updated 3/17/2011 4:15:42 PM ET 2011-03-17T20:15:42

MIDDLETOWN, R.I., March 17, 2011 (GLOBE NEWSWIRE) -- Towerstream (Nasdaq:TWER), a leading 4G service provider delivering high-speed wireless Internet access to businesses in 11 major metropolitan areas in the U.S., announced results for the fourth quarter ended December 31, 2010.

Fourth Quarter Operating Highlights
 

  • Revenues increased 7% to $5.5 million during the fourth quarter 2010 compared to the third quarter 2010 and increased 35% compared to the same period last year
  • Gross margin remained strong at 75% during the fourth quarter 2010
  • Adjusted Market EBITDA profitability increased to $2.9 million in the fourth quarter 2010 as compared to $2.7 million for the third quarter 2010 and $2.0 million for the fourth quarter 2009
  • Adjusted EBITDA profitability, excluding non-recurring expenses of $0.3 million, increased to $0.7 million for the fourth quarter 2010 compared to $0.4 million for the third quarter 2010 and an Adjusted EBITDA loss of $0.2 million for the fourth quarter 2009
  • Customer churn for the fourth quarter 2010 was 1.36% compared to 1.60% during the third quarter 2010 and 1.43% during the fourth quarter 2009
  • Acquisition of Pipeline Wireless completed in December 2010 which increased the customer base in the Boston market by 32% and the market's annual revenue base by 29%

Management Comments

"We are pleased to report another quarter of strong revenue growth and improved Adjusted EBITDA profitability," stated Jeff Thompson, Chief Executive Officer.  "We completed our second acquisition in December 2010 and believe there will be additional acquisition opportunities in 2011."

"We have seen a significant increase in interest in our carrier class Wifi network in Manhattan," added Mr. Thompson. "We are working diligently to complete construction of the network by the middle of the year."

"Adjusted EBITDA profitability, excluding non-recurring expenses, increased from approximately $414,000 in the third quarter to approximately $706,000 in the fourth quarter," stated Joseph Hernon, Chief Financial Officer. "ARPU for new customers increased to $661 per month after averaging $540 per month over the past seven quarters during the long economic recession.  In addition, customer upgrades increased by more than 80% during the second half of 2010 as compared to the same period in 2009.  We are hopeful that the strong improvement in these key operating metrics signal increased confidence levels by our business customers and that these trends will continue in 2011."

Selected Financial Data and Key Operating Metrics

(All dollars are in thousands except ARPU)

  (Unaudited)
  Three months ended
  12/31/2010 9/30/2010 12/31/2009
Selected Financial Data      
Revenues $ 5,452 $ 5,080 $   4,042
Gross margin 75% 75% 75%
Depreciation and amortization 1,658 1,557 1,070
Core operating expenses (1)( 3) 3,842 3,681 3,520
Operating loss (1) (1,403) (1,409)  (1,566)
Net loss (1) (1,378) (1,387) (1,972)
Adjusted EBITDA (3) 374 382 (263)
Adjusted EBITDA excluding non-recurring expenses(2)(3) 706 414 (174)
Capital expenditures $ 1,457 $ 1,051 $ 1,165
       
Key Operating Metrics      
Churn rate (3) 1.36% 1.60% 1.43%
ARPU (3) $ 682 $ 669 $ 715
ARPU of new customers (3)  661  543 561
   
  (Audited)
  Years ended
  12/31/2010   12/31/2009
Selected Financial Data      
Revenues $ 19,646   $   14,915
Gross margin 75%   75%
Depreciation and amortization 5,770   4,035
Core operating expenses (1)(3) 15,036   14,622
Operating loss (1) (6,048)    (7,432)
Net loss (1)  (5,603)   (8,625)
Adjusted EBITDA (3) 568   (2,537)
Adjusted EBITDA excluding non-recurring expenses(2)(3) 1,327   (2,352)
       
Capital expenditures $ 5,660   $  4,848
       
Key Operating Metrics      
Churn rate (3) 1.35%   1.67%
ARPU (3) $ 682   $ 715
ARPU of new customers (3)  561   546

(1) Includes stock-based compensation of $94, $220 and $227, respectively and $772 and $803, respectively.

(2) Excludes non-recurring expenses of $332, $32 and $89, respectively and $759 and $185 respectively.

(3) 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 first quarter 2011 are expected to range between $5.9 million to $6.1 million.
     
  • Adjusted EBITDA profitability is expected to range between $0.7 million to $0.8 million. The modest increase compared to the fourth quarter 2010 reflects professional services costs associated with being a public company and payroll tax expenses which are significantly higher in the first quarter compared to other quarters.

