Earnings Roundup: Cbeyond, tw telecom, Cogent, Inteliquent

Now that Sandy has passed and the cleanup continues, four very different but publicly held alternative network service providers report their Q3 earnings this week/  Cbeyond and probably tw telecom will report after the close today, Cogent tomorrow morning, and Inteliquent on Wednesday morning.  Here’s a quick preview of what to expect from each: 

cbey has been on a quest to transform itself from a heavy dependence on T1 connections and voice revenues to Ethernet and cloud-based services.  Their margins have begun to benefit, rising above 20% for the first time last quarter.  Forward guidance, however, suggests the second half will send both revenues and EBITDA down as they hire more sales for the new products and perhaps churn off some older stuff.  The market hasn’t been giving their transformation plans much credit this year, but hopefully 2013 will look brighter:

$ in millions	Q3/11	Q4/11	Q1/12	Q2/12	Q3/12 (my guess)	FY2012 (guidance)
Revenue	122.5	123	123.8	123.8	121	485-490
EBITDA	18.9	23	22.9	27.2	20	85-90
Earnings per share	-0.05	-0.17	-0.04	0.09	-0.03
Adj. EBITDA Margin	15.4%	18.7%	18.5%	22.0%	~19%
Capex	19.3	18	17.2	15.7	15-20	55-60

TW Telecom (NASDAQ:TWTC, news, filings) was the featured stock in last month’s big M&A rumor, with CenturyLink supposedly sniffing around.  That rumor quickly faded, although it could easily flare up again this month without warning.  My two cents are still that tw telecom could produce more value for its shareholders on the other end of the M&A lasso.  But operationally tw telecom is very predictable, and their Q3 numbers are very unlikely fall far from their existing growth trajectory.  They’ll add another 400-500 on-net buildings and perhaps expand margins slightly again.  Here are my Q3 guesses.

($ in millions)	Q3/11	Q4/11	Q1/12	Q2/12	Q3/12 (my estimate)
– Data & Internet Services	164.7	171.6	176.8	182.5	188.5
– Network Services	86.9	85.4	84.8	83.0	82
– Voice Services	85.2	86.7	89.6	91.0	92
– Intercarrier Compensation	7.7	7.6	7.6	8.0	7.5
Total Revenue	344.5	351.5	358.9	364.5	370
M-EBITDA	125.0	128.1	131.8	134.0	136.5
M-EBITDA Margin	36.3%	36.3%	36.7%	36.8%	36.9%
Earnings per share	0.10	0.11	0.13	0.13	0.14
Revenue Churn	1.0%	0.8%	1.0%	0.9%	<=1.0%
Capital Expenditures	86.0	86.6	79.1	80.8	80-90
On-net buildings added	561	566	467	462	400+
Free Cash Flow	23.2	25.6	37.3	37.7	30-40

Cogent Communications (NASDAQ:CCOI, news, filings) started off this year with a kick to the groin as the MegaUpload scandal hit their revenues and margins.  But since then, steady growth from the rest of their customer base and cost savings have taken up the slack, and the market is expecting the company to push revenues up to $80M with positive earnings per share of $0.01.  I’m going to be a bit more conservative, although along the same trajectory:

$ in millions	Q3/11	Q4/11	Q1/12	Q2/12	Q3/12 (my estimate)
Revenue	77.4	79.1	76.9	77.8	79.5
EBITDA	26.7	27.8	22.6	25.3	27.1
Earnings per share	0.01	0.12	-0.05	-0.04	0.00
Gross Margin	56.7%	57.8%	55.4%	55.0%	~55%
Adj. EBITDA Margin	34.5%	35.2%	29.3%	32.6%	~34%
On-net Buildings	1707	1744	1769	1799	1825-1830

Inteliquent (NASDAQ:IQNT, news, filings) had a rough summer, with a weak second quarter report leading to lowered second quarter guidance.  That was followed by the departure of their COO and CFO last month.  Last month they also finalized their plans for a one time dividend aimed at returning cash to their investors, after scaling back its magnitude somewhat. Inteliquent has been working to diversify its approach by leveraging the profitable tandem voice business, with IP/Ethernet services becoming more important to their future and new cloud-based UC services still at an early stage.  I’ll be interested to see what if any changes of that strategy emerge with the leadership change.  My guesses:

($ in millions)	Q3/11	Q4/11	Q1/12	Q2/12	Q3/12 (my estimate)	FY12 guidance
Revenue	67.3	69.5	70.7	68.3	70.5	280-290
Adj. EBITDA	21.0	22.1	21.3	18.5	19.0	74-82
Adj. EBITDA Margin	31.2%	31.7%	30.2%	27.1%	~27%
Earnings per share	0.18	0.19	0.21	0.12	0.14
Billed Minutes	32.9	33.3	34.4	32.8	34	133-138
Capex	6.8	2.4	9.1	5.7	5-8	25-30

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Categories: CLEC · Ethernet · Internet Backbones · Metro fiber