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): May 11, 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)

 



 

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 May 11, 2015, Towerstream Corporation (the “Company”) issued a press release (the “Press Release”) announcing results for the three months ended March 31, 2015. 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) nonmonetary transactions, and (ii) 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 May 11, 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: May 11, 2015

By:

/s/ Joseph P. Hernon

 

 

 

Joseph P. Hernon

 

 

 

Chief Financial Officer

 

 

 
 

 

 

EXHIBIT INDEX

 

 

Exhibit No.

Description

99.1

Press Release, dated May 11, 2015

 

 

 

 



Exhibit 99.1

 

Towerstream Reports First Quarter 2015 Results

 

MIDDLETOWN, R.I., May 11, 2015Towerstream Corporation (NASDAQ: TWER) (the “Company”), a Fixed Wireless Fiber Alternative provider, announced results for the first quarter ended March 31, 2015.

 

First Quarter Operating Highlights

 

HetNets Tower Corporation Subsidiary

 

 

Revenues for the three months ended March 31, 2015 were $0.8 million compared to $0.7 million for the three months ended March 31, 2014 representing an increase of $0.1 million, or 6%.

 

Number of Shared Wireless Infrastructure locations increased by 6% during the twelve months ended March 31, 2015.

 

Number of Access Points leased by major cable company increased by 25% during the twelve months ended March 31, 2015.

 

Towerstream Corporation

 

 

Number of buildings lit with Cogent-like service of 100 Megabytes of bandwidth for $699 more than doubled in the first quarter of 2015 compared to all of 2014.

 

ARPU increased to $773 at March 31, 2015 compared to $758 at March 31, 2014 representing an increase of $15, or 2%.

 

Customer churn for the three months ended March 31, 2015 totaled 1.85% compared to 2.33% for the three months ended March 31, 2014.

 

Executed a wholesale agreement with a CLEC (Competitive Local Exchange Carrier).

 

 

Management Comments

 

“With the completion of recent spectrum auctions, carriers are now focused on utilizing small cell architectures and the densification of their networks, which is driving increased demand for our rooftop locations,” said Jeffrey Thompson, President and Chief Executive Officer.  “We are also excited to see Google enter the WiFi cellular model as it will likely spur demand for our network.  Moreover, the addition of LTE-Unlicensed is increasing the value of our beach front rooftops.”

 

"Our On Net program offering of 100 megabytes of bandwidth for $699 per month continues to gain traction as evidenced by the strong growth in lit buildings and customers," noted Joseph Hernon, Chief Financial Officer. "Our new sales center location in Southern Florida is open and staffed, and we expect that a higher base of experienced account executives will drive growth in the Fixed Wireless segment over the course of the year."

 

 
 

 

 

Selected Financial Data and Key Operating Metrics

(All dollars are in thousands except ARPU)

 

   

(Unaudited)

 
   

Three Months Ended

 
   

3/31/2015

   

12/31/2014

   

3/31/2014

 
                         

Revenues

  $ 7,960     $ 8,090     $ 8,380  

Gross margin

                       

Consolidated

    20 %     21 %     30 %

Fixed wireless

    62 %     63 %     67 %

Capital expenditures

                       

Fixed wireless

  $ 1,434     $ 1,524     $ 1,486  

Shared wireless infrastructure

    119       202       938  

Corporate

    121       43       113  

Churn rate (1)

    1.85 %     1.65 %     2.33 %

ARPU (1)

  $ 773     $ 772     $ 758  

ARPU of new customers (1)

    628       639       636  

Cash and cash equivalents

    32,267       38,028       21,206  

 

 

(1)

See Non-GAAP Measures below for the definitions of Churn, ARPU and ARPU of new customers.

 

Consolidated Statements of Operations (Unaudited)

(All dollars are in thousands except per share amounts)

 

   

Three Months Ended March 31,

 
   

2015

   

2014

 
                 

Revenues

  $ 7,960     $ 8,380  
                 

Operating Expenses

               

Cost of revenues

    6,400       5,856  

Depreciation and amortization

    3,380       3,695  

Customer support

    1,241       1,176  

Sales and marketing

    1,329       1,422  

General and administrative

    2,869       2,678  

Total Operating Expenses

    15,219       14,827  

Operating Loss

    (7,259 )     (6,447 )

Other Income/(Expense)

               

Interest expense, net

    (1,664 )     (63 )

Total Other Income/(Expense)

    (1,664 )     (63 )

Net Loss

  $ (8,923 )   $ (6,510 )
                 

Net loss per common share – basic and diluted

  $ (0.13 )   $ (0.10 )

Weighted average common shares outstanding – basic and diluted

    67,857       66,439  

 

 
 

 

 

Statements of Operations - Segment Basis (Unaudited)

 

   

Three Months Ended March 31, 2015

 
   

Fixed Wireless

   

Shared Wireless Infrastructure

   

Corporate

   

Eliminations

   

Total

 
                                         

Revenues

  $ 7,217     $ 788     $ -     $ (45 )   $ 7,960  
                                         

Operating Expenses

                                       

Cost of revenues

    2,722       3,706       17       (45 )     6,400  

Depreciation and amortization

    2,127       1,032       221       -       3,380  

Customer support

    326       160       755       -       1,241  

Sales and marketing

    1,210       44       75       -       1,329  

General and administrative

    120       108       2,641       -       2,869  

Total Operating Expenses

    6,505       5,050       3,709       (45 )     15,219  
                                         

Operating Income (Loss)

