TWTC Investor Presentation Q4 2013-3

8/12/2019 TWTC Investor Presentation Q4 2013-3

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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
http://www.twtelecom.com/http://www.twtelecom.com/


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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


18/2718(1) For Quarter Ended December 31, 2013(2) Calculated on trailing 12 months as of December 31, 2013

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


Revenue $115 $241 $282

M-EBITDA $21 $82 $98


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%

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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


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



Strategic Ethernet & VPN

56% of Data & Internet Revenue

31% of Total Revenue


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


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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Documents

TWTC Investor Presentation Q4 2013-3