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tw telecom inc. (TWTC)

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TW Telecom (TWTC)

Q1 2013 Earnings Call

May 07, 2013 11:00 am ET

Executives

Carole Curtin

Larissa L. Herda - Chairman, Chief Executive Officer and President

Mark A. Peters - Chief Financial Officer and Executive Vice President

Analysts

Lily Chen - Morgan Stanley, Research Division

Frank G. Louthan - Raymond James & Associates, Inc., Research Division

Colby Synesael - Cowen and Company, LLC, Research Division

Michael Rollins - Citigroup Inc, Research Division

Barry McCarver - Stephens Inc., Research Division

Donna Jaegers - D.A. Davidson & Co., Research Division

Timothy K. Horan - Oppenheimer & Co. Inc., Research Division

Presentation

Operator

Good morning, and welcome to TW Telecom's First Quarter 2013 Conference Call. Today's call is being recorded. With us from the company is Chairman, Chief Executive Officer and President, Ms. Larissa Herda; and Executive Vice President and Chief Financial Officer, Mr. Mark Peters. At this time, I will turn the call over to Carole Curtin, Vice President and -- of Investor Relations. Please go ahead.

Carole Curtin

Welcome to TW Telecom's conference call. We're pleased to have you join us today. To review our results for the quarter, please visit our website at www.twtelecom.com, where you can find our press release, supplemental quarterly information and SEC filings.

Before we start, I'd also like to draw your attention to our Safe Harbor statement included in our supplemental materials, which you can find on our website. Information in our quarterly earnings materials and our discussion today contain statements about expected future events and financial results that are forward-looking and are subject to risks and uncertainties. A discussion of factors that may cause our results to differ materially from our expectations is contained in our filings with the SEC under Risk Factors and elsewhere available on our website. I'd also like to point out that our earnings materials and discussion contain certain non-GAAP financial measures. And you can find the reconciliation between the GAAP and the non-GAAP measures in the materials on our website.

Now I'm pleased to introduce TW Telecom's Chairman, CEO and President, Larissa Herda.

Larissa L. Herda

Thank you, Carole. Hi, everyone, and thank you for joining us today. This was another important and productive quarter as we continue to grow revenue, deliver new products and features, advance our industry-leading innovation, optimize our balance sheet and grow shareholder value. I'd like to touch on 3 key areas, including our quarterly results, strategic balance sheet initiative and products and innovation. Let me start with some financial highlights for the quarter.

We grew revenue 6.2% year-over-year to deliver our 34th consecutive quarter of sequential revenue growth, demonstrating our ongoing enterprise market leadership and our ability to compete and take share. We also delivered a 35.7% Modified EBITDA margin, reflecting our ongoing strong operation. And we generated a healthy levered free cash flow margin of 6.3% for the quarter, even after absorbing the impact of resetting payroll taxes and investing in growth initiatives.

This quarter marks our 23rd consecutive quarter of positive levered free cash flow, which speaks to our execution, return-based focus and strength in our business model. Our financial results reflect the trends we communicated in February, including our growth initiatives to drive greater sales momentum over the course of this year through ongoing investments in sales and support, product capabilities, automation and market reach, all designed to reaccelerate our revenue growth.

Turning to our strategic efforts. We've been actively executing our capital allocation strategy for 2013, which includes investing in the business, returning value to shareholders and maintaining flexibility for future strategic opportunities.

Because of our strong track record of revenue growth and cash flow, we did not have to choose between these priorities. Instead, we are able to do all of these in a balanced and thoughtful way while continuing to drive the business forward.

Let me touch on 3 of our key strategic balance sheet actions we've delivered this year. First, in April, we executed a benchmark financing, reflecting a very effectively priced Term Loan B as we completed a refinancing of our credit agreement that extends our maturities, substantially improves our interest rate and provides additional covenant flexibility. Second, through last week, we executed $105.5 million in share repurchases year-to-date. Third, we're retiring nearly 40% of the par value of our convertible debt subsequent to the first quarter through open-market purchases and voluntary conversions. Collectively, these 3 events all helped to optimize our balance sheet and grow shareholder value. And they were possible due to our ongoing strong financial performance, as well as our effective strategic sequencing of events, many of which we put into place -- we put into motion prior to this year.

Let me -- now let me turn to our products and innovations. We're advancing the development of our Constellation platform. With this unique platform, we're creating a powerful operating paradigm for enterprises to increase the velocity of how they buy our network services, driven by the ability to more quickly access and consume network and IT services. We're in the process of hiring the right talent, establishing and evolving key data center and vendor relationships and developing and deploying the required technology as we move forward with these new capabilities.

We've also continued to gain market awareness with our Intelligent Network services that are within the Constellation platform, with ongoing momentum showing up in our Ethernet revenue. And we've launched several new product capabilities that enhance and freshen our current portfolio, which reflects the bread and butter of our business, with more production for later this year -- more in production for later this year that I will talk about later.

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