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) derivative instruments, 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, has been reconciled to Net loss as follows:

(All dollars are in thousands)

  Three months ended
  12/31/2010 9/30/2010 12/31/2009
Reconciliation of Non-GAAP to GAAP:      
Adjusted EBITDA, excluding non-recurring expenses $ 706  $ 414  $ (174)
Depreciation and amortization  (1,658)  (1,557)  (1,070)
Non-recurring expenses, primarily acquisition-related (332) (32) (89)
Stock-based compensation (94)  (220) (227)
Loss on property and equipment (25)  (14) (7)
Interest expense (1) -- (187)
Loss on derivative financial instruments -- -- (219)
Interest income 3  1 1
Other income (expense), net 23  21  --
Net loss $ (1,378) $  (1,387) $ (1,972)
 

 

 
 

 

Years ended
  12/31/2010   12/31/2009
Reconciliation of Non-GAAP to GAAP:      
Adjusted EBITDA, excluding non-recurring expenses $ 1,327    $  (2,352) 
Depreciation and amortization  (5,770)     (4,035)
Stock-based compensation (772)    (803)
Non-recurring expenses, primarily acquisition-related (759)    (185)
Loss on property and equipment (74)    (58)
Interest expense (1)    (740)
Loss on derivative financial instruments --   (479)
Interest income 4     27
Other income (expense), net 86    --
Gain on business acquisition 356    --
Net loss $  (5,603)   $ (8,625)

Summary Condensed Consolidated Financial Statements

(All dollars are in thousands except per share amounts)

Statement of Operations  (Unaudited) (Audited)
  Three months ended

December 31, 
Years ended

December 31,
  2010 2009 2010 2009
         
Revenues $5,452 $4,042 $19,646 $14,915
         
Operating Expenses        
 Cost of revenues (exclusive of depreciation) 1,355 1,018 4,888 3,690
 Depreciation and amortization 1,658 1,070 5,770 4,035
 Customer support services 663 555 2,550 2,133
 Sales and marketing  1,255 1,205 5,088 5,546
 General and administrative 1,924 1,760 7,398 6,943
Total Operating Expenses 6,855 5,608 25,694 22,347
Operating Loss (1,403) (1,566) (6,048) (7,432)
Other Income (Expense)        
 Interest income 3 1 4 27
 Interest expense (1) (187) (1) (740)
 Gain on business acquisition -- -- 356 --
 Loss on derivative financial instruments -- (219) -- (479)
 Other income (expense), net 23 (1) 86 (1)
Total Other Income (Expense) 25 (406) 445 (1,193)
Net Loss  $ (1,378)  $ (1,972)  $ (5,603)  $ (8,625)
         
Net loss per common share  $ (0.04)  $ (0.06)  $ (0.16)  $ (0.25)
Weighted average common shares outstanding – basic and diluted 37,891 34,634 35,627 34,607

Analysis of Fourth Quarter Results of Operations

Revenues for the fourth quarter 2010 increased 7% from the third quarter 2010 and increased 35% compared to the fourth quarter 2009. These increases were driven by 48% growth in our customer base from approximately 1,900 customers at the end of the fourth quarter 2009 to approximately 2,800 at the end of the fourth quarter 2010.

ARPU of new customers increased 22% in the fourth quarter 2010 compared to the third quarter 2010 and increased 18% compared to the fourth quarter 2009. ARPU of all customers in the fourth quarter 2010 increased 2% compared to the third quarter 2010 and decreased 5% compared to the fourth quarter 2009. During most of 2010, the impact of the long economic recession caused many of our prospective customers to continue to either delay their buying decision or to purchase lower bandwidth services than normal.  In addition, general pricing levels for Internet services declined modestly during the year. During the fourth quarter 2010, customers began to increase their bandwidth purchases which resulted in a 24% increase in ARPU of new customers compared to the average for the first three quarters of the year. In addition, customer upgrades to higher bandwidth, which also increases ARPU, increased by more than 80% during the second half of 2010 as compared to the same period in 2009.

Depreciation and amortization expenses increased 7% in the fourth quarter 2010 compared to the third quarter 2010 and increased 55% compared to the fourth quarter 2009.  The increases are consistent with a higher base of depreciable assets primarily related to our network and customer premise equipment.  Amortization expense totaled approximately $370,000 in the fourth quarter 2010 primarily associated with customer contracts acquired through the acquisition of Sparkplug Chicago in April 2010.

Customer support expenses increased 4% in the fourth quarter 2010 compared to the third quarter 2010 and increased 19% compared to the fourth quarter 2009. The increase compared to the fourth quarter 2009 reflected staffing additions and other costs incurred to support a customer base which increased 48% over the one year period. 

Sales and marketing expenses decreased 2% in the fourth quarter 2010 compared to the third quarter 2010 and increased 4% compared to the fourth quarter 2009. The year-over-year increase related to higher commissions earned.

