After tw telecom announced a major expansion across 27 markets back in November, they didn’t waste much time. The biggest feature of the company’s Q4 earnings report yesterday was a $119.8M in capex associated with the project including a ‘strategic market expansion capital lease’. As for the rest of the report, tw telecom reported its usual clockwork revenue growth and indicated next year will see a somewhat faster pace.
| ($ in millions) | Q4/12 | Q1/13 | Q2/13 | Q3/13 | Q4/13 | Comments |
|---|---|---|---|---|---|---|
| – Data & Internet Services | 197.8 | 202.1 | 209.6 | 215.9 | 223.7 | Steady, strong growth |
| – Network Services | 81.0 | 78.9 | 78.5 | 76.1 | 75.4 | Continued erosion |
| – Voice Services | 92.1 | 92.3 | 93.1 | 93.9 | 94.3 | Steady growth |
| – Intercarrier Compensation | 7.0 | 7.9 | 8.3 | 7.3 | 6.6 | Fluctuated lower, accounting for differencewith street estimates |
| Total Revenue | 377.9 | 381.2 | 389.5 | 393.2 | 400.0 | Street:400.6 |
| M-EBITDA | 138.3 | 136.0 | 137.3 | 138.5 | 140.7 | |
| M-EBITDA Margin | 36.6% | 35.7% | 35.3% | 35.2% | 35.2% | Reflecting expansion projects |
| Adj. Earnings per share | 0.11 | 0.09 | 0.12 | 0.12 | 0.11 | Without one time events, 0.12 |
| Revenue Churn | 0.9% | 0.8% | 0.9% | 1.0% | 0.8% | Improving over the prior quarter |
| Capital Expenditures | 99.6 | 90.9 | 101.0 | 102.0 | 208.0 | Includes $119.8 for capital leases forthe previously announced market expansion. |
| On-net buildings added | 497 | 498 | 616 | 566 | 607 | Passing the 20K milestone |
| Free Cash Flow | 17.5 | 23.9 | 16.1 | 16.3 | (34.1) | Without the expansion capital lease they generated 85.7 |
Total revenue came in slightly under the street, but this can be largely chalked up to the lower intercarrier compensation number (which will be trending down regardless), everything else seemed as expected. Margins continue to be a bit lower in light of the various product development and market expansion projects the company put in place in 2013, which raised expenses in order to hopefully drive higher future growth. And while they didn’t give quantitative guidance, tw does say that their overall growth rate in 2014 should be higher than it has been in 2013.
In the initial version of this article, I ‘deduced’ that Zayo must be the supplier for all that fiber tw telecom will need for its expansion based on the parallel items from Zayo’s supplemental data. As it turns out, a reader points out that tw telecom disclosed exactly this back in November, so I’m a bit late on that — I had simply missed that line in their 10-Q. Oh well. It certainly makes perfect sense for tw telecom to partner with Zayo for such a move, as the former’s preference for enterprise connectivity complements Zayo’s more wholesale and dark fiber approach.
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I thought TW disclosed in its 10-q that zayo was indeed the supplier.
Oops, you are right, I had simply missed that in their 10-Q. Omniscient I’m not, thanks for the correction, I will update the article.