisition related  -   -      91      -     91  
  Non-cash expenses (a)   6,896    3,136     1,478      -     11,510  
Adjusted EBITDA (b)   10,339    (9,183)     (8,547)     -      (7,391) 
  Less: Capital expenditures   4,044    2,018     339      -     6,401  
Net Cash Flow (b) $ 6,295 $  (11,201) $  (8,886) $   -  $  (13,792) 
                         

(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.

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) 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 September 30,
    2015     2014 
Adjusted EBITDA $ (3,129) $ (2,529)
Depreciation and amortization   (3,436)   (3,318)
Stock-based compensation   (193)   (185)
Loss on nonmonetary transactions   (60)   (68)
Non-recurring expenses   (8)   - 
Deferred rent   (18)   (110)
Operating Income (Loss) $ (6,844) $  (6,210)
Interest expense, net   (1,665)    (44)
Net loss $ (8,509) $  (6,254)


    
   Nine Months Ended September 30,
    2015    2014 
Adjusted EBITDA $ (9,699) $  (7,391)
Depreciation and amortization   (10,224)    (10,295)
Stock-based compensation   (615)    (740)
Loss on nonmonetary transactions   (193)   (203)
Non-recurring expenses   (406)   (91)
Deferred rent   (146)   (272)
Operating Income (Loss) $ (21,283)  $ (18,992)
Interest expense, net   (5,000)   (166)
Net loss $ (26,283) $ (19,158)
            

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

   
  Three Months Ended September 30,
    2015    2014 
Net cash flow $ (4,986) $ (4,295)
Capital expenditures   1,857    1,766 
Non-recurring expenses   (8)   - 
Changes in operating assets and liabilities, net   136    (737)
Other, net   (819)   (37)
Net cash used in operating activities $ (3,820) $ (3,303)


   
  Nine Months Ended September 30,
    2015     2014 
Net cash flow $ (15,765) $  (13,792)
Capital expenditures   6,066     6,401 
Non-recurring expenses   (406)    (91)
Changes in operating assets and liabilities, net   842      (1,514)
Other, net   (2,380)    (178)
Net cash used in operating activities $ (11,643) $  (9,174)
            

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 9, 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 November 16, 2015 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 63065499.

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. 

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.

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

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