Earnings Preview: tw telecom, Cogent

May 6th, 2013 by · 8 Comments

This week will see a parade of earnings reports from network providers big and small.  For now, let's focus in on the two alternative fiber operators tw telecom and Cogent.  Both have their conference calls on Tuesday morning, although tw will probably issue its press release later today.  Here's a quick look at what I'm expecting to see:

tw telecom:  Any surprises that come out of TW Telecom (NASDAQ:TWTC, news, filings) at earnings time are generally only surprising on a relative scale, as their performance has been so steady for so many years.  That being said, last quarter they boosted expenses with an aim toward higher growth via new products and opportunities, so analysts will be looking for early signs of success on that front.  Yet Q1 is also when the company sees higher seasonal expenses, so the two trends will be offsetting.  I'd be surprised to be surprised by anything this quarter - here's a table of my guesses in context:

($ in millions) Q1/12 Q2/12 Q3/12 Q4/12 Q1/13
(my guess)
Comments
- Data & Internet Services 176.8 182.5 189.2 197.8 203  
- Network Services 84.8 83.0 81.3 81.0 80  
- Voice Services 89.6 91.0 91.1 92.1 92  
- Intercarrier Compensation 7.6 8.0 7.5 7.0 7
Total Revenue 358.9 364.5 368.9 377.9 383 Steady as she goes
M-EBITDA 131.8  134.0 136.5 138.3 140
M-EBITDA Margin 36.7% 36.8% 37.0% 36.6% 36.6% Q1 margins rarely expand
Earnings per share 0.13  0.13 0.14 0.11 0.12  
Revenue Churn 1.0% 0.9% 0.8% 0.9% 0.9%
Capital Expenditures 79.1 80.8 83.9 99.6 90
On-net buildings added 467 462 552 497 ~450  
Free Cash Flow 37.3 37.7  37.2 17.5 25-35  

Cogent Communications:  Meanwhile, Cogent Communications (NASDAQ:CCOI, news, filings) has lately been even quieter than tw telecom in many ways.  And since the MegaUpload incident affeted them four quarters ago, they've been just as steady and should pass back into profitability this quarter.  They've got another year or two's worth of large multi-tenant office buildings to bring on-net, but the rate seems likely to start to moderate this year as they focus more on selling deeper into their existing footprint and continuing to add off-net connections where it makes sense.

$ in millions Q1/12 Q2/12 Q3/12 Q4/12 Q1/13
(my guess)
 - On-net 56.8 57.3 58.1 60.4 62.1
 - Off-net 19.5 19.9 20.9 21.6 22.2
 - Other 0.6 0.6 0.6 0.6 0.6
Revenue 76.9 77.8 79.7 82.6 85
EBITDA 22.6 25.3 26.2 28.5 30
Earnings per share -0.05 -0.04 0.00 -0.01 0.02
Gross Margin 55.4% 55.0% 54.3% 54.6% 54-55%
Adj. EBITDA Margin 29.3% 32.6% 32.9% 34.6% 35%
On-net Buildings 1769 1799 1832 1867 1890-1900

Later this week we have both CenturyLink and Windstream reporting, which will probably bring up yet again the topic of dividends and how sustainable they are in a big way.  But more on that later.

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Categories: Fiber Networks · Financials

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8 Comments So Far


  • CarlK says:

    The real CarlK who won’t be pirated, says, LOL, you DUMMIES! But, they’re “GROWING” with new products and technological innovations, right! Yeah right! LOL!

    Note to Dr. Storey: Don’t touch these pigs. Let some other sucker buy them too! LOL!

    http://finance.yahoo.com/marketupdate/inplay#twtc

  • CarlK says:

    Have any of the board geniuses explained why twtc’s intercarrier compensation is rising at a $31.63M run rate and why this is sustainable or good in light of the regulatory framework being radically overhauled as respects “exchanging” voice traffic?

  • Seems like a stable number to me given the past 9 quarters of data or so, not rising and certainly falling as a percentage of revenue. But I do think most expect their intercarrier compensation to decline as the regultory framework evolves.

  • CarlK says:

    In addition, the FCC has granted ILEC requests for forbearance from regulation of certain Ethernet and OC-n high capacity services offered by the ILECs as special access, with the result that prices we would pay for those services are no longer regulated and can increase. We are seeking to reverse these forbearance requests. In the meantime, we have pursued commercial agreements with the ILECs and other providers for those services.
    Intercarrier Compensation and Universal Service Fund. Switched access is a component of intercarrier compensation that long distance carriers are charged to originate and terminate long distance calls using our local network. We also pay switched access charges to other carriers to originate and terminate our customers’ long distance traffic and pay intercarrier compensation to other carriers for traffic that our customers terminate on their facilities. Reciprocal compensation is the other component of intercarrier compensation that represents our charges to LECs for local exchange traffic terminated on our facilities that their customers originate and charges that we pay to LECs for our customers’ local exchange traffic terminated on their facilities.
    We and other carriers are required to make contributions to the federal Universal Service Fund, which provides support to promote access to telecommunications services at reasonable rates for those living in rural and high-cost areas, income-eligible consumers, rural health care facilities, schools and libraries. In 2012, the FCC established the Connect America Fund to support broadband access. The FCC is currently investigating a new assessment mechanism. We cannot yet determine the impact this proceeding will have on us.

    The FCC released an order on November 18, 2011, which establishes a transition by July 2018 of all terminating intercarrier compensation rates to “Bill and Keep,” meaning that the exchange of traffic would generate no revenue or expense, with intermediate step-downs beginning in July 2012. Intercarrier compensation revenue, comprised of switched access revenue and reciprocal compensation revenue, represented 2% of our total revenue for the year ended December 31, 2012. We lowered our rates in July 2012 to comply with the order and the next mandated rate decrease is scheduled to occur in July of 2013. As a result of the order, we lost approximately $2.0 million in intercarrier compensation revenue in the year ended December 31, 2012 and expect intercarrier compensation to decline approximately $4.0 million in the year ended December 31, 2013 compared to the full year 2012.

  • CarlK says:

    twtc is a cable owned and influenced bitch precluded from going inside the last mile to residences including cdn for entertainment companies with fiber leases or IRU’s from The Big Bad Cable consortium ending in 2028.

    Note to Dr. Storey. Kill this bitch with a work around solution against its Fathers in Cable Land. Send the soccer mom to the Kiddie Field full time. IMO

    Our ability to offer residential and content services is limited by our Capacity License Agreements.
    Our Capacity License Agreements with the Cable Operations prohibit us from using facilities licensed under those agreements until 2028 to (i) engage in the business of providing, offering, packaging, marketing, promoting, or branding (alone or jointly with or as an agent for other parties) any residential services, or (ii) produce or otherwise provide entertainment, information, or other content services. Although we do not believe that these restrictions will materially affect our business and operations in the immediate future, we cannot predict the effect of such restrictions in the rapidly changing telecommunications industry. We do not currently have plans to offer residential or content services in any of our service areas.

  • CarlK's dog says:

    Ize worried. My master talks to trees and only eats fruit loops and bananas. To me he makes no sense but wtf does a dog know about telephones? woof.

    • CarlK says:

      How much is my LVLT doggie in the Microsoft window? WrongStreet will get it right when SEAM puts it on the table for $100. The Level 3 PP&E cost over $40B will be realized soon rather than later. I will be LOLing all the way to the bank. BOW WOW!!!!!! Captain CAPS ON CarlK

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