Continuing its surge out of obscurity, abvt reported an excellent Q3. Revenues of $92.4M were up a full 5% over the prior quarter's $88.0M, and were substantially above the market's expectations of about $88.8M as collected by Yahoo Finance. Adjusted EBITDA of $40.7M and adjusted EBITDA margin of 44.0% were similarly powerful. Earlier in the year, when the company reached 44% ebitda margins, it seemed as if they couldn't possibly keep it up. But now it looks more and more sustainable. With growth and scale could they start to edge toward 50%?
Guidance had already been raised in Q2, and now they raised it again in Q3 - something we have seen rarely in the sector except from the datacenter space. Full year revenue projections are now $355-360M and that EBITDA margin for the full year should remain in the 44% range. That translates to Q4 revenues of $89.5-94.2M and EBITDA of $39.5-41.5M, which still appear to be quite conservative.
Abovenet now sits on a cash stockpile of $110M with little debt and a profitable business that shrugged off the recession. They have been proving that they know how to make money off of metro fiber assets, but their success poses the question of what next? They would seem to be in a good position for M&A of other metro fiber assets of course, but even in terms of organic growth there are many new markets out there they might start up in. As with Equinix (NASDAQ:EQIX, news, filings) in the datacenter sector and their fiber brethren TW Telecom (NASDAQ:TWTC, news, filings), Abovenet has emerged into an era where their business generates quite a bit more cash than its existing markets are consuming even at a healthy growth rate.
In the competitive telecom landscape, that isn't as common as it ought to be. So what to do with it? Not a dividend I hope!
If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!Categories: Financials · Metro fiber