Company in a strong financial position with cash balance of $25
million MIDDLETOWN, R.I., March 18 /PRNewswire-FirstCall/ --
Towerstream (NASDAQ: TWER), a leading WiMAX provider currently
operating in nine major metropolitan areas, announced results for
the fourth quarter and fiscal year ended December 31, 2008.
Operating Highlights: -- Fourth quarter 2008 revenues increased 12%
from the third quarter 2008, above previous guidance of a 10%
increase, and a 68% increase from the fourth quarter 2007 -- Gross
margin improved to 68% during the fourth quarter 2008 which
represented a 6% increase from the third quarter 2008 and a 17%
increase from the fourth quarter 2007 -- Customer churn for the
fourth quarter 2008 was 1.23%, compared to 1.22% for the third
quarter 2008 and 1.99% for the fourth quarter 2007 -- Average
revenue per user (ARPU) was $828, a decrease of less than 1% from
the third quarter 2008 and an increase of 13% from the fourth
quarter 2007 -- "Cash burn" totaled $3.3 million in the fourth
quarter 2008, representing a 16% decrease from the third quarter
2008 and a 30% decrease from its peak of $4.7 million in the first
quarter 2008 -- EBITDA before stock based compensation improved by
27% from the third quarter 2008, decreasing from a loss of $2.2
million to a loss of $1.6 million -- Six of nine markets are now
generating positive EBITDA and Market Cash Flow -- Cash and cash
equivalents totaled $25 million on December 31, 2008 Management
Comments: "Our fourth quarter results complete a year of strong
operating performance and execution despite the recession," said
Jeff Thompson, President and Chief Executive Officer. "Strong
customer demand for our unique, simple broadband products has
resulted in three consecutive quarters of double digit sequential
revenue growth. With six of our nine markets now generating
positive EBITDA, we are well positioned for solid growth in 2009."
"Our key financial metrics continued to strengthen in the fourth
quarter," stated Joseph Hernon, Chief Financial Officer. "Gross
margin improved for the third consecutive quarter as additional
customers were added at relatively low marginal costs. Fourth
quarter operating expenses were only 1% higher than the first
quarter even though fourth quarter revenues were 54% higher than
first quarter revenues. As a result, EBITDA before stock based
compensation improved by 27% in the fourth quarter compared to the
third quarter, and our cash burn decreased by 16%. We ended 2008 in
a strong financial position with approximately $25 million in cash
and cash equivalents. We have the capital required to execute our
business plan through this challenging economic period." "Given the
current economic environment and the significant up-front costs to
expand into new markets, we presently plan to focus our resources
on strengthening our presence in existing markets rather than
opening new markets," stated Mr. Thompson. "With penetration rates
of less than 1% in our existing markets, we have substantial
opportunities for growth in 2009. We expect capital expenditures to
be significantly lower in 2009 since the network build-out in our
existing markets has been largely completed." Selected Financial
Data and Key Operating Metrics: (All dollars are in thousands
except ARPU) (Unaudited) Three months ended 12/31/2008 9/30/2008
12/31/2007* Selected Financial Data Revenues $3,210 $2,870 $1,906
Gross profit margin 68% 64% 58% Operating expenses (1) 5,874 6,092
5,023 Operating loss (1) (2,664) (3,222) (3,117) Net loss (1)
(2,823) (3,216) (2,727) EBITDA before stock-based compensation (2)
(1,588) (2,189) (2,213) Capital expenditures $1,755 $2,041 $2,416
Key Operating Metrics Churn rate (2) 1.23% 1.22% 1.99% ARPU (2)
$828 $831 $730 ARPU of new customers (2) $773 $733 $759 (Audited)
Years ended 12/31/2008 12/31/2007* Selected Financial Data Revenues
$10,656 $6,883 Gross profit margin 62% 64% Operating expenses (1)
24,020 15,695 Operating loss (1) (13,364) (8,812) Net loss (1)
(13,377) (8,502) EBITDA before stock-based compensation (2) (9,324)
(6,063) Capital expenditures $7,684 $6,710 Key Operating Metrics
Churn rate (2) 1.24% 1.60% ARPU (2) $828 $730 ARPU of new customers
(2) $806 $794 * Certain reclassifications of prior period amounts
have been made to conform to current year presentation. (1)
Includes stock-based compensation of $202, $188 and $307,
respectively, and $899 and $1,046, respectively. (2) See Non-GAAP
Measures below for a definition and reconciliation of EBITDA before
stock-based compensation, Market Cash Flow, and definitions of
Churn, ARPU and ARPU of new customers. Analysis of Results of
Operations and Financial Condition Fourth Quarter 2008 Results of
Operations Revenues for the fourth quarter 2008 increased 12%
compared to the third quarter 2008, and increased 68% from the
fourth quarter 2007. These increases were driven by the continued
growth in our customer base and improved ARPU, primarily associated
with the success of our mid-range offering which is priced at $999
per month. ARPU of new customers in the fourth quarter 2008
increased 5% compared to the third quarter 2008, and increased 2%
compared to the fourth quarter 2007. ARPU of all customers in the
fourth quarter 2008 decreased less than 1% compared to the third
quarter 2008, and increased 13% compared to the fourth quarter
2007. Customer churn for the fourth quarter 2008 of 1.23% remained
essentially flat compared to 1.22% for the third quarter 2008 and
decreased from 1.99% for the fourth quarter 2007. Gross margin
increased by 6% in the fourth quarter 2008 compared to the third
quarter 2008, and increased by 17% compared to the fourth quarter
2007. 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 fourth quarter 2008
increased 10% compared to the third quarter 2008, and increased 55%
compared to the fourth quarter 2007. These increases reflect
staffing additions and other costs incurred to support our growing
customer base. The number of customers increased 12% during the
fourth quarter 2008. Sales and marketing expenses in the fourth
quarter 2008 decreased 14% compared to the third quarter 2008, and
increased 22% compared to the fourth quarter 2007. The sequential
decline related to a decrease in average department headcount from
135 in the third quarter 2008 to 106 in the fourth quarter 2008, as
the Company increased its focus on cost controls in response to the
recession. The increase in the fourth quarter 2008 compared to the
fourth quarter 2007 reflects higher payroll costs associated with
the overall expansion of our sales and marketing team in 2008.
