Towerstream Reports Third Quarter 2012 Results

Towerstream Reports Third Quarter 2012 Results

MIDDLETOWN, R.I., Nov. 8, 2012 (GLOBE NEWSWIRE) -- Towerstream Corporation
(Nasdaq:TWER) (the "Company"), a leading 4G and Small Cell Rooftop Tower
("rooftop tower locations") company, announced results for the third quarter
ended September 30, 2012.

Third Quarter Operating Highlights

  *Adjusted EBITDA profitability, excluding non-recurring expenses and net
    costs associated with the rooftop tower locations, was $1.5 million for
    the third quarter 2012 compared to $1.3 million for the second quarter
    2012 and $1.1 million for the third quarter 2011.
  *Customer churn for the third quarter 2012 was 1.54% compared to 1.65% for
    the second quarter 2012 and 1.27% for the third quarter 2011. Customer
    churn remained within the Company's target range of 1.4% to 1.7% for the
    twelfth consecutive quarter.
  *Average revenue per user ("ARPU") of all customers increased to $714
    compared to $708 for the second quarter 2012 and $709 for the third
    quarter 2011.
  *Customer upgrades for the third quarter were at record levels for the
    second consecutive quarter.

Management Comments

"We made tremendous progress on our small cell network in the third quarter
and now have more than 10,000 Wi-Fi and small cell antenna locations available
for lease," stated Jeffrey Thompson, President and Chief Executive Officer.
"Earlier this week, AT&T announced its plans to deploy 40,000+ small cell
antennas and we believe we are well positioned to be part of their solution."

"We are pleased to report record adjusted EBITDA profitability for our fixed
wireless business and our goal is to reach cash flow profitability for that
business in the first half of 2013," noted Joseph Hernon, Chief Financial
Officer. "The launch of small cell in early 2013 presents a new backhaul
revenue opportunity for our fixed wireless business."

Selected Financial Data and Key Operating Metrics
(All dollars are in thousands except ARPU)
                                 (Unaudited)
                                 Three months ended
                                 9/30/2012      6/30/2012      9/30/2011
Selected Financial Data                                       
Revenues                          $8,127        $8,103        $6,776
Gross margin                      45%            54%            67%
Adjusted gross margin excluding   71%            70%            73%
rooftop tower locations expenses
Depreciation and amortization     3,399          3,348          2,299
Core operating expenses (1)(2)    5,669          5,750          4,875
Operating loss (1)                (5,380)        (4,714)        (2,629)
Gain (loss) on business           --             (40)           --
acquisition
Net loss (1)                      (5,408)        (4,759)        (2,620)
Adjusted EBITDA (2)               (1,424)        (884)          96
Non-recurring expenses            55             41             112
Rooftop tower locations expenses, 2,820          2,180          880
net
Adjusted EBITDA excluding
non-recurring and rooftop tower   1,451          1,337          1,088
locations expenses, net (2)
Capital expenditures                                          
Wireless broadband               $1,935        $3,779        $2,627
Rooftop tower locations           4,299          4,046          1,663
                                                             
Key Operating Metrics                                         
Churn rate (2)                    1.54%          1.65%          1.27%
ARPU (2)                          $714          $708          $709
ARPU of new customers (2)         560            477            625
                                                             
(1) Includes stock-based compensation of $438, $392 and $415, respectively.
(2) See Non-GAAP Measures below for a definition and reconciliation of
Adjusted EBITDA, and definitions of Core Operating Expenses, Churn, ARPU and
ARPU of new customers.

Operating Outlook and Guidance

  *Revenues for the fourth quarter 2012 are expected to range between $8.1
    million to $8.2 million.
    
  *Adjusted EBITDA profitability is expected to range between $1.4 million to
    $1.6 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 principal 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,
other non-operating income or expenses as well as gain or loss on (i) disposal
of property and equipment, (ii) nonmonetary transactions, and (iii) business
acquisitions.Adjusted Market EBITDA also excludes corporate overhead expenses
and other centralized costs.We believe that Adjusted Market EBITDA trends are
insightful indicators of our markets' relative performance, and whether our
markets are able to produce sufficient market cash flow to fund working
capital and capital expenditure needs.

