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Towerstream Reports Third Quarter 2014 Results

MIDDLETOWN, R.I., Nov. 10, 2014 (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, 2014.

Third Quarter Operating Highlights

HetNets Tower Corporation Subsidiary

  • Revenues increased to $0.8 million in the third quarter 2014 compared to $0.5 million in the third quarter 2013.
  • Expanded Wi-Fi locations for large cable company customer by approximately 20% over the twelve months ended September 30, 2014.

Towerstream Corporation

  • Total customer average revenue per user ("ARPU") totaled $769 during the third quarter 2014 as compared to $760 for the second quarter 2014 and $747 for the third quarter 2013.
  • ARPU of new customers totaled $651 during the third quarter 2014 as compared to $626 for the second quarter 2014 and $648 for the third quarter 2013.
  • Customer churn for the third quarter 2014 was 1.69% compared to 1.71% for the second quarter 2014 and the third quarter 2013.
  • New Cogent-like offering of 100 Mbps for $699 continues to gain traction with 22 customer installations and 17 buildings lit.
  • Completed a $35 million debt financing in October 2014.

Management Comments

"We are seeing increased activity in the densification of networks in major urban markets where our robust fixed wireless backhaul network provides us with a unique advantage over competing solutions" stated Jeff Thompson, President and Chief Executive Officer. "Carriers are now physically evaluating our rooftop locations for potential initial deployments and we believe the FCC's newly issued new order, designed to streamline the regulatory process, will accelerate the deployment of small cell infrastructure."

"Our recently completed debt financing provides us with the capital needed to support the strategic growth objectives for our fixed wireless and shared wireless businesses," stated Joseph Hernon, Chief Financial Officer. "We have expanded the number of buildings powered with our 100 megabyte offering and are visiting potential locations for a second sales center designed to re-ignite growth in our fixed wireless segment."

Selected Financial Data and Key Operating Metrics
(All dollars are in thousands except ARPU)
(Unaudited)
Three months ended
9/30/2014 6/30/2014 9/30/2013
Revenues $ 8,302 $ 8,265 $ 8,401
Gross margin
Consolidated 25% 26% 35%
Fixed wireless 65% 65% 68%
Capital expenditures
Fixed wireless $ 1,154 $ 1,403 $ 1,243
Shared wireless infrastructure 590 490 681
Corporate 22 205 200
Churn rate (1) 1.69% 1.71% 1.71%
ARPU (1) $ 769 $ 760 $ 747
ARPU of new customers (1) 651 626 648
Cash and cash equivalents 11,891 17,289 32,794
(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 September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Revenues $ 8,302 $ 8,401 $ 24,946 $ 24,912
Operating Expenses
Cost of revenues 6,211 5,445 18,169 15,592
Depreciation and amortization 3,318 3,846 10,295 11,653
Customer support 1,244 1,221 3,563 3,800
Sales and marketing 1,353 1,369 4,174 4,333
General and administrative 2,382 2,600 7,726 8,374
Total Operating Expenses 14,508 14,481 43,927 43,752
Operating Loss (6,206) (6,080) (18,981) (18,840)
Other Income/(Expense)
Gain on business acquisition -- -- -- 1,004
Interest expense, net (44) (60) (166) (154)
Other income (expense), net (4) (3) (11) (11)
Total Other Income/(Expense) (48) (63) (177) 839
Net Loss $ (6,254) $ (6,143) $ (19,158) $ (18,001)
Net loss per common share – basic and diluted $ (0.09) $ (0.09) $ (0.29) $ (0.28)
Weighted average common shares outstanding – basic and diluted 66,644 66,402 66,521 64,764
Statement of Operations - Segment Basis (Unaudited)
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 342 147 755 -- 1,244
Sales and marketing 1,239 38 76 -- 1,353
General and administrative 64 163 2,155 -- 2,382
Total Operating Expenses 6,258 4,972 3,324 (46) 14,508
Operating Income (Loss) $ 1,296 $ (4,178) $ (3,324) $ -- $ (6,206)
Non-cash expenses (a) 2,096 1,084 501 -- 3,681
Adjusted EBITDA (b) 3,392 (3,094) (2,823) -- (2,525)
Less: Capital expenditures 1,154 590 22 -- 1,766
Net Cash Flow (b) $ 2,238 $ (3,684) $ (2,845) $ -- $ (4,291)
Three Months Ended September 30, 2013
Fixed Wireless Shared Wireless Infrastructure Corporate Eliminations Total
Revenues $ 7,910 $ 536 $ -- $ (45) $ 8,401
Operating Expenses
Cost of revenues 2,510 2,957 23 (45) 5,445
Depreciation and amortization 2,755 857 234 -- 3,846
Customer support 339 209 673 -- 1,221
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)
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 879 502 2,182 -- 3,563
Sales and marketing 3,754 178 242 -- 4,174
General and administrative 374 467 6,885 -- 7,726
Total Operating Expenses 19,357 14,592 10,116 (138) 43,927
Operating Income (Loss) $ 3,454 $ (12,319) $ (10,116) $ -- $ (18,981)
Non-recurring expenses, primarily acquisition related -- -- 91 -- 91
Non-cash expenses (a) 6,896 3,136 1,478 -- 11,510
Adjusted EBITDA (b) 10,350 (9,183) (8,547) -- (7,380)
Less: Capital expenditures 4,044 2,018 339 -- 6,401
Net Cash Flow (b) $ 6,306 $ (11,201) $ (8,886) $ -- $ (13,781)
Nine Months Ended September 30, 2013
Fixed Wireless Shared Wireless Infrastructure Corporate Eliminations Total
Revenues $ 24,158 $ 891 $ -- $ (137) $ 24,912
Operating Expenses
Cost of revenues 7,229 8,405 95 (137) 15,592
Depreciation and amortization 8,411 2,633 609 -- 11,653
Customer support 901 588 2,311 -- 3,800
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, 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.

