Earnings Preview: tw telecom, Cogent, Lumos, euNetworks

Quite a few alternative metro fiber operators will likely be putting out their first quarter earnings reports this week.  Here are quick previews of four of them:

tw telecom: The story this year for tw telecom is the company’s ongoing network expansion via dark fiber spanning dozens of markets across the country. It’s too early to see much from that other than capex though, so revenue should stay on its steady trajectory. Costs should be up somewhat, both from the buildout and the company’s usual seasonality, so EBITDA margins may dip – though the effect probably won’t be huge.

($ in millions)	Q1/13	Q2/13	Q3/13	Q4/13	Q1/14 (my guess)
– Data & Internet Services	202.1	209.6	215.9	223.7	230
– Network Services	78.9	78.5	76.1	75.4	75
– Voice Services	92.3	93.1	93.9	94.3	95
– Intercarrier Compensation	7.9	8.3	7.3	6.6	6
Total Revenue	381.2	389.5	393.2	400.0	406
M-EBITDA	136.0	137.3	138.5	140.7	142
M-EBITDA Margin	35.7%	35.3%	35.2%	35.2%	35%
Adj. Earnings per share	0.09	0.12	0.12	0.11	0.10
Revenue Churn	0.8%	0.9%	1.0%	0.8%	0.9%
Capital Expenditures	90.9	101.0	102.0	208.0	110
On-net buildings added	498	616	566	607	~500
Free Cash Flow	23.9	16.1	16.3	(34.1)	~20

Cogent Communications:  Cogent is making itself heard these days mostly via earnings, dividends, and stock buybacks. I expect we will hear just as much of that sort of thing this quarter. I am curious though to see where they start putting their capex as the tightly focused multi-tenant building opportunity they have specialized in starts to get more sparse in the years ahead.  In Q1 they should pass the 2,000 on-net building mark at last.  Another big thing to watch for of course is the company’s comments on the ongoing peering/net neutrality/Comcast/Netflix saga.

$ in millions	Q1/13	Q2/13	Q3/13	Q4/13	Q1/14 (my guess)
– On-net	61.7	62.7	64.5	66.0	67.5
– Off-net	22.3	22.6	22.8	23.4	24
– Other	0.6	0.5	0.4	0.4	0.4
Revenue	84.6	85.8	87.8	89.9	91.9
EBITDA	28.3	29.6	30.7	31.5	32.2
Earnings per share	0.01	0.03	0.05	1.10	0.05
Gross Margin	56.1%	56.9%	57.5%	57.4%	57-58%
Adj. EBITDA Margin	33.5%	34.5%	35.0%	35.0%	~35%
On-net Buildings	1890	1921	1955	1990	2015

Lumos Networks:  Lumos has been busy investing in its network, both 0n fiber-to-the-tower and on turning those Pennsylvania assets into something more like the rest of the company’s network footprint.  On the financial front lately they’ve seen their gains in strategic data offset by declines in the legacy voice and access side of their business.  That trend will probably continue for another few quarters.

$ in millions	Q1/13	Q2/13	Q3/13	Q4/13	Q1/14 (my guess)
– Strategic Data	29.7	30.0	30.4	31.2	31.6
– Legacy Voice	14.9	14.3	14.1	13.3	13.0
– Access	8.0	8.0	7.2	6.5	6.0
Revenue	52.5	52.3	51.6	51.0	50.6
Adjusted EBITDA	24.7	24.6	23.0	24.0	23
Earnings per share	0.30	0.22	0.11	0.18	0.20
Adj. EBITDA Margin	47.0%	46.9%	44.6%	47.1%	45.5%
Capex	15.0	11.7	19.0	22.6	~20
On-net Buildings	1235	1273	1303	1344	~1380
On-net Cell Sites	405	465	540	608	650-700

euNetworks:  Over in Europe, euNetworks will be looking for a little less churn going forward in 2014 than it endured last year even as EBITDA continued to rise.  Following Zayo’s purchase of Neo Telecoms, speculation on euNetworks role on either side of further Euro fiber M&A activity is likely be on the mind of many.  But for Q1 I don’t expect there will be much in the way of fireworks, and the higher churn probably isn’t quite over yet.

in millions of €	Q1/13	Q2/13	Q3/13	Q4/13	Q1/14 (my guess)
Revenue	24.8	24.5	24.1	24.0	24.2
Gross margin	72.4%	72.0%	72.9%	74.4%	~74%
Adj EBITDA	5.7	6.0	6.3	7.4	6.7
Adj EBITDA margin	23.0%	24.5%	26.1%	30.8%	27.7%
Capital Expenditures	3.6	4.9	8.7	10.7	5-10
Proxy Cash Flow	2.1	1.1	(2.4)	(3.3)	0-(2)
Churn	1.2%	2.8%	2.2%	2.3%	~2%
On-net buildings	945	985	1,011	1,046	~1080

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Categories: Financials · Metro fiber