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Investo r Presen tat ion
February 2014
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Safe Harbor StatementForward Looking Statements Caution
The Companys fourth quarter 2013 press release and conference call contains certain forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements regarding, among other items, product and platform plans, growth prospects, marketopportunities, market expansion and its implementation, sales growth, cash flow and cash balances, growth initiatives, sales force, customeropportunities, network capabilities, sales and installations timing, demand, revenue growth, revenue growth rate, margins, expense trends, servicedisconnections, business trends and fluctuations, liquidity position, future share repurchases and expected capital expenditures. These forward-lookingstatements are based on management's current expectations and are naturally subject to risks, uncertainties, and changes in circumstances, certain ofwhich are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Although webelieve that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that those expectations will prove tobe correct.
Important factors that could cause actual results to differ materially from the expectations described in the press release and earnings call are set forth
in the section entitled "Risk Factors" in our 2013 Annual Report on Form 10-K and in Risk Factors and elsewhere in our subsequent quarterly reports onForm 10-Q. In addition, actual results may differ from our expectations due to increased customer disconnections, consolidation in thetelecommunications or other industries impacting our customers, delays in installation of services, delays in launching new products, inability to achievethe expected benefits of growth initiatives, inability to obtain rights to build networks into commercial buildings, failure to offer competitive new services,decreased demand for our existing services, further economic downturn, unanticipated conditions in debt and equity markets, s ignificant changes in themarket prices of our shares, increases in taxes or loss of tax benefits, further declines in the prices of our services due to competitive pressures orotherwise, changes in the rates of taxes and fees that we report on a gross basis, increases in the price we pay for and the extent of our use of facilities ofother carriers, inability to hire people with the needed skills to advance our business, increased costs from healthcare reform and higher taxes or furtherderegulation of the ILECs and other adverse regulatory rulings or legislative developments. Readers are cautioned not to place undue reliance on theseforward-looking statements, which speak only as of their dates. tw telecom undertakes no obligations to publicly update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise.
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Todays comments and discussions related to financial performance & trends Are based on the information from tw telecoms fourth quarter 2013 earnings call, press release & supplemental earnings materials and are provided as
of December 31, 2013.
Do not include any current quarter information or updates, unless otherwise publicly disclosed
The press release and supplemental earnings materials can be found at www.twtelecom.com
For a reconciliation of Non-GAAP measures used in this presentation, including without limitation Net Income excluding debt extinguishment and executiveretirement costs and the related tax impact, M-EBITDA, Levered Free Cash Flow and Unlevered Free Cash Flow to US GAAP measures see the Q4 2013supplemental earnings information at www.twtelecom.com under Investors.
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Our Platform for Growth
History of Consistent Strong Results2013 Results(1)
Consistent tota l revenue growthevery quarter for 9 years
Driven by Data & Internet Revenuegrew 14.1% for year56% of revenue for Q4(2)
