Towerstream Reports First Quarter 2013 Results
MIDDLETOWN, R.I., May 9, 2013 –Towerstream Corporation (NASDAQ: TWER) (the “Company”), a leading 4G and Small Cell Rooftop Tower company, announced results for the first quarter ended March 31, 2013.
First Quarter Operating Highlights
| · | Revenue increased 6% to $8.3 million during the first quarter 2013 compared to the first quarter 2012 and increased 1% compared to the fourth quarter 2012. |
| · | Customer churn for the first quarter 2013 was 1.64% compared to 1.58% for the first quarter 2012 and 1.59% for the fourth quarter 2012. Customer churn remained within the Company’s target range of 1.4% to 1.7% for the fourteenth consecutive quarter. |
| · | Average revenue per user (“ARPU”) of new customers (excluding acquisitions) increased to $630 during the first quarter 2013 compared to $545 for the first quarter 2012 and $542 for the fourth quarter 2012. |
| · | Total ARPU of all customers increased for the fifth consecutive quarter to $727. |
| · | Recognized gain of $941,457 related to the acquisition of Delos Internet which closed in February 2013. This transaction brings us into Houston, Texas and expands our national presence to thirteen markets, including nine of the eleven largest business markets in the United States. |
| · | Formed Hetnets Tower Corporation, a wholly owned subsidiary which will provide a range of shared wireless infrastructure services and access. |
| · | Strong financial position with cash and cash equivalents totaling $40.3 million at March 31, 2013. |
Management Comments
"We built Towerstream's fixed wireless business from the ground up and achieved cash flow profitability,” stated Jeffrey Thompson, President and Chief Executive Officer. “This is a very exciting milestone for the company and we believe we can attain the same result with Hetnets, our tower subsidiary, while addressing a much larger market opportunity. We are very encouraged by the acceleration we are seeing in small cell business activity for WiFi colocation, which gives us confidence in our strategy and market position."
“Beginning this quarter, we are reporting on a Segment Basis so that investors can clearly understand the operating performance of our two businesses,” stated Joseph Hernon, Chief Financial Officer. “Our Fixed Wireless business continues to perform strongly and reached cash flow profitability in the first quarter under our prior reporting method which was a goal that we had previously established and communicated to investors.”
Selected Financial Data and Key Operating Metrics
(All dollars are in thousands except ARPU)
| | | (Unaudited) | |
| | | Three months ended | |
| | | 3/31/2013 | | | 12/31/2012 | | | 3/31/2012 | |
| | | | | | | | | | |
| Revenues | | $ | 8,299 | | | $ | 8,229 | | | $ | 7,819 | |
| Gross margin | | | | | | | | | | | | |
| Consolidated | | | 37 | % | | | 38 | % | | | 61 | % |
| Fixed wireless | | | 70 | % | | | 69 | % | | | 71 | % |
| Capital expenditures | | | | | | | | | | | | |
| Fixed wireless | | $ | 1,087 | | | $ | 2,337 | | | $ | 2,630 | |
| Shared wireless infrastructure | | | 136 | | | | 2,430 | | | | 1,918 | |
| Corporate | | | 104 | | | | 126 | | | | 1,313 | |
