Towerstream Releases Fourth Quarter & Full-Year 2008 Earnings: Reports Strong Increase in Revenue & Improving Margins

US based business WiMAX broadband provider Towerstream released earnings Wednesday reporting double-digit revenue growth and improving margins and cash flow. Feature interview with Jeff Thompson, CEO Towerstream.

Fourth quarter revenue was $3.3M up 12% from the third quarter and up 68% from the year prior.  Full year revenue was $10.6M, up 56% from the year prior.  The company also reported continued improvements in gross margins and EBITDA cash flow.  A few weeks back we had the opportunity to sit down and talk with Towerstream's CEO Jeff Thompson.

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.

The company provides service to a wide range of business customers.  "Every vertical has bought from Towerstream," says Thompson.  "We have financial, health-cares, large brands, small brands and start-ups."

Ask Thompson what is driving increased demand for higher bandwidth services and you will likely get the same three word reply - "Video, video & video.  With the increased use of video, T1s are no longer enough and some customers may not need or be able to afford the additional cost of a T3," says Thompson.  "Wireless technologies provide the flexibility to dial-in the amount of capacity that the customer needs."

"If you are a business and you are trying to use the internet to save money, you have to have a high-quality bandwidth connection," says Thompson.  "A lot of these business applications require a lot of upstream capability which means DSL is out the question and cable as well.  It really gives us a competitive edge."

Towerstream provides 3 tiers of service using a variety of technologies over both licensed and unlicensed frequencies depending on the customers needs.  For customers requiring T1 type service, Towerstream offers a 5Mbs service utilizing standard WiMAX equipment.  For customers that need more than a T1, but less than the 45Mbs of a T3, Towerstream offers a mid-tier 5-15Mbs service using radios from Alvarion and Redline over different channel sizes.  For customers with even higher bandwidth requirements, the company utilizes P2P (point to point radios) at higher frequencies.

In addition to the flexibility in the type of service plans allowed by wireless broadband, WiMAX also offer the advantage of being able to be provisioned quickly to the customer.  Customers requesting changes to their fixed line services must often have to wait weeks, while WiMAX services can typically be provisioned in a few days depending on the operator.

For the most part, customers seem to be satisfied with the service.  Towerstream's churn is reportedly less than 1.3% and is able to offer guarantee throughput with its contracts.  "We have these service-level capabilities and that is what our customers like about the service.  Our churn rate is low and is a reflection of that," says Thompson.

Towerstream also appears to be making some head-way on its profitability targets.  Just last month, Towerstream announced that their Los Angeles market had reached EBITDA profitability (earnings before interest, tax and depreciation/amortization - a non-GAPP approximation of operational cash flow).  "Six of our nine markets are now EBITDA profitable, including the three largest markets in the U.S., said Thompson.  "Our continued progress demonstrates the leverage of our business model and the predictability of our revenue stream."

Thompson comments that the company has learned much as it has built out its markets - putting in a few POPs (points of presence) and then building out from there based on customer demand.  "It's a very physical business.  Coverage is key and you have to be smart in how you cover a market and continue to execute," says Thompson.

In NYC for example, the third market entered, Towerstream reportedly has coverage in 90% of the city.  "You never have enough coverage.  We try to get to over 90% of coverage in each market - that is out goal.  Is almost impossible to get to 100% based on certain limitations of the city, such as limitations with a small section of a town."

"What is great about WiMAX is that I can take this base station and put it anywhere.  I can put in a Rural base station and will make a certain amount," says Thompson.  I can then take that same base station and put it up on the Empire State building.  You want to make sure you put those base station where they are going to get filled up on customers.  Eventually you get good coverage with the more you build out.  We have a controlled roll-out - each market is different."

When asked about other technologies such as LTE, Thompson takes a pragmatic approach.  "There are real deployments with WiMAX and the equipment is shipping today.  LTE and WiMAX are different business models.  WiMAX is more of an open model and not controlled by who operates the network.  As for deployments, It took Wi-Fi 5 years to get the adoption and WiMAX is just in the first year."

Needless to say, being able to execute in the current economic environment is an accomplishment and Towerstream appears focused on its model.  The company also has the resources to grow and ended 2008 with $25M in cash on its balance sheet.  "We are well financed and have the money we need to execute our business model and get the overall company profitable," says Thompson.



 

Thursday, March 19, 2009 in Deployments  | Permalink |  Comments (4)