Company reports fourth consecutive quarter of improved operating
results MIDDLETOWN, R.I., May 6 /PRNewswire-FirstCall/ --
Towerstream (NASDAQ: TWER), a leading WiMAX provider currently
operating in nine major metropolitan areas, announced results for
the first quarter ended March 31, 2009. Operating Highlights: --
First quarter 2009 revenues increased 64% from the first quarter
2008 and increased 6% from the fourth quarter 2008 -- Record number
of customer installations in first quarter 2009 -- Gross margin
improved to 76% during the first quarter 2009 which represented a
10% increase from the fourth quarter 2008 and a 38% increase from
the first quarter 2008 -- Adjusted EBITDA increased by 29% from the
fourth quarter 2008, improving from a loss of $1.5 million to a
loss of $1.1 million -- Six markets are now generating positive
EBITDA and all nine markets collectively are generating positive
EBITDA -- "Cash burn" totaled $2.7 million in the first quarter
2009, representing a 19% decrease from the fourth quarter 2008 and
a 43% decrease from its peak of $4.7 million in the first quarter
2008 -- Customer churn for the first quarter 2009 was 1.68%,
compared to 1.23% for the fourth quarter 2008 and 1.33% for the
first quarter 2008 -- Cash and cash equivalents totaled $21.8
million at March 31, 2009 Management Comments: "Our first quarter
results were impressive, especially considering the difficult
economic environment," said Jeff Thompson, President and Chief
Executive Officer. "ARPU for new customers was lower in the first
quarter, reflecting more cautious purchasing decisions by new
customers. However, our total number of installations reached a
corporate record during the quarter, reflecting strong overall
customer demand. Businesses need a strong Internet connection to
operate effectively and our unique, simple broadband products
provide that solution." "Our current operating focus on existing
markets is clearly demonstrating the leveraging capacity of our
business model," stated Joseph Hernon, Chief Financial Officer.
"Gross margin improved for the fourth consecutive quarter and
reached 76%, a corporate record. Operating expenses decreased 5% on
a sequential basis, reflecting our continued focus on controlling
costs. As a result, adjusted EBITDA improved by 29% in the first
quarter 2009 compared to the fourth quarter 2008. As expected,
capital expenditures decreased to approximately $955,000 which
represents a 50% decrease from our quarterly average during 2008.
Improved adjusted EBITDA and lower capital expenditures resulted in
a 19% decrease in cash burn as compared to the fourth quarter 2008.
We ended the first quarter 2009 in a strong financial position with
approximately $21.8 million in cash and cash equivalents. We have
the capital required to execute our business plan through this
challenging economic period." "We have included operating
information on each of our nine markets in this quarter's report,"
stated Mr. Thompson. "We believe that this information will enable
shareholders and investors to better understand the long-term
potential of our business model. This potential is evident in
reviewing the performance of our first two markets, Boston and New
York, which generated gross margins of 85% and 86% respectively,
and per-market adjusted EBITDA of approximately $650,000 and
$740,000 respectively. In total, six of our nine markets are now
reporting positive adjusted EBITDA, and collectively, our nine
markets are profitable on an adjusted EBITDA basis. Our Dallas,
Miami, and Seattle markets have each been consistently reducing
their per-market adjusted EBITDA losses over the past six months
and we expect continued improvement going forward. We presently
expect Miami to be the next market to reach EBITDA profitability."
The Company also announced that Bruce Grinnell had left the
Company, effective May 1, 2009. His responsibilities are being
assumed by the Company's other executive officers in order to
realize additional expense savings and operational efficiencies.
