Adjusted EBITDA improves 39% compared to First Quarter 2009
MIDDLETOWN, R.I., Aug. 5 /PRNewswire-FirstCall/ -- Towerstream
(NASDAQ: TWER), a leading fixed WiMAX provider currently operating
in nine major metropolitan areas, announced results for the second
quarter ended June 30, 2009. Operating Highlights: -- Second
quarter 2009 revenues increased 47% from the second quarter 2008
and increased 8% from the first quarter 2009 -- Adjusted EBITDA
improved 39% compared to the first quarter 2009, decreasing from a
loss of almost $1.1 million to a loss of less than $0.7 million --
Record number of contracts signed in June 2009, exceeding the
previous monthly record by 28% -- Gross margin remained strong at
75% during the second quarter 2009 which represented a 1% decrease
from the first quarter 2009 and a 25% increase from the second
quarter 2008 -- Six markets are now generating positive quarterly
adjusted EBITDA and all nine markets collectively are generating
positive quarterly adjusted EBITDA -- "Cash burn" totaled $1.6
million in the second quarter 2009, representing a 40% decrease
from the first quarter -- Customer churn for the second quarter
2009 was 1.90%, compared to 1.68% for the first quarter 2009 and
1.17% for the second quarter 2008 -- Cash and cash equivalents
totaled $20.2 million at June 30, 2009 Management Comments: "This
was a pivotal quarter for Towerstream to demonstrate the evolution
of our sales strategy," said Jeff Thompson, President and Chief
Executive Officer. "Already, we have seen positive results from
this strategy as we reported a record number of contracts in June.
New contracts executed in July were the second highest in our
history, and we believe these sustained results reflect an
accelerating interest in our wireless products." "The core strength
of our monthly recurring revenue model and tight cost controls
resulted in a 39% improvement in adjusted EBITDA compared to the
first quarter," stated Joseph Hernon, Chief Financial Officer.
"Cash burn improved 40% sequentially, and our cash resources of
approximately $20 million at June 30, 2009 provide solid coverage
relative to current quarterly cash requirements. Gross margin
remained strong at 75% and continued operational improvements
resulted in a 5% sequential decrease in core operating expenses."
Selected Financial Data and Key Operating Metrics: (All dollars are
in thousands except ARPU) (Unaudited) Three months ended 6/30/2009
3/31/2009* 6/30/2008* Selected Financial Data Revenues $3,673
$3,417 $2,494 Gross margin 75% 76% 60% Operating expenses (1) 5,562
5,622 6,266 Operating loss (1) (1,889) (2,205) (3,772) Net loss (1)
(2,100) (2,416) (3,730) Adjusted EBITDA (2) (660) (1,084) (2,679)
Capital expenditures $1,071 $955 $1,841 Key Operating Metrics Churn
rate (2) 1.90% 1.68% 1.17% ARPU (2) $769 $799 $819 ARPU of new
customers (2) $547 $540 $898 * Certain reclassifications of prior
period amounts have been made to conform to current year
presentation. (1) Includes stock-based compensation of $229, $157
and $336, 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 Second Quarter 2009 Results of
Operations Revenues for the second quarter 2009 increased 8% from
the first quarter 2009, and increased 47% compared to the second
quarter 2008. These increases were driven by growth in our customer
base from approximately 1,100 customers at the end of the second
quarter 2008 to approximately 1,600 at the end of second quarter
2009. ARPU of new customers in the second quarter 2009 increased 1%
compared to the first quarter 2009, and decreased 39% compared to
the second quarter 2008. ARPU of all customers in the second
quarter 2009 decreased 4% compared to the first quarter 2009, and
decreased 6% compared to the second quarter 2008. Customer churn
for the second quarter 2009 of 1.90% increased compared to 1.68%
for the first quarter 2009 and 1.17% for the second quarter 2008.
New customers continued to be cautious in their purchasing
decisions which resulted in ARPU values below historical levels.
