Company in a strong financial position with cash balance of $28
million MIDDLETOWN, R.I., Nov. 5 /PRNewswire-FirstCall/ --
Towerstream (NASDAQ: TWER), a leading fixed WiMAX provider
currently operating in nine major metropolitan areas, announced
results for the third quarter ended September 30, 2008. Operating
Highlights: -- Third quarter 2008 revenues increased 15% from
second quarter 2008, above previous guidance of 12%, and a 63%
increase from third quarter 2007 -- Gross margin improved more than
10% sequentially, increasing to 64% during the third quarter 2008
as compared to 58% in the second quarter 2008 -- Customer churn for
the third quarter 2008 was 1.22%, as compared to 1.17% for the
second quarter 2008 and 1.26% for the third quarter 2007 -- Average
revenue per user (ARPU) reached $827, an increase of 4% from second
quarter 2008 and an increase of 19% from third quarter 2007 --
"Cash burn" totaled $3.9 million in third quarter 2008,
representing a 9% decrease from the second quarter 2008 and a 17%
decrease from the first quarter 2008 -- EBITDA before stock based
compensation improved by 18% from the second quarter 2008,
decreasing from a loss of $2.7 million to a loss of $2.2 million --
Cash and cash equivalents totaled $28 million on September 30, 2008
Management Comments: "I am pleased to report that Towerstream has
recorded another quarter of significant revenue growth with 63%
percent year-over-year growth and 15% sequential quarterly growth,"
said Jeff Thompson, President and Chief Executive Officer. "We
continue to deliver strong operating performance despite an
extremely difficult economic environment and believe that our low
cost, high quality suite of broadband products position us well
going forward." "We remain focused on driving revenues higher and
cash burn lower," said Joseph Hernon, Chief Financial Officer. "We
were able to improve EBITDA before stock based compensation by 18%
on a sequential basis and our cash burn for the third quarter
decreased by 9% from the second quarter. We expect that continued
growth, careful cost controls and the leveraging of our business
model will result in further decreases in cash burn. We ended the
third quarter in a strong financial position with more than $28
million in cash and cash equivalents. We have the capital required
to execute our business plan through the current economic
downturn." "Customers recognize that we provide high quality
services at a lower price than the large telecommunication
providers," added Thompson. "Churn remains well below industry
standards and existing customers continue to upgrade to higher
bandwidth products, especially our mid-range offering." Selected
Financial Data and Key Operating Metrics: (All dollars are in
thousands except ARPU) (Unaudited) Three months ended 9/30/2008
6/30/2008 9/30/2007* Selected Financial Data Revenues $2,870 $2,494
$1,765 Gross profit margin 64% 58% 63% Operating expenses (1) 6,092
6,262 3,958 Operating loss (1) (3,222) (3,768) (2,193) Net loss (1)
(3,216) (3,730) (1,746) EBITDA before stock-based compensation (2)
(2,189) (2,683) (1,431) Capital expenditures $2,041 $1,841 $4,294
Key Operating Metrics Churn rate (2) 1.22% 1.17% 1.26% ARPU (2)
$827 $797 $694 ARPU of new subscribers (2) $733 $898 $748 * Certain
reclassifications of prior period amounts have been made to conform
to current year presentation. (1) Includes Stock-based compensation
of $188, $336 and $276, respectively. (2) See Non-GAAP Measures
below for a definition and reconciliation of EBITDA before
stock-based compensation, and definitions of Churn, ARPU and ARPU
of new subscribers. Analysis of Results of Operations and Financial
Condition Revenues for the third quarter 2008 increased 15% as
compared to the second quarter 2008, and increased 63% from the
third quarter 2007. These increases were driven by the continued
growth in our customer base and higher ARPU. ARPU of new
subscribers in the third quarter 2008 decreased 18% as compared to
the second quarter 2008, and decreased 2% as compared to the third
quarter 2007. During the third quarter, a higher percentage of new
subscribers purchased our lower priced multipoint service offering,
partly in response to promotional programs offered during the third
quarter. ARPU of all subscribers in the third quarter 2008
increased 4% as compared to the second quarter 2008, and increased
19% as compared to the third quarter 2007. Customer churn for the
third quarter 2008 of 1.22% remained essentially flat as compared
to 1.17% for the second quarter 2008 and 1.26% for the third
quarter 2007. Gross margin increased by 10% in the third quarter
2008 as compared to the second quarter 2008, and was relatively
flat as compared to the third quarter 2007. 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
subscriber revenues. Customer support expenses in the third quarter
2008 increased 1% as compared to the second quarter 2008, and
increased 76% as compared to the third quarter 2007. These
increases reflect staffing additions and other costs incurred to
support our growing customer base. The number of customers
increased 11% during the third quarter 2008. Sales and marketing
expenses in the third quarter 2008 increased 1% as compared to the
second quarter 2008, and increased 96% as compared to the third
quarter 2007. The increase in the 2008 period as compared to the
2007 period reflects higher payroll costs associated with the
expansion of our sales team. General and administrative expenses
decreased 14% in the third quarter 2008 as compared to the second
quarter 2008, and increased 14% as compared to the third quarter
2007. The decrease in the third quarter 2008 compared to the second
quarter 2008 primarily related to lower stock-based compensation
charges and lower professional services fees. Net loss decreased
14% in the third quarter 2008 as compared to the second quarter
2008, and increased 84% as compared to the third quarter 2007. The
14% improvement on a sequential basis reflects the positive effect
of a 15% increase in revenues and a 3% decrease in operating
expenses. Cash and cash equivalents totaled $28.1 million at
September 30, 2008 as compared to $40.8 million at December 31,
2007 representing a "cash burn" of approximately $13 million for
the first nine months of 2008. Capital expenditures totaled
approximately $5.9 million during the nine months ended September
30, 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 $6.3 million in the nine
months ended September 30, 2008 with a significant portion
attributable to a substantial increase in the Company's sales
force. Operating Outlook and Guidance: -- Revenues for the fourth
quarter 2008 are expected to increase by approximately 10% on a
sequential basis and by approximately 54% on a year-over-year
basis. -- Operating focus will remain on reaching EBITDA break-even
in existing markets 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 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 subscribers
disconnecting from our network. The term "ARPU" refers to average
revenue per subscriber, calculated as the average revenue for the
period divided by the average number of subscribers on the network.