General and administrative expenses increased 9% in the fourth quarter 2010 compared to both the third quarter 2010 and the fourth quarter 2009, respectively. The comparative increase is attributable to higher professional services costs in the fourth quarter 2010, primarily related to the Pipeline acquisition.

Net loss decreased less than 1% in the fourth quarter 2010 compared to the third quarter 2010 and decreased 30% compared to the fourth quarter 2009. The year-over-year improvement primarily related to a 35% increase in revenues partially offset by a 22% increase in operating expenses.

Capital expenditures totaled $1.5 million for the fourth quarter 2010 as compared to $1.1 million for the third quarter 2010 and $1.2 million for the fourth quarter 2009. The comparative increase can be attributed to an increase in point-to-point sales and upgrades during the second half of 2010. Equipment and installation costs for these customers are significantly higher than for midrange and multi-point customers, however, the recurring revenues are higher and these businesses generally remain a customer for a longer period of time.

 

Balance Sheet (Audited)
 

Years ended December 31
  2010 2009
Assets    
Current Assets    
 Cash and cash equivalents $  23,173 $ 14,041
 Other    856 661
 Total Current Assets  24,029 14,702
     
Property and equipment, net  15,266 13,635
     
Other assets  5,295  1,166
     
 Total Assets  44,590  29,503
     
Liabilities and Stockholders' Equity    
Current Liabilities    
 Accounts payable and accrued expenses  2,506  2,142
 Deferred revenues and other  1,339 1,108 
 Total Current Liabilities   3,845 3,250
     
 Long-Term Liabilities  724 842
 Total Liabilities  4,569  4,092
     
Stockholders' Equity    
 Common stock  42  35
 Additional paid-in-capital  75,333  55,127
 Accumulated deficit  (35,354)  (29,751)
 Total Stockholders' Equity  40,021  25,411
 Total Liabilities and Stockholders' Equity $  44,590 $ 29,503
   
Statement of Cash Flows  (Audited) Years ended December 31,
  2010 2009
Cash Flows From Operating Activities    
 Net loss $ (5,603) $ (8,625)
 Non-cash adjustments:    
 Depreciation & amortization  5,770  4,035
 Stock-based compensation  772  803
 Gain on business acquisition  (356)   --
 Other  149  1,079
 Changes in operating assets and liabilities  (139)  (272)
Net Cash Provided By (Used In) Operating Activities     593  (2,980)
     
Cash Flows From Investing Activities    
 Acquisitions of property and equipment  (5,660)  (4,848)
 Acquisition of Sparkplug Chicago, Inc.  (1,170)   --
 Acquisition of Pipeline Wireless, LLC  (1,580)  --
 Other   (3)  (96)
Net Cash Used In Investing Activities  (8,413)  (4,944)
     
Cash Flows From Financing Activities    
 Repayment of capital leases  (7)  (25)
 Repayment of short-term debt  --  (2,750)
 Net proceeds from sale of common stock  16,958  --
 Other  1  --
Net Cash Provided By (Used In) Financing Activities  16,952  (2,775)
     
Net Increase (Decrease) In Cash and Cash Equivalents   9,132  (10,699)
Cash and Cash Equivalents – Beginning  14,041  24,740
Cash and Cash Equivalents – Ending  $  23,173 $ 14,041

Market data for the three months ended December 31, 2010

(All dollars are in thousands)

Market Revenues Cost of Revenues(1) Gross Margin(1) Operating Costs Adjusted Market EBITDA
New York $ 1,494 $ 322 $ 1,172  78% $ 274 $ 898
Boston  1,243  208  1,035  83%  184  851
Los Angeles  909  184  725  80%  257  468
Chicago  762  256  506  66%  174  332
San Francisco  331  68  263  79%   123  140 
Miami  290  80  210  72%  104  106
Providence/Newport  120  40  80   67%   26  54
Seattle  133  55  78   59%  32  46
Dallas-Fort Worth  141  64  77   55%  51  26
Nashville  19  7  12  63%  5  7
Philadelphia  10  12  (2)  0%  39  (41)
Total $ 5,452 $ 1,296 $ 4,156  76%  $ 1,269 $ 2,887
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure
               
Adjusted market EBITDA             $ 2,887
Centralized costs (1)             (708)
Corporate expenses             (1,830)
Depreciation and amortization             (1,658)
Stock-based compensation             (94)
Other income (expense)              25
Net loss             $ (1,378)
                     