The higher churn in the 2009 period reflects the effect of the
ongoing economic recession on the Company's commercial customer
base. Gross margin decreased 1% in the second quarter 2009 compared
to the first quarter 2009, and increased by 25% compared to the
second quarter 2008. The year-over-year improvement in gross margin
primarily related to a 47% 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
second quarter 2009 decreased 12% compared to the first quarter
2009, and decreased less than 1% compared to the second quarter
2008. The quarter-over-quarter decrease relates to lower payroll
expenses as the Company continues to focus on cost control. Sales
and marketing expenses in the second quarter 2009 decreased 12%
compared to the first quarter 2009, and decreased 31% compared to
the second quarter 2008. The decreases are primarily related to
lower department headcount which averaged 100, 102, and 130 in the
second quarter 2009, first quarter 2009, and second quarter 2008,
respectively. The Company continues to optimize its sales and
marketing strategy, including the enhanced use of Internet-based
marketing programs which has both increased qualified leads and
enabled the Company to reduce headcount. Sales and marketing
headcount includes marketing, direct sales which includes account
executives and sales managers, and indirect sales which includes
sales operations, support and administration. General and
administrative expenses increased 4% in the second quarter 2009
compared to the first quarter 2009, and decreased 11% compared to
the second quarter 2008. The year-over-year decrease of 11% is
attributable to lower professional fees of approximately $100,000
and stock-based compensation of approximately $110,000. Net loss
decreased 13% in the second quarter 2009 compared to the first
quarter 2009, and decreased 44% compared to the second quarter
2008. The 13% sequential improvement reflects the positive effect
of an 8% increase in revenues and a 1% decrease in operating
expenses. The year-over-year improvement of 44% is attributable to
a 47% increase in revenues and an 11% decrease in operating
expenses. Operating Outlook and Guidance: -- Revenues for the third
quarter 2009 are expected to range between $3.85 million to $3.95
million -- Adjusted EBITDA loss for the third quarter 2009 is
expected to range between $0.5 million to $0.6 million, excluding
$0.1 million that the Company expects to spend related to efforts
to secure grants under the U.S. Government's Broadband Stimulus
program 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 instruments, 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 6/30/2009 3/31/2009* 6/30/2008*
Reconciliation of Non-GAAP to GAAP: Adjusted EBITDA $(660) $(1,084)
$(2,679) Interest expense (186) (184) (106) Interest income 9 13
148 Loss on derivative financial instruments (34) (41) - Loss on
property and equipment (18) (16) (4) Depreciation (982) (947) (753)
Stock-based compensation (229) (157) (336) Net loss $(2,100)
$(2,416) $(3,730) * Certain reclassifications of prior period
amounts have been made to conform to current year presentation.
Summary Condensed Consolidated Financial Statements (Unaudited)
(Audited) June 30, December 31, 2009 2008 Assets Current Assets
Cash and cash equivalents $20,188 $24,740 Accounts receivable, net
340 280 Other 305 319 Total Current Assets 20,833 25,339 Property
and equipment, net 12,953 12,891 Other assets 1,162 1,058 Total
Assets 34,948 39,288 Liabilities and Stockholders' Equity Current
Liabilities Accounts payable 882 1,395 Accrued expenses 820 861
Deferred revenues 979 986 Short-term debt, net of discount 2,613
2,607 Derivative liabilities 12 - Other 69 78 Total Current
Liabilities 5,375 5,927 Long-Term Liabilities Derivative
liabilities 152 - Other 317 354 Total Long-Term Liabilities 469 354
Total Liabilities 5,844 6,281 Stockholders' Equity Common stock 35
34 Additional paid-in-capital 54,711 54,852 Accumulated deficit
(25,642) (21,879) Total Stockholders' Equity 29,104 33,007 Total
Liabilities and Stockholders' Equity $34,948 $39,288 (Unaudited)
(Unaudited) Three months ended Six months ended June 30, June 30,