ARPU of new subscribers is calculated as the monthly recurring
revenue generated by new subscribers during a period divided by the
total number of new subscribers added during the period. The
Non-GAAP measure, EBITDA before stock-based compensation, has been
reconciled to the nearest GAAP measure, Net loss, as follows: Three
months ended 9/30/2008 6/30/2008 *9/30/2007 Reconciliation of
Non-GAAP to GAAP: EBITDA before stock-based Compensation $(2,189)
$(2,683) $(1,431) Interest expense (106) (106) (133) Interest
income 124 148 597 Depreciation (857) (753) (502) Stock-based
compensation (188) (336) (276) Net loss $(3,216) $(3,730) $(1,745)
-- Certain reclassifications of prior period amounts have been made
to conform to current year presentation. Summary Balance Sheet and
Statements of Operations (Unaudited) September 30, December 31 2008
2007 Assets Current Assets Cash and cash equivalents $28,085
$40,757 Accounts receivable, net 259 185 Other current assets 362
736 Total Current Assets 28,706 41,678 Property and equipment, net
12,138 8,519 Other assets 1,135 758 Total Assets 41,979 50,955
Liabilities and Stockholders' Equity Current Liabilities Accounts
payable 1,299 1,414 Accrued expenses 1,033 686 Deferred revenues
990 632 Other current liabilities 34 47 Total Current Liabilities
3,356 2,779 Other Liabilities Long-term debt, net of deferred
discount 2,573 3,143 Other liabilities 422 298 Total Other
Liabilities 2,995 3,441 Total Liabilities 6,351 6,220 Stockholders'
Equity Common stock 34 34 Additional paid-in-capital 54,650 53,223
Deferred consulting costs - (20) Accumulated deficit (19,056)
(8,502) Total Stockholders' Equity 35,628 44,735 Total Liabilities
and Stockholders' Equity $41,979 $50,955 ======= ======= Three
months ended Nine months ended September 30, September 30, 2008
2007 2008 2007 Revenues $2,870 $1,765 $7,446 $4,977 Operating
Expenses Cost of revenues (exclusive of depreciation) 1,031 659
3,045 1,670 Depreciation 857 502 2,287 1,279 Customer support
services 453 258 1,322 609 Sales and marketing 2,059 1,050 5,927
2,146 General and administrative 1,692 1,489 5,565 4,968 Total
Operating Expenses 6,092 3,958 18,146 10,672 Operating Loss (3,222)
(2,193) (10,700) (5,695) Other Income (Expense) Interest income 124
597 560 933 Interest expense (106) (133) (395) (842) Other expense,
net (12) (17) (20) (171) Total Other Income (Expense) 6 447 145
(80) Net Loss $(3,216) $(1,746) $(10,555) $(5,775) Net loss per
common share $(0.09) $(0.05) $(0.31) $(0.21) Net loss per common
share excluding stock-based compensation $(0.09) $(0.04) $(0.29)
$(0.18) Weighted average common shares outstanding - basic and
diluted 34,557 34,077 34,536 27,614 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 6, at 8:30 a.m. EST 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 November 13, 2008 at 11:59 p.m. EST by
dialing 888-286-8010 or 617-801-6888 (for international callers)
using pass code 14944498. 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 Voice Over IP 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 publicly release statements made to reflect events or
circumstances after the date hereof. DATASOURCE: Towerstream
CONTACT: INVESTOR CONTACT: Terry McGovern, Vision Advisors,
+1-415-902-3001, ; MEDIA CONTACT: Amanda Lordy, , or Todd Barrish,
both of Dukas Public Relations, +1-212-704-7385, for Towerstream
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