Market data for the three months ended December 31, 2009

Market Revenues Cost of Revenues(1) Gross Margin(1) Operating Costs Adjusted Market EBITDA
New York $ 1,353 $ 247 $ 1,106  82% $ 295 $ 811
Boston  1,018  163  855  84%  153  702
Los Angeles  585  104  481  82%  264  217
San Francisco   273  68  205  75%    77  128
Providence/Newport  135  38  97  72%  42  55
Chicago  275   131  144  52%  104  40
Miami  179  67  112   63%  72  40
Seattle  115   54  61   53%  29  32
Dallas-Fort Worth  109  84  25  23%  62  (37)
Total $ 4,042 $  956 $ 3,086  76%  $ 1,098 $ 1,988
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure
               
Adjusted market EBITDA             $ 1,988
Centralized costs (1)             (724)
Corporate expenses             (1,533)
Depreciation             (1,070)
Stock-based compensation             (227)
Other income (expense)             (406)
Net loss             $ (1,972)

Market data for the year ended December 31, 2010

(All dollars are in thousands)

Market Revenues Cost of Revenues(1) Gross Margin(1) Operating Costs Adjusted Market EBITDA
New York $ 5,783 $ 1,161 $ 4,622  80% $ 1,187 $ 3,435
Boston  4,510  729  3,781  84%   689  3,092
Los Angeles  3,178  612  2,566  81%  1,098  1,468
Chicago  2,453  799  1,654  67%  604   1,050
San Francisco  1,161  246  915  79%  362  553 
Miami  987  317  670  68%  361  309
Providence/Newport  495  162  333   67%  112  221
Seattle  510  217  293   57%   127  166
Nashville  59  29  30  51%  18  12
Dallas-Fort Worth  493  315  178  36%  226  (48)
Philadelphia  17  54  (37)  0%  184  (221)
Total $ 19,646 $ 4,641 $ 15,005  76%  $ 4,968 $ 10,037
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure
               
Adjusted market EBITDA             $ 10,037
Centralized costs (1)             (2,917)
Corporate expenses             (6,626)
Depreciation and amortization             (5,770)
Stock-based compensation             (772)
Other income (expense)              445
Net loss             $ (5,603)
                     

Market data for the year ended December 31, 2009

Market Revenues Cost of Revenues(1) Gross Margin(1) Operating Costs Adjusted Market EBITDA
New York $ 5,218 $ 929 $ 4,289  82% $ 1,247 $ 3,042
Boston  3,983  656  3,327  84%  735  2,592
Los Angeles  1,930  340  1,590   82%  1,043  547
San Francisco  984  218  766  78%  414  352
Providence/Newport  530  151  379  72%   200  179
Chicago  951  391  560  59%  460  100
Miami  590  259  331  56%  382  (51)
Seattle   431  233  198  46%  259  (61)
Dallas-Fort Worth  298  261  37  12%  404  (367)
Total $ 14,915 $ 3,438 $  11,477  77%  $ 5,144 $ 6,333
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure
               
Adjusted market EBITDA             $ 6,333
Centralized costs (1)             (2,787)
Corporate expenses             (6,140)
Depreciation             (4,035)
Stock-based compensation             (803)
Other income (expense)             (1,193)
Net loss             $ (8,625)
                     

(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 $59 and $62 respectively for the three months ended December 31, 2010 and 2009 and $247 and $252 respectively for the years ended December 31, 2010 and 2009.

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 March 17, 2011 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 877-664-7392 or 678-894-3061 (for international callers).  A telephonic replay of the conference may be accessed approximately two hours after the call through March 24, 2011 at 11:59 p.m. ET by dialing 800-642-1687 or 706-645-9291 (for international callers) using pass code 48863608.

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/eventdetail.cfm?eventid=93590 .

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 11 markets including New York City, Boston, Los Angeles, Chicago, the San Francisco Bay area, Miami, Seattle, Dallas-Fort Worth, Philadelphia, Nashville and the greater Providence area where the Company is based. For more information, visit our website at www.towerstream.com or follow us on Twitter @Towerstream. The Towerstream Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6570 .

Towerstream's wireless broadband solution network delivers high-speed Internet access supporting VoIP, bandwidth on demand, wireless redundancy, VPNs, disaster recovery, bundled data, and video services, and can be delivered in days. Unlike cable Internet and DSL, Towerstream connections are symmetrical, which means that the upload and download speeds are identical. This creates a more stable connection, suitable for VoIP and web hosting, as well as many other business applications. Companies utilizing multiple appliances simultaneously, such as streaming video and VoIP, can prioritize their bandwidth to secure mission-critical activities. All of Towerstream's products are backed by its Service Level Agreement (SLA) and the ability to be up and running within a week. 

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. 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:
         Terry McGovern
         Vision Advisors
         415-902-3001
         mcgovern@visionadvisors.net
         
         MEDIA CONTACT:
         Matt Calderone
         LaunchSquad Public Relations
         212-564-3665
         towerstream@launchsquad.com

© Copyright 2012, GlobeNewswire, Inc. All Rights Reserved

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