euNetworks Saw Steady Revenue, EBITDA Growth in Q3

The independent European metro fiber operator euNetworks defied the macroeconomic headwinds and increased its forward momentum as reported in their third quarter results this morning.  Recurring revenues were up 4% sequentially,while EBITDA rose by 32%.  Here’s a quick tabular summary:

in millions of €	Q3/11	Q4/11	Q1/12	Q2/12	Q3/12
– recurring	21.2	22.3	23.0	23.2	24.1
– non-recurring	2.9	1.5	0	0	0
Revenue	24.1	23.8	23.0	23.2	24.1
Gross margin	65.6%	64.7%	66.5%	67.1%	67.1
Adj EBITDA	4.3	0.1	2.1	2.5	3.3
Adj EBITDA margin	17.8%	0.4%	9.1%	10.8%	13.7%
Capital Expenditures	8.9	13.8	8.1	8.2	6.4
Churn	1.5%	0.9%	1.3%	1.2%	1.7%
On-net buildings	530	633	701	790	853

The integrations of LambdaNet and TeraGate are winding down, showing up in higher EBITDA and greater operational efficiency and freeing up the company for some new initiatives to drive faster growth.  They added 63 buildings to their network during Q3 and spent $6.4M in capex, both of which were a bit slower than in the last few quarters.  The main downside to the quarter is on the churn line, with a few contracts for legacy SDH and IPVPN churn from LambdaNet running out, but that churn was more than offset by higher margin sales.

I wonder if the company is ready now for some further M&A, as fiber valuations in Europe continue to be relatively cheap and their private equity backers surely know that.  Of course, it’s a different ballgame in Europe than in the US and there aren’t as many easily identifiable targets.

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Categories: Financials · Metro fiber