| Churn rate (1) | | | 1.64 | % | | | 1.59 | % | | | 1.58 | % |
| ARPU (1) | | $ | 727 | | | $ | 717 | | | $ | 706 | |
| ARPU of new customers (1) | | | 630 | | | | 542 | | | | 545 | |
| Cash and cash equivalents | | $ | 40,329 | | | $ | 15,152 | | | $ | 38,675 | |
(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 March 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| Revenues | | $ | 8,299 | | | $ | 7,819 | |
| | | | | | | | | |
| Operating Expenses | | | | | | | | |
| Cost of revenues | | | 5,231 | | | | 3,073 | |
| Depreciation and amortization | | | 3,871 | | | | 3,281 | |
| Customer support | | | 1,147 | | | | 1,162 | |
| Sales and marketing | | | 1,441 | | | | 1,482 | |
| General and administrative | | | 3,137 | | | | 3,191 | |
| Total Operating Expenses | | | 14,827 | | | | 12,189 | |
| Operating Loss | | | (6,528 | ) | | | (4,370 | ) |
| Other Income (Expense) | | | | | | | | |
| Gain on business acquisition | | | 941 | | | | - | |
| Interest income | | | - | | | | 17 | |
| Interest expense | | | (36 | ) | | | (22 | ) |
| Other income (expense), net | | | (3 | ) | | | (5 | ) |
| Total Other Income (Expense) | | | 902 | | | | (10 | ) |
| Net Loss | | $ | (5,626 | ) | | $ | (4,380 | ) |
| | | | | | | | | |
| Net loss per common share – basic and diluted | | $ | (0.09 | ) | | $ | (0.08 | ) |
| | | | | | | | | |
| Weighted average common shares outstanding – basic and diluted | | | 61,465 | | | | 54,312 | |
Statement of Operations - Segment Basis
| | | Three months ended March 31, 2013 (Unaudited) | |
| | | Fixed
Wireless | | | Shared Wireless
Infrastructure | | | Corporate | | | Eliminations | | | Total | |
| | | | | | | | | | | | | | | | |
| Revenues | | $ | 8,187 | | | $ | 158 | | | $ | - | | | $ | (46 | ) | | $ | 8,299 | |
| | | | | | | | | | | | | | | | | | | | | |
| Operating Expenses | | | | | | | | | | | | | | | | | | | | |
| Cost of revenues | | | 2,431 | | | | 2,793 | | | | 53 | | | | (46 | ) | | | 5,231 | |
| Depreciation and amortization | | | 2,820 | | | | 864 | | | | 187 | | | | - | | | | 3,871 | |
| Customer support | | | 178 | | | | 103 | | | | 866 | | | | - | | | | 1,147 | |
| Sales and marketing | | | 1,297 | | | | 47 | | | | 97 | | | | - | | | | 1,441 | |
| General and administrative | | | 147 | | | | 190 | | | | 2,800 | | | | - | | | | 3,137 | |
| Total Operating Expenses | | | 6,873 | | | | 3,997 | | | | 4,003 | | | | (46 | ) | | | 14,827 | |
| | | | | | | | | | | | | | | | | | | | | |
| Operating Income (Loss) | | $ | 1,314 | | | $ | (3,839 | ) | | $ | (4,003 | ) | | $ | - | | | $ | (6,528 | ) |
| Non-recurring expenses, primarily acquisition related | | | - | | | | - | | | | 65 | | | | - | | | | 65 | |
| Non-cash expenses (a) | | | 2,936 | | | | 867 | | | | 584 | | | | - | | | | 4,387 | |
| Adjusted EBITDA(b) | | | 4,250 | | | | (2,972 | ) | | | (3,354 | ) | | | - | | | | (2,076 | ) |
| Less: Capital expenditures | | | 1,087 | | | | 136 | | | | 104 | | | | - | | | | 1,327 | |
| Net Cash Flow(b) | | $ | 3,163 | | | $ | (3,108 | ) | | $ | (3,458 | ) | | $ | - | | | $ | (3,403 | ) |
(a) Includes depreciation and amortization, stock-based compensation, loss on property and equipment, and loss on nonmonetary transactions.