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) 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
(All dollars are in thousands)
(Unaudited) (Audited)
September 30, 2014 December 31, 2013
Assets
Current Assets
Cash and cash equivalents $ 11,891 $ 28,182
Other 2,478 1,537
Total Current Assets 14,369 29,719
Property and equipment, net 35,382 38,485
Other assets 5,724 6,713
Total Assets 55,475 74,917
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses 2,833 3,774
Deferred revenues and other 2,094 2,247
Total Current Liabilities 4,927 6,021
Long-Term Liabilities 2,845 2,802
Total Liabilities 7,772 8,823
Stockholders' Equity
Common stock 67 66
Additional paid-in-capital 154,939 154,172
Accumulated deficit (107,303) (88,144)
Total Stockholders' Equity 47,703 66,094
Total Liabilities and Stockholders' Equity $ 55,475 $ 74,917
Summary Condensed Statement of Cash Flows
(Unaudited) Nine Months Ended September 30,
2014 2013
Cash Flows from Operating Activities
Net loss $ (19,158) $ (18,001)
Non-cash adjustments:
Depreciation & amortization 10,295 11,653
Stock-based compensation 740 939
Gain on business acquisition -- (1,004)
Other 463 65
Changes in operating assets and liabilities (2,381) (2,018)
Net Cash Used in Operating Activities (10,041) (8,366)
Cash Flows From Investing Activities
Acquisitions of property and equipment (5,982) (3,897)
Acquisition of a business, net of cash acquired -- (223)
Lease incentive payment from landlord 380 --
Other (78) (148)
Net Cash Used in Investing Activities (5,680) (4,268)
Cash Flows From Financing Activities
Payments on capital leases (596) (571)
Proceeds from stock issuances 30 348
Net proceeds from sale of common stock -- 30,499
Other (4) --
Net Cash (Used in) Provided by Financing Activities (570) 30,276
Net (Decrease) Increase In Cash and Cash Equivalents (16,291) 17,642
Cash and cash equivalents – beginning 28,182 15,152
Cash and cash equivalents – ending $ 11,891 $ 32,794
Fixed Wireless Segment Market data for the three months ended September 30, 2014
(All dollars are in thousands)
Adjusted
Cost of Operating Market
Market Revenues Revenues Gross Margin Costs EBITDA
Los Angeles $ 2,017 $ 544 $ 1,473 73% $ 514 $ 959
New York 1,949 724 1,225 63% 348 877
Boston 1,364 398 966 71% 202 764
Chicago 722 299 423 59% 112 311
Las-Vegas-Reno 338 126 212 63% 1 211
Miami 358 117 241 67% 50 191
Houston 178 71 107 60% 10 97
Dallas-Fort Worth 156 96 60 38% 20 40
San Francisco 270 125 145 54% 105 40
Seattle 74 45 29 39% (3) 32
Providence-Newport 57 54 3 5% 2 1
Philadelphia 25 33 (8) --% 4 (12)
Total $ 7,508 $ 2,632 $ 4,876 65% $ 1,365 $ 3,511
Fixed Wireless Segment Market data for the three months ended September 30, 2013
(All dollars are in thousands)
Adjusted
Cost of Operating Market
Market Revenues Revenues Gross Margin Costs EBITDA
Boston $ 1,633 $ 362 $ 1,271 78% $ 196 $ 1,075
Los Angeles 2,021 549 1,472 73% 419 1,053
New York 1,915 636 1,279 67% 294 985
Chicago 780 284 496 64% 136 360
Miami 383 120 263 69% 132 131
San Francisco 312 128 184 59% 80 104
Las Vegas-Reno 251 127 124 49% 52 72
Houston 154 66 88 57% 23 65
Providence-Newport 115 50 65 57% 11 54
Dallas-Fort Worth 174 101 73 42% 65 8
Seattle 83 48 35 42% 28 7
Nashville 5 15 (10) --% 2 (12)
Philadelphia 39 24 15 38% 31 (16)
Total $ 7,865 $ 2,510 $ 5,355 68% $ 1,469 $ 3,886
Fixed Wireless Segment Market data for the nine months ended September 30, 2014
(All dollars are in thousands)
Adjusted
Cost of Operating Market
Market Revenues Revenues Gross Margin Costs EBITDA
Los Angeles $ 6,053 $ 1,678 $ 4,375 72% $ 1,451 $ 2,924
New York 5,815 2,045 3,770 65% 964 2,806
Boston 4,347 1,195 3,152 73% 589 2,563
Chicago 2,182 886 1,296 59% 381 915
Miami 1,107 338 769 69% 224 545
Las-Vegas-Reno 819 370 449 55% 100 349
Houston 524 194 330 63% 66 264
San Francisco 831 377 454 55% 254 200
Dallas-Fort Worth 483 290 193 40% 115 78
Seattle 214 140 74 35% 14 60
Providence-Newport 201 152 49 24% 5 44
Philadelphia 95 72 23 24% 25 (2)
Nashville 2 13 (11) --% 2 (13)
Total $ 22,673 $ 7,750 $ 14,923 66% $ 4,190 $ 10,733
Fixed Wireless Segment Market data for the nine months ended September 30, 2013
(All dollars are in thousands)
Adjusted
Cost of Operating Market
Market Revenues Revenues Gross Margin Costs EBITDA
Los Angeles $ 6,138 $ 1,562 $ 4,576 75% $ 1,211 $ 3,365
Boston 4,931 1,048 3,883 79% 657 3,226
New York 5,741 1,869 3,872 67% 1,002 2,870
Chicago 2,513 856 1,657 66% 362 1,295
Miami 1,152 324 828 72% 303 525
Las Vegas-Reno 913 400 513 56% 150 363
San Francisco 934 342 592 63% 283 309
Houston 387 144 243 63% 66 177
Providence-Newport 356 149 207 58% 48 159
Seattle 314 141 173 55% 90 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 $ 7,229 $ 16,792 70% $ 4,456 $ 12,336

