TWER Towerstream Corporation (CE)

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

 

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FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

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Date of Report (Date of earliest event reported): November 9, 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 November 9, 2015, Towerstream Corporation (the “Company”) issued a press release (the “Press Release”) announcing results for the three and nine months ended September 30, 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 November 9, 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: November 9, 2015		By:	/s/ Joseph P. Hernon
			Joseph P. Hernon
			Chief Financial Officer

 

 

EXHIBIT INDEX

 

 

Exhibit No.	Description
99.1	Press Release, dated November 9, 2015

 

 

 

 

Exhibit 99.1

 

Towerstream Reports Third Quarter 2015 Results and Business Update

 

MIDDLETOWN, R.I., November 9, 2015 – Towerstream Corporation (NASDAQ: TWER) (the “Company”), a Fixed Wireless Fiber Alternative provider, announced results for the third quarter ended September 30, 2015 and provided a business update.

 

Operating Highlights and Business Update

 

Shared Wireless Infrastructure

 

●

Executed small cell contracts with Verizon Wireless for the colocation of small cell equipment on shared wireless infrastructure.

●

Revenues for the three months ended September 30, 2015 increased 7% compared to the three months ended September 30, 2014.

●

Syscom and HetNets announce landmark agreement to enable carriers to deploy wireless infrastructure on 45,000 Syscom billboards.

 

Fixed Wireless

 

	●	Towerstream connected 55 buildings with 15.8 million square feet and 1,527 possible customers to its On Net service of 100 MB of bandwidth for $699.
	●	Wholesale platform continues to grow with additional connections provided to existing CLEC customer and trial program launched with third CLEC.
	●	New sales center staffed and closing customer contracts ahead of internal plan.

 

Management Comments and Business Update

 

"Continued growth in our On Net program and the maturation of the sales force in our new South Florida office has positioned the Fixed Wireless segment for higher revenues in 2016, and possibly as soon as the fourth quarter of 2015" stated Joseph Hernon, Chief Financial Officer. "Anticipated higher revenues and cost management initiatives are expected to drive cash burn lower in the fourth quarter of 2015 and continuing into 2016."

 

"Revenues for our Shared Wireless segment continue to grow as carriers have started to densify their networks." stated Jeffrey Thompson, Chief Executive Officer. "Our expansive network in Manhattan, the most congested city in the country, has significant capacity and is uniquely positioned for small cell deployments, Wi-Fi access and offload, and connectivity to support the continued growth of the Internet-of-Things.”

 

 

Selected Financial Data and Key Operating Metrics

(All dollars are in thousands except ARPU)

		(Unaudited)
		Three Months Ended
		9/30/2015				6/30/2015				9/30/2014
Revenues		$	7,798			$	7,857			$	8,302
Gross margin
Consolidated			21	%			20	%			25	%
Fixed wireless			61	%			62	%			65	%
Capital expenditures
Fixed wireless		$	1,779			$	2,422			$	1,154
Shared wireless infrastructure			46				56				590
Corporate			32				57				22
Churn rate (1)			1.87	%			1.84	%			1.69	%
ARPU (1)		$	768			$	772			$	769
ARPU of new customers (1)			627				620				651
Cash and cash equivalents			20,309				26,117				11,891

 

(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 September 30,								Nine Months Ended September 30,
		2015				2014				2015				2014
Revenues		$	7,798			$	8,302			$	23,615			$	24,946
Operating Expenses
Cost of revenues			6,187				6,211				18,907				18,169
Depreciation and amortization			3,436				3,318				10,224				10,295
Customer support			1,310				1,248				3,884				3,574
Sales and marketing			1,514				1,353				4,391				4,174
General and administrative			2,195				2,382				7,492				7,726
Total Operating Expenses			14,642				14,512				44,898				43,938
Operating Loss			(6,844	)			(6,210	)			(21,283	)			(18,992	)
Other Expense
Interest expense, net			(1,665	)			(44	)			(5,000	)			(166	)
Total Other Expense			(1,665	)			(44	)			(5,000	)			(166	)
Net Loss		$	(8,509	)		$	(6,254	)		$	(26,283	)		$	(19,158	)
Net loss per common share – basic and diluted		$	(0.13	)		$	(0.09	)		$	(0.39	)		$	(0.29	)
Weighted average common shares outstanding – basic and diluted			67,966				66,644				67,916				66,521

