TW Telecom Posts a Strong Q2

August 10th, 2010 by · 4 Comments

As regular as clockwork, TW Telecom (NASDAQ:TWTC, news, filings) has posted its second quarter financial results, showing solid revenue growth.  There was perhaps a bit stronger acceleration on the revenue front, however costs increased in parallel which held down EBITDA growth.  Since I have been looking for an acceleration in top line growth from the company, I am hopeful that they are gearing up for such a growth phase.  As always, here is a quick tabular summary of their results in the context of prior quarters:

($ in millions) Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10
– Data/Internet 112.0 115.8 120.0 124.8 129.1 134.2
– Network 93.9 93.2 92.3 90.5 89.5 90.0
– Voice 83.1 83.5 83.8 82.9 84.1 84.0
– Intercarrier Compensation 8.6 8.4 7.8 9.8 8.5 8.7
Total Revenue 297.6 301.1 304.8 307.9 311.2 316.8
Cost of Revenue 123.7 123.2 127.2 129.9 128.9 132.3
SG&A 75.8 75.5 74.6 71.4 75.1 76.8
M-EBITDA 104.4 108.9 109.4 113.9 114.2 114.4
M-EBITDA Margin 35.1% 36.2% 35.9% 37.0% 36.7% 36.1%
Earnings per share 0.02 0.04 0.05 0.07 0.08 0.10
Revenue Churn 1.3% 1.3% 1.2% 1.2% 0.9% 1.0%
Capital Expenditures 73.4 69.2 59.9 72.3 80.9 85.0
Free Cash Flow 14.5 23.6 33.8 25.7 17.5 15.2

Revenue: As usual, strong growth from Data/Internet revenues led the way due to increased Ethernet and IP product sales, while network, voice, and intercarrier compensation revenues jogged in place. Revenue churn of 1.0% was up slightly from the prior quarter, but remains at low levels.

Costs & EBITDA: While revenue growth was strong, increased field costs, higher sales commissions, and annual merit increases ate away at it this time, and thus EBITDA rose only slightly to $114.4M from $114.2M in the prior quarter.

Earnings and Cash Flow: Excluding a deferred tax item, the company earned $0.10 per share, slightly above analyst expectations.  Free cash flow of $15.2M was solid as usual, but reflected increased capex levels as they look to drive growth.

Capex: Spending was up to $85.0M during the quarter, and the company updated its capex guidance for the year to $300-325M, which appears to put it around 25% of revenues – a big higher than it has been.  The bulk of the new spending is expected to come from new sales activity.  Hopefully we will see the results of this spending on increased top line growth.

On-net buildings: A bunch of that extra capex appears to have gone toward bringing more buildings on-net.  The company added 320 more direct fiber connections during the quarter, which is appreciably higher than its usual rate of 250-300.  While this number is necessarily lumpy, it does suggest that the company is becoming more aggressive in leveraging its fiber footprint.

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Categories: Financials · Metro fiber

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4 Comments So Far

  • carlk says:

    Nice top line growth, but I can’t get this CEO out of my mind who refuses to let market participants forget that, he who doesn’t own ACCESS will pay DEARLY as time fast forwards.

    Deals with devils will always end this way!

    TWTC’s bottom line is reflective of this fact.

    Cheering soccer moms will not change this fact. imo

  • Dave Rusin says:

    Type 2 circuits is like having Type 2 diabetes … eventually it will slow you down if not kill you.

  • carlk says:

    That’s funny because, if not for the competitive and regulatory landscape heading straight for their face, this company has done a damn good job executing. As a matter of fact, excluding long haul and without knowing their owned vs. leased metro bldg. holdings, they’re better than (3) on the surface, even with more quota bearing salespeople today.

    I’m sure the investment banks are readying to upgrade them through the $3B market cap barrier while risk factors are increasing exponentially.

  • carlk says:

    The Company ended the second quarter with approximately 27,500 route miles(including nearly 21,000 metro miles), 10,967 fiber connected on-net(6)buildings and 2,901 employees, including 528 sales associates.

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