As a privately held company, pan-European fiber operator Interoute (news) doesn’t have to tell us anything. Therefore, when they do give us financial details then you know they must have had a good year. Today Interoute announced 2008 revenues of €247M and EBITDA of €25M, up from €187M and €-6M in 2007, respectively. That’s 32% revenue growth, which is a heck of a number any way you count it. Of course, it’s hard to put that into dollars in a meaningful way given the huge swings in exchange rates lately, but in euros it sure looks healthy.
That said, I have wondered what state Interoute was really in. When they were taken private after the crash their operations were far in the red – but they sold a stake to some very deep pockets in Dubai and have been mostly quiet since. They have been very nimble over the last few years operationally, but at what expense? The 2008 EBITDA number tells us that they do still have a ways to go yet before becoming truly self-sustaining. In 2008 they achieved positive EBITDA – a big milestone, but are still only at EBITDA margins of 10% and could only be cash flow positive if they weren’t growing. Yet they do have those deep pockets, and they are still growing very nicely despite the worsening economy.
According to Interoute, expenses rose only 9% while revenues were growing so well. Hmmm, that shows that what the company lacks is the scale to offset its fixed costs. I wonder if those deep pockets have an interest in Interoute growing inorganically during this environment? Valuations are low everywhere, Europe included. There must be some bargains out there…
One new thing I need to read up on though: Interoute has a CDN? I must have missed that one. Did they build it organically or are they partnering with someone? Does anyone know?
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