Towerstream Reports First Quarter 2012 Results
MIDDLETOWN, R.I., May 10, 2012 –Towerstream Corporation (NASDAQ: TWER), a leading 4G and Wi-Fi/ Small Cell Network Services provider, announced results for the first quarter ended March 31, 2012.
First Quarter Operating Highlights
| · | Revenues increased 9% to $7.8 million during the first quarter 2012 compared to the fourth quarter 2011 and increased 31% compared to the first quarter 2011 |
| · | Adjusted EBITDA profitability, excluding non-recurring expenses and costs associated with the Wi-Fi network investment, increased to $1.4 million for the first quarter 2012 compared to $1.3 million for the fourth quarter 2011 and compared to $0.8 million for the first quarter 2011 |
| · | Customer churn for the first quarter 2012 was 1.58% and remained within or below the Company’s target range of 1.4% to 1.7% for the tenth consecutive quarter. |
Management Comments
“We are very pleased with the progress we are making with the carriers with our Wi-Fi and Small Cell rooftop assets,” stated Jeff Thompson, Chief Executive Officer. “We believe that we have positioned the Company to become one of the leaders in Small Cell rooftops leasing and operating during one of the biggest network upgrades in the history of Mobile broadband.”
“Adjusted EBITDA profitability from core services continued to improve in the first quarter,” stated Joseph Hernon, Chief Financial Officer. “We are expanding investment in our Wi-Fi offload program into additional markets based on the strong interest in these services in major urban areas.”
Selected Financial Data and Key Operating Metrics
(All dollars are in thousands except ARPU)
| | | (Unaudited) | |
| | | Three months ended | |
| | | 3/31/2012 | | | 12/31/2011 | | | 3/31/2011 | |
| Selected Financial Data | | | | | | | | | |
| Revenues | | $ | 7,819 | | | $ | 7,185 | | | $ | 5,953 | |
| Gross margin | | | 61 | % | | | 64 | % | | | 75 | % |
| Adjusted gross margin excluding Wi-Fi network expenses | | | 72 | % | | | 72 | % | | | 75 | % |
| Depreciation and amortization | | | 3,281 | | | | 2,651 | | | | 1,975 | |
| Core operating expenses (1)(2) | | | 5,840 | | | | 5,109 | | | | 3,986 | |
| Operating loss (1) | | | (4,370 | ) | | | (3,164 | ) | | | (1,514 | ) |
| Gain on business acquisition | | | - | | | | 1,186 | | | | - | |
| Net loss (1) | | | (4,380 | ) | | | (2,080 | ) | | | (1,513 | ) |
| Adjusted EBITDA (2) | | | (520 | ) | | | (63 | ) | | | 593 | |
| Non-recurring expenses | | | 334 | | | | 200 | | | | 49 | |
| Wi-Fi network expenses | | | 1,632 | | | | 1,181 | | | | 121 | |
Adjusted EBITDA excluding non-recurring and Wi-Fi network expenses(2) | | | 1,446 | | | | 1,318 | | | | 763 | |
| Capital expenditures | | | | | | | | | | | | |
| Wireless broadband | | $ | 3,813 | | | $ | 3,052 | | | $ | 1,532 | |
| Wi-Fi network | | | 2,048 | | | | 1,071 | | | | 1,088 | |
| | | | | | | | | | | | | |
| Key Operating Metrics | | | | | | | | | | | | |
| Churn rate (2) | | | 1.58 | % | | | 1.43 | % | | | 1.56 | % |
| ARPU (2) | | $ | 706 | | | $ | 710 | | | $ | 688 | |
| ARPU of new customers (2) | | | 545 | | | | 612 | | | | 558 | |
(1) Includes stock-based compensation of $524, $419 and $106, respectively.
(2) See Non-GAAP Measures below for a definition and reconciliation of Adjusted EBITDA, and definitions of Core Operating Expenses, Churn, ARPU and ARPU of new customers.
Operating Outlook and Guidance
| · | Revenues for the second quarter 2012 are expected to range between $8.0 million to $8.1 million. |
| · | Adjusted EBITDA profitability is expected to range between $1.3 million to $1.5 million. |
Non-GAAP Measures
The terms “Adjusted EBITDA,” “Churn,” “Churn rate,” ”ARPU,” and “Market Cash Flow” are measurements used by Towerstream to monitor business performance and are not recognized measures under generally accepted accounting principles (“GAAP”). Accordingly, investors are cautioned in using or relying upon these measures as alternatives to recognized GAAP measures. Our methods of calculating these measures may differ from other issuers and, accordingly, may not be comparable to similar measures presented by other issuers.