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 decreased 3% in the fourth quarter 2008 compared to the
third quarter 2008, and decreased 12% compared to the fourth
quarter 2007. During the fourth quarter 2007, the Company incurred
higher professional services fees related to recruiting activities
and investor relations services, as compared to the fourth quarter
2008. Net loss decreased 12% in the fourth quarter 2008 compared to
the third quarter 2008, and increased 4% compared to the fourth
quarter 2007. The 12% improvement on a sequential basis reflects
the positive effect of a 12% increase in revenues and a 4% decrease
in operating expenses. 2008 Full Year Results of Operations
Revenues for 2008 increased 55% compared to 2007. This increase was
driven by continued growth in our customer base and higher ARPU,
primarily associated with the success of our mid-range offering
which is priced at $999 per month. ARPU of new customers in 2008
increased 2% compared to 2007. ARPU of all customers for 2008
increased 13% compared to 2007, related to strong sales of our
mid-range offering which has a selling price higher than our ARPU.
Customer churn for 2008 of 1.24% decreased 23% compared to 1.60%
for 2007. During 2008, we invested approximately $3.8 million to
strengthen our network in existing markets and establish a network
presence in new markets. In addition, we added personnel in our
customer care and engineering departments. These efforts resulted
in higher levels of customer satisfaction and reduced churn. Gross
margin decreased by 4% for 2008 compared to 2007. The Company
launched service in Miami at the end of first quarter 2007 and in
Dallas-Fort Worth in the second quarter of 2008. During 2008, the
Company also expanded its network in a number of existing markets.
These activities increased network operating expenses by
approximately $1.3 million. Towerstream's gross margin can
fluctuate from period to period due to the timing of when the
Company expands into new markets or adds network capacity to
existing markets. The effect of entering new markets can be
substantial because the Company is required to incur significant
costs to establish a market presence before generating new customer
revenues. Customer support expenses for 2008 increased 95% compared
to 2007. This increase reflects staffing additions and other costs
incurred to support our growing customer base. The number of
customers increased 51% during 2008. Average headcount increased
from 23 to 35 in 2008. Sales and marketing expenses for 2008
increased 114% compared to 2007, primarily related to higher
payroll costs associated with the expansion of our sales and
marketing department. The average number of department personnel
totaled 123 in 2008 compared to 54 in 2007. General and
administrative expenses for 2008 increased 6% compared to 2007.
Payroll costs increased by approximately $700,000 related to higher
employee headcount which also resulted in an increase of
approximately $718,000 in indirect personnel related costs. These
increases were offset by a decrease in professional services fees
of approximately $976,000 related to merger and financing
transactions completed in 2007. Net loss increased 57% in 2008
compared to 2007. Approximately $4.1 million, or 84%, of the
increase related to higher sales and marketing expenses, primarily
associated with the expansion of our sales and marketing
department. Cash and cash equivalents totaled $24.7 million at
December 31, 2008 compared to $40.8 million at December 31, 2007
representing a "cash burn" of approximately $16 million for 2008.
