Towerstream Corporation (Nasdaq:TWER) (the "Company"), a leading 4G
and Small Cell Rooftop Tower company, announced results for the
fourth quarter and year ended December 31, 2014.
2014 Operating Highlights and Corporate
Update
HetNets Tower Corporation Subsidiary
- Revenues for the year ended December 31, 2014 were $3.1 million
compared to $1.5 million for the year ended December 31, 2013
representing an increase of $1.6 million, or greater than
100%.
- Master Lease Agreement executed with national carrier in third
quarter of 2014 with initial deployments expected in the first half
of 2015.
- Number of Shared Wireless Infrastructure locations increased by
12% during 2014.
- Number of Access Points leased by major cable company increased
by 38% during 2014.
Towerstream Corporation
- Launch of Cogent-like offering of 100 Megabytes
of bandwidth for $699 generates strong demand with 27
buildings lit and 50 customer connections since launch in the
first quarter of 2014.
- ARPU increased to $772 at December 31, 2014 compared to $761 at
December 31, 2013 representing an increase of $11, or 1%.
- Customer churn for the year ended December 31, 2014 totaled
1.85% compared to 1.86% for the year ended December 31, 2013.
- Search for second sales center during 2014 culminates in
opening of new office in Southern Florida in March 2015.
- Long-term debt financing completed in October 2014 provides
working capital to execute growth initiatives planned for
2015.
Management Comments
"Our Shared Wireless segment demonstrated strong growth in 2014
with revenues doubling and the number of leasable locations
increasing by 12% during the year," stated Jeffrey Thompson,
President and CEO. "The carriers have been vocal in stating that
they are focused on the densification of their networks and we
expect initial deployments on our locations in the first half of
this year."
"Our 100 megabyte service continues to gain traction and we will
be adding buildings throughout 2015," stated Joseph Hernon, Chief
Financial Officer. "The recent opening of our second sales center
will substantially increase our sales force. We believe that these
initiatives will drive our Fixed Wireless segment back into growth
mode in 2015."
Selected Financial Data
and Key Operating Metrics |
|
|
(All dollars are in thousands except
ARPU) |
|
|
|
|
(Unaudited) Three
Months Ended |
|
12/31/2014 |
9/30/2014 |
12/31/2013 |
|
|
|
|
Revenues |
$ 8,090 |
$ 8,302 |
$ 8,521 |
Gross margin |
|
|
|
Consolidated |
21% |
25% |
27% |
Fixed wireless |
63% |
65% |
66% |
Capital expenditures |
|
|
|
Fixed wireless |
$ 1,524 |
$ 1,154 |
$ 1,160 |
Shared wireless
infrastructure |
202 |
590 |
1,265 |
Corporate |
43 |
22 |
909 |
Churn rate (1) |
1.65% |
1.69% |
1.78% |
ARPU (1) |
$ 772 |
$ 769 |
$ 761 |
ARPU of new customers (1) |
639 |
651 |
752 |
Cash and cash equivalents |
38,028 |
11,891 |
28,182 |
|
|
|
|
|
|
Years
Ended |
|
|
12/31/2014 |
12/31/2013 |
Selected Financial Data |
|
|
|
Revenues |
|
$ 33,036 |
$ 33,433 |
Gross margin |
|
|
|
Consolidated |
|
26% |
35% |
Fixed wireless |
|
65% |
69% |
Capital expenditures |
|
|
|
Fixed wireless |
|
$ 5,568 |
$ 4,519 |
Shared wireless
infrastructure |
|
2,221 |
2,314 |
Corporate |
|
382 |
1,259 |
Churn rate (1) |
|
1.85% |
1.86% |
ARPU (1) |
|
$ 772 |
$ 761 |
ARPU of new customers (1) |
|
639 |
663 |
Cash and cash equivalents |
|
38,028 |
28,182 |
|
|
|
|
(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 December 31, |
(Audited) Years Ended
December 31, |
|
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
Revenues |
