CBeyond Winces But Chugs On

August 7th, 2008 by · 3 Comments

CBeyond (CBEY) reported earnings today, reporting revenues of $85M, EBITDA of $13.7M, and earnings of $0.02.  None of that came as much of a surprise, it was in line with guidance and expectations.  Some, including Citibank, thought CBeyond might show the same symptoms as PAETEC, since both serve the enterprise and both build their networks out of leased circuits from other carriers.

The company did reduce full-year revenue guidance slightly from $355-360M down to $350-355M, but kept EBITDA guidance the same and churn didn’t increase.  They appear cautious about risks from economy, which is probably a smart move.  All that is perhaps not a huge endorsement, but nothing close to the haircut PAETEC pre-announced the other day.

Macroeconomic weakness is clearly being felt at the SME level in the telecom space, but it doesn’t seem severe so far.  PAETEC’s troubles may be local and could be related to their M&A and integration.  The next test perhaps will be TWTC on Tuesday.  In theory, TWTC should have some immunity due to their substantial fiber footprint and stickier revenue base.

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Categories: CLEC · Metro fiber

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3 Comments So Far

  • tech101 says:

    Hi, Rob,

    When you said “CBeyond and PAET … both serve the enterprise and both build their networks out of leased circuits from other carriers”, do you mean Cbeyond, like other “facility-based” CLEC, heavily relies on the mercy of UNE-L?

    If so, how could CBEY figure out a way to grow revenue 26% and stand out making a profit – unlike LVLT, XO, GLBC, … and Broadwing, which always struggle to gain EBITDA slowly and still losing money?

    Just better execution? Or CBEY has some special advantage others do not have?

  • tech101 says:

    CBEY’s 10-Q indicates SG&A about 53% of the revenue – way above the industry average. But the “Cost of Revenue” of $27 million – was only 30% of the revenue – seemingly very low among CLECs.

    What makes the difference? They must own a lot metro fiber, right?

  • Rob Powell says:

    They certainly are executing well so far. They are a niche player with really just one product, but they know that product very well and are selling the hell out of it. No, they have no fiber, they have tremendous focus and it will carry them for a while. It’s harder to predict where they go when they have to move on to the next product though.

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