Yet Another 500 Buildings for tw telecom

There was no let up in the torrid pace at which TW Telecom (NASDAQ:TWTC, news, filings) has been adding buildings to its network during the third quarter.  According to the company’s  Q3 earnings report today, they added another 561  through September 30, meaning the past twelve months have seen 2,179 buildings brought on-net.  Overall, the company’s financial results went by like clockwork as usual.  Here’s a quick table:

($ in millions)	Q3/10	Q4/10	Q1/11	Q2/11	Q3/11
– Data & Internet Services	138.8	145.1	152.2	158.2	164.7
– Network Services	90.0	89.5	89.5	88.9	86.9
– Voice Services	82.9	81.9	83.0	83.6	85.2
– Intercarrier Compensation	8.4	8.3	7.8	8.7	7.7
Total Revenue	320.3	324.8	332.5	338.4	344.5
M-EBITDA	115.5	119.4	121.4	123.2	125.0
M-EBITDA Margin	36.1%	36.7%	36.5%	36.4%	36.3%
Earnings per share	0.11	0.11	0.08	0.09	0.10
Revenue Churn	1.1%	1.0%	1.0%	0.9%	1.0%
Capital Expenditures	77.8	78.1	79.3	$90.9	$86.0
On-net buildings added	417	537	512	569	561
Free Cash Flow	23.8	26.4	26.1	16.5	23.2

Revenue: Data and Internet services led the way, while Network services saw churn offset by growth over in Voice.  All in all, extremely typical for tw and almost maddeningly in-line with analyst expectations.  Churn remained at the 1.0% level – so steady we really need another decimal place to track actual trends these days.

EBITDA & Margins: EBITDA rose $1.8M sequentially to $125.0M, almost perfectly linearly as usual, with EBITDA margins of 36.3%.  It’s interesting that as tw telecom scales its revenue they aren’t seeing the margin expansion that other metro providers have seen.  But then none of the others are so aggressively bringing buildings on-net — tw telecom is going after different building types than its brethren while ensuring margins hold steady.

Cash: Capex remained at higher levels during the quarter at $86M, or 25.0% of revenue, reflecting the high rate of building additions.  Free cash flow of $23.2M was in the usual range.

Thoughts: Larissa Herda & company continue to be so steady that it’s almost painful to watch, as nothing ever seems to happen but steady growth of just under 10%.  It still feels like eventually they will take that well-oiled machine and use it for some inorganic consolidation, but at the moment nothing seems terribly imminent.

If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!

Categories: Financials · Metro fiber