Fiber Earnings Preview: AboveNet, PAETEC, Cogent

Tomorrow before the market opens, three very different competitive network operators will report earnings, here’s a quick preview of what to expect:

AboveNet: abvt is coming off a year of organic growth in which it entered several new metro markets both in the US and in Europe, and investors will be looking to see if they can maintain the pace they have set for themselves.  Some extra capex from 2010 was delayed and will probably show up in an elevated Q1 number.  Otherwise, I’d expect revenues to continue on their current trajectory and for EBITDA margins to hold in the 43-45% range, give or take a bit.  AboveNet’s assets and scale have reached a point where they are more than just a metro fiber operator and have many options for future growth to choose from.

$ in millions	Q1/10	Q2/10	Q3/10	Q4/10	Q1/11  (my guess)	FY2011  (Guidance)
Revenue	$97.2	$100.7	$103.7	$108.1	$111.5	$460-470 (13-15%)
Adj. EBITDA	$42.6	$45.7	$47.2	$47.3	$49
EBITDA Margin	43.8%	45.4%	45.5%	43.8%	44%	~2010 (i.e. 44-45%)
Capex	$27.4	$30.1	$30.5	$47.7	$45	$140-150
EPS (diluted)	$0.52	$0.62	$0.66	$0.85	$0.70

 

PAETEC: Meanwhile, PAETEC (news, filings) comes off a year of inorganic growth which culminated in the purchase of Cavalier and the still pending purchase of XETA, which have brought the company’s revenues to what should be over $2B annualized.  This will be the first full quarter of revenues from Cavalier, and will certainly include integration-related expenses and churn.  Hence, I don’t expect fireworks just yet, although I do hope they say some nice things about EBITDA margins rising as the year goes  on and they take better advantage of all that fiber they have now.

$ in millions	Q1/10	Q2/10	Q3/10	Q4/10	Q1/11  (my guess)	FY2011  (guidance)
Revenue	390.1	396.1	408.4	429.2	490	$2,025-2,125
EBITDA	65.5	65.1	62.2	72.1	80	$375-395
Capex	29.5	31.4	34	30.2	40
Free Cash Flow	36.1	33.7	28.2	41.9	25
Gross Margin	50.6%	50.3%	49.5%	50.4%	50%
EBITDA Margin	16.8%	16.4%	15.2%	16.8%	16%	~18% (derived)

 

Cogent: Cogent Communications (NASDAQ:CCOI, news, filings) spent 2010 quietly growing organically and achieving profitability, although the interest on the new notes they sold will most likely tip them back a few cents into the red in the first quarter of 2011.  The market is expecting steady revenue growth, but my feeling is that there is some Q1 seasonality from the net-centric business that will slow them down a bit – nothing to worry about, but that’s why my projection might seem light.  Of course, they’ll add another 30 or so buildings to their on-net footprint and may have bought some more dark fiber in Europe.  I’ll also be curious to hear CEO Dave Schaeffer’s take on the impact of the proposed LVLT/GLBC deal, which I expect will involve some revenue opportunity from churn in IP transit as well as more pricing stability.

$ in millions	Q1/10	Q2/10	Q3/10	Q4/10	Q1/11 (my guess)
Revenue	$62.8	$64.4	$66.8	$69.5	$70.5
EBITDA	$17.5	$18.9	$20.3	$22.6	$23
Earnings per share	-0.01	-0.02	-0.01	+0.06	-0.02
Gross Margin	55.3%	54.8%	54.3%	55.5%	55.0%
Adj. EBITDA Margin	27.9%	29.3%	30.4%	32.5%	32%

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Categories: CLEC · Financials · Metro fiber