2009 2008 2009 2008 Revenues $3,673 $2,494 $7,090 $4,576 Operating
Expenses Cost of revenues (exclusive of depreciation) 915 993 1,741
1,927 Depreciation 982 753 1,930 1,429 Customer support services
484 485 1,034 938 Sales and marketing 1,385 2,020 2,961 3,794
General and administrative 1,796 2,015 3,518 3,975 Total Operating
Expenses 5,562 6,266 11,184 12,063 Operating Loss (1,889) (3,772)
(4,094) (7,487) Other Income (Expense) Interest income 9 148 22 437
Interest expense (186) (106) (369) (289) Loss on derivative
financial instruments (34) - (75) - Total Other Income (Expense)
(211) 42 (422) 148 Net Loss $(2,100) $(3,730) $(4,516) $(7,339) Net
loss per common share $(0.06) $(0.11) $(0.13) $(0.21) Net loss per
common share excluding stock-based compensation $(0.05) $(0.10)
$(0.12) $(0.20) Weighted average common shares outstanding - basic
and diluted 34,595 34,556 34,591 34,526 (Unaudited) Six months
ended June 30, 2009 2008 Cash Flows From Operating Activities Net
loss $(4,516) $(7,339) Non-cash adjustments: Depreciation 1,930
1,429 Stock-based compensation 386 510 Other 366 340 Changes in
operating assets and liabilities (662) (64) Net Cash Used In
Operating Activities (2,496) (5,124) Cash Flows From Investing
Activities Acquisitions of property and equipment (2,026) (3,888)
Other (3) (13) Net Cash Used In Investing Activities (2,029)
(3,901) Cash Flows From Financing Activities Repayment of capital
leases (19) (25) Repayment of short-term debt (8) - Net Cash Used
In Financing Activities (27) (25) Net Decrease In Cash and Cash
Equivalents (4,552) (9,050) Cash and Cash Equivalents - Beginning
24,740 40,757 Cash and Cash Equivalents - Ending $20,188 $31,707
Market data for the three months ended June 30, 2009 (in thousands)
Adjusted Cost of Gross Operating Market Market Revenues Revenues
Margin Costs EBITDA New York $1,322 $228 $1,094 83% $279 $815
Boston 1,008 166 842 84% 238 604 Los Angeles 442 82 360 81% 238 122
San Francisco 235 56 179 76% 99 80 Providence/Newport 126 37 89 71%
19 70 Chicago 220 87 133 60% 116 17 Miami 150 66 84 56% 110 (26)
Seattle 107 59 48 45% 87 (39) Dallas-Fort Worth 63 60 3 5% 118
(115) Total $3,673 $841 $2,832 77% $1,304 $1,528 Reconciliation of
Non-GAAP Financial Measure to GAAP Financial Measure Adjusted
market EBITDA $1,528 Centralized operating costs (639) Corporate
expenses (1,567) Depreciation (982) Stock-based compensation (229)
Other income (expense) (211) Net loss $(2,100) Market data for six
months ended June 30, 2009 (in thousands) Adjusted Cost of Gross
Operating Market Market Revenues Revenues Margin Costs EBITDA New
York $2,559 $426 $2,133 83% $626 $1,507 Boston 1,969 335 1,634 83%
441 1,193 Los Angeles 848 149 699 82% 510 189 San Francisco 459 100
359 78% 228 131 Providence/Newport 267 74 193 72% 71 122 Chicago
422 168 254 60% 243 11 Miami 260 126 134 52% 217 (83) Seattle 204
126 78 38% 187 (109) Dallas-Fort Worth 102 114 (12) (12%) 243 (255)
Total $7,090 $1,618 $5,472 77% $2,766 $2,706 Reconciliation of
Non-GAAP Financial Measure to GAAP Financial Measure Adjusted
market EBITDA $2,706 Centralized operating costs (1,352) Corporate
expenses (3,132) Depreciation (1,930) Stock-based compensation
(386) Other income (expense) (422) Net loss $(4,516) 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 August 5, 2009 at 5:00 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 three hours after the call through August
12, 2009 at 11:59 p.m. EDT by dialing 888-286-8010 or 617-801-6888
(for international callers) using pass code 78771672. 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 fixed 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 correct or update any forward-looking statements, whether as a
result of new information, future events or otherwise. INVESTOR
CONTACT: Terry McGovern Vision Advisors 415-902-3001 MEDIA CONTACT:
Amanda Lordy Dukas Public Relations 212-704-7385 DATASOURCE:
Towerstream Corporation CONTACT: Investors, Terry McGovern of
Vision Advisors, +1-415-902-3001, ; or Media, Amanda Lordy of Dukas
Public Relations, +1-212-704-7385, Web Site:
http://www.towerstream.com/
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