The term "Core Operating Expenses" includes customer support services, sales
and marketing, and general and administrative expenses, and excludes cost of
revenues, depreciation and amortization.

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 costs
which support all markets collectively or (ii) any network related capital
expenditures incurred in a market.

The Non-GAAP measure, Adjusted EBITDA, excluding non-recurring expenses and
rooftop tower locations expenses, net, has been reconciled to Net loss as
follows:

(All dollars are in thousands)
                                                Three months ended
                                                9/30/2012 6/30/2012 9/30/2011
Reconciliation of Non-GAAP to GAAP:                                
Adjusted EBITDA, excluding non-recurring
expenses and rooftop tower locations expenses,   $1,451   $1,337   $1,088
net
Depreciation and amortization                    (3,399)   (3,348)   (2,299)
Non-recurring expenses, primarily                (55)      (41)      (112)
acquisition-related
Rooftop tower locations expenses, net            (2,820)   (2,180)   (880)
Stock-based compensation                         (438)     (392)     (415)
Loss on property and equipment                   (48)      (12)      (1)
Loss on nonmonetary transactions                 (71)      (78)      (10)
Interest expense                                 (37)      (17)      (9)
Gain (loss) on business acquisition              --        (40)      --
Other income (expense), net                      (1)       (2)       (4)
Interest income                                  10        14        22
Net loss                                         $(5,408) $(4,759) $(2,620)



Summary Condensed Consolidated Financial Statements
(All dollars are in thousands except per share amounts)
                                                                 
Statement of Operations      (Unaudited)                  (Unaudited)
                            Three months ended September Nine months ended
                             30,                          September 30,
                            2012          2011           2012       2011
Revenues                     $8,127       $6,776        $24,050   $19,310
                                                                 
Operating Expenses                                                
Cost of revenues (exclusive  4,439         2,231          11,226     5,583
of depreciation)
Depreciation and             3,399         2,299          10,029     6,487
amortization
Customer support services    1,129         870            3,369      2,374
Sales and marketing          1,518         1,348          4,458      4,069
General and administrative   3,022         2,657          9,432      6,797
Total Operating Expenses     13,507        9,405          38,514     25,310
Operating Loss               (5,380)       (2,629)        (14,464)   (6,000)
Other Income (Expense)                                            
Gain (loss) on business      --            --             (40)       1,045
acquisition
Interest income              10            22             41         32
Interest expense             (37)          (9)            (76)       (13)
Other income (expense), net  (1)           (4)            (8)        (9)
Total Other Income (Expense) (28)          9              (83)       1,055
Net Loss                     $(5,408)     $(2,620)     $(14,547) $(4,945)
                                                                 
Net loss per common share –  $(0.10)      $(0.05)       $(0.27)   $(0.11)
basic and diluted
Weighted average common
shares outstanding – basic   54,403        51,599         54,361     45,517
and diluted
                                                                 

Analysis of Third Quarter Results of Operations

Revenues for the third quarter 2012 increased by less than 1% from the second
quarter 2012 and increased 20% compared to the third quarter 2011. The
year-over-year increase was driven by a 14% growth in our customer base from
approximately 3,200 customers at the end of the third quarter 2011 to
approximately 3,600 at the end of the third quarter 2012.

ARPU of all customers in the third quarter 2012 increased 1% compared to both
the second quarter 2012 and the third quarter 2011. ARPU of new customers
increased 17% in the third quarter 2012 compared to the second quarter 2012
and decreased 10% compared to the third quarter 2011. ARPU of new customers
can fluctuate on a quarter-to-quarter basis depending upon the relative
percentage of customers purchasing lower bandwidth service, known as
multipoint, and higher bandwidth service, known as point-to-point.

Customer churn during the third quarter 2012 was 1.54% compared to 1.65%
during the second quarter 2012 and 1.27% during the third quarter 2011. Our
churn rate was within our targeted range of 1.4% to 1.7% and remains low
compared to industry averages.

