Windstream Closes Out 2011, Looks Ahead to a Busy Year

February 22nd, 2012 by · 1 Comment

Hybrid RLEC/CLEC Windstream (NYSE:WIN, news, filings) turned in its fourth quarter earnings report this morning, giving us our first look at the company since it acquired PAETEC in December. They mercifully focused most of their key metrics on the pro-forma numbers, i.e. including a full quarter of PAETEC’s results.

Pro forma revenues of $1.569M were up slightly from the prior quarter, reflecting growth in business services and consumer broadband offset by those everpresent landline losses. Revenues for the year are expected to stay roughly in that quarterly ballpark, with guidance of $6.180-6.305B

Adjusted OIBDA checked in at $612M, yielding margins of 39.0%. Projections for the year came in at $2.43-2.5B, suggesting some margin growth. Adjusted free cash flow is expected to be $840M-950M, of which 62-70% will be paid out in dividends.

Obviously, the effects of the PAETEC integration won’t show up for a while yet, since these numbers have only one month’s worth. They do expect to spend $55M in capex on that integration. Meanwhile, they are still finishing up with their earlier M&A activity, and will see $55M in cash from a sale of acquired spectrum during Q1.  Key will be not merely a smooth integration and better usage of all that fiber they’re now sitting on, but a successful expansion deeper into the cloud-based enterprise services market.

It still seems likely that at some point Windstream will fill in the remaining hole in its fiber footprint – the Rockies and the West Coast. But for now Windstream has a busy year ahead of it already.  Putting together all the puzzle pieces they have been acquiring and building them into a cohesive whole will require their full attention for few quarters, I think.

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Categories: CLEC · Financials · ILECs, PTTs

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  • Anonymous says:

    Rob (or a fellow follower), do you have any insight into the 39% EBITDA margin?

    I haven’t delved to deep on PAETEC/Windstream yet, but here are my thoughts…

    Paetec YTD 9/30/2011 had approx 16.2% EBITDA Margins, 17.9% adj EBITDA.

    Windstream looks like for full year 2011 stand alone it had revenue of $4.29B, EBITDA 1.89B, margins of 44% and 44.5% EBITDA and adj EBITDA respectively.

    Pro forma full year has Win at 6.24B, EBITDA 2.47B with 39.6% margins.

    If I back out Win stand alone, of 4.29B rev and the 1.89B EBITDA, I need from PAETEC 1.95B Rev and then $583M EBITDA for 30% margins.

    Can you give me some comments into the EBITDA increase for PAETEC?

    Any insight would be greatly appreciated.

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