We focus on Adjusted EBITDA as a principal indicator of the operating performance of our business. EBITDA represents net income (loss) before interest, income taxes, depreciation and amortization. We define Adjusted EBITDA as 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.
The term “Core Operating Expenses” includes customer support services, sales and marketing, and general and administrative expenses, and excludes cost of revenues, depreciation and amortization.
The terms “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. The term “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. 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.
The Non-GAAP measure, Adjusted EBITDA, excluding non-recurring expenses and Wi-Fi network expenses, has been reconciled to Net loss as follows:
(All dollars are in thousands)
| | | Three months ended | |
| | | 3/31/2012 | | | 12/31/2011 | | | 3/31/2011 | |
| Reconciliation of Non-GAAP to GAAP: | | | | | | | | | |
| Adjusted EBITDA, excluding non-recurring expenses and Wi-Fi network expenses | | $ | 1,446 | | | $ | 1,318 | | | $ | 763 | |
| Depreciation and amortization | | | (3,281 | ) | | | (2,651 | ) | | | (1,975 | ) |
| Non-recurring expenses, primarily acquisition-related | | | (334 | ) | | | (200 | ) | | | (49 | ) |
| Wi-Fi network expenses | | | (1,632 | ) | | | (1,181 | ) | | | (121 | ) |
| Stock-based compensation | | | (524 | ) | | | (419 | ) | | | (106 | ) |
| Loss on property and equipment | | | (12 | ) | | | (16 | ) | | | (18 | ) |
| Loss on nonmonetary transactions | | | (33 | ) | | | (15 | ) | | | (8 | ) |
| Interest expense | | | (22 | ) | | | (8 | ) | | | (3 | ) |
| Gain on business acquisition | | | - | | | | 1,186 | | | | - | |
| Other income (expense), net | | | (5 | ) | | | (1 | ) | | | (2 | ) |
| Interest income | | | 17 | | | | 25 | | | | 6 | |
| Provision for income taxes | | | - | | | | (118 | ) | | | - | |
| Net loss | | $ | (4,380 | ) | | $ | (2,080 | ) | | $ | (1,513 | ) |
Summary Condensed Consolidated Financial Statements
(All dollars are in thousands except per share amounts)
| Statement of Operations | | (Unaudited) | |
| | | Three months ended March 31, | |
| | | 2012 | | | 2011 | |
| | | | | | | |
| Revenues | | $ | 7,819 | | | $ | 5,953 | |
| | | | | | | | | |
| Operating Expenses | | | | | | | | |
| Cost of revenues (exclusive of depreciation) | | | 3,068 | | | | 1,506 | |
| Depreciation and amortization | | | 3,281 | | | | 1,975 | |
| Customer support services | | | 1,068 | | | | 771 | |
| Sales and marketing | | | 1,430 | | | | 1,340 | |
| General and administrative | | | 3,342 | | | | 1,875 | |
| Total Operating Expenses | | | 12,189 | | | | 7,467 | |
| Operating Loss | | | (4,370 | ) | | | (1,514 | ) |
| Other Income (Expense) | | | | | | | | |
| Interest income | | | 17 | | | | 6 | |
| Interest expense | | | (22 | ) | | | (3 | ) |
| Other income (expense), net | | | (5 | ) | | | (2 | ) |
| Total Other Income (Expense) | | | (10 | ) | | | 1 | |
| Net Loss | | $ | (4,380 | ) | | $ | (1,513 | ) |
| | | | | | | | | |
| Net loss per common share | | $ | (0.08 | ) | | $ | (0.04 | ) |
| Weighted average common shares outstanding – basic and diluted | | | 54,312 | | | | 42,210 | |
Analysis of First Quarter Results of Operations
Revenues for the first quarter 2012 increased 9% from the fourth quarter 2011 and increased 31% compared to the first quarter 2011. These increases were driven by a 24% growth in our customer base from approximately 2,900 customers at the end of the first quarter 2011 to approximately 3,600 at the end of the first quarter 2012.
