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|
|– Intercarrier Compensation||8.6||8.4||7.8||9.8||8.5||8.7|
|Cost of Revenue||123.7||123.2||127.2||129.9||128.9||132.3|
|Earnings per share||0.02||0.04||0.05||0.07||0.08||0.10|
|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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