$ 8,090 |
$ 8,521 |
$ 33,036 |
$ 33,433 |
|
|
|
|
|
Operating Expenses |
|
|
|
|
Cost of revenues |
6,351 |
6,262 |
24,520 |
21,854 |
Depreciation and
amortization |
3,345 |
3,698 |
13,639 |
15,352 |
Customer support |
1,233 |
1,084 |
4,796 |
4,883 |
Sales and marketing |
1,396 |
1,446 |
5,570 |
5,779 |
General and administrative |
2,610 |
2,659 |
10,337 |
11,033 |
Total Operating Expenses |
14,935 |
15,149 |
58,862 |
58,901 |
Operating Loss |
(6,845) |
(6,628) |
(25,826) |
(25,468) |
Other Income/(Expense) |
|
|
|
|
Gain on business
acquisition |
-- |
-- |
-- |
1,004 |
Interest expense, net |
(1,506) |
(64) |
(1,673) |
(218) |
Other income (expense),
net |
(3) |
(4) |
(14) |
(15) |
Total Other
Income/(Expense) |
(1,509) |
(68) |
(1,687) |
771 |
Loss before income taxes |
(8,354) |
(6,696) |
(27,513) |
(24,697) |
Provision for income taxes |
(79) |
(78) |
(79) |
(78) |
Net Loss |
$ (8,433) |
$ (6,774) |
$ (27,592) |
$ (24,775) |
|
|
|
|
|
Net loss per common share – basic
and diluted |
$ (0.12) |
$ (0.10) |
$ (0.41) |
$ (0.38) |
Weighted average common shares outstanding –
basic and diluted |
67,642 |
66,419 |
66,804 |
65,181 |
|
|
|
|
|
|
Statement of
Operations - Segment Basis |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December 31, 2014 (Unaudited) |
|
Fixed Wireless |
Shared Wireless
Infrastructure |
Corporate |
Eliminations |
Total |
|
|
|
|
|
|
Revenues |
$ 7,308 |
$ 827 |
$ -- |
$ (45) |
$ 8,090 |
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
Cost of revenues |
2,684 |
3,708 |
4 |
(45) |
6,351 |
Depreciation and
amortization |
2,099 |
1,025 |
221 |
-- |
3,345 |
Customer support |
327 |
181 |
725 |
-- |
1,233 |
Sales and marketing |
1,274 |
51 |
71 |
-- |
1,396 |
General and
administrative |
226 |
102 |
2,282 |
-- |
2,610 |
Total Operating
Expenses |
6,610 |
5,067 |
3,303 |
(45) |
14,935 |
|
|
|
|
|
|
Operating Income (Loss) |
$ 698 |
$ (4,240) |
$ (3,303) |
$ -- |
$ (6,845) |
Non-recurring expenses,
primarily acquisition related |
-- |
-- |
28 |
-- |
28 |
Non-cash expenses (a) |
2,227 |
1,079 |
432 |
-- |
3,738 |
Adjusted EBITDA (b) |
2,925 |
(3,161) |
(2,843) |
-- |
(3,079) |
Less: Capital expenditures |
1,524 |
202 |
43 |
-- |
1,769 |
Net Cash Flow (b) |
$ 1,401 |
$ (3,363) |
$ (2,886) |
$ -- |
$ (4,848) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December 31, 2013 (Unaudited) |
|
Fixed Wireless |
Shared Wireless
Infrastructure |
Corporate |
Eliminations |
Total |
|
|
|
|
|
|
Revenues |
$ 7,917 |
$ 650 |
$ -- |
$ (46) |
$ 8,521 |
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
Cost of revenues |
2,704 |
3,575 |
29 |
(46) |
6,262 |
Depreciation and
amortization |
2,652 |
875 |
171 |
-- |
3,698 |
Customer support |
343 |
198 |
543 |
-- |
1,084 |
Sales and marketing |
1,302 |
63 |
81 |
-- |
1,446 |
General and
administrative |
148 |
182 |
2,329 |
-- |
2,659 |
Total Operating
Expenses |
7,149 |
4,893 |
3,153 |
(46) |
15,149 |
|
|
|
|
|
|
Operating Income (Loss) |
$ 768 |
$ (4,243) |
$ (3,153) |
$ -- |
$ (6,628) |
Non-cash
expenses (a) |
2,988 |
1,308 |
399 |
-- |
4,695 |
Adjusted EBITDA (b) |
3,756 |
(2,935) |
(2,754) |
-- |
(1,933) |
Less: Capital expenditures |
1,160 |
1,265 |
909 |
-- |
3,334 |
Net Cash Flow (b) |
$ 2,596 |
$ (4,200) |
$ (3,663) |
$ -- |
$ (5,267) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2014 |
|
Fixed Wireless |
Shared Wireless
Infrastructure |
Corporate |
Eliminations |
Total |
|
|
|
|
|
|
Revenues |
$ 30,119 |
$ 3,100 |
$ -- |
$ (183) |
$ 33,036 |
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
Cost of revenues |
10,435 |
14,220 |