Cost of revenue increased 19% in the third quarter 2012 compared to the second
quarter 2012 and increased by 99% compared to the third quarter 2011. The
Company spent $2.1 million in the third quarter 2012 related to the
construction of its rooftop tower locations as compared to $1.3 million in the
second quarter 2012 and $0.4 million in the third quarter 2011. The
year-over-year increase also related to additional network expenses associated
with the acquisition of Color Broadband in the fourth quarter 2011.

Depreciation expense increased 9% in the third quarter 2012 compared to the
second quarter 2012 and increased 56% compared to the third quarter 2011.The
base of depreciable assets was 9% higher at the end of the third quarter 2012
as compared to the second quarter 2012 and 57% higher compared to the third
quarter of 2011. The increased depreciable base reflects continued growth in
the core business as well as spending on the rooftop tower locations.

Amortization expense decreased 18% in the third quarter 2012 compared to the
second quarter 2012 and increased 25% compared to the third quarter 2011.The
sequential decrease relates to customer based intangible assets recorded in
connection with the acquisition of Pipeline Wireless which were fully
amortized in May 2012. The year-over-year increase relates to customer based
intangible assets recorded in connection with the acquisition of Color
Broadband in the fourth quarter 2011.

Customer support expenses decreased by 4% in the third quarter 2012 compared
to the second quarter 2012 and increased 30% compared to the third quarter
2011. Costs associated with rooftop tower locations totaled approximately
$244,000 in the third quarter 2012 compared to approximately $252,000 in the
second quarter 2012 and approximately $150,000 in the third quarter 2011. In
addition, there were staffing additions and other costs incurred to support
our customer base which increased 23% over the one year period.

Sales and marketing expenses increased by less than 1% in the third quarter
2012 compared to the second quarter 2012 and increased 13% compared to the
third quarter 2011. The year-over-year increase primarily related to higher
commissions and bonuses.

General and administrative expenses decreased by 1% in the third quarter 2012
compared to the second quarter 2012 and increased 14% compared to the third
quarter 2011. Costs associated with rooftop tower locations totaled
approximately $0.6 million in both the third quarter 2012 and the second
quarter 2012 compared to approximately $0.3 million in the third quarter 2011.
The year-over-year increase also relates to higher information technology
spending.

Capital expenditures totaled $6.2 million for the third quarter 2012 as
compared to $7.8 million for the second quarter 2012 and $4.3 million for the
third quarter 2011. The Company spent $4.3 million in the third quarter 2012
related to the construction of its rooftop tower locations as compared to $4.0
million in the second quarter 2012 and $1.7 million in the third quarter 2011.

Balance Sheet                                               
(All dollars are in thousands)
                                         (Unaudited)        (Audited)
                                          September 30, 2012 December 31, 2011
Assets                                                      
Current Assets                                              
Cash and cash equivalents                 $23,132           $44,672
Other                                     1,399              1,216
Total Current Assets                      24,531             45,888
                                                           
Property and equipment, net               39,990             27,531
                                                           
Other assets                              8,712              10,218
                                                           
Total Assets                              73,233             83,637
                                                           
Liabilities and Stockholders' Equity                        
Current Liabilities                                         
Accounts payable and accrued expenses     4,608              3,564
Deferred revenues and other               2,360              2,277
Total Current Liabilities                 6,968              5,841
                                                           
Long-Term Liabilities                     2,355              651
Total Liabilities                         9,323              6,492
                                                           
Stockholders' Equity                                        
Common stock                              54                 54
Additional paid-in-capital                120,782            119,470
Accumulated deficit                       (56,926)           (42,379)
Total Stockholders' Equity                63,910             77,145
Total Liabilities and Stockholders'       $73,233           $83,637
Equity
                                                           

