Fourth quarter revenues come in at $294.6M, with net income of 6 cents per share

February 9, 2009

4 Min Read

LITTLETON, Colo. -- tw telecom inc. (NASDAQ:TWTC) , a leading provider of managed voice, Internet and data networking solutions for business customers, today announced its fourth quarter 2008 financial results, including $294.6 million of revenue, $104.2 million in Modified EBITDA(1) ("M-EBITDA") and net income of $5.0 million. For the year ended December 31, 2008, the Company reported $1.159 billion in revenue, $399.0 million of M-EBITDA and net income of $8.5 million.

"For 2008, we grew revenue, produced net income, further enhanced our strong liquidity position, and achieved record growth in levered free cash flow, resulting in our strongest overall financial performance ever," said Larissa Herda, tw telecom's Chairman, CEO and President. "Our sales trends remained steady but revenue growth was dampened by the headwinds of churn and a challenging economy. For 2009, we expect the challenges to continue, but we remain focused on growth. As customers continue to make the network an imperative for running their businesses to optimize their cost efficiencies, we will focus on serving their evolving demand, which we believe will require large amounts of bandwidth as well as network management skills. To position ourselves for these opportunities, we are continuing targeted initiatives including product development, ongoing network expansion and further investment in our customer experience, which we believe will serve us well."

Highlights for the Year

  • Grew total revenue 7% year over year

  • Grew enterprise revenue to $840.5 million, a 12% increase

  • Grew M-EBITDA to $399.0 million, an increase of $60 million over 2007, or 18%

  • Achieved modified gross margin(8) of 57.9% and M-EBITDA margin of 34.4% representing a 90 basis point improvement in modified gross margin and 310 basis point improvement in M-EBITDA margin over 2007

  • Achieved net income of $8.5 million, or $0.06 earnings per share for 2008, compared to a net loss of $40.3 million, or $.28 loss per share for 2007

  • Delivered levered free cash flow(4) of $50.9 million, or 4% of revenue, compared to $5.7 million, or 1% of revenue for 2007, a 797% improvement

  • Ended the year with $352.2 million in cash and equivalents, up $30.6 million for the year

    Business Trends
    "We are realistic about the economy, with the coming year being one in which we must remain nimble in adjusting our plans for any volatility in the economic environment," said Mark Peters, tw telecom's Executive Vice President and Chief Financial Officer. "Our current plan is to continue to invest in targeted opportunities and position ourselves for the future, and we expect to deliver positive levered free cash flow for 2009."

    The Company continues in a strong liquidity position with no significant debt maturities until 2013, $352 million in cash and equivalents, an undrawn revolver, and no financial maintenance covenants unless it draws its revolver(9), which provides a great deal of flexibility to make the right investments for its business.

    The Company continued to see higher revenue churn(10), which was 1.2% for the current and prior quarter compared to 1.0% for the same quarter last year. The increase in churn began in the first quarter of the year and reflects the impacts of the economy and acquired customers. The Company continues to see a concentration of this churn from the acquired customer base that buys less complex services, especially smaller customers, as well as mortgage-related businesses and carriers. The Company expects this higher revenue churn may continue.

    Customer churn(10) was 1.3% for the current quarter, down from 1.5% for the prior quarter but up from 1.0% for the same quarter last year. The majority of the customer turnover was from small acquired(2) customers that are below the Company's service profile and the Company expects this churn will continue.

    Expectations for 2009
    The Company continues to expect normal business fluctuations to impact sequential trends in revenue, margins and cash flow. This includes the timing of sales and installations, seasonality of sales and usage, disputes, repricing of contract renewals and ongoing revenue churn, which includes the impact from carrier customers related to their consolidation activities and network grooming.

    The Company expects the first quarter of 2009 will be impacted by historical trends, which include lower seasonal revenue growth and a sequential cost increase due to resetting of payroll taxes and other employee related costs. The fluctuation in these costs is expected to increase expenses $4 to $5 million sequentially in the first quarter over the fourth quarter.

    tw telecom inc. (Nasdaq: TWTC)

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