Strong Modi f ied EBITDA margin35.3% for the year
Ongoing Cash Flow Contr ibut ionfor over 8 years(3)
Ongoing Balance Sheet Streng th
Industry-Leading Products Portfolio
ONE Network and ONE Platform
(1) For the year ended December 31, 2013, unless otherwise indicated. See definitions of financial measures in the Companys earnings release at www.twtelecom.com(2) For the quarter ended December 31, 2013.(3) Of quarterly positive levered free cash flow, excluding strategic market expansion capital lease in Q4 2013, as well as the impact of acquisition-related transaction &
integration costs in Q2 2007. 3
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StrategicMarket
Expansion
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A Powerful Nationwide Network
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Add ing 5 New Markets & Expanding 27 Exist ing Markets
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Rapid Expansion of Market Reach
Expanding metro fibernetwork
Multi-market reach Leverages needs of multi
market customers Expands regional fiber to
serve Natl Ethernet Strategy
Serving Enterprise & DataCenter & Cloud Strategy 5 new & 27 expanded markets
Increases access to businessesnear our network
Northwest & Pacific-Seatt le, Spokane, Portland /Vancou ver
-Bo ise, Los Angeles, Orange Co.-San Diego , Oakland , Salt Lake City *
-San Francisc o/San Jo se
Midwest-Minneapol is /St Paul, Chicago
-Ind ianapol is, Memph is-Louisv i l le, Nashv i l le, Cleveland*
Northeast & Atlantic
-Boston*, Phi ladelphia*, Richm ond*-Northern New Jersey, Balt imo re, Atlanta-NYC Greater Metro Area, Washing ton DC
Southwest & So. Central-Tucs on , Phoenix, Las Vegas
-Alb uquerque, Denver
-Colorado Springs, Houston
* New TWTC Market 6
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Financial Overview of Expansion
--2013--
$120M Cap-Ex & Capital Lease Obligation recognized in Q4 2013,with payments over 20 year initial term
--2014 --An Estimated $50M of Cap-Ex to integrate & connect expansion fiber
Expect to hire Sales & Operational Support to support this project
Expect Incremental Sales or Bookings Contribution from project
in the 2nd
half of 2014
-- 2015 --Expect expansion to generate positive incremental Modified EBITDA
Highl ights(1)
7 Continued Disciplined Capital Allocation
(1) See the Companys fourth quarter earnings release for a definition of these and other terms at www.twtelecom.com
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Our Products
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Ethernet Eco System
On-Net Access~20,300 On-Net
Buildings
Industry Leading Ethernet
Services PortfolioWorld Class Customer Care
More than 30,000 Fiber Miles
- Ethernet NNI
- Special Access
Local Reach-Extending our reach with
Ethernet Partners
Internet Platform
Global Reach-Top 10 Most Connected Internet Backbone
-MPLS IP VPN Partners with Global Reach
Enterprise
Networking- Thousands of
Enterprise owned
Corporate Data Centers
Cloud Access
~470 3rd
Party DataCenters
(1)
(1)
(1) As of December 31, 2013 9
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Our Intelligent Network
Phase IEnhanced ManagementLaunched - Q2 2012Enhanced - Q1 2013
- Proactive notification feature
Phase IIDynamic Capacity
Launched - Q3 2012Enhanced - Q2 2013
- Automatic alert driven feature- Extended capacity to 10
Gig ports
Phase IIIApplicationsAware Networking
Planned Future Offering10
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A Look at Dynamic Capacity
Ordering via MyPortal
Customers can scale
capacity on demand
Provides appropriate
budgeting information
Real time
performance
management Highlights bandwidth
utilization during
increased
consumption period
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Our VisionLinking it All Together
The Intelligent Network
Enhanced Management
Dynamic Capacity
Applications Aware *
Disruptive Telco
Model *
Ethernet First Connectivity
On-Demand Connections
Click and Connect
