Competitive provider cbey closed out 2010 with a fourth quarter that was a bit lighter than expected due to lower average revenue per customer. Revenues of $116.2M were up sequentially from $113.5M in Q3, but adjusted EBITDA remained flat at $18.0M while loss per share expanded to $0.07 from $0.02. EBITDA margin therefore fell again to 15.5%, giving back a bit more of the gains earlier in the year.
Average revenue per user fell from $695 to $680 sequentially, which the company chalked up to lingering effects of the recession and to everpresent competitive pressures. Gross margins fell to 66.9% in part due to higher transitional costs for T-1 to Ethernet conversion. That part we’ll be seeing more of in 2011, as they will be continuing that conversion to Ethernet.
Projections for 2011 include 6-8% revenue growth, or $479-489M – somewhat below market expectations. They base that on the assumption of continued ARPU declines and more sluggishness in the economy – obviously they’ll do better if those underlying assumptions don’t pan out. Meanwhile they expect EBITDA growth of 9-12%, or $62-64M, and capital expenditures of $75-80M.
Cbeyond purchased two cloud services companies during the quarter that didn’t contribute much to revenue yet but do offer higher margins down the line. Just where they take that cloud initiative and what kind of success they have in offering such products to their SME customer base will be the thing to watch in 2011.
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Categories: CLEC · Financials
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I left this company because the CEO and the newly promoted operation guy Brent are full of air. They have no idea about how to run a business in a changing environment. They work old school and any senior executive that joined the company and turned it around all left when they saw idiot leadership. Now they are getting into cloud services where ARPU will be even lower than the declining ARPU they have been reporting.
The marketing guy who could turn the ARPU left and the customer support guy who could have stopped the revenue bleeding and churn left too.
The ARPU will not stop declining. I am aware of their plans and this is a slippery slope they have been on for a year.