Metro fiber specialist abvt reported earnings this morning, showing why they had the confidence to announce a two-for-one stock split last week. Revenue of $88.0M grew sequentially from $85.4M in the first quarter despite the recession. Adjusted EBITDA of $38.5M was also up sequentially from last quarter’s unexpectedly high $38.2M. EBITDA margins fell slightly from 44.7% to 43.8%, but remain above 40% and higher as anyone has any right to expect in this sector. Earnings per share of $1.95 were, also very strong. A few more datapoints and we will have to start believing them, eh?
The numbers were strong enough that the company was able to raise full year revenue guidance to $350-355M from $340-350M. Those numbers remain conservative, which isn’t a shock given the fact that we are still in a recession. But it is quite clear that the metro fiber business remains very strong despite the economic environment. Strong enough to produce the cash flow needed for its own expansion for the most part. Kind of makes you wonder where we would be if carrier capex weren’t being compressed mercilessly…
So where to now from here for Abovenet? I continue to see M&A in their future, but given the strength of their stock price and their operational performance perhaps it will be as the acquirer rather than as acquiree. Certainly at their current valuation none of the more likely acquirers would be able to make a reasonable bid any time soon, so why not turn it around? They might have shown up in the bidding for ftgx, but having just sold their datacenter business they perhaps didn’t want to get back into it with those Meet-me facilities etc. But there are other assets out there looking for a home, new markets to enter, etc.
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