Access to Broad
Applications Environment
Use what you need
For as long as you need
Incrementally pay only for
what you use
Constellation Platformsm*
Constellation
Platformsm
Storage Compute Software
On-demand dedicated access to
enable world class
Best of Breed applications
By the slice, By the hour
* Future capabilitiesUnder Development 12
~470 Fiber Connected 3rd
Party Data Centers
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Our Constellation PlatformsmVision*
ConstellationPlatformConstellation Platform *
Click and Connect New Instantaneous Network Connections On-Demand
Access Data Center and Cloud Application Partners
Intelligent Network
Enhanced Management Dynamic Capacity Application Aware*
2 Mb to 10 gig
Fractional 10 GigStrategic ServicesEthernet / IP VPN
MPLS CoS
One to Many
Powerful Foundation Integrated Common Systems
Consistent Element Deployment
~20,300 Fiber connected buildings
~470 3rd
party data centers
* Future capabilitiesUnder Development 13
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TWTC One to Many Ethernet Access- A Single Connection for National Access -
Rolled Out October 2012
CustomerBenefits
Reduces NationalCapEx DeploymentCosts
Reduces OperatingExpense
Reduces Time toService
Reduces OperatingComplexity
TWTCs NationalEthernet Backbone
Extended Reachthroughout our 75 USmarkets
Rapid 15 day on-net turnup interval
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2013 New Product Launches
Intelligent
Network&
Constellatio
n
Platforms
m
Data
IP
Managed
Services
EnhancedMgmt. AlertsEnables customers toestablish customized networkperformance thresholds withautomatic notification
10 Gig DynamicCapacityExtends ability to flexup bandwidth over a10 Gigabit port
Alert Driven
DynamicCapacityCustomers are able toautomatically increasebandwidth through pre-setthresholds at whichbandwidth is increased
ConstellationPlatformsmPrototype demonstrationwith data center and cloudapplications partnersat Cloud Expo in June
DDoS ScrubbingProactive security function
to mitigate unwanted trafficautomatically on enterpriseIP networks
Enterprise SIPTrunkingFully managed enterprise Voiceover IP Trunking service withplug and play connectivityfor wide range of IP PBXs
High Capacity 40/100
Gigabit Ethernet40 or 100 Gigabit metro Ethernetconnectivity
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FlexVoiceFully managed Voice T-1 andAnalog Line services withability to mix & match both
line and trunk services to application.Includes upgrade path to SIP services.
Multi-VPN PortPrivate interconnection of
VPNs to centralizedresources or applications
MulticastOne to many contenttransmission / streaming toa subscribed group ofparticipants
2013
eLynksm*
Private data solution thatsecurely connects multipleend-users to centralizedresources or applications
Converged ServicesSIP TrunkingFully managed Convergedsolution supporting anycombination of Voice over IP,Data, Internet & Security services
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Financial
Overview
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A Balanced Approach to Growth
Grow Revenue
Continue Product & CustomerExperience Leadership
Innovate to win Market Share
Invest to Scale
Margins
Cash Flow
Capital Intensity
ROIC
Share Repurchases
Financial StrengthRevenue37 Qtrs. Of Growth(3)
Enterprise Revenue46 Qtrs. Of Growth(3)
Strong M-EBITDA margin35.3% for 2013
Strong Balance Sheet
Market LeadershipUnique Fiber Assets & Extensive Reach
Integrated Operating Platform
Innovative Products & Capabilities
Highly skilled sales organization
(1) As of December 31, 2013(2) For a definition of M-EBITDA and a reconciliation to US GAAP measures see the earnings press release and the supplemental earnings information
at www.twtelecom.com
(3) Consecutive sequential quarterly revenue growth 17
-- Our Scorecard To Date (1)--
Shareholder Value Creation -- A Balancing Act
http://www.twtelecom.com/http://www.twtelecom.com/8/12/2019 TWTC Investor Presentation Q4 2013-3
