Towerstream Reports Fourth Quarter and 2010 Year End Results

Towerstream, a leading 4G service provider delivering high-speed wireless Internet access to businesses in 11 major metropolitan areas in the U.S., announced results for the fourth quarter ended December 31, 2010.

"We are pleased to report another quarter of strong revenue growth and improved Adjusted EBITDA profitability," stated Jeff Thompson, Chief Executive Officer.  "We completed our second acquisition in December 2010 and believe there will be additional acquisition opportunities in 2011."

"We have seen a significant increase in interest in our carrier class Wifi network in Manhattan," added Mr. Thompson. "We are working diligently to complete construction of the network by the middle of the year."

"Adjusted EBITDA profitability, excluding non-recurring expenses, increased from roughly $414,000 in the third quarter to in broad outline $706,000 in the fourth quarter," stated Joseph Hernon, Chief Financial Officer. "ARPU for new clients increased to $661 per month afterwards averaging $540 per month over the past seven quarters while the long economic recession.  Should the contingency arise, customer upgrades increased by more than 80% while the second half of 2010 as compared to the same period in 2009.  We are hopeful that the strong improvement in these key operating metrics signal increased confidence levels by our business clients and that these trends will continue in 2011."

The terms Adjusted EBITDA

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 in accordance with generally accepted accounting principles. Consequently, 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, consequently, 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 earlier interest, income taxes, depreciation and amortization. We define Adjusted EBITDA as net income previously interest, income taxes, depreciation and amortization expenses, excluding, when applicable, stock-based compensation, other non-operating income or expenses as then as gain or loss on disposal of property and equipment, derivative instruments, and business acquisitions. Adjusted Market EBITDA as well 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 earnings, depreciation and amortization.

The terms Churn

The terms "Churn" and "Churn rate" refer to the percent of revenue lost on a monthly basis from clients 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 pursuant to this agreement contract at the end of each indicated period. We calculate ARPU by dividing our monthly recurring revenue at the end of a period by the number of clients generating that MRR. ARPU of new clients is calculated in the same manner however only includes new customers who entered into contracts while the indicated period. Market Cash Flow represents the amount of cash generated in a market afterwards deducting a market's direct operating expenses from that market's earnings. Market Cash Flow does not include centralized costs which support all markets collectively or any network related capital expenditures incurred in a market.

Revenues for the fourth quarter 2010 increased 7% from the third quarter 2010 and increased 35% compared to the fourth quarter 2009. These increases were driven by 48% growth in our customer base from in broad outline 1,900 clients at the end of the fourth quarter 2009 to roughly 2,800 at the end of the fourth quarter 2010.

ARPU of new clients increased 22% in the fourth quarter 2010 compared to the third quarter 2010 and increased 18% compared to the fourth quarter 2009. ARPU of all clients in the fourth quarter 2010 increased 2% compared to the third quarter 2010 and decreased 5% compared to the fourth quarter 2009. While most of 2010, the impact of the long economic recession caused many of our prospective clients to continue to either delay their buying decision or to purchase lower bandwidth services than normal.  Just in case, general pricing levels for Internet services declined modestly while the year. While the fourth quarter 2010, customers began to increase their bandwidth purchases which resulted in a 24% increase in ARPU of new customers compared to the average for the first three quarters of the year. Moreover, customer upgrades to higher bandwidth, which as well increases ARPU, increased by more than 80% during the second half of 2010 as compared to the same period in 2009.

Depreciation and amortization expenses increased 7% in the fourth quarter 2010 compared to the third quarter 2010 and increased 55% compared to the fourth quarter 2009.  The increases are consistent with a higher base of depreciable assets primarily related to our network and customer premise equipment.  Amortization expense totaled in broad outline $370,000 in the fourth quarter 2010 primarily associated with customer contracts acquired through the acquisition of Sparkplug Chicago in April 2010.

Net loss decreased less than 1% in the fourth quarter 2010 compared to the third quarter 2010 and decreased 30% compared to the fourth quarter 2009. The year-over-year improvement primarily related to a 35% increase in earnings partially offset by a 22% increase in operating expenses.

Capital expenditures totaled $1.5 million for the fourth quarter 2010 as compared to $1.1 million for the third quarter 2010 and $1.2 million for the fourth quarter 2009. The comparative increase can be attributed to an increase in point-to-point sales and upgrades while the second half of 2010. Equipment and installation costs for these clients are significantly higher than for midrange and multi-point clients, nevertheless, the recurring earnings are higher and these businesses as a rule remain a customer for a longer period of time.

(1) Certain expenses are reported as Cost of Earnings for financial statement purposes nevertheless are included in Centralized costs in the Market Data table because they are not specific to any market. These costs totaled $59 and $62 respectively for the three months ended December 31, 2010 and 2009 and $247 and $252 respectively for the years ended December 31, 2010 and 2009.

Conference call led

A conference call led by President and Chief Executive Officer, Jeff Thompson, and Chief Financial Officer, Joseph Hernon, will be held on March 17, 2011 at 5:00 p.m. ET to review our financial results and provide an update on current business developments.

Towerstream's wireless broadband solution network delivers high-speed Internet access supporting VoIP (Voice over Internet Protocol), 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 (Voice over Internet Protocol) and web hosting, as so then as many other business applications. Companies utilizing multiple appliances simultaneously, just as streaming video and VoIP (Voice over Internet Protocol), can prioritize their bandwidth to secure mission-critical activities. All of Towerstream's products are backed by its Service Level Agreement and the ability to be up and running within a week. 

The meaning of applicable federal securities laws

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 in this way 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 place to place in reports filed by the Company with the Securities and Exchange Commission. Though 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. Accordingly, 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 if not.