Earnings Roundup: Cbeyond, tw telecom, Cogent, Inteliquent

November 5th, 2012 by · Leave a Comment

Now that Sandy has passed and the cleanup continues, four very different but publicly held alternative network service providers report their Q3 earnings this week/  Cbeyond and probably tw telecom will report after the close today, Cogent tomorrow morning, and Inteliquent on Wednesday morning.  Here's a quick preview of what to expect from each: 

cbey has been on a quest to transform itself from a heavy dependence on T1 connections and voice revenues to Ethernet and cloud-based services.  Their margins have begun to benefit, rising above 20% for the first time last quarter.  Forward guidance, however, suggests the second half will send both revenues and EBITDA down as they hire more sales for the new products and perhaps churn off some older stuff.  The market hasn't been giving their transformation plans much credit this year, but hopefully 2013 will look brighter:

$ in millions Q3/11 Q4/11 Q1/12 Q2/12 Q3/12
(my guess)
FY2012
(guidance)
Revenue 122.5 123 123.8 123.8 121 485-490
EBITDA 18.9 23 22.9 27.2 20 85-90
Earnings per share -0.05 -0.17 -0.04 0.09 -0.03
Adj. EBITDA Margin 15.4% 18.7% 18.5% 22.0% ~19%
Capex 19.3 18 17.2 15.7 15-20 55-60

TW Telecom (NASDAQ:TWTC, news, filings) was the featured stock in last month's big M&A rumor, with CenturyLink supposedly sniffing around.  That rumor quickly faded, although it could easily flare up again this month without warning.  My two cents are still that tw telecom could produce more value for its shareholders on the other end of the M&A lasso.  But operationally tw telecom is very predictable, and their Q3 numbers are very unlikely fall far from their existing growth trajectory.  They'll add another 400-500 on-net buildings and perhaps expand margins slightly again.  Here are my Q3 guesses.

($ in millions) Q3/11 Q4/11 Q1/12 Q2/12 Q3/12
(my estimate)
- Data & Internet Services 164.7 171.6 176.8 182.5 188.5
- Network Services 86.9 85.4 84.8 83.0 82
- Voice Services 85.2 86.7 89.6 91.0 92
- Intercarrier Compensation 7.7 7.6 7.6 8.0 7.5
Total Revenue 344.5 351.5 358.9 364.5 370
M-EBITDA 125.0 128.1 131.8  134.0 136.5
M-EBITDA Margin 36.3% 36.3% 36.7% 36.8% 36.9%
Earnings per share 0.10 0.11 0.13  0.13 0.14
Revenue Churn 1.0% 0.8% 1.0% 0.9%
<=1.0%
Capital Expenditures 86.0 86.6 79.1 80.8
80-90
On-net buildings added 561 566 467 462
400+
Free Cash Flow 23.2 25.6 37.3 37.7
 30-40

Cogent Communications (NASDAQ:CCOI, news, filings) started off this year with a kick to the groin as the MegaUpload scandal hit their revenues and margins.  But since then, steady growth from the rest of their customer base and cost savings have taken up the slack, and the market is expecting the company to push revenues up to $80M with positive earnings per share of $0.01.  I'm going to be a bit more conservative, although along the same trajectory:

$ in millions Q3/11 Q4/11 Q1/12 Q2/12 Q3/12
(my estimate)
Revenue 77.4 79.1 76.9 77.8 79.5
EBITDA 26.7 27.8 22.6 25.3 27.1
Earnings per share 0.01 0.12 -0.05 -0.04 0.00
Gross Margin 56.7% 57.8% 55.4% 55.0% ~55%
Adj. EBITDA Margin 34.5% 35.2% 29.3% 32.6% ~34%
On-net Buildings 1707 1744 1769 1799 1825-1830

Inteliquent (NASDAQ:IQNT, news, filings) had a rough summer, with a weak second quarter report leading to lowered second quarter guidance.  That was followed by the departure of their COO and CFO last month.  Last month they also finalized their plans for a one time dividend aimed at returning cash to their investors, after scaling back its magnitude somewhat. Inteliquent has been working to diversify its approach by leveraging the profitable tandem voice business, with IP/Ethernet services becoming more important to their future and new cloud-based UC services still at an early stage.  I'll be interested to see what if any changes of that strategy emerge with the leadership change.  My guesses:

($ in millions) Q3/11 Q4/11 Q1/12 Q2/12 Q3/12
(my estimate)
FY12
guidance
Revenue 67.3 69.5 70.7 68.3 70.5 280-290
Adj. EBITDA 21.0 22.1 21.3 18.5 19.0 74-82
Adj. EBITDA Margin 31.2% 31.7% 30.2% 27.1% ~27%
Earnings per share  0.18 0.19 0.21 0.12 0.14
Billed Minutes 32.9 33.3 34.4 32.8 34 133-138
Capex  6.8 2.4 9.1 5.7  5-8 25-30

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Categories: CLEC · Ethernet · Internet Backbones · Metro fiber

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