 

 

Summary Condensed Balance Sheets

(All dollars are in thousands)

 

		(Unaudited) September 30, 2015				(Audited) December 31, 2014
Assets
Current Assets
Cash and cash equivalents		$	20,309			$	38,028
Other			2,128				2,237
Total Current Assets			22,437				40,265
Property and equipment, net			30,041				33,905
Other assets			6,780				8,152
Total Assets			59,258				82,322
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued expenses			3,476				2,910
Deferred revenues and other			2,296				2,288
Total Current Liabilities			5,772				5,198
Long-Term Liabilities
Long-term debt			34,061				32,101
Other			3,099				3,061
Total Long-Term Liabilities			37,160				35,162
Total Liabilities			42,932				40,360
Stockholders’ Equity
Common stock			67				67
Additional paid-in-capital			158,278				157,631
Accumulated deficit			(142,019	)			(115,736	)
Total Stockholders’ Equity			16,326				41,962
Total Liabilities and Stockholders’ Equity		$	59,258			$	82,322

 

Summary Condensed Statements of Cash Flows (Unaudited)

 

		Nine Months Ended September 30,
		2015				2014
Net Cash Used in Operating Activities		$	(11,643	)		$	(9,174	)
Net Cash Used in Investing Activities			(5,347	)			(6,547	)
Net Cash Used in Financing Activities			(729	)			(570	)
Net Decrease in Cash and Cash Equivalents		$	(17,719	)		$	(16,291	)

 

 

Statements of Operations - Segment Basis (Unaudited)

 

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.

 

		Three Months Ended September 30, 2015
		Fixed Wireless				Shared Wireless Infrastructure				Corporate				Eliminations				Total
Revenues		$	6,996			$	850			$	-			$	(48	)		$	7,798
Operating Expenses
Cost of revenues			2,735				3,484				16				(48	)			6,187
Depreciation and amortization			2,214				1,006				216				-				3,436
Customer support			379				179				752				-				1,310
Sales and marketing			1,401				36				77				-				1,514
General and administrative			110				100				1,985				-				2,195
Total Operating Expenses			6,839				4,805				3,046				(48	)			14,642
Operating Income (Loss)		$	157			$	(3,955	)		$	(3,046	)		$	-			$	(6,844	)
Non-recurring expenses, primarily acquisition related			-				-				8				-				8
Non-cash expenses (a)			2,309				1,002				396				-				3,707
Adjusted EBITDA (b)			2,466				(2,953	)			(2,642	)			-				(3,129	)
Less: Capital expenditures			1,779				46				32				-				1,857
Net Cash Flow (b)		$	687			$	(2,999	)		$	(2,674	)		$	-			$	(4,986	)

 

		Three Months Ended September 30, 2014
		Fixed Wireless				Shared Wireless Infrastructure				Corporate				Eliminations				Total
Revenues		$	7,554			$	794			$	-			$	(46	)		$	8,302
Operating Expenses
Cost of revenues			2,632				3,610				15				(46	)			6,211
Depreciation and amortization			1,981				1,014				323				-				3,318
Customer support			346				147				755				-				1,248
Sales and marketing			1,239				38				76				-				1,353
General and administrative			64				163				2,155				-				2,382
Total Operating Expenses			6,262				4,972				3,324				(46	)			14,512
Operating Income (Loss)		$	1,292			$	(4,178	)		$	(3,324	)		$	-			$	(6,210	)
Non-cash expenses (a)			2,096				1,084				501				-				3,681
Adjusted EBITDA (b)			3,388				(3,094	)			(2,823	)			-				(2,529	)
Less: Capital expenditures			1,154				590				22				-				1,766
Net Cash Flow (b)		$	2,234			$	(3,684	)		$	(2,845	)		$	-			$	(4,295	)

 

 

