TWER Towerstream Corporation (CE)

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

_________________

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

_________________

 

Date of Report (Date of earliest event reported): March 12, 2015

 

Towerstream Corporation
(Exact Name of Registrant as Specified in Charter)

 

Delaware		001-33449		20-8259086
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

88 Silva Lane Middletown, RI		02842
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (401) 848-5848

 

 

(Former name or former address, if changed since last report)

 

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 DFR 240.14a-12)

 

[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[   ] Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02.     Results of Operations and Financial Condition.

Item 7.01.     Regulation FD Disclosure.

 

On March 12, 2015, Towerstream Corporation (the “Company”) issued a press release (the “Press Release”) announcing results for the three and twelve months ended December 31, 2014. A copy of the press release is attached to this report as Exhibit 99.1 and is being furnished pursuant to Items 2.02 and 7.01 and shall not be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. The furnishing of the information in this Current Report on Form 8-K is not intended to, and does not, constitute a representation that such furnishing is required by Regulation FD or that the information contained in this Current Report on Form 8-K constitutes material investor information that is not otherwise publicly available.

 

The Company uses certain Non-GAAP measures to monitor the Company's business performance and that of its 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. The Company’s methods of calculating these measures may not be comparable to similar measures presented by other companies.

 

A definition of key Non-GAAP measures that the Company employs, and how it uses them to monitor business performance, include the following:

 

“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.

 

“EBITDA” represents net income (loss) before interest, income taxes, depreciation and amortization.

 

“Net Cash Flows” represents Adjusted EBITDA less capital expenditures.

 

The following reconciliations of non-GAAP measures to GAAP financial measures are presented in the attached press release: (i) Adjusted EBITDA to Net Loss, and (ii) Net Cash Flow to Net Cash Used in Operating Activities.

 

Any statements that are not historical facts contained in this Form 8-K are "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”) which statements may be identified by words such as "expects," "plans," "projects," "will," "may," "anticipates," "believes," "should," "intends," "estimates," and other words of similar meaning. Forward-looking statements, include certain statements regarding intent, beliefs, expectations, projections, forecasts and plans, which are subject to numerous assumptions, risks, and uncertainties. A number of factors described from time to time in our periodic filings with the Securities and Exchange Commission could cause actual conditions, events, or results to differ significantly from those described in the forward-looking statements. All forward-looking statements included in this Form 8-K are based on information available at the time of the report. We assume no obligation to update any forward-looking statement. We intend that all forward-looking statements be subject to the safe-harbor provisions of the PSLRA.

 

 

Item 9.01.     Financial Statements and Exhibits.

 

(d) Exhibits

 

99.1	Press Release, dated March 12, 2015

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	TOWERSTREAM CORPORATION
Dated: March 12, 2015	By:	/s/ Joseph P. Hernon
	Joseph P. Hernon
	Chief Financial Officer

 

 

EXHIBIT INDEX

 

 

Exhibit No.	Description
99.1	Press Release, dated March 12, 2015

 

 

 

 

 

Exhibit 99.1

 

Towerstream Reports 2014 Financial Results

and Corporate Update

 

MIDDLETOWN, R.I., March 12, 2015 – 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)								(Audited)
		Three Months Ended December 31,								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.

 

 

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

 

 

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