Earnings Preview: tw telecom, Cogent, Lumos, euNetworks

May 5th, 2014 by · Leave a Comment

Quite a few alternative metro fiber operators will likely be putting out their first quarter earnings reports this week.  Here are quick previews of four of them:

tw telecom: The story this year for tw telecom is the company's ongoing network expansion via dark fiber spanning dozens of markets across the country. It's too early to see much from that other than capex though, so revenue should stay on its steady trajectory. Costs should be up somewhat, both from the buildout and the company's usual seasonality, so EBITDA margins may dip - though the effect probably won't be huge.

($ in millions) Q1/13 Q2/13 Q3/13 Q4/13 Q1/14
(my guess)
- Data & Internet Services 202.1 209.6 215.9 223.7 230
- Network Services 78.9 78.5 76.1 75.4 75
- Voice Services 92.3 93.1 93.9 94.3 95
- Intercarrier Compensation 7.9 8.3 7.3 6.6 6
Total Revenue 381.2 389.5 393.2 400.0  406
M-EBITDA 136.0 137.3 138.5 140.7 142
M-EBITDA Margin 35.7% 35.3% 35.2% 35.2% 35%
Adj. Earnings per share 0.09 0.12 0.12 0.11 0.10
Revenue Churn 0.8% 0.9% 1.0% 0.8% 0.9%
Capital Expenditures 90.9 101.0 102.0 208.0 110
On-net buildings added 498 616 566 607 ~500
Free Cash Flow 23.9  16.1 16.3 (34.1) ~20

Cogent Communications:  Cogent is making itself heard these days mostly via earnings, dividends, and stock buybacks. I expect we will hear just as much of that sort of thing this quarter. I am curious though to see where they start putting their capex as the tightly focused multi-tenant building opportunity they have specialized in starts to get more sparse in the years ahead.  In Q1 they should pass the 2,000 on-net building mark at last.  Another big thing to watch for of course is the company's comments on the ongoing peering/net neutrality/Comcast/Netflix saga.

$ in millions Q1/13 Q2/13 Q3/13 Q4/13 Q1/14
(my guess)
 - On-net 61.7 62.7 64.5 66.0 67.5
 - Off-net 22.3 22.6 22.8 23.4 24
 - Other 0.6 0.5 0.4 0.4 0.4
Revenue 84.6 85.8 87.8 89.9 91.9
EBITDA 28.3 29.6 30.7 31.5 32.2
Earnings per share 0.01 0.03 0.05 1.10 0.05
Gross Margin 56.1% 56.9% 57.5% 57.4% 57-58%
Adj. EBITDA Margin 33.5% 34.5% 35.0% 35.0% ~35%
On-net Buildings 1890 1921 1955 1990 2015

Lumos Networks:  Lumos has been busy investing in its network, both 0n fiber-to-the-tower and on turning those Pennsylvania assets into something more like the rest of the company's network footprint.  On the financial front lately they've seen their gains in strategic data offset by declines in the legacy voice and access side of their business.  That trend will probably continue for another few quarters.

$ in millions Q1/13 Q2/13 Q3/13 Q4/13 Q1/14
(my guess)
 - Strategic Data 29.7 30.0 30.4 31.2 31.6
 - Legacy Voice 14.9 14.3 14.1 13.3 13.0
 - Access 8.0 8.0 7.2 6.5 6.0
Revenue 52.5 52.3 51.6 51.0 50.6
Adjusted EBITDA 24.7 24.6 23.0 24.0 23
Earnings per share 0.30  0.22 0.11 0.18 0.20
Adj. EBITDA Margin 47.0% 46.9% 44.6% 47.1% 45.5%
Capex 15.0 11.7 19.0 22.6 ~20
On-net Buildings 1235 1273 1303  1344 ~1380
On-net Cell Sites 405 465 540 608 650-700

euNetworks:  Over in Europe, euNetworks will be looking for a little less churn going forward in 2014 than it endured last year even as EBITDA continued to rise.  Following Zayo's purchase of Neo Telecoms, speculation on euNetworks role on either side of further Euro fiber M&A activity is likely be on the mind of many.  But for Q1 I don't expect there will be much in the way of fireworks, and the higher churn probably isn't quite over yet.

 in millions of €  Q1/13 Q2/13 Q3/13 Q4/13 Q1/14
(my guess)
Revenue 24.8 24.5 24.1 24.0 24.2
Gross margin 72.4% 72.0% 72.9% 74.4% ~74%
Adj EBITDA 5.7 6.0 6.3 7.4 6.7
Adj EBITDA margin 23.0% 24.5% 26.1% 30.8% 27.7%
Capital Expenditures 3.6 4.9 8.7 10.7 5-10
Proxy Cash Flow 2.1 1.1 (2.4) (3.3) 0-(2)
Churn 1.2% 2.8% 2.2% 2.3% ~2%
On-net buildings 945 985 1,011 1,046 ~1080

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Categories: Financials · Metro fiber

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