The competitive metro provider with the most buildings on-net, TW Telecom (NASDAQ:TWTC, news, filings), posted its first quarter results today. Revenue growth accelerated at a higher rate than in the past and bested estimates at $332.5M, while earnings per share fell sequentially as expected to $0.08 due to seasonality in costs. Capital expenditures remained high, and the company continued to expand its on-net footprint very aggressively. Here is a quick tabular summary in the context of the past four quarters:
|($ in millions)||Q1/10||Q2/10||Q3/10||Q4/10||Q1/11|
|- Data & Internet Services||129.1||134.1||138.8||145.1||152.2|
|- Network Services||89.6||90.2||90.0||89.5||89.5|
|- Voice Services||84.1||84.0||82.9||81.9||83.0|
|- Intercarrier Compensation||8.5||8.7||8.4||8.3||7.8|
|Earnings per share||0.08||0.10||0.11||0.11||0.08|
|On-net buildings added||367||417||537||512|
|Free Cash Flow||$17.5||$15.2||$23.8||26.4||$26.1|
Revenue: As you can see, all the growth continues to come from the company's Data & Internet services, while Network, Voice, and Intercarrier Comp remain flat. The first quarter normally sees slower growth, so to see an acceleration now bodes well for the rest of the year. The fact that they guided to the high end of their capex range for the full year supports that as well.
Costs & EBITDA: SG&A held firm despite seasonal pressures, but network expenses went the other direction. Thus EBITDA of $121.4 was probably inline with expectations. m-EBITDA margins fell slightly, but remained at the middle of the range we have been seeing for some time - 36.5%.
On-Net Buildings: TW Telecom continued its accelerated pace of adding buildings to its network, adding 512 more during the quarter - far more than anyone else amongst the competitive fiber operators. They also began reporting their full building count, now including the 1397 buildings without electronics and ILEC local serving offices they previously left out. That puts their full on-net building count at 13,742 as of the end of the first quarter.
Final Thoughts: The one thing missing from tw telecom's performance over the past few years was a higher rate of growth. Things definitely seemed to shift into a higher gear this quarter, but of course it takes more than one quarter to call it a trend. I continue to hear M&A rumors involving the company, almost always as a buyer, but nothing yet definitive.
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