48 |
(183) |
24,520 |
Depreciation and
amortization |
8,697 |
3,958 |
984 |
-- |
13,639 |
Customer support |
1,205 |
683 |
2,908 |
-- |
4,796 |
Sales and marketing |
5,029 |
229 |
312 |
-- |
5,570 |
General and
administrative |
601 |
569 |
9,167 |
-- |
10,337 |
Total Operating
Expenses |
25,967 |
19,659 |
13,419 |
(183) |
58,862 |
|
|
|
|
|
|
Operating Income (Loss) |
$ 4,152 |
$ (16,559) |
$ (13,419) |
$ -- |
$ (25,826) |
Non-recurring expenses,
primarily acquisition related |
-- |
-- |
120 |
-- |
120 |
Non-cash expenses (a) |
9,123 |
4,216 |
1,909 |
-- |
15,248 |
Adjusted EBITDA (b) |
13,275 |
(12,343) |
(11,390) |
-- |
(10,458) |
Less: Capital expenditures |
5,568 |
2,221 |
382 |
-- |
8,171 |
Net Cash Flow (b) |
$ 7,707 |
$ (14,564) |
$ (11,772) |
$ -- |
$ (18,629) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2013 |
|
Fixed Wireless |
Shared Wireless
Infrastructure |
Corporate |
Eliminations |
Total |
|
|
|
|
|
|
Revenues |
$ 32,076 |
$ 1,540 |
$ -- |
$ (183) |
$ 33,433 |
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
Cost of revenues |
9,934 |
11,979 |
124 |
(183) |
21,854 |
Depreciation and
amortization |
11,063 |
3,509 |
780 |
-- |
15,352 |
Customer support |
1,243 |
785 |
2,855 |
-- |
4,883 |
Sales and marketing |
5,128 |
301 |
350 |
-- |
5,779 |
General and
administrative |
592 |
669 |
9,772 |
-- |
11,033 |
Total Operating
Expenses |
27,960 |
17,243 |
13,881 |
(183) |
58,901 |
|
|
|
|
|
|
Operating Income (Loss) |
$ 4,116 |
$ (15,703) |
$ (13,881) |
$ -- |
$ (25,468) |
Non-recurring
expenses, primarily acquisition related |
-- |
-- |
113 |
-- |
113 |
Non-cash expenses (a) |
11,678 |
3,949 |
1,947 |
-- |
17,574 |
Adjusted EBITDA (b) |
15,794 |
(11,754) |
(11,821) |
-- |
(7,781) |
Less: Capital expenditures |
4,519 |
2,314 |
1,259 |
-- |
8,092 |
Net Cash Flow (b) |
$ 11,275 |
$ (14,068) |
$ (13,080) |
$ -- |
$ (15,873) |
|
|
|
|
|
|
(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. |
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 (Audited) |
|
|
(All dollars are in
thousands) |
|
|
|
|
|
|
December 31,
2014 |
December 31,
2013 |
Assets |
|
|
Current Assets |
|
|
Cash and cash equivalents |
$ 38,028 |
$ 28,182 |
Other |
2,237 |
1,537 |
Total Current Assets |
40,265 |
29,719 |
|
|
|
Property and equipment, net |
33,905 |
38,485 |
|
|
|
Other assets |
8,152 |
6,713 |
|
|
|
Total Assets |
82,322 |
74,917 |
|
|
|
Liabilities and Stockholders' Equity |
|
|
Current Liabilities |
|
|
Accounts payable and accrued
expenses |
2,910 |
3,774 |
Deferred revenues and
other |
2,288 |
2,247 |
Total Current Liabilities |
5,198 |
6,021 |
|
|
|
Long-Term Liabilities |
|
|
Long-term debt |
32,101 |
-- |
Other |
3,061 |
2,802 |
Total Long-Term
Liabilities |
35,162 |
2,802 |
|
|
|
Total Liabilities |
40,360 |
8,823 |
|
|
|
Stockholders' Equity |
|
|
Common stock |
67 |
66 |
Additional paid-in-capital |
157,631 |
154,172 |
Accumulated deficit |
(115,736) |
(88,144) |
Total Stockholders' Equity |
41,962 |
66,094 |
Total Liabilities and Stockholders'
Equity |
$ 82,322 |
$ 74,917 |
|
|
|
Summary
Condensed Statement of Cash Flows (Audited) |
|
|
|
|
|
|
Years Ended December
31, |
|
2014 |
2013 |
Net Cash Used in Operating Activities |
$ (13,413) |
$ (9,484) |
Net Cash Used in Investing Activities |
(7,037) |
(7,562) |
Net Cash Provided by Financing
Activities |
30,296 |
30,076 |
Net Increase In Cash and Cash
Equivalents |
$ 9,846 |
$ 13,030 |
Operating Outlook and Guidance
- Revenues for the first quarter 2015 are expected to range
between $7.4 million to $7.7 million for the Fixed Wireless
segment.