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Revenue Growth by Line of Business
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Revenue Growth by Customer Type
$ millions
Enterprise revenue represented 81% of total revenue (1)and
grew at a 9% CAGR over the past 3 years
3 Year
CAGR (2)
% of Revenue
Q413
9%81%
17% 0%
2% (4%)
(1) For Quarter Ended December 31, 2013(2) Calculated on trailing 12 months as of December 31, 2013
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Carrier
Intercarrier Compensation
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Investing in the Network Effect
Growing our Fiber CoreExpanded On-Net Fiber Connected Buildings
Created Assets vs. Network Access Spending
# of on-net fiber connected buildings
YOY Sequential
Leveraging/Scaling MarketsStrong 35.2% M-EBITDA margin (1)
Top markets provide strong cash flow
Middle & bottom markets contribute
significantly to revenue growth
Grew ROIC over the past 5 yearsROIC (pre-tax)(2)
(1) For quarter ended 12/31/13. For definition of Modified EBITDA margin and reconciliation to US GAAP measures see the earnings press release & supplemental earningsinformation at www.twtelecom.com
(2) ROIC for 2013, excludes the $119.8 million capital lease recorded as a capital investment 20
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InitialRanking
Time & Investment = Scale & Growth-- M-EBITDA Margin ranking held constant since 2007--
Ranked in 2007 by M-EBITDA Margin
2007 2012 2013
Revenue $652 $792 $816
M-EBITDA $371 $466 $475
M-EBITDA margin 57% 59% 58%
Revenue$317 $437 $466
M-EBITDA $123 $200 $215
M-EBITDA margin 39% 46% 46%
Revenue $115 $241 $282
M-EBITDA $21 $82 $98
M-EBITDA margin 18% 34% 35%
Corporate/Central Operations ($176) ($207) ($235)
Total Revenue $1,084 $1,470 $1,564
M-EBITDA (3) $339 $541 $553
M-EBITDA margin 31.3% 36.8% 35.3%
1/3
1/3
1/3
75 Local Markets (1) (3)Top 25 Markets
Middle 25 Markets
Bottom 25 Markets
Corporate/Central Operations
MarketDensity
UFCF(2)
Contribution
HighlyScaled
BelowCompanyAverage
ScalingNear
CompanyAverage
SubScale
AboveCompanyAverage
(1) Market-level results are prior to corporate costs & centralized operations and other corporate allocations(2) Unlevered Free Cash Flow is defined as M-EBITDA less capital expenditures. For 2013, this excludes a $119.8 million capital lease recorded as capex(3) For a reconciliation to US GAAP measures see the supplemental earnings information at www.twtelecom.com
($ millions)
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Capex% of
Revenue
HighestContributing
Contributing
Contributing
2013 M-EBITDA margin ReflectsImpact of 2013 Growth Initiatives
RecentMarket Results
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Local Market Progress
Market Level Results as of year end 2007 and 2013(1)
Top 25 market Bottom 25 market Bottom 25 market
Aust in Denver Las Vegas
2007 to 2007 to2013 2013 20132007
Bottom 25 market
M-EBITDA Marg in 58% . . . 59% 21% . . . 44% 15% . . . 46%
Capex / Reven ue 13% . . . 13% 35% . . . 33% 22% . . . 37%
UFCF/Invested Capital(2)
50% . . . 63% (7%) . . . 10% (2%) . . . 4%
Fiber Route Miles (3) ~850 . . . ~840 ~140 . . . ~260 ~80 . . . ~240
Bui lding s On Net (3)~360 . . . ~590 ~70 . . . ~210 ~30 . . . ~210
Scaling the
Business
Launched in 1994
Includes Xspedius market from
acquisition 11/06
Consistent investment over life of market
Significant cash flow and Capital efficient
Greenfield market in 01
Market temporarily put on hold
then restarted in approx. 04
Generating cash
Developing market
Xspedius acquisition in 06
Low Network Density
Developing market
Generating cash
(1) Market-level results are prior to corporate costs and centralized operations and other corporate allocations(2) Unlevered Free Cash Flow (UFCF) is defined as M-EBITDA less Capex. Invested Capital is defined as net property, plant & equipment, intangible assets & goodwill
(3) Certain prior year fiber route miles & on-net buildings were restated due to prior year alignment of key operating systems 22
