TW Telecom Hums Along

November 3rd, 2009 by · 5 Comments

When it comes to fiber-based telecom, there are ups and there are downs – and then there is TW Telecom (NASDAQ:TWTC, news, filings).  In their earnings report after the bell, the company reported revenues of $304.8M, EBITDA of $109.6M, and earnings per share of $0.05.  Those results are essentially in-line with expectations, except perhaps the earnings per share which beat by $0.01.  Additionally, TW Telecom doesn’t offer much in the way of guidance but who needs it?  You could set your watch by these numbers, here is a summary table of the last 4 quarters ($ in millions):

Q4/08 Q1/09 Q2/09 Q3/09
Data/Internet 107.6 112.0 115.8 120.0
Network 95.6 93.9 93.2 92.3
Voice 83.0 83.1 83.5 83.8
Intercarrier Compensation 8.6 8.6 8.4 7.8
Total Revenue 294.6 297.6 301.1 304.8
Cost of Revenue 126.2 123.7 123.2 127.2
SG&A 70.6 75.8 75.5 74.6
M-EBITDA 104.2 104.4 108.9 109.4
M-EBITDA Margin 35.4%1 35.1% 36.2% 35.9%
Earnings per share 0.01 0.02 0.04 0.05
Revenue Churn 1.2% 1.3% 1.3% 1.2%
Capital Expenditures 72.9 73.4 69.2 59.9
Free Cash Flow 12.7 14.5 23.6 33.8

Rarely do we get trends so easily discerned.  Data and Internet revenues continued their 4-5% growth each quarter, network revenues and intercarrier compensation drifted slightly downward, and voice revenues slightly upward.  M-EBITDA, FCF, and EPS continued to steadily increase, with M-EBITDA margins holding in the 36% range.  Revenue churn remained ‘high’ relative to historical levels at 1.2%, but quite low compared to the rest of telecom.

Capital Expenditures have trended downward a bit, they had been up due to several colocation projects and opportunistic fiber purchases.   Total capex for the year is forecasted at $250-270, which implies Q4 will be roughly similar to Q3.  With falling capex has of course come higher free cash flow and a fatter wallet.  With $432M in cash on hand, positive cash flow, no debt maturities for more than 3 years, and no financial covenants to worry about – they can probably raise money on pretty good terms in this market.  Hence, the company remains in a very favorable position if the opportunity arises.

TW Telecom continued its on-net building dominance, adding 236 more to its total of 10,170 enterprise buildings – they also connect more than a thousand wholesale sites such as large data centers and wireless switching centers, etc.

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Categories: Financials · Metro fiber

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5 Comments So Far

  • Ben Hilborn says:

    It would be interesting to see how many ON-NET buildings they have in each specific market. I think TW Telecom has over 70 markets which is an average of 145 buildings per market.

    • Anon says:

      Especially Tulsa OK, huh?

      • Rob Powell says:

        I still don’t really understand the wide range in level of secrecy across the sector. Some companies publish every address of every on-net building. Others think doing so would somehow compromise their business. One would think that one or the other opinion would prevail.

        Certainly I would prefer everyone publish everything!

        • Frank Coluccio says:

          I’ve often wondered about the same thing. One possibility that might account for this dichotomy: those who pull fiber publish; those who piggyback don’t? Do you have the necessary level of granularity within your records to test this thesis? Curious …

          • Rob Powell says:

            Unfortunately, there doesn’t seem to be a good correlation as far as I can see. For instance, Cogent leases all its fiber, and lists every building. I think it’s more about individual corporate culture. Much like individuals, some are gregarious, some are secretive.

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