Fiber earnings season is moving into high gear this week, so here are a few more early looks at what we might see from tw telecom (first in line), Cogent Communications (by request), and Lumos Networks (the newcomer):
tw telecom: Predicting the results of TW Telecom (NASDAQ:TWTC, news, filings) is a bit like shooting fish in a barrel, as nothing ever seems to happen much other than steady organic growth and another 500+ on-net buildings. Last quarter saw a bit of an acceleration in revenue growth, but until I see a trend I’m going to guess a return to the trendline for this quarter’s report – which may be out this evening. Here’s a quick guess in context:
| ($ in millions) | Q1/11 | Q2/11 | Q3/11 | Q4/11 | Q1/12
(estimate) |
|---|---|---|---|---|---|
| – Data & Internet Services | 152.2 | 158.2 | 164.7 | 171.6 | 178-179 |
| – Network Services | 89.5 | 88.9 | 86.9 | 85.4 | 84-85 |
| – Voice Services | 83.0 | 83.6 | 85.2 | 86.7 | 85-86 |
| – Intercarrier Compensation | 7.8 | 8.7 | 7.7 | 7.6 | 7-8 |
| Total Revenue | 332.5 | 338.4 | 344.5 | 351.5 | 356-358 |
| M-EBITDA | 121.4 | 123.2 | 125.0 | 128.1 | 129.1 |
| M-EBITDA Margin | 36.5% | 36.4% | 36.3% | 36.3% | 36.2% |
| Earnings per share | 0.08 | 0.09 | 0.10 | 0.11 | 0.11 |
| Revenue Churn | 1.0% | 0.9% | 1.0% | 0.8% | <1% |
| Capital Expenditures | 79.3 | 90.9 | 86.0 | 86.6 | 80-90 |
| On-net buildings added | 512 | 569 | 561 | 566 | 500-600 |
| Free Cash Flow | 26.1 | 16.5 | 23.2 | 25.6 | 20-30 |
Cogent: The big news for Cogent Communications (NASDAQ:CCOI, news, filings) this quarter was obviously the MegaUpload takedown, which stands to take a $4M/quarter bite out of the company’s revenue. That will obviously put a crimp in the company’s numbers equivalent to about two quarters of organic growth, but so far there is no indication of collateral damage. I know some (yes you Carlk) are looking for such a thing, but I’ll believe it when I see it. Here’s my guess:
| $ in millions | Q1/11 | Q2/11 | Q3/11 | Q4/11 | Q1/12
(estimate) |
|---|---|---|---|---|---|
| Revenue | 73.5 | 75.6 | 77.4 | 79.1 | ~77 |
| EBITDA | 24.2 | 25.4 | 26.7 | 27.8 | ~26 |
| Earnings per share | -0.01 | 0.05 | 0.01 | 0.12 | -0.03 |
| Gross Margin | 56.9% | 56.2% | 56.7% | 57.8% | ~56% |
| Adj. EBITDA Margin | 33.0% | 33.6% | 34.5% | 35.2% | ~34% |
| On-net Buildings | 1609 | 1669 | 1707 | 1744 | ~1770 |
Lumos Networks: Lumos Networks (NASDAQ:LMOS, news, filings) split off from nTelos last fall, giving us a rare new face amongst publicly traded fiber operators. I’m still figuring these guys out, but generally the RLEC piece is declining as the Competitive piece is growing. They have been adding more buildings lately, and last quarter crossed the 1,000 milestone.
| Q4/11 | Q1/12
(estimate) |
|
|---|---|---|
| – Competitive | 39.4 | 39.5 |
| – RLEC | 11.7 | 11.3 |
| Total Revenues | 51.1 | 50.8 |
| Adjusted EBITDA | 23.0 | 22-23 |
| Capex | 12.7 | 12-13 |
| On-net buildings | 1051 | 1100-1150 |
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Categories: Financials · Metro fiber
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Regarding Cogent, Robert, I only know this. If I was leading a sales force against them, they wouldn’t stand a chance because I would place emphasis on quality versus price while exploiting that incident to the HIGH HEAVENS! Not to make people fearful like Chicken Little, mind you, rather to educate them surrounding the facts tied to all the moving parts including “internal controls,” etc.
On the buy side of essential communication services, I also know that, NO PRICE no matter how LOW would encourage me to do business with companies being implicated in such blatant violations by their customers. Content owners beware!
If I do violate such disciplines and principles, I will deserve everything I don’t get for having expected it!
You’re setting them up for a back half story in returning to growth, and who am I to argue with you until Enron’s “little company” reports on Thursday, the same day as Big (3)! 🙂
When you talk about Cogent, people forget they are heroes in the content world. They worked with the big players even before majors knew who the players were. Let us not forget in the file sharing companies were the bulk of the content on the internet. Porn was the first content to really make money on the internet. Megaupload to me will be to the M.P.A.A ,what Napster was to the music industry.MegaUpload will go under , not because of SOPA but to individual lawsuits. However due to this case SOPA will not prevail in its current structure. Alot of people do not realize MegaUpload was heading toward a Billion dollar IPO , before this case happened. Not really the actions of a criminal enterprise. How will this effect Cogent, simple. All that traffic did not disappear, it is coming back. Cogent will regain alot of that traffic back.
What worries me about Cogent is not its dealing with the file sharing industry, it is more on how they sell IP transit and furthermore how the content world buys IP transit. Content companies do paid peering deals or ASN specific deals now more than in the past when they mainly bought full transit. What this means is now content companies can work with the main players like DT, Level3 , etc and cherry pick ASN’s at low costs. Cogent who only sells full transit will not be able to compete. In short the price war they revolutionized will be their ending.
The mkt isn’t going to hate TW’s lower capex and big fcf beat. Many bears on the story couldn’t stomach the capex, with it falling and the associated rise in fcf – you wonder if it will be viewed through a lens of a corporate maturation. If so, should catch the eyes of a few more generalist PMs, and maybe a few bankers as well.