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Revenue MixQ4 13
Revenue Mix
Data & Internet Revenue
Data & Internet Revenue
Represents 56% of Total Revenue
Grew 13.1% YOY, 3.6% sequentially
Strategic Services(1), a subset ofData & Internet revenue
Grew 17.9% YOY and3.8% sequentially
(1) Ethernet & VPN-based products
($ in millions)
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$197.8
$215.9
$223.7
Q4'12 Q3'13 Q4'13
Up 13.1% YOY
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Annual Capital Investing
Full Year2010
Full Year2011
Full Year2012
Full Year2013
Short to Medium Term Success Based
Building Entry & Network Capacity(including fiber, electronics & labor) $252 $274 $264 $287
Longer-term Strategic
Product Investment, life-cycle & marketexpansions
44 34 46 62
IT Corporate Investment/Other 26 35 33 33
Total before Capital Lease $322 $343 $343 $382
Cap-ex as a % of revenue 25.3% 25.1% 23.4% 24.4%
Strategic Market Expansion Lease - - - $120
Total Capital $322 $343 $343 $502
($ in mil l ions)
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Revenue & Customer Churn
0.9%
1.0%1.0%
1.0%
1.0%
1.0%
0.9%0.9%
0.9%0.9%
0.8%
0.8%
1.0%
0.9%1.0%
0.8%
1.1%
0.9%
0.8%
0.9%
0.8%
0.9%
1.0%
0.8%
0.2% 0.2%
0.3%
0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013
Mo. Customer Churn (1)
Avg. Mo. Revenue Churn (2)
Avg. Mo. Revenue Churn f rom customer ful ly disconnect ing (3)
(1) Customer churn reflects average monthly customer turnover compared to the average monthly customer count for the period.(2) Revenue churn reflects average lost recurring monthly billing from customers partial or complete disconnection of services (excl. repricing & usage) compared to reported revenue for the period.(3) Revenue churn for customers fully disconnecting reflects average lost recurring monthly billing from customers complete disconnection of services compared to reported revenue for the period.
2011Annual revenue
churn 0.9%
2012Annual revenue
churn 0.9%
2013Annual revenue
churn 0.9%
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Key Operating StatisticsQ4 13
Total Revenue
37thconsecutive quarter of sequential growth
5.9% growth YOY, 1.7% sequentially
~70% on-net
Revenue by Product Line
56% Data & Internet Services
23% Voice Services19% Network Services
2% Intercarrier Comp
Data & Internet Revenue
13.1% growth YOY, 3.6% sequentially
Strategic Ethernet & VPN
56% of Data & Internet Revenue
31% of Total Revenue
17.9% growth YOY, 3.8% sequentially
Usage Revenue
3% of total revenue
Q4 2013 (1)
RevenueCustomer Revenue
81% Enterprise
17% Carrier
2% Intercarrier Comp
Enterprise Revenue
46thconsecutive quarter of
sequential growth
7.5% growth YOY, 2.1% sequentially
Carrier Revenue
Flat YOY, 1.4% growthsequentially27% from wireless providers
Revenue Mix
Data & Internet Services88% Enterprise/12% Carrier
Network Service
46% Enterprise/54% Carrier
Voice Services
98% Enterprise/2% Carrier
Revenue Margin/Other(1)
35.2% M-EBITDA margin
1.7% M-EBITDA growth YoY
Levered Free Cash Flow (LFCF) of ($90.3M), or
$29.5M excluding $119.8M capital lease
Net Income of $15.4M
$0.11 Earnings Per Share
Balance Sheet (1)
$479.0M cash & near cash
(2)
6.1x Interest Coverage
2.6x Net Debt/M-EBITDA
$100M undrawn revolver
Term LoanFloating Rate
Eurodollar +2.50%
Effective rate 2.67%
Annual Results(1)
6.4% Total Revenue growth
8.2% Enterprise revenue growth
14.1% Data & Internet revenue growth
2.2% M-EBITDA growth
35.3% M-EBITDA margin
Net Income of $36.5M, or
$64.4M excluding Debt Extinguishment
& Executive Retirement Costs, net of tax
(1) As of December 31 or for the quarter then ended. See definitions of financial measures in the Companys earnings release at www.twtelecom.com& reconciliations to US
GAAP numbers as well as net debt and interest reconciliations elsewhere in this presentation.(2) Refers to cash, equivalents & short-term investments
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