(b) See Non-GAAP Measures below for a definition andreconciliation 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) 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)
March 31, 2013 | | | (Audited)
December 31, 2012 | |
| Assets | | | | | | | | |
| Current Assets | | | | | | | | |
| Cash and cash equivalents | | $ | 40,329 | | | $ | 15,152 | |
| Other | | | 1,964 | | | | 1,553 | |
| Total Current Assets | | | 42,293 | | | | 16,705 | |
| | | | | | | | | |
| Property and equipment, net | | | 40,974 | | | | 41,982 | |
| | | | | | | | | |
| Other assets | | | 9,211 | | | | 8,423 | |
| | | | | | | | | |
| Total Assets | | | 92,478 | | | | 67,110 | |
| | | | | | | | | |
| Liabilities and Stockholders’ Equity | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accounts payable and accrued expenses | | | 3,048 | | | | 4,149 | |
| Deferred revenues and other | | | 2,407 | | | | 2,468 | |
| Total Current Liabilities | | | 5,455 | | | | 6,617 | |
| | | | | | | | | |
| Long-Term Liabilities | | | 2,610 | | | | 2,689 | |
| Total Liabilities | | | 8,065 | | | | 9,306 | |
| | | | | | | | | |
| Stockholders’ Equity | | | | | | | | |
| Common stock | | | 66 | | | | 54 | |
| Additional paid-in-capital | | | 153,342 | | | | 121,118 | |
| Accumulated deficit | | | (68,995 | ) | | | (63,368 | ) |
| Total Stockholders’ Equity | | | 84,413 | | | | 57,804 | |
| Total Liabilities and Stockholders’ Equity | | $ | 92,478 | | | $ | 67,110 | |
Summary Condensed Statement of Cash Flows
(Unaudited) | | Three months ended March 31, | |
| | | 2013 | | | 2012 | |
| Cash Flows from Operating Activities | | | | | | | | |
| Net loss | | $ | (5,626 | ) | | $ | (4,380 | ) |
| Non-cash adjustments: | | | | | | | | |
| Depreciation & amortization | | | 3,871 | | | | 3,281 | |
| Stock-based compensation | | | 397 | | | | 524 | |
| Gain on business acquisition | | | (941 | ) | | | - | |
| Other | | | 12 | | | | 21 | |
| Changes in operating assets and liabilities | | | (2,136 | ) | | | (1,820 | ) |
| Net Cash Used in Operating Activities | | | (4,423 | ) | | | (2,374 | ) |
| | | | | | | | | |
| Cash Flows From Investing Activities | | | | | | | | |
| Acquisitions of property and equipment | | | (697 | ) | | | (3,434 | ) |
| Acquisition of a business, net of cash acquired | | | (223 | ) | | | - | |
| Other | | | (56 | ) | | | (126 | ) |
| Net Cash Used in Investing Activities | | | (976 | ) | | | (3,560 | ) |
| | | | | | | | | |
| Cash Flows From Financing Activities | | | | | | | | |
| Payments on capital leases | | | (192 | ) | | | (131 | ) |
| Proceeds from stock issuances | | | 268 | | | | 68 | |
| Net proceeds from sale of common stock | | | 30,500 | | | | - | |
| Net Cash Provided by (Used in) Financing Activities | | | 30,576 | | | | (63 | ) |
| | | | | | | | | |
| Net Increase (Decrease) In Cash and Cash Equivalents | | | 25,177 | | | | (5,997 | ) |
| Cash and cash equivalents – beginning | | | 15,152 | | | | 44,672 | |
| Cash and cash equivalents – ending | | $ | 40,329 | | | $ | 38,675 | |
Fixed Wireless Segment Market data for the three months ended March 31, 2013
(All dollars are in thousands)
| Market | | Revenues | | | Cost of
Revenues | | | Gross Margin | | | Operating
Costs | | | Adjusted
Market
EBITDA | |
| Los Angeles | | $ | 2,070 | | | $ | 559 | | | $ | 1,511 | | | | 73 | % | | $ | 382 | | | $ | 1,129 | |
| Boston | | | 1,669 | | | | 358 | | | | 1,311 | | | | 79 | % | | | 187 | | | | 1,124 | |
