A Larger euNetworks Reports Growth

European independent metro fiber operator euNetworks (news) reported substantially higher revenues and adjusted EBITDA for the third quarter of 2011, boosted by the company’s inorganic efforts over the summer.  The acquisition of LambdaNet and TeraGate on top of organic growth in the company’s network sales has more than doubled their revenues.  Here’s a quick table of the company’s results in context:

in millions of €	Q3/10	Q4/10	Q1/11	Q2/11	Q3/11
– recurring	9.9	10.5	10.5	14.6	21.2
– non-recurring	1.2	3.2	0	0	2.9
Revenue	11.1	13.7	10.5	14.6	24.1
Adj EBITDA	0.8	1.8	0.4	1.1	4.3
Adj EBITDA margin	8%	13%	4%	7.5%	17.8%
Capital Expenditures	4.5	5.2	2.8	6.3
On-net buildings	329	365	394	489	530

Revenues:  Total revenues of €24.1M included a non-recurring boost this quarter from termination revenues, but recurring revenues were up strongly mostly inorganically but with good organic growth as well.  The LambdaNet and TeraGateAG acquisitions helped boost the company’s German revenues above half of the total, whereas in the past it was the UK which generated the lions share.  The UK was the main source of organic growth however, and the company’s Netherlands business also saw sales growth.

EBITDA: Adjusted EBITDA of €4.3M included €0.5M in non-recurring items, but nevertheless represented a solid jump into double digit adjusted EBITDA margins.  The company’s integration efforts should boost margins further in coming quarters.  The key here is scale, something that euNetworks did not yet have on its extensive metro assets.  With their annual revenues now approaching a run rate of €100M, we can expect those margins to start to look more and more like euNetworks’ American cousins.

General thoughts: Network rationalization and portfolio integration are well underway, but the cost savings and revenue synergies won’t really begin to appear until the next quarter or two.  However, euNetworks’ on-net building push continued during the quarter, with 41 more brought on-net – the most they’ve added organically yet.  Fiber builds into another 202 buildings are underway.

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Categories: Financials · Metro fiber