  $ 712     $ (4,262 )   $ (3,709 )   $ -     $ (7,259 )

Non-recurring expenses, primarily acquisition related

    -       -       236       -       236  

Non-cash expenses (a)

    2,238       1,081       429       -       3,748  

Adjusted EBITDA (b)

    2,950       (3,181 )     (3,044 )     -       (3,275 )

Less: Capital expenditures

    1,434       119       121       -       1,674  

Net Cash Flow (b)

  $ 1,516     $ (3,300 )   $ (3,165 )   $ -     $ (4,949 )

 

   

Three Months Ended March 31, 2014

 
   

Fixed Wireless

   

Shared Wireless Infrastructure

   

Corporate

   

Eliminations

   

Total

 
                                         

Revenues

  $ 7,686     $ 740     $ -     $ (46 )   $ 8,380  
                                         

Operating Expenses

                                       

Cost of revenues

    2,499       3,389       14       (46 )     5,856  

Depreciation and amortization

    2,538       940       217       -       3,695  

Customer support

    273       176       727       -       1,176  

Sales and marketing

    1,263       77       82       -       1,422  

General and administrative

    108       147       2,423       -       2,678  

Total Operating Expenses

    6,681       4,729       3,463       (46 )     14,827  
                                         

Operating Income (Loss)

  $ 1,005     $ (3,989 )   $ (3,463 )   $ -     $ (6,447 )

Non-cash expenses (a)

    2,612       1,014       500       -       4,126  

Adjusted EBITDA (b)

    3,617       (2,975 )     (2,963 )     -       (2,321 )

Less: Capital expenditures

    1,486       938       113       -       2,537  

Net Cash Flow (b)

  $ 2,131     $ (3,913 )   $ (3,076 )   $ -     $ (4,858 )

 

 

(a) Includes depreciation and amortization, stock-based compensation, deferred rent expense 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 Sheets

(All dollars are in thousands)

 

   

(Unaudited)

March 31, 2015

   

(Audited)

December 31, 2014

 

Assets

               

Current Assets

               

Cash and cash equivalents

  $ 32,267     $ 38,028  

Other

    2,529       2,237  

Total Current Assets

    34,796       40,265  
                 

Property and equipment, net

    32,298       33,905  
                 

Other assets

    7,673       8,152  
                 

Total Assets

    74,767       82,322  
                 

Liabilities and Stockholders’ Equity

               

Current Liabilities

               

Accounts payable and accrued expenses

    3,470       2,910  

Deferred revenues and other

    2,270       2,288  

Total Current Liabilities

    5,740       5,198  
                 

Long-Term Liabilities

               

Long-term debt

    32,761       32,101  

Other

    3,004       3,061  

Total Long-Term Liabilities

    35,765       35,162  
                 

Total Liabilities

    41,505       40,360  
                 

Stockholders’ Equity

               

Common stock

    67       67  

Additional paid-in-capital

    157,854       157,631  

Accumulated deficit

    (124,659 )     (115,736 )

Total Stockholders’ Equity

    33,262       41,962  

Total Liabilities and Stockholders’ Equity

  $ 74,767     $ 82,322  

 

 
 

 

 

Summary Condensed Statements of Cash Flows (Unaudited)

 

   

Three Months Ended March 31,

 
   

2015

   

2014

 

Net Cash Used in Operating Activities

  $ (3,891 )   $ (4,222 )

Net Cash Used in Investing Activities

    (1,657 )     (2,557 )

Net Cash Used in Financing Activities

    (212 )     (197 )

Net Decrease in Cash and Cash Equivalents

  $ (5,760 )   $ (6,976 )

 

 

Operating Outlook and Guidance

 

 

Revenues for the second quarter 2015 are expected to range between $7.2 million to $7.5 million for the Fixed Wireless segment.

 

 

Revenues for the second 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 second 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) nonmonetary transactions, and (ii) 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 March 31,

 
   

2015

   

2014

 

Adjusted EBITDA

  $ (3,275 )   $ (2,321 )

Depreciation and amortization

    (3,380 )     (3,695 )

Stock-based compensation

    (211 )     (292 )

Loss on nonmonetary transactions

    (66 )     (68 )

Non-recurring expenses

    (236 )     -  

Deferred rent

    (91 )     (71 )

Operating Income (Loss)

  $ (7,259 )   $ (6,447 )

Interest expense, net

    (1,664 )     (63 )

Net loss

  $ (8,923 )   $ (6,510 )

 

 

II. Net Cash Flow to Net Cash Used in Operating Activities

 

   

Three Months Ended March 31,

 
   

2015

   

2014

 

Net cash flow

  $ (4,949 )   $ (4,858 )

Capital expenditures

    1,674       2,537  

Non-recurring expenses

    (236 )     -  

Changes in operating assets and liabilities, net

    761       (1,780 )

Other, net

    (1,141 )     (121 )

Net cash used in operating activities

  $ (3,891 )   $ (4,222 )

 

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 11, 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 May 18, 2015 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 31087467.

 

 
 

 

 

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 Corporation (Nasdaq:TWER) is a leading Fixed Wireless Fiber Alternative company delivering high-speed Internet access to businesses. To date the company offers its 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. In 2014, Towerstream launched its On-Net fixed wireless service offering building owners and property managers a redundant and reliable dense urban network that directly connects with Towerstream’s fiber backbone. On-Net building tenants have access to 100 Mbps of dedicated, symmetrical Internet connectivity, with a premier SLA, for an industry-leading price of $699/month. 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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