Selected Financial Data and Key Operating Metrics: (All dollars are
in thousands except ARPU) (Unaudited) Three months ended 3/31/2009
12/31/2008* 3/31/2008* Selected Financial Data Revenues $3,417
$3,210 $2,082 Gross margin 76% 69% 55% Operating expenses (1) 5,605
5,874 5,792 Operating loss (1) (2,188) (2,664) (3,710) Net loss (1)
(2,416) (2,823) (3,609) Adjusted EBITDA (2) (1,084) (1,526) (2,859)
Capital expenditures $955 $1,755 $2,047 Key Operating Metrics Churn
rate (2) 1.68% 1.23% 1.33% ARPU (2) $799 $828 $772 ARPU of new
customers (2) $540 $773 $842 * Certain reclassifications of prior
period amounts have been made to conform to current year
presentation. (1) Includes stock-based compensation of $157, $202
and $174, respectively. (2) See Non-GAAP Measures below for a
definition and reconciliation of adjusted EBITDA, and definitions
of Churn, ARPU and ARPU of new customers. Analysis of Results of
Operations and Financial Condition First Quarter 2009 Results of
Operations Revenues for the first quarter 2009 increased 64% from
the first quarter 2008, and increased 6% compared to the fourth
quarter 2008. These increases were driven by the continued growth
in our customer base. ARPU of new customers in the first quarter
2009 decreased 30% compared to the fourth quarter 2008, and
decreased 36% compared to the first quarter 2008. ARPU of all
customers in the first quarter 2009 decreased 4% compared to the
fourth quarter 2008, and increased 3% compared to the first quarter
2008. Customer churn for the first quarter 2009 of 1.68% increased
compared to 1.23% for the fourth quarter 2008 and 1.33% for the
first quarter 2008. The higher churn in the 2009 period reflects
the effect of the ongoing economic recession on the Company's
commercial customer base. Gross margin increased by 10% in the
first quarter 2009 compared to the fourth quarter 2008, and
increased by 38% compared to the first quarter 2008. The
improvement in gross margin primarily related to an increase in the
number of customers, and the Company's ability to add these
customers onto its network at relatively low marginal cost.
Customer support expenses in the first quarter 2009 decreased 3%
compared to the fourth quarter 2008, and increased 21% compared to
the first quarter 2008. The year-over-year increase reflects
staffing additions and other costs incurred to support our growing
customer base. The number of customers increased 51% during the
twelve months ended March 31, 2009. Sales and marketing expenses in
the first quarter 2009 decreased 9% compared to the fourth quarter
2008, and decreased 11% compared to the first quarter 2008. The
decreases are primarily related to lower average department
headcount as the Company increased its focus on cost controls and
continued to optimize its sales model. Department headcount
averaged 102, 106, and 120 in the first quarter 2009, fourth
quarter 2008, and first quarter 2008, respectively. Sales and
marketing headcount includes direct sales personnel including
account executives, sales managers and sales directors, as well as
indirect sales personnel which includes sales operations, support
and administration. General and administrative expenses increased
2% in the first quarter 2009 compared to the fourth quarter 2008,
and decreased 13% compared to the first quarter 2008. The
year-over-year decrease of 13% is attributable to lower
professional fees of approximately $196,000. Net loss decreased 14%
in the first quarter 2009 compared to the fourth quarter 2008, and
decreased 33% compared to the first quarter 2008. The 14%
improvement on a sequential basis reflects the positive effect of a
6% increase in revenues and a 5% decrease in operating expenses.
The year-over-year improvement of 33% is attributable to a 64%
increase in revenues, and a 3% decrease in operating expenses.
Operating Outlook and Guidance: -- Revenues for the second quarter
2009 are expected to range between $3.6 million to $3.7 million. --
Cash Burn for the second quarter 2009 is expected to range between
$2.0 million to $2.4 million. Non-GAAP Measures The terms "Adjusted
EBITDA," "Churn," "Churn rate," "ARPU," and "Market Cash Flow" are
measurements used by Towerstream to monitor business performance
and are not recognized measures under generally accepted accounting
principles ("GAAP"). Accordingly, investors are cautioned in using
or relying upon these measures as alternatives to recognized GAAP
measures. Our methods of calculating these measures may differ from
other issuers and, accordingly, may not be comparable to similar
measures presented by other issuers. We focus on adjusted EBITDA as
a principle indicator of the operating performance of our business.
EBITDA represents net income (loss) before interest, income taxes,
depreciation and amortization. We define adjusted EBITDA as net
income (loss) before interest, income taxes, depreciation and
amortization expenses, excluding, when applicable, stock-based
compensation, gain or loss on disposal of property and equipment,
gain or loss on derivative liabilities, and other non-operating
income or expenses. Adjusted EBITDA for a market also excludes
corporate overhead expenses and other centralized operating costs.
