Yet Another 500 Buildings for tw telecom

November 7th, 2011 by · Leave a Comment

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.

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Categories: Financials · Metro fiber

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