Metro fiber operator abvt continued its rapid growth through the second quarter. Revenues, EBITDA, EBITDA Margin, and earnings per share all came in ahead of expectations. In fact, the company’s guidance for the year now was too light, and therefore they had to raise it. Here is a quick tabular summary:
| $ in millions | Q1/09 | Q2/09 | Q3/09 | Q4/09 | Q1/10 | Q2/10 | 2010 Guidance |
|---|---|---|---|---|---|---|---|
| Revenue | $85.4 | $88.0 | $92.4 | $94.3 | $97.2 | $100.7 | $400-410 |
| COS | $29.4 | $32.3 | $33.9 | $35.1 | $33.1 | $34.1 | |
| SG&A | $20.7 | $20.1 | $20.3 | $21.4 | $23.6 | $23.0 | |
| Adj. EBITDA | $38.2 | $38.5 | $40.7 | $39.2 | $42.6 | $45.7 | |
| EBITDA Margin | 44.7% | 43.8% | 44.0% | 41.6% | 43.8% | 45.4% | inline with 2009 or slightly above |
| Capex | $21.1 | $32.4 | $26.5 | $38.7 | $27.4 | $30.1 | $150-160 |
| EPS (diluted) | $1.11 | $0.98 | $0.88 | $0.921 | $0.52 | $0.62 |
Revenues: For the first quarter, revenues of $100.7M were slightly above analyst expectations which mostly came in still below that $100M watermark. They were therefore able to raise guidance to $400-410 for the full year.
EBITDA: EBITDA of $45.7M was the company’s highest since its re-emergence, coming both from those higher revenues and from costs which remain under control. EBITDA margins of 45.4% were above expectations, and one has to wonder if they don’t have 50% in their sights privately. For this year, they now expect EBITDA margins to be similar or slightly above last year’s.
Earnings: Earnings per share of $0.62 easily exceeded the street’s expectations of $0.54, which is only to be expected given the outperformance on revenues and EBITDA.
Cash: Capital expenditures of $30.1M continued to not reflect the company’s expectation of elevated levels, despite their recent entry in to the Miami market and some other efforts across the Atlantic. The company still expects to spend $150-160M for the year, which would mean some $90-100M in the second half.
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Categories: Financials · Metro fiber
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They achieved ebitda margin growth in the face of an expanding sale force which is not firing on all cylinders…. yet. I’d say they are doing pretty well and the second half of the year should shape up nicely.
These results are not a surprise to me … this will continue for at least the next 3-4 years unless someone acquires AboveNet … the only thing this is a 10x-12x EBITDA value today … analysts can’t segregate double digit growth, high margin, high-end customer serving businesses from all the rest.
The other thing analyst tend to lose on this all-fiber business model, is the amount of next years plan that is booked and the proverbial”in the bank” for next year. Usually by Dec 31st, a company with this model has 85% of next years revenue done.
On top of it, typical contracts are with high quality companies averaging in length from 3-7 years! The bad debt is low and DSO outstanding.
Valuing these types of firms on a ttm basis is misleading and leagcy — giving away a free year .. but as we know analysts move as a herd.
Dave, does the company release its “contracts signed” pipeline figure? I did not see this. It sure would enlighten wall street if they did.
Most companies in the fiber ownership business don’t and here is why – analysts can’t comprehend fluctuations of order vs. time to build — sometimes you can ink a deal and its 3-6 months before construction is done and billing strats.
Wall Street still does not accept as Larissa Herda would say “lumpiness” and my proof is for as long as Larissa has been CEO I have heard explain lumpiness to analyst each and every quarter and they still don’t get it. I figure by now, Larissa has to be into some type of therapy in preparing for a quarterly call — the mental anguish of explaining the same thing over and over each and every quarter —
So if you own fiber and extend it, you shoot yourself in the foot giving out and booked order numbers … as I like to say, unless it is written in CRAYOLA Wall Street Analysts can’t grasp it.