The bandwidth infrastructure marketplace in Europe has been an interesting one this year from both organic and inorganic perspectives. Growing revenues and expanding margins marked euNetworks' performance in their third quarter results out this morning. Here is a quick table putting their numbers in some context:
|in millions of €, UOS||Q3/13||Q4/13||Q1/14||Q2/14||Q3/14|
|Adj EBITDA margin||26.1%||30.8%||25.6%||27.8%||29.1%|
|Proxy Cash Flow||(2.4)||(3.3)||(0.3)||0.1||(1.3)|
|New Sales (in thousands of €)||535.1||607.1||782.6||788.1||630.8|
|Installs (in thousands of €)||419.8||650.9||640.3||661.6||688.9|
|Monthly Incremental Service Revenue||(30.0)||158.3||155.1||225.9||254.2|
|Churn (new methodology)||1.0%||1.0%||0.8%||1.1%|
Revenues were up 2% sequentially and 8% over the same quarter last year, better than the company's guidance of 3-5% annualized growth. Both gross margins and adjusted EBITDA margins expanded during the quarter, as did installs and monthly incremental service revenue. The only sequential downside was in new sales, but even that was up 18% from the same period last year.
Late last month, euNetworks purchased FiberLac and gained an intercity dark fiber presence in the Alps to the south. That should boost revenues for the fourth quarter at least a little bit, and should be relatively easy to integrate.
The company also said in a filing that it has been involved in talks with a major shareholder and various third parties about potential combinations. Frankly I'd be amazed if they haven't had periodic talks of that sort, we'll just have to wait and see if anything further comes out of it. The company's size could put them on either side of the table this winter, but the speculation will probably center around Zayo, where the appetite is known and the fit is easy to see.
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