With Level 3 In the Wings, tw telecom Posts Solid Q2 Growth

A week or so earlier than usual and a day and a half after its prospective acquirer did so, tw telecom posted its second quarter results.  They saw revenue growth pick up a little bit over the past few quarters, moving up 2.8% sequentially and beating estimates slightly.  Earnings per share seems to have been inline after excluding merger-related costs.  Here are their numbers in some context:

($ in millions)	Q2/13	Q3/13	Q4/13	Q1/14	Q2/14
– Data & Internet Services	220.1	226.5	235.2	243.7	253.0
– Network Services	64.1	61.6	60.0	58.4	56.7
– Voice Services	76.4	77.3	76.8	77.4	77.9
– Intercarrier Compensation	8.3	7.3	6.6	6.1	6.7
– Taxes & Fees	20.6	20.5	21.4	22.8	25.1
Total Revenue	389.5	393.2	400.0	408.3	419.7
M-EBITDA	137.3	138.5	140.7	136.8	138.4
M-EBITDA Margin	35.3%	35.2%	35.2%	33.5%	33.0%
Adj. Earnings per share	0.12	0.12	0.11	0.07	0.08
Revenue Churn	0.9%	1.0%	0.8%	0.8%	0.9%
Capital Expenditures	101.0	102.0	208.0	102.2	95.2
On-net buildings added	616	566	607	523	554
Free Cash Flow	16.1	16.3	(34.1)	10.8	20.0

Margins remained lower than they have been historically, which is not at all unexpected due to all the market expansion work the company has been doing for the past 8 months.  Capex ticked back down below the $100M mark for the quarter, the first time we’ve seen that in a while with or without the market expansion projects.  But tw telecom kept up its on-net building pace, adding 554 more during the quarter. and breaking the 21K mark.

With the Level 3 deal set to close in Q4 and I suspect possibly in October, this very well may be the last earnings report we get from tw telecom before the closing of the deal.  For almost a decade we’ve almost been able to set our watches by tw telecom’s numbers and performance, as they usually chose focus and discipline over the more free-wheeling consolidation on the other side of the fence.

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Categories: Financials · Metro fiber