We believe that adjusted EBITDA trends are valuable indicators of
our markets relative performance, and of whether our markets are
able to produce sufficient market cash flow to fund working capital
and capital expenditure needs. The terms "Churn" and "Churn rate"
refer to the percent of revenue lost on a monthly basis from
customers disconnecting from our network or reducing the amount of
their bandwidth. The term "ARPU" refers to the monthly average
revenue per user, or customer, being generated from those customers
under contract at the end of each indicated period. We calculate
ARPU by dividing our monthly recurring revenue ("MRR") at the end
of a period by the number of customers generating that MRR. ARPU of
new customers is calculated in the same manner but only includes
new customers who entered into contracts during the indicated
period. Market Cash Flow represents the amount of cash generated in
a market after deducting a market's direct operating expenses from
that market's revenues. Market Cash Flow does not include (i)
centralized operating costs which support all markets collectively
or (ii) any network related capital expenditures incurred in a
market. The Non-GAAP measure, adjusted EBITDA, has been reconciled
to Net loss as follows: All amounts are in thousands except per
share amounts Three months ended 3/31/2009 12/31/2008* 3/31/2008*
Reconciliation of Non-GAAP to GAAP: Adjusted EBITDA $ (1,084) $
(1,526) $ (2,859) Interest expense (184) (115) (183) Interest
income 13 18 289 Other expense, net (16) (62) (5) Loss on
derivative financial instruments (41) - - Depreciation (947) (936)
(677) Stock-based compensation (157) (202) (174) Net loss $ (2,416)
$ (2,823) $ (3,609) -------- -------- -------- * Certain
reclassifications of prior period amounts have been made to conform
to current year presentation. Summary Condensed Consolidated
Financial Statements (Unaudited) (Audited) March 31, December 31,
2009 2008 Assets Current Assets Cash and cash equivalents $ 21,807
$ 24,740 Accounts receivable, net 385 280 Other 359 319 Total
Current Assets 22,551 25,339 Property and equipment, net 12,881
12,891 Other assets 1,062 1,058 Total Assets 36,494 39,288
Liabilities and Stockholders' Equity Current Liabilities Accounts
payable 865 1,395 Accrued expenses 759 861 Deferred revenues 952
986 Short-term debt, net of discount 2,406 2,607 Derivative
liabilities 14 - Other 69 78 Total Current Liabilities 5,065 5,927
Other Liabilities Derivative liabilities 116 - Other 338 354 Total
Other Liabilities 454 354 Total Liabilities 5,519 6,281
Stockholders' Equity Common stock 34 34 Additional paid-in-capital
54,482 54,852 Accumulated deficit (23,541) (21,879) Total
Stockholders' Equity 30,975 33,007 Total Liabilities and
Stockholders' Equity $ 36,494 $ 39,288 (Unaudited) Three months
ended March 31, 2009 2008 Revenues $ 3,417 $ 2,082 Operating
Expenses Cost of revenues (exclusive of depreciation) 826 933
Depreciation 947 677 Customer support services 550 453 Sales and
marketing 1,576 1,774 General and administrative 1,706 1,955 Total
Operating Expenses 5,605 5,792 Operating Loss (2,188) (3,710) Other
Income (Expense) Interest income 13 289 Interest expense (184)
(183) Other expense, net (16) (5) Loss on derivative financial
instruments (41) - Total Other Income (Expense) (228) 101 Net Loss
$ (2,416) $ (3,609) Net loss per common share $ (0.07) $ (0.10) Net
loss per common share excluding stock-based compensation $ (0.07) $
(0.10) Weighted average common shares outstanding - basic and
diluted 34,588 34,496 (Unaudited) Three months ended March 31, 2009
2008 Cash Flows From Operating Activities Net loss $ (2,416) $
(3,609) Non-cash adjustments: Depreciation 947 677 Stock-based
compensation 157 174 Other 172 251 Changes in operating assets and
liabilities (823) (157) Net Cash Used In Operating Activities
(1,963) (2,664) Cash Flows From Investing Activities Acquisitions
of property and equipment (955) (2,047) Other (3) (9) Net Cash Used
In Investing Activities (958) (2,056) Cash Flows From Financing
Activities Repayment of capital leases (12) (14) Net Cash Used In
Financing Activities (12) (14) Net Decrease In Cash and Cash
Equivalents (2,933) (4,734) Cash and Cash Equivalents - Beginning
24,740 40,757 Cash and Cash Equivalents - Ending $ 21,807 $ 36,023
Market data for the quarter ended March 31, 2009 (in thousands)
Adjusted Cost of Operating Market Market Revenues Revenues Gross
Margin Cost EBITDA New York $ 1,237 $ 174 $ 1,063 86% $ (323) $ 741