Statement of Cash Flows(Unaudited)       Nine months ended September 30,
                                         2012               2011
Cash Flows From Operating Activities                        
Net loss                                  $(14,547)         $(4,945)
Non-cash adjustments:                                       
Depreciation & amortization               10,029             6,487
Stock-based compensation                  1,353              661
(Gain) loss on business acquisition       40                 (1,045)
Other                                     216                202
Changes in operating assets and           (725)              102
liabilities
Net Cash (Used in) Provided By Operating  (3,634)            1,462
Activities
                                                           
Cash Flows From Investing Activities                        
Acquisitions of property and equipment    (17,382)           (10,359)
Acquisition of business                   --                 (1,600)
Other                                    (501)              (136)
Net Cash Used in Investing Activities     (17,883)           (12,095)
                                                           
Cash Flows From Financing Activities                        
Repayment of capital leases               (385)              (97)
Proceeds from stock issuances             397                309
Net proceeds from sale of common stock    --                 38,835
Other                                     (35)               --
Net Cash (Used in) Provided By Financing  (23)               39,047
Activities
                                                           
Net (Decrease) Increase In Cash and Cash  (21,540)           28,414
Equivalents
Cash and Cash Equivalents – Beginning     44,672             23,173
Cash and Cash Equivalents – Ending       $23,132           $51,587

                                                                          
                                                                          
                                                                          
Market data for the three months ended September 30, 2012                  
(All dollars are in thousands)
                                                                          
Market             Revenues Cost of     Gross Margin Operating Adjusted
                            Revenues(1) (1)          Costs     Market EBITDA
Los Angeles        $1,995  $599       $1,396 70%  $397     $999     
New York           1,858    435         1,423  77% 320      1,103    
Boston             1,698    388         1,310   77% 220       1,090     
Chicago            944      304         640     68% 170       470       
Miami              413      117         296     72%  94        202       
San Francisco      373      87          286     77%  80        206       
Las Vegas-Reno     370      158         212     57%  29        183       
Dallas-Fort Worth  158      83          75      48%  90        (15)      
Seattle            144      54          90      63%  36        54        
Providence-Newport 132      65          67      51%  30        37        
Philadelphia       30       22          8       26%  32        (24)      
Nashville          12       14          (2)     --%  8         (10)      
Total              $8,127  $2,326    $5,801 71%  $1,506   $4,295   
                                                                  
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure     
Adjusted market                                           $4,295   
EBITDA
Centralized costs                                         (940)     
(1)
Corporate expenses                                        (2,012)   
Rooftop tower                                             (2,886)   
locations expenses
Depreciation and                                          (3,399)   
amortization
Stock-based                                               (438)     
compensation
Other income                                              (28)      
(expense)
Net loss                                                  $(5,408) 



Market data for the three months ended September 30, 2011
(All dollars are in thousands)

                              Cost of     Gross        Operating Adjusted
Market               Revenues Revenues(1) Margin(1)    Costs     Market
                                                                 EBITDA
Boston               $1,695  $390       $1,305 77% $224     $1,081
New York             1,533  349        1,184  77%  310      874
Los Angeles          1,087   223        864    79% 263      601
Chicago              870     266        604    69% 151      453
Las Vegas-Reno       409     180        229     56% 44        185
San Francisco        370     67         303    82% 92       211
Miami                365      81          284     78%  100       184
Dallas-Fort Worth    166     85         81      49% 80        1
Seattle              125     55         70     56% 27       43
Providence-Newport   120     51         69     58% 24       45
Philadelphia         23      15         8      35% 28       (20)
Nashville            13      1          12     92% 11       1
Total                $6,776  $1,763     $5,013 74% $1,354  $3,659
                                                           
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure      
Adjusted market                                             $3,659
EBITDA
Centralized costs                                           (761)
(1)
Corporate expenses                                          (1,933)
Rooftop tower                                               (880)
locations expenses
Depreciation and                                            (2,299)
amortization
Stock-based                                                 (415)
compensation
Other income                                                9
(expense)
Net loss                                                    $(2,620)



Market data for the nine months ended September 30, 2012
(All dollars are in thousands)

