Earnings Preview: Steady Progress for tw telecom, Cogent

Two very different competitive fiber operators will report earnings later this week.  Both tw telecom and Cogent have scheduled their conference calls for Thursday morning, although usually that means tw telecom will have their release out the night before.  Both seem to have cracked the code of profitability in this space, although from very different approaches.

tw telecom: tw telecom has been busy for the last several quarters spending money and resources on its next generation Constellation platform, dragging back the bottom line a bit in preparation for the next wave.  That trend will surely continue to impact their Q2 numbers, but within expectations.  My guesses:

($ in millions)	Q2/12	Q3/12	Q4/12	Q1/13	Q2/13 (my guess)
– Data & Internet Services	182.5	189.2	197.8	202.1	208
– Network Services	83.0	81.3	81.0	78.9	79.5
– Voice Services	91.0	91.1	92.1	92.3	92
– Intercarrier Compensation	8.0	7.5	7.0	7.9	7.5
Total Revenue	364.5	368.9	377.9	381.2	387
M-EBITDA	134.0	136.5	138.3	136.0	140
M-EBITDA Margin	36.8%	37.0%	36.6%	35.7%	36%
Earnings per share	0.13	0.14	0.11	0.09	0.12
Revenue Churn	0.9%	0.8%	0.9%	0.8%	0.9%
Capital Expenditures	80.8	83.9	99.6	90.9	90-100
On-net buildings added	462	552	497	498	450-500
Free Cash Flow	37.7	37.2	17.5	23.9	~20

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Cogent Communications:  Analysts are predicting Dave Schaeffer and his team will move the company’s profitability further across the break even line to a nickel per share.  I’m going to be very slightly less optimistic than that, although I’m not expecting any trends to break.  Cogent recently poached XO’s Ernie Ortega as its new Chief Revenue Officer so I’ll be curious to hear what they’ve got in mind for Q3.  In the meantime, my guesses for Q2:

$ in millions	Q2/12	Q3/12	Q4/12	Q1/13	Q2/13 (my guess)
– On-net	57.3	58.1	60.4	61.7	63.0
– Off-net	19.9	20.9	21.6	22.3	23.0
– Other	0.6	0.6	0.6	0.6	0.6
Revenue	77.8	79.7	82.6	84.6	86.6
EBITDA	25.3	26.2	28.5	28.3	29.2
Earnings per share	-0.04	0.00	-0.01	0.01	0.04
Gross Margin	55.0%	54.3%	54.6%	56.1%	55%
Adj. EBITDA Margin	32.6%	32.9%	34.6%	33.5%	33.7%
On-net Buildings	1799	1832	1867	1890	~1910

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Categories: Fiber Networks · Financials · Metro fiber