ARPU of new customers decreased 11% in the first quarter 2012 compared to the fourth quarter 2011 and decreased 2% compared to the first quarter 2011. The sequential decrease related to a higher relative percentage of new customers purchasing lower ARPU bandwidth in the first quarter 2012 compared to the fourth quarter 2011. ARPU of all customers in the first quarter 2012 decreased 1% compared to the fourth quarter 2011 and increased 3% compared to the first quarter 2011.
Customer churn during the first quarter 2012 was 1.58% compared to 1.43% during the fourth quarter 2011 and 1.56% during the first quarter 2011. Our churn rate was within our targeted range of 1.4% to 1.7% and remains low compared to industry averages.
Cost of revenue increased 19% in the first quarter 2012 compared to the fourth quarter 2011 and increased by slightly greater than 100% compared to the first quarter 2011. The Company spent $0.8 million in the first quarter 2012 related to the construction of its Wi-Fi network as compared to $0.6 million in the fourth quarter 2011 and basically zero in the first quarter 2011. The increase also related to additional network expenses associated with the acquisition of One Velocity and Color Broadband.
Depreciation expense increased 14% in the first quarter 2012 compared to the fourth quarter 2011 and increased 68% compared to the first quarter 2011. The base of depreciable assets was 11% higher at the end of the first quarter 2012 as compared to the fourth quarter 2011 and 62% higher compared to the first quarter of 2011. The increased depreciable base reflects continued growth in the core business as well as spending on the Wi-Fi network.
Amortization expense increased 51% in the first quarter 2012 compared to the fourth quarter 2011 and increased 63% compared to the first quarter 2011. The year-over-year increase relates to customer based intangible assets recorded in connection with the acquisitions of One Velocity in the second quarter 2011 and Color Broadband in the fourth quarter 2011.
Customer support expenses increased 9% in the first quarter 2012 compared to the fourth quarter 2011 and increased 38% compared to the first quarter 2011. These increases related to staffing additions and other costs incurred to support a customer base which increased 24% over the one year period.
Sales and marketing expenses increased 14% in the first quarter 2012 compared to the fourth quarter 2011 and increased 7% compared to the first quarter 2011. These increases primarily related to higher payroll costs.
General and administrative expenses increased 16% in the first quarter 2012 compared to the fourth quarter 2011 and increased 78% compared to the first quarter 2011. Costs associated with the Wi-Fi network totaled approximately $0.6 million in the first quarter 2012 compared to approximately $0.4 million in the fourth quarter 2011 and approximately $0.1 million in the first quarter 2011. The year-over-year increase also relates to higher employee stock-based compensation, acquisition costs and information technology spending.
Capital expenditures totaled $5.9 million for the first quarter 2012 as compared to $4.1 million for the fourth quarter 2011 and $2.6 million for the first quarter 2011.The Company spent $2.0 million in the first quarter 2012 related to the construction of its Wi-Fi network, and $1.1 million in the fourth quarter 2011 and $1.1 million in the first quarter 2011.
Balance Sheet (All dollars are in thousands) | | | |
| | | (Unaudited)
March 31, 2012 | | | (Audited)
December 31, 2011 | |
| Assets | | | | | | | | |
| Current Assets | | | | | | | | |
| Cash and cash equivalents | | $ | 38,675 | | | $ | 44,672 | |
| Other | | | 1,767 | | | | 1,216 | |
| Total Current Assets | | | 40,442 | | | | 45,888 | |
| | | | | | | | | |
| Property and equipment, net | | | 31,148 | | | | 27,531 | |
| | | | | | | | | |
| Other assets | | | 9,345 | | | | 10,218 | |
| | | | | | | | | |
| Total Assets | | | 80,935 | | | | 83,637 | |
| | | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accounts payable and accrued expenses | | | 5,057 | | | | 3,564 | |
| Deferred revenues and other | | | 1,999 | | | | 2,277 | |
| Total Current Liabilities | | | 7,056 | | | | 5,841 | |
| | | | | | | | | |
| Long-Term Liabilities | | | 522 | | | | 651 | |
| Total Liabilities | | | 7,578 | | | | 6,492 | |
| | | | | | | | | |
| Stockholders’ Equity | | | | | | | | |
| Common stock | | | 54 | | | | 54 | |
| Additional paid-in-capital | | | 120,062 | | | | 119,470 | |
| Accumulated deficit | | | (46,759 | ) | | | (42,379 | ) |
| Total Stockholders’ Equity | | | 73,357 | | | | 77,145 | |
| Total Liabilities and Stockholders’ Equity | | $ | 80,935 | | | $ | 83,637 | |
| Statement of Cash Flows (Unaudited) | | Three months ended March 31, | |
| | | 2012 | | | 2011 | |
| Cash Flows From Operating Activities | | | | | | | | |
| Net loss | | $ | (4,380 | ) | | $ | (1,513 | ) |
| Non-cash adjustments: | | | | | | | | |
| Depreciation & amortization | | | 3,281 | | | | 1,975 | |
| Stock-based compensation | | | 524 | | | | 106 | |
| Other | | | 21 | | | | 25 | |
| Changes in operating assets and liabilities | | | (636 | ) | | | 684 | |
| Net Cash Provided (Used in) By Operating Activities | | | (1,190 | ) | | | 1,277 | |
| | | | | | | | | |
| Cash Flows From Investing Activities | | | | | | | | |
| Acquisitions of property and equipment | | | (4,618 | ) | | | (2,620 | ) |
| Other | | | (126 | ) | | | (9 | ) |
| Net Cash Used In Investing Activities | | | (4,744 | ) | | | (2,629 | ) |
| | | | | | | | | |
| Cash Flows From Financing Activities | | | | | | | | |
| Repayment of capital leases | | | (131 | ) | | | (20 | ) |
| Proceeds from stock issuances | | | 68 | | | | 205 | |
| Net Cash (Used in) Provided By Financing Activities | | | (63 | ) | | | 185 | |
| | | | | | | | | |
| Net Decrease In Cash and Cash Equivalents | | | (5,997 | ) | | | (1,167 | ) |
| Cash and Cash Equivalents – Beginning | | | 44,672 | | | | 23,173 | |
| Cash and Cash Equivalents – Ending | | $ | 38,675 | | | $ | 22,006 | |
Market data for the three months ended March 31, 2012
(All dollars are in thousands)
| Market | | Revenues | | | Cost of
Revenues | | | Gross Margin (1) | | | Operating Costs | | | Adjusted
Market
EBITDA | |
| Los Angeles | | $ | 1,967 | | | $ | 580 | | | $ | 1,387 | | | | 71 | % | | $ | 351 | | | $ | 1,036 | |
| Boston | | | 1,689 | | | | 394 | | | | 1,295 | | | | 77 | % | | | 266 | | | | 1,029 | |
| New York | | | 1,648 | | | | 1,102 | | | | 546 | | | | 33 | % | | | 353 | | | | 193 | |
| Chicago | | | 861 | | | | 274 | | | | 587 | | | | 68 | % | | | 158 | | | | 429 | |
| Las Vegas-Reno | | | 432 | | | | 153 | | | | 279 | | | | 65 | % | | | 40 | | | | 239 | |
| Miami | | | 419 | | | | 88 | | | | 331 | | | | 79 | % | | | 102 | | | | 229 | |
| San Francisco | | | 377 | | | | 176 | | | | 201 | | | | 53 | % | | | 84 | | | | 117 | |
| Providence-Newport | | | 108 | | | | 40 | | | | 68 | | | | 63 | % | | | 30 | | | | 38 | |
| Seattle | | | 116 | | | | 63 | | | | 53 | | | | 46 | % | | | 27 | | | | 26 | |
| Dallas-Fort Worth | | | 169 | | | | 83 | | | | 86 | | | | 51 | % | | | 78 | | | | 8 | |
| Nashville | | | 9 | | | | 13 | | | | (4 | ) | | | 0 | % | | | 9 | | | | (13 | ) |
| Philadelphia | | | 24 | | | | 16 | | | | 8 | | | | 33 | % | | | 22 | | | | (14 | ) |
| Total | | $ | 7,819 | | | $ | 2,982 | | | $ | 4,837 | | | | 62 | % | | $ | 1,520 | | | $ | 3,317 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted market EBITDA | | | | | | | | | | | | | | | | | | | | | | $ | 3,317 | |
| Centralized costs | | | | | | | | | | | | | | | | | | | | | | | (1,064 | ) |
| Corporate expenses | | | | | | | | | | | | | | | | | | | | | | | (2,818 | ) |
| Depreciation and amortization | | | | | | | | | | | | | | | | | | | | | | | (3,281 | ) |
| Stock-based compensation | | | | | | | | | | | | | | | | | | | | | | | (524 | ) |
| Other income (expense) | | | | | | | | | | | | | | | | | | | | | | | (10 | ) |
