Alternative telecommunications service provider PAETEC (news, filings) reported earnings this morning, and no the sky hasn't fallen yet. Revenues of $400.2M were in the upper half of guidance, as was adjusted EBITDA of $60.3M. Net loss for the fourth quarter was $114.4M, but that included a deferred income tax adustment of $93.3M and a goodwill adjustment of $15M. Excluding these, net loss would have been $6.1M or $0.04 per share. To summarize:
Overall, these results seem solid in a difficult economic environment. PAETEC has fiber only in the former McLeodUSA footprint, which means their revenues are less sticky than many others in the sector. In recessions, therefore they may be more vulnerable than those who mostly use their own fiber. That is perhaps born out by the fact that revenues declined 1% sequentially, but the disaster that the market seems to expect just didn't happen.
The company held costs in check as the recession took hold, and their situation seems to be holding pretty steady. Free cashflow remained positive at $28.2M, and the company bought back some 3.4M shares of its stock. They have no maturities and their covenants do not seem to be an issue.
For 2009, PAETEC didn't give much guidance, only that they expect positive cash flow and continued efforts at cost reduction. That goes with the territory these days of course.
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