After a year of offsetting revenue trends with rising EBITDA, euNetworks is looking forward to some growth in 2014. They've added some new metrics to their reporting and are now offering some forward revenue guidance as well. Here are their first quarter numbers in some context:
|in millions of €, UOS||Q1/13||Q2/13||Q3/13||Q4/13||Q1/14
|Adj EBITDA margin||23.0%||24.5%||26.1%||30.8%||25.6%|
|Proxy Cash Flow||2.1||1.1||(2.4)||(3.3)||(0.3)|
|New Sales (in thousands of €)||485.7||607.1||782.6|
|Installs (in thousands of €)||579.8||650.9||640.3|
|Monthly Incremental Service Revenue||260.1||158.3||155.1|
|Churn (new methodology)||1.0%||1.0%|
New sales and installs maintained last quarter's momentum, which bodes well for revenue growth going forward. The company guided its growth rate to be as good as or better than the growth of the overall European bandwidth market, a number they quoted as 3-5% for 2014. Gross profit and EBITDA should each grow a bit faster than revenue as well.
The company shifted how it accounts for churn to match others in the industry, including hard disconnects and not cases where a customer shifted products or had their service repriced. Last year saw churn in legacy LambdaNet contracts and colo cancel out sales gains elsewhere.
With the sale of France-based Neo Telecoms to Zayo now on the table, I do think there is a decent chance that fiber M&A activity in Europe will tick upwards. If it does, euNetworks will probably be one of those mentioned frequently. In their release they show their current valuation at 6.8xEBITDA, while Neo seems to have sold at a substantial premium to that.
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