After posting strong gains in last few trading session, yesterday the stock price of Towerstream Corporation (NASDAQ:TWER) declined more than 1% to close the day at $0.177. The last major announcement came from the company in mid-March when the company released corporate update.
The corporate update
Towerstream reported that HetNets Tower Corporation has terminated its businesses effective immediately. It finalized a deal with Time Warner Cable to take over $7mm worth of annual lease responsibilities. Also, the company finalized a 3-year deal with renewal options to offer backhaul services for $1.6mm per year with Time. It will redeploy valuable backhaul equipment for On-Net installations which can lower future capital expenditures. The cash burn for 2Q2016 is projected to be under $2.9mm. Philip Urso, the interim CEO of Towerstream, said that their immediate focus is to minimize cash burn, and to scale the On-Net sales model.
The expert speaks
Urso further added that Towerstream made a remarkable commitment to small cell, but they have reached a point where they could not wait anymore for it to be utilized. The company have discontinued HetNets business, which in turn has enabled to reduce cash burn, maintain a large customer and focus on priorities. Starting at $6.2 million in 3Q2015, cash burn declined to $5.2 million in 4Q2015. For first quarter, it is projected at $4 million while for 2Q2016 the burn is expected to decline to $2.9 million.
As part of reducing cash burn, Towerstream has finalized a deal with Time Warner Cable to get a substantial number of leases in NY City. It marks a release of $7 million in lease costs annually. The company is in position to offer backhaul at no or little cost to small cells on rooftops. In addition, it has been able to reallocate other valued backhaul equipment from the retired small cell sites into company’s inventory for future deployment.