- Revenues for the first quarter 2015 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 first quarter 2015
is expected to range between profitability of $2.8 million to $3.1
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.
"ARPU" refers to the monthly average revenue per user, or
customer, being generated from those customers under contract at
the end of each indicated period. We calculate ARPU by
dividing our monthly recurring revenue ("MRR") at the end of a
period by the number of customers generating that MRR.
"ARPU of new customers" is calculated in the same manner but
only includes new customers who entered into contracts during the
indicated period.
"Churn" and "Churn rate" refer to the percent of revenue lost on
a monthly basis from customers disconnecting from our network or
reducing the amount of their bandwidth.
"Corporate" includes corporate overhead and centralized
activities which support our overall operations.
"EBITDA" represents net income (loss) before interest, income
taxes, depreciation and amortization.
"Net Cash Flows" represents Adjusted EBITDA less capital
expenditures.
A reconciliation of non-GAAP measures to GAAP financial measures
is as follows (amounts in thousands):
I. Adjusted
EBITDA to Net Loss |
|
|
|
|
|
|
Three Months Ended
December 31, |
|
2014 |
2013 |
Adjusted EBITDA |
$ (3,079) |
$ (1,933) |
Depreciation and amortization |
(3,345) |
(3,698) |
Non-recurring expenses |
(28) |
-- |
Stock-based compensation |
(220) |
(314) |
Loss on property and equipment |
-- |
(39) |
Loss on nonmonetary transactions |
(68) |
(68) |
Deferred rent |
(105) |
(576) |
Operating Income (Loss) |
$ (6,845) |
$ (6,628) |
Interest expense, net |
(1,506) |
(64) |
Other income (expense), net |
(3) |
(4) |
Provision for income taxes |
(79) |
(78) |
Net loss |
$ (8,433) |
$ (6,774) |
|
|
|
|
Year Ended December
31, |
|
2014 |
2013 |
Adjusted EBITDA |
$ (10,458) |
$ (7,781) |
Depreciation and amortization |
(13,639) |
(15,352) |
Non-recurring expenses |
(120) |
(113) |
Stock-based compensation |
(960) |
(1,254) |
Loss on property and equipment |
-- |
(121) |
Loss on nonmonetary transactions |
(272) |
(272) |
Deferred rent |
(377) |
(575) |
Operating Income (Loss) |
$ (25,826) |
$ (25,468) |
Interest expense, net |
(1,673) |
(218) |
Gain on business acquisition |
-- |
1,004 |
Other income (expense), net |
(14) |
(15) |
Provision for income taxes |
(79) |
(78) |
Net loss |
$ (27,592) |
$ (24,775) |
|
|
|
II. Net Cash
Flow to Net Cash Used in Operating Activities |
|
|
|
|
|
Three Months Ended
December 31, |
|
2014 |
2013 |
Net cash flow |
$ (4,848) |
$ (5,267) |
Capital expenditures |
1,769 |
3,334 |
Non-recurring expenses |
(28) |
-- |
Changes in operating assets and liabilities,
net |
601 |
849 |
Other, net |
(866) |
(34) |
Net cash used in operating activities |
$ (3,372) |
$ (1,118) |
|
|
|
|
Year Ended December
31, |
|
2014 |
2013 |
Net cash flow |
$ (18,629) |
$ (15,873) |
Capital expenditures |
8,171 |
8,092 |
Non-recurring expenses |
(120) |
(113) |
Changes in operating assets and liabilities,
net |
(1,781) |
(1,170) |
Other, net |
(1,054) |
(420) |
Net cash used in operating activities |
$ (13,413) |
$ (9,484) |
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 12, 2015 at 5:00 p.m. ET to review our financial
results and provide an update on current business developments.
Interested parties may participate in the conference by dialing
877-755-7423 or 678-894-3069 (for
international callers). A telephonic replay of the conference
may be accessed approximately two hours after the call through
March 19, 2015 at 11:59 p.m. ET by dialing
855-859-2056 or 404-537-3406 (for
international callers) using pass code
84829903.
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
Towerstream (CE) (USOTC:TWER)
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