Two very different competitive fiber operators will report earnings later this week. Both tw telecom and Cogent have scheduled their conference calls for Thursday morning, although usually that means tw telecom will have their release out the night before. Both seem to have cracked the code of profitability in this space, although from very different approaches.
tw telecom: tw telecom has been busy for the last several quarters spending money and resources on its next generation Constellation platform, dragging back the bottom line a bit in preparation for the next wave. That trend will surely continue to impact their Q2 numbers, but within expectations. My guesses:
| ($ in millions) | Q2/12 | Q3/12 | Q4/12 | Q1/13 |
Q2/13 |
|---|---|---|---|---|---|
| – Data & Internet Services | 182.5 | 189.2 | 197.8 | 202.1 | 208 |
| – Network Services | 83.0 | 81.3 | 81.0 | 78.9 | 79.5 |
| – Voice Services | 91.0 | 91.1 | 92.1 | 92.3 | 92 |
| – Intercarrier Compensation | 8.0 | 7.5 | 7.0 | 7.9 | 7.5 |
| Total Revenue | 364.5 | 368.9 | 377.9 | 381.2 | 387 |
| M-EBITDA | 134.0 | 136.5 | 138.3 | 136.0 | 140 |
| M-EBITDA Margin | 36.8% | 37.0% | 36.6% | 35.7% | 36% |
| Earnings per share | 0.13 | 0.14 | 0.11 | 0.09 | 0.12 |
| Revenue Churn | 0.9% | 0.8% | 0.9% | 0.8% | 0.9% |
| Capital Expenditures | 80.8 | 83.9 | 99.6 | 90.9 | 90-100 |
| On-net buildings added | 462 | 552 | 497 | 498 | 450-500 |
| Free Cash Flow | 37.7 | 37.2 | 17.5 | 23.9 | ~20 |
.
Cogent Communications: Analysts are predicting Dave Schaeffer and his team will move the company’s profitability further across the break even line to a nickel per share. I’m going to be very slightly less optimistic than that, although I’m not expecting any trends to break. Cogent recently poached XO’s Ernie Ortega as its new Chief Revenue Officer so I’ll be curious to hear what they’ve got in mind for Q3. In the meantime, my guesses for Q2:
| $ in millions | Q2/12 | Q3/12 | Q4/12 | Q1/13 | Q2/13 (my guess) |
|---|---|---|---|---|---|
| – On-net | 57.3 | 58.1 | 60.4 | 61.7 | 63.0 |
| – Off-net | 19.9 | 20.9 | 21.6 | 22.3 | 23.0 |
| – Other | 0.6 | 0.6 | 0.6 | 0.6 | 0.6 |
| Revenue | 77.8 | 79.7 | 82.6 | 84.6 | 86.6 |
| EBITDA | 25.3 | 26.2 | 28.5 | 28.3 | 29.2 |
| Earnings per share | -0.04 | 0.00 | -0.01 | 0.01 | 0.04 |
| Gross Margin | 55.0% | 54.3% | 54.6% | 56.1% | 55% |
| Adj. EBITDA Margin | 32.6% | 32.9% | 34.6% | 33.5% | 33.7% |
| On-net Buildings | 1799 | 1832 | 1867 | 1890 | ~1910 |
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