Level 3’s Growth Trend Continues

August 3rd, 2017 by · 4 Comments

With the CenturyLink deal inching closer every day, this is probably the last pure Level 3 earnings report to cover.  Level 3 had a good second quarter, seeing its third consecutive quarter of CNS revenue growth and beating analyst expectations on the bottom line.  Here are Level 3's numbers in some context:

$ in millions Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Comments
 – North America – Wholesale 443 412 405 403 415 N.A. wholesale was strong, while enterprise held the line.
 – North America – Enterprise 1162 1160 1179 1191 1192
 – EMEA – Wholesale 63 61 55 55 55 EMEA remarkably stable sequentially.
 – EMEA – Enterprise 110 104 108 106 107
 – EMEA – UK Government 18 17 16 14 14
 – Latin America – Wholesale 37 37 34 36 36 Strong L.A. enterprise growth.
 – Latin America – Enterprise 123 139 136 141 146
Total Core Network Services 1,956 1,930  1,934 1,946 1,965 Best CNS quarter in a long while
 – Wholesale Voice & Other 100 103  98 102 96
Total Revenue 2,056 2,033  2,032 2,048 2,061 Inline with expectations
Network Access Costs 676 675  680 691 675
Network Expenses 339 337 332 336 331
Cash SG&A 326 305 311 316 330
Adjusted EBITDA 715 716 709 705 722 Included $22M in acquisition costs in Q2, else $744M
Adjusted earnings per share 0.41 0.40 0.70  0.34 0.42 Beating the composite analyst estimate of $0.38.
Network access margin % 67.1% 66.8%  66.5% 66.3% 67.2%
Adj. EBITDA margin % 34.8% 35.2%  34.9% 34.4% 35.0%
Capital Expenditures 367 364  306 368 328
Free Cash Flow 264 281  251 171 233 Includes $2M in acquisition expenses

Revenue growth was found in North American wholesale and in Latin American enterprise, which counterbalanced losses in, well, nothing.  The only revenue category that fell was the declining basket of wholesale voice and other, and that just gave back unexpected gains from the prior quarter.

Meanwhile, excluding expenses related to the CenturyLink deal of $22M, EBITDA would have risen all the way to $744M or 36.1% of total revenue, and earnings per share checked in four pennies above expectations.

Looking ahead, Level 3 simply maintained its guidance for 2017 EBITDA of $2.94-3.0 and FCF of $1.10-1.16B going into the closing of the CenturyLink merger.

Along with its win at the GSA EIS contract, it's been a very good week for Level 3 I'd say.

Categories: Financials · Internet Backbones

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