| New York | | | 1,886 | | | | 602 | | | | 1,284 | | | | 68 | % | | | 333 | | | | 951 | |
| Chicago | | | 913 | | | | 310 | | | | 603 | | | | 66 | % | | | 109 | | | | 494 | |
| Las Vegas-Reno | | | 388 | | | | 151 | | | | 237 | | | | 61 | % | | | 38 | | | | 199 | |
| Miami | | | 377 | | | | 99 | | | | 278 | | | | 74 | % | | | 84 | | | | 194 | |
| San Francisco | | | 303 | | | | 107 | | | | 196 | | | | 65 | % | | | 80 | | | | 116 | |
| Providence-Newport | | | 127 | | | | 49 | | | | 78 | | | | 61 | % | | | 18 | | | | 60 | |
| Seattle | | | 137 | | | | 51 | | | | 86 | | | | 63 | % | | | 34 | | | | 52 | |
| Houston | | | 53 | | | | 23 | | | | 30 | | | | 57 | % | | | 11 | | | | 19 | |
| Dallas-Fort Worth | | | 171 | | | | 89 | | | | 82 | | | | 48 | % | | | 75 | | | | 7 | |
| Philadelphia | | | 40 | | | | 18 | | | | 22 | | | | 55 | % | | | 23 | | | | (1 | ) |
| Nashville | | | 6 | | | | 15 | | | | (9 | ) | | | -% | | | | 4 | | | | (13 | ) |
| Total | | $ | 8,140 | | | $ | 2,431 | | | $ | 5,709 | | | | 70 | % | | $ | 1,378 | | | $ | 4,331 | |
Fixed Wireless Segment Market data for the three months ended March 31, 2012
(All dollars are in thousands)
| Market | | Revenues | | | Cost of
Revenues | | | Gross Margin | | | Operating
Costs | | | Adjusted
Market
EBITDA | |
| Los Angeles | | $ | 1,967 | | | $ | 569 | | | $ | 1,398 | | | | 71 | % | | $ | 340 | | | $ | 1,058 | |
| Boston | | | 1,689 | | | | 394 | | | | 1,295 | | | | 77 | % | | | 266 | | | | 1,029 | |
| New York | | | 1,648 | | | | 501 | | | | 1,147 | | | | 70 | % | | | 306 | | | | 841 | |
| Chicago | | | 861 | | | | 257 | | | | 604 | | | | 70 | % | | | 144 | | | | 460 | |
| Las Vegas-Reno | | | 432 | | | | 153 | | | | 279 | | | | 65 | % | | | 40 | | | | 239 | |
| Miami | | | 419 | | | | 88 | | | | 331 | | | | 79 | % | | | 102 | | | | 229 | |
| San Francisco | | | 377 | | | | 96 | | | | 281 | | | | 75 | % | | | 84 | | | | 197 | |
| Providence-Newport | | | 108 | | | | 40 | | | | 68 | | | | 63 | % | | | 30 | | | | 38 | |
| Seattle | | | 116 | | | | 60 | | | | 56 | | | | 48 | % | | | 24 | | | | 32 | |
| Dallas-Fort Worth | | | 169 | | | | 83 | | | | 86 | | | | 51 | % | | | 78 | | | | 8 | |
| Nashville | | | 9 | | | | 13 | | | | (4 | ) | | | -% | | | | 9 | | | | (13 | ) |
| Philadelphia | | | 24 | | | | 16 | | | | 8 | | | | 33 | % | | | 22 | | | | (14 | ) |
| Total | | $ | 7,819 | | | $ | 2,270 | | | $ | 5,549 | | | | 71 | % | | $ | 1,445 | | | $ | 4,104 | |
Operating Outlook and Guidance
| · | Revenues for the second quarter 2013 are expected to range between $8.3 million to $8.5 million. |
| · | Adjusted EBITDA, on a segment basis, is expected to range between profitability of $4.2 million to $4.4 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:
“EBITDA” represents net income (loss) before interest, income taxes, depreciation and amortization.
“Adjusted EBITDA” represents 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.
“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.
“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.
“Corporate” includes corporate overhead and centralized activities which support our overall operations.
“Net Cash Flows” represents Adjusted EBITDA less capital expenditures.
“Non-Core Expenses” relate to our efforts in 2012 to develop other wireless technology solutions and services, and primarily consisted of rent payments for street level rooftops, costs associated with constructing an offload network and payroll costs for employees working on these projects.