                             Cost of     Gross        Operating Adjusted
Market              Revenues Revenues(1) Margin(1)    Costs     Market
                                                                EBITDA
Los Angeles         $5,888  $1,798     $4,090  69% $1,109   $2,981
New York            5,349    1,340       4,009   75% 911       3,098
Boston              5,135    1,147       3,988    78% 710       3,278
Chicago             2,743    836         1,907    70% 507       1,400
Miami               1,238    299         939      76% 291       648
Las Vegas-Reno      1,199    464         735      61% 115       620
San Francisco       1,160   277         883      76% 244       639
Dallas-Fort Worth   488      258         230      47% 258       (28)
Seattle             375      173         202      54% 88        114
Providence-Newport  365      150        215      59% 93        122
Philadelphia        79       55          24     30% 77        (53)
Nashville           31       42          (11)     --% 26        (37)
Total               $24,050 $6,839     $17,211 72% $4,429   $12,782
                                                          
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure      
Adjusted market                                            $12,782
EBITDA
Centralized costs                                          (2,829)
(1)
Corporate expenses                                         (6,300)
Rooftop tower                                              (6,735)
locations expenses
Depreciation and                                           (10,029)
amortization
Stock-based                                                (1,353)
compensation
Other income                                               (83)
(expense)
Net loss                                                   $(14,547)



Market data for the nine months ended September 30, 2011
(All dollars are in thousands)

                              Cost of                     Operating Adjusted
Market               Revenues Revenues(1) Gross Margin(1) Costs     Market
                                                                    EBITDA
Boston               $5,054  $1,183     $3,871   77%  $722     $3,149
New York             4,484   1,025      3,459    77%  946      2,513
Los Angeles          3,085   589         2,496    81%  799      1,697
Chicago              2,604  788         1,816     70%  499      1,317
San Francisco        1,105   199        906       82%  283      623
Miami                1,008   229        779      77%  295      484
Las Vegas-Reno       598      256         342       57%   53        289
Dallas-Fort Worth    490     245        245      50%  215      30
Seattle              400     163        237       59%  90       147
Providence-Newport   351     134        217     62%  75       142
Philadelphia         87      46         41       47%   84       (43)
Nashville            44      21         23       52%  34       (11)
Total                $19,310 $4,878     $14,432  75%  $4,095  $10,337
                                                              
Reconciliation of Non-GAAP Financial Measure to GAAP Financial Measure
Adjusted market                                                $10,337
EBITDA
Centralized costs                                              (2,243)
(1)
Corporate expenses                                             (5,540)
Rooftop tower                                                  (1,406)
locations expenses
Depreciation and                                               (6,487)
amortization
Stock-based                                                    (661)
compensation
Other income                                                   1,055
(expense)
Net loss                                                       $(4,945)

(1) Certain expenses are reported as Cost of Revenues for financial statement
purposes but are included in other line items in the Market Data table, either
because they are not specific to any market or they relate to rooftop tower
locations.

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 8, 2012
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 14, 2012 at 11:59 p.m. ET by dialing 800-585-8367 or 404-537-3406
(for international callers) using pass code 56988940.

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 (Nasdaq:TWER) is a leading 4G and Small Cell Rooftop Tower
company. The company owns, operates, and leases Wi-Fi and Small Cell rooftop
tower locations to cellular phone operators, tower, Internet and cable
companies and hosts a variety of customers on its network. Towerstream was
originally founded in 2000 to deliver fixed-wireless high-speed Internet
access to businesses and to date offers broadband services in over 12 urban
markets including New York City, Boston, Los Angeles, Chicago, Philadelphia,
the San Francisco Bay area, Miami, Seattle, Dallas-Fort Worth, Nashville, Las
Vegas-Reno and the greater Providence area. 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

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 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.

CONTACT: INVESTOR CONTACT:
         Terry McGovern
         Vision Advisors
         415-902-3001
         mcgovern@visionadvisors.net
        
         MEDIA CONTACT:
         Todd Barrish
         Indicate Media
         646-396-6090
         todd@indicatemedia.com

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