Competitive provider cbey closed out 2010 with a fourth quarter that was a bit lighter than expected due to lower average revenue per customer. Revenues of $116.2M were up sequentially from $113.5M in Q3, but adjusted EBITDA remained flat at $18.0M while loss per share expanded to $0.07 from $0.02. EBITDA margin therefore fell again to 15.5%, giving back a bit more of the gains earlier in the year.
Average revenue per user fell from $695 to $680 sequentially, which the company chalked up to lingering effects of the recession and to everpresent competitive pressures. Gross margins fell to 66.9% in part due to higher transitional costs for T-1 to Ethernet conversion. That part we’ll be seeing more of in 2011, as they will be continuing that conversion to Ethernet.
Projections for 2011 include 6-8% revenue growth, or $479-489M – somewhat below market expectations. They base that on the assumption of continued ARPU declines and more sluggishness in the economy – obviously they’ll do better if those underlying assumptions don’t pan out. Meanwhile they expect EBITDA growth of 9-12%, or $62-64M, and capital expenditures of $75-80M.
Cbeyond purchased two cloud services companies during the quarter that didn’t contribute much to revenue yet but do offer higher margins down the line. Just where they take that cloud initiative and what kind of success they have in offering such products to their SME customer base will be the thing to watch in 2011.
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