"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 EBITDA, Fixed Wireless Segment Markets to Net Loss
For the three months ended March 31, 2013
| Adjusted Market EBITDA | | $ | 4,331 | |
| Fixed Wireless, non-market specific | | | | |
| Other expenses | | | (243 | ) |
| Depreciation and amortization | | | (2,820 | ) |
| Shared wireless infrastructure, net | | | (3,793 | ) |
| Corporate | | | (4,003 | ) |
| Other income (expense) | | | 902 | |
| Net loss | | $ | (5,626 | ) |
For the three months ended March 31, 2012
| Adjusted market EBITDA | | $ | 4,104 | |
| Fixed wireless, non-market specific | | | | |
| Other expenses | | | (144 | ) |
| Depreciation and amortization | | | (2,787 | ) |
| Non-core expenses | | | (1,300 | ) |
| Corporate | | | (4,243 | ) |
| Other income (expense) | | | (10 | ) |
| Net loss | | $ | (4,380 | ) |
II. Adjusted EBITDA, Segment Basis to Net Loss
For the three months ended March 31, 2013
| Adjusted EBITDA | | $ | (2,076 | ) |
| Depreciation and amortization | | | (3,871 | ) |
| Non-recurring expenses | | | (65 | ) |
| Stock-based compensation | | | (397 | ) |
| Loss on property and equipment | | | (42 | ) |
| Loss on non-monetary transactions | | | (77 | ) |
| Operating Income (Loss) | | $ | (6,528 | ) |
| Interest expense | | | (36 | ) |
| Gain on business acquisition | | | 941 | |
| Other income (expense), net | | | (3 | ) |
| Net loss | | $ | (5,626 | ) |
III. Net Cash Flow, Segment Basis to Net Cash Used in Operating Activities
For the three months ended March 31, 2013
| Net cash flow, segment basis | | $ | (3,403 | ) |
| Capital expenditures | | | 1,327 | |
| Non-recurring expenses | | | (65 | ) |
| Changes in operating assets and liabilities, net | | | (2,136 | ) |
| Other, net | | | (146 | ) |
| Net cash used in operating activities | | $ | (4,423 | ) |
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 9, 2013 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 16, 2013 at 11:59 p.m. ET by dialing855-859-2056or404-537-3406(for international callers) using pass code53209923.
The call will also be webcast and can be accessed in a listen-only mode on the Company’s website athttp://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 over 13 urban markets including New York City, Boston, Los Angeles, Chicago, Philadelphia, the San Francisco Bay area, Miami, Seattle, Dallas-Fort Worth, Houston, Nashville, Las Vegas-Reno, and the greater Providence area. For more information on Towerstream services, please visitwww.towerstream.comand/or follow us @Towerstream.
The Towerstream Corporation logo is available at:http://www.globenewswire.com/newsroom/prs/?pkgid=6570
About Hetnets Tower Corporation
In early 2013, we formed a wholly owned subsidiary, Hetnets Tower Corporation (“Hetnets”). Since 2010, the Company has been exploring opportunities to leverage our fixed wireless network in urban markets to provide other wireless technology solutions and services. Over the past few years, a significant increase in mobile data generated by smartphones, tablets, and other devices has placed tremendous demand on the networks of the carriers. The Company believes that the wireless communications industry is experiencing a fundamental shift from its current, macro-cellular architecture to hyper-densified Small Cell architecture where existing cell sites will be supplemented by many smaller base stations operating near street level. The Company also believes that Wi-Fi will be an integral component of Small Cell architecture.
We have effectively transferred certain assets to Hetnets which is the operating entity for our shared wireless infrastructure segment. Hetnets plans to generate the majority of its revenue from (i) rental of space on street level rooftops for the installation of customer owned Small Cells which includes Wi-Fi antennae, DAS, and Metro and Pico cells, (ii) rental of a channel on Hetnets’ Wi-Fi network for the offloading of mobile data, (iii) rental of cabinets, switch ports, interconnection services, including backhaul or transport, and (iv) rental of power and power backup.
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 CONTACTS:
Terry McGovern
Vision Advisors
415-902-3001
mcgovern@visionadvisors.net
Monica Gould
The Blueshirt Group
212-871-3927
monica@blueshirtgroup.com
MEDIA CONTACT:
Todd Barrish
Indicate Media
646-396-6038
todd@indicatemedia.com