Operating Outlook and Guidance

  • Revenues for the fourth quarter 2014 are expected to range between $7.4 million to $7.7 million for the Fixed Wireless segment.
  • Revenues for the fourth quarter 2014 are expected to range between $0.8 million to $1.0 million for the Shared Wireless Infrastructure segment.
  • Adjusted EBITDA, on a segment basis, for the fourth quarter 2014 is expected to range between profitability of $3.1 million to $3.4 million for the Fixed Wireless segment.

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.

"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.

"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 September 30,
2014 2013
Adjusted Market EBITDA $ 3,511 $ 3,886
Fixed wireless, non-market specific
Other expenses (280) (202)
Depreciation and amortization (1,981) (2,755)
Shared wireless infrastructure, net (4,132) (3,675)
Corporate (3,324) (3,334)
Other income (expense) (48) (63)
Net loss $ (6,254) $ (6,143)
For the nine months ended September 30,
2014 2013
Adjusted Market EBITDA $ 10,733 $ 12,336
Fixed wireless, non-market specific
Other expenses (818) (714)
Depreciation and amortization (6,599) (8,411)
Shared wireless infrastructure, net (12,181) (11,323)
Corporate (10,116) (10,728)
Other income (expense) (177) 839
Net loss $ (19,158) $ (18,001)
II. Adjusted EBITDA to Net Loss
For the three months ended September 30,
2014 2013
Adjusted EBITDA $ (2,525) $ (1,876)
Depreciation and amortization (3,318) (3,846)
Stock-based compensation (185) (272)
Loss on property and equipment -- (23)
Loss on non-monetary transactions (68) (63)
Deferred rent (110) --
Operating Income (Loss) $ (6,206) $ (6,080)
Interest expense, net (44) (60)
Other income (expense), net (4) (3)
Net loss $ (6,254) $ (6,143)
For the nine months ended September 30,
2014 2013
Adjusted EBITDA $ (7,380) $ (5,848)
Depreciation and amortization (10,295) (11,653)
Stock-based compensation (740) (939)
Loss on property and equipment -- (82)
Loss on non-monetary transactions (203) (205)
Deferred rent (272) --
Non-recurring expenses (91) (113)
Operating Income (Loss) $ (18,981) $ (18,840)
Interest expense, net (166) (154)
Gain on business acquisition -- 1,004
Other income (expense), net (11) (11)
Net loss $ (19,158) $ (18,001)
III. Net Cash Flow to Net Cash Used in Operating Activities
For the three months ended September 30,
2014 2013
Net cash flow $ (4,291) $ (4,000)
Capital expenditures 1,766 2,124
Changes in operating assets and liabilities, net (737) 383
Other, net (41) (145)
Net cash used in operating activities $ (3,303) $ (1,638)
For the nine months ended September 30,
2014 2013
Net cash flow $ (13,781) $ (10,606)
Capital expenditures 6,401 4,758
Non-recurring expenses (91) (113)
Changes in operating assets and liabilities, net (2,381) (2,018)
Other, net (189) (387)
Net cash used in operating activities $ (10,041) $ (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 10, 2014 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 17, 2014 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 23980446.

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

Source:Towerstream Corporation