Capital expenditures totaled approximately $7.7 million during 2008
primarily related to network, base station, and customer premise
equipment associated with installations for new customers and
increases in our network capabilities. Net cash used in operating
activities totaled approximately $7.9 million for 2008 with a
significant portion attributable to a substantial increase in the
Company's sales and marketing department. Operating Outlook and
Guidance: -- Revenues for the first quarter 2009 are expected to
increase by approximately 60% to 65% on a year-over-year basis. --
Operating focus will remain on increasing penetration in our
existing markets and reaching EBITDA break-even before expanding
into new markets. Non-GAAP Measures The terms "EBITDA before
stock-based compensation", "Churn", "Churn rate" and "ARPU" 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. The term "EBITDA before
stock-based compensation" refers to income before deducting
interest, taxes, depreciation, amortization and stock-based
compensation. The terms "Churn" and "Churn rate" refer to the
percent of revenue lost on a monthly basis from customers
disconnecting from our network. 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, EBITDA before
stock-based compensation, has been reconciled to Net loss as
follows: All amounts are in thousands except per share amounts
Three months ended 12/31/2008 9/30/2008 *12/31/2007 Reconciliation
of Non-GAAP to GAAP: EBITDA before stock-based compensation
$(1,588) $(2,189) $(2,213) Interest expense (115) (106) (133)
Interest income 18 124 527 Depreciation (936) (857) (601)
Stock-based compensation (202) (188) (307) Net loss $(2,823)
$(3,216) $(2,727) Years ended 12/31/2008 *12/31/2007 Reconciliation
of Non-GAAP to GAAP: EBITDA before stock-based compensation
$(9,324) $(6,063) Interest expense (509) (975) Interest income 578
1,461 Depreciation (3,223) (1,879) Stock-based compensation (899)
(1,046) Net loss $(13,377) $(8,502) * Certain reclassifications of
prior period amounts have been made to conform to current year
presentation. Summary Condensed Consolidated Financial Statements
(Audited) December 31, December 31, 2008 2007 Assets Current Assets
Cash and cash equivalents $24,740 $40,757 Accounts receivable, net
280 185 Other 319 736 Total Current Assets 25,339 41,678 Property
and equipment, net 12,891 8,519 Other assets 1,058 758 Total Assets
39,288 50,955 Liabilities and Stockholders' Equity Current
Liabilities Accounts payable 1,395 1,414 Accrued expenses 861 686
Deferred revenues 986 632 Short-term debt, net of discount 2,607 -
Other 78 47 Total Current Liabilities 5,927 2,779 Other Liabilities
Long-term debt, net of discount - 3,143 Other 354 298 Total Other
Liabilities 354 3,441 Total Liabilities 6,281 6,220 Stockholders'
Equity Common stock 34 34 Additional paid-in-capital 54,852 53,223
Deferred consulting costs - (20) Accumulated deficit (21,879)
(8,502) Total Stockholders' Equity 33,007 44,735 Total Liabilities
and Stockholders' Equity $39,288 $50,955 ======= =======
(Unaudited) (Audited) Three months ended Years ended December 31,
December 31, 2008 2007 2008 2007 Revenues $3,210 $1,906 $10,656
$6,883 Operating Expenses Cost of revenues (exclusive of
depreciation) 1,031 799 4,076 2,469 Depreciation 936 601 3,223
1,879 Customer support services 498 322 1,820 932 Sales and
marketing 1,766 1,442 7,692 3,588 General and administrative 1,643
1,859 7,209 6,827 Total Operating Expenses 5,874 5,023 24,020
15,695 Operating Loss (2,664) (3,117) (13,364) (8,812) Other Income
(Expense) Interest income 18 527 578 1,461 Interest expense (115)
(133) (509) (975) Other expense, net (62) (4) (82) (176) Total
Other Income (Expense) (159) 390 (13) 310 Net Loss $(2,823)
$(2,727) $(13,377) $(8,502) Net loss per common share $(0.08)
$(0.08) $(0.39) $(0.29) Net loss per common share excluding
stock-based compensation $(0.08) $(0.07) $(0.36) $(0.25) Weighted
average common shares outstanding - basic and diluted 34,567 34,080
34,544 29,244 (Audited) Years ended December 31, 2008 2007 Cash
Flows From Operating Activities Net loss $(13,377) $(8,502)
Non-cash adjustments: Depreciation 3,223 1,879 Stock-based
compensation 899 1,046 Other 555 1,069 Changes in operating assets
and liabilities 827 534 Net Cash Used in Operating Activities
(7,873) (3,974) Cash Flows From Investing Activities Acquisitions
of property and equipment (7,684) (6,710) Acquisition of FCC
licenses (400) (125) Other (12) (60) Net Cash Used In Investing
Activities (8,096) (6,895) Cash Flows From Financing Activities Net
proceeds from sale of common stock - 48,251 Net proceeds from sale
of debentures - 3,360 Proceeds from exercise of warrants/options -
127 Repayment of notes - (209) Repayment of capital leases (48)
(63) Net Cash (Used In) Provided By Financing Activities (48)
51,466 Net (Decrease) Increase In Cash and Cash Equivalents
(16,017) 40,597 Cash and Cash Equivalents - Beginning 40,757 160
Cash and Cash Equivalents - Ending $24,740 $40,757 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 19, 2009 at 8:30 a.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
two hours after the call through March 26, 2009 at 11:59 p.m. EDT
by dialing 888-286-8010 or 617-801-6888 (for international callers)
using pass code 91002308. 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 CONTACT: Investors: Terry McGovern, Vision Advisors,
+1-415-902-3001, ; or Media: Amanda Lordy, , or Todd Barrish, ,
Dukas Public Relations, +1-212-704-7385, all for Towerstream Web
Site: http://www.towerstream.com/
Copyright