| Net loss | | | | | | | | | | | | | | | | | | | | | | $ | (4,380 | ) |
Market data for the three months ended March 31, 2011
(All dollars are in thousands)
| Market | | Revenues | | | Cost of Revenues(1) | | | Gross Margin(1) | | | Operating Costs | | | Adjusted Market EBITDA | |
| Boston | | $ | 1,653 | | | $ | 394 | | | $ | 1,259 | | | | 76 | % | | $ | 222 | | | $ | 1,037 | |
| New York | | | 1,448 | | | | 340 | | | | 1,108 | | | | 77 | % | | | 332 | | | | 776 | |
| Los Angeles | | | 950 | | | | 174 | | | | 776 | | | | 82 | % | | | 261 | | | | 515 | |
| Chicago | | | 817 | | | | 227 | | | | 590 | | | | 72 | % | | | 185 | | | | 405 | |
| San Francisco | | | 349 | | | | 60 | | | | 289 | | | | 83 | % | | | 93 | | | | 196 | |
| Miami | | | 301 | | | | 69 | | | | 232 | | | | 77 | % | | | 103 | | | | 129 | |
| Seattle | | | 136 | | | | 53 | | | | 83 | | | | 61 | % | | | 29 | | | | 54 | |
| Providence/Newport | | | 119 | | | | 41 | | | | 78 | | | | 66 | % | | | 27 | | | | 51 | |
| Dallas-Fort Worth | | | 144 | | | | 81 | | | | 63 | | | | 44 | % | | | 65 | | | | (2 | ) |
| Nashville | | | 16 | | | | 8 | | | | 8 | | | | 50 | % | | | 12 | | | | (4 | ) |
| Philadelphia | | | 20 | | | | 13 | | | | 7 | | | | 35 | % | | | 28 | | | | (21 | ) |
| Total | | $ | 5,953 | | | $ | 1,460 | | | $ | 4,493 | | | | 75 | % | | $ | 1,357 | | | $ | 3,136 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted market EBITDA | | | | | | | | | | | | | | | | | | | | | | $ | 3,136 | |
| Centralized costs(1) | | | | | | | | | | | | | | | | | | | | | | | (799 | ) |
| Corporate expenses | | | | | | | | | | | | | | | | | | | | | | | (1,770 | ) |
| Depreciation and amortization | | | | | | | | | | | | | | | | | | | | | | | (1,975 | ) |
| Stock-based compensation | | | | | | | | | | | | | | | | | | | | | | | (106 | ) |
| Other income (expense) | | | | | | | | | | | | | | | | | | | | | | | 1 | |
| Net loss | | | | | | | | | | | | | | | | | | | | | | $ | (1,513 | ) |
| (1) | Certain expenses are reported as Cost of Revenues for financial statement purposes but are included in Centralized costs in the Market Data table because they are not specific to any market. These costs totaled $86 and $46 respectively for the three months ended March 31, 2012 and 2011. |
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 May 10, 2012 at 5:00 p.m.ETto review our financial results and provide an update on current business developments.
Interested parties may participate in the conference by dialing877-755-7423or 678-894-3069 (for international callers). A telephonic replay of the conference may be accessed approximately two hours after the call through May 17, 2012 at 11:59 p.m. ET by dialing800-585-8367or404-537-3406(for international callers) using pass code72701708.
The call will also be webcast and can be accessed in a listen-only mode on the Company’s website athttp://ir.towerstream.com/eventdetail.cfm?eventid=112334.
About Towerstream Corporation
Towerstream is a leading 4G service provider in the U.S., delivering high-speed wireless Internet access to businesses. Founded in 2000, the Company has established networks in 12 markets including New York City, Boston, Los Angeles, Chicago, Philadelphia, the San Francisco Bay area, Miami, Seattle, Dallas-Fort Worth, Nashville, Las Vegas-Reno, and the greater Providence area where the Company is based. In 2011, Towerstream launched its Manhattan Wi-Fi network geared towards mobile operators, retail/daily deal providers and Wi-Fi operators. For more information, visit our website atwww.towerstream.com or follow us on Twitter @Towerstream.
The Towerstream Corporation logo is available at:http://www.globenewswire.com/newsroom/prs/?pkgid=6570.
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 a Wi-Fi network 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:
Terry McGovern
Vision Advisors
415-902-3001
mcgovern@visionadvisors.net
MEDIA CONTACT:
Todd Barrish
Indicate Media
646-396-6090
todd@indicatemedia.com