		Nine Months Ended September 30, 2015
		Fixed Wireless				Shared Wireless Infrastructure				Corporate				Eliminations				Total
Revenues		$	21,294			$	2,464			$	-			$	(143	)		$	23,615
Operating Expenses
Cost of revenues			8,141				10,863				46				(143	)			18,907
Depreciation and amortization			6,516				3,053				655				-				10,224
Customer support			1,066				536				2,282				-				3,884
Sales and marketing			4,039				123				229				-				4,391
General and administrative			411				303				6,778				-				7,492
Total Operating Expenses			20,173				14,878				9,990				(143	)			44,898
Operating Income (Loss)		$	1,121			$	(12,414	)		$	(9,990	)		$	-			$	(21,283	)
Non-recurring expenses, primarily acquisition related			-				-				406				-				406
Non-cash expenses (a)			6,828				3,109				1,241				-				11,178
Adjusted EBITDA (b)			7,949				(9,305	)			(8,343	)			-				(9,699	)
Less: Capital expenditures			5,635				221				210				-				6,066
Net Cash Flow (b)		$	2,314			$	(9,526	)		$	(8,553	)		$	-			$	(15,765	)

 

		Nine Months Ended September 30, 2014
		Fixed Wireless				Shared Wireless Infrastructure				Corporate				Eliminations				Total
Revenues		$	22,811			$	2,273			$	-			$	(138	)		$	24,946
Operating Expenses
Cost of revenues			7,751				10,512				44				(138	)			18,169
Depreciation and amortization			6,599				2,933				763				-				10,295
Customer support			890				502				2,182				-				3,574
Sales and marketing			3,754				178				242				-				4,174
General and administrative			374				467				6,885				-				7,726
Total Operating Expenses			19,368				14,592				10,116				(138	)			43,938
Operating Income (Loss)		$	3,443			$	(12,319	)		$	(10,116	)		$	-			$	(18,992	)
Non-recurring expenses, primarily acquisition related			-				-				91				-				91
Non-cash expenses (a)			6,896				3,136				1,478				-				11,510
Adjusted EBITDA (b)			10,339				(9,183	)			(8,547	)			-				(7,391	)
Less: Capital expenditures			4,044				2,018				339				-				6,401
Net Cash Flow (b)		$	6,295			$	(11,201	)		$	(8,886	)		$	-			$	(13,792	)

 

(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.

 

 

Operating Outlook and Guidance

 

●

Revenues for the fourth quarter 2015 are expected to range between $6.8 million to $7.2 million for the Fixed Wireless segment.

 

●

Revenues for the fourth quarter 2015 are expected to range between $0.875 million to $1.15 million for the Shared Wireless Infrastructure segment.

 

●

Cash burn for the fourth quarter 2015 is expected to range between $4.5 million to $4.9 million.

 

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 September 30,
		2015				2014
Adjusted EBITDA		$	(3,129	)		$	(2,529	)
Depreciation and amortization			(3,436	)			(3,318	)
Stock-based compensation			(193	)			(185	)
Loss on nonmonetary transactions			(60	)			(68	)
Non-recurring expenses			(8	)			-
Deferred rent			(18	)			(110	)
Operating Income (Loss)		$	(6,844	)		$	(6,210	)
Interest expense, net			(1,665	)			(44	)
Net loss		$	(8,509	)		$	(6,254	)

 

		Nine Months Ended September 30,
		2015				2014
Adjusted EBITDA		$	(9,699	)		$	(7,391	)
Depreciation and amortization			(10,224	)			(10,295	)
Stock-based compensation			(615	)			(740	)
Loss on nonmonetary transactions			(193	)			(203	)
Non-recurring expenses			(406	)			(91	)
Deferred rent			(146	)			(272	)
Operating Income (Loss)		$	(21,283	)		$	(18,992	)
Interest expense, net			(5,000	)			(166	)
Net loss		$	(26,283	)		$	(19,158	)

 

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

 

		Three Months Ended September 30,
		2015				2014
Net cash flow		$	(4,986	)		$	(4,295	)
Capital expenditures			1,857				1,766
Non-recurring expenses			(8	)			-
Changes in operating assets and liabilities, net			136				(737	)
Other, net			(819	)			(37	)
Net cash used in operating activities		$	(3,820	)		$	(3,303	)

 

		Nine Months Ended September 30,
		2015				2014
Net cash flow		$	(15,765	)		$	(13,792	)
Capital expenditures			6,066				6,401
Non-recurring expenses			(406	)			(91	)
Changes in operating assets and liabilities, net			842				(1,514	)
Other, net			(2,380	)			(178	)
Net cash used in operating activities		$	(11,643	)		$	(9,174	)

 

 

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 November 9, 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 November 16, 2015 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 63065499.

 

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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