Boston 962 140 822 85% (172) 650 Los Angeles 406 65 341 84% (270)
71 Providence/Newport 141 34 107 76% (49) 58 San Francisco 223 43
180 81% (129) 51 Chicago 202 71 131 65% (117) 14 Seattle 97 56 41
42% (88) (47) Miami 109 59 50 46% (107) (57) Dallas-Fort Worth 40
54 (14) (35)% (125) (139) Total $ 3,417 $ 696 $ 2,721 80% $ 1,380 $
1,341 Reconciliation of Non-GAAP Financial Measure to GAAP
Financial Measure Adjusted market EBITDA $ 1,341 Centralized
operating costs (876) Corporate expenses (1,549) Depreciation (947)
Stock-based compensation (157) Other income (expense) (228) Net
loss $ (2,416) 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 6, 2009 at
4:30 p.m. EDT to review results and provide an update on business
developments. Interested parties may participate in the conference
by dialing 888-679-8033 or 617-213-4846 (for international callers)
using pass code 70974945. A telephonic replay of the conference may
be accessed approximately four hours after the call through May 13,
2009 at 11:59 p.m. EDT by dialing 888-286-8010 or 617-801-6888 (for
international callers) using pass code 47296875. 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.
Towerstream's wireless broadband solution network delivers
high-speed Internet access supporting VoIP, bandwidth on demand,
wireless redundancy, VPNs, disaster recovery, bundled data, and
video services, and can be delivered in days. Unlike cable Internet
and DSL, Towerstream connections are symmetrical, which means that
the upload and download speeds are identical. This creates a more
stable connection, suitable for VoIP and web hosting, as well as
many other business applications. Companies utilizing multiple
appliances simultaneously, such as streaming video and VoIP, can
prioritize their bandwidth to secure mission-critical activities.
All of Towerstream's products are backed by its Service Level
Agreement (SLA) and the ability to be up and running within a week.
Towerstream currently serves businesses of all sizes in New York,
Boston, Los Angeles, Chicago, the San Francisco Bay Area, Miami,
Seattle, Dallas-Fort Worth and Providence/Newport, RI. For more
information, visit http://www.towerstream.com/. About Towerstream
Corporation Towerstream is a leading WiMAX service provider in the
U.S., delivering high-speed Internet access to businesses. Founded
in 2000, the Company has established networks in nine markets
including New York City, Boston, Los Angeles, Chicago, the San
Francisco Bay Area, Miami, Seattle, Dallas-Fort Worth, and the
greater Providence area where the Company is based. The Company was
the first carrier selected to join the WiMAX Forum to assist
leading vendors in establishing industry compliance with
international broadband wireless access standards and cross-vendor
interoperability. Towerstream was awarded two 2008 Telephony
Innovation Awards for Most Innovative Broadband Wireless Service
and Most Innovative Small Business Service and the Best of WiMAX
World 2008 Service Provider Deployment Award for its New York City
network. Safe Harbor Certain statements contained in this press
release are "forward-looking statements" within the meaning of
applicable federal securities laws, including, without limitation,
anything relating or referring to future financial results and
plans for future business development activities, and are thus
prospective. Forward-looking statements are inherently subject to
risks and uncertainties some of which cannot be predicted or
quantified based on current expectations. Such risks and
uncertainties include, without limitation, the risks and
uncertainties set forth from time to time in reports filed by the
Company with the Securities and Exchange Commission. Although the
Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to be correct. Consequently,
future events and actual results could differ materially from those
set forth in, contemplated by, or underlying the forward-looking
statements contained herein. The Company undertakes no obligation
to publicly release statements made to reflect events or
circumstances after the date hereof. INVESTOR CONTACT: Terry
McGovern Vision Advisors 415-902-3001 MEDIA CONTACT: Amanda Lordy /
Todd Barrish Dukas Public Relations 212-704-7385 / DATASOURCE:
Towerstream Corporation CONTACT: Investors, Terry McGovern, Vision
Advisors, +1-415-902-3001, ; or Media, Amanda Lordy, , or Todd
Barrish, , both of Dukas Public Relations, +1-212-704-7385 Web
Site: http://www.towerstream.com/
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