Q4 Projections & Model for Level 3

November 17th, 2008 by · 3 Comments

Here is my updated Level 3 Communications (LVLT) model with projections for Q4 and onward into 2009 and 2010.  As with recent spreadsheets, this one is stored on Google Documents. I have included a summary page for Q4 and full year 2008 projections, but if you really want to see the details or further projections then you can delve into to the other sheets. I have tried to take a slowdown due to the economy into consideration, but of course who can tell.

To play with the whole thing, try this link to the excel spreadsheet.

To make a long story short, I project Q4 core revenues of $985M, with total communications revenues of $1066. EBITDA of $272 seems very reasonable to achieve, and earnings per share of $-0.10 include the known debt/equity swaps in early October. Comparing with thejuice, I have core revenue coming in lighter than his $993, which accounts for most of the variance in EBITDA from his $279. Mostly this is just a guess about how much the economy will hurt growth in Q4 and on.

I expect Business Markets to continue to struggle, while Wholesale Markets should show a little life. Content Markets should have a nice Q4 on the back of Vyvx’s seasonal boost plus increasing CDN relevance. Europe will grow solidly as usual, but this division seems to face a continuing currency headwind so I don’t expect that much. Cash SG&A will drop below $360M, and gross margins probably will pull back after a strong Q3 – Murphy’s law and all that.

My model is complex, probably much more complex than it needs to be for almost anyone else looking at it.  But I prefer it that way, it lets me keep track of more threads than I otherwise would.  For instance, I can look at the effects of differing growth rates across product lines on gross margins, and the historical effects of working capital swings. Anyway, I find it useful.

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Categories: Financials · Internet Backbones

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3 Comments So Far


  • Morty Dick says:

    Rob—–I think COGS goes down . Using your #s —- 21 mil X .2 = +4.2 , 9 mil X .3 = -2.7 , a net increase of 1.5 mil . We can expect some network savings— no idea how much . Last qtr it was around 15 mil .

  • Rob Powell says:

    Morty, one can certainly hope. I only have it going up somewhat because last quarter’s savings seemed high and could be a perturbation, and because otherwise the revenue and ebitda guidance from the company seem inconsistent.

    But on the other hand, what would be best is if COGS goes up while gross margin goes down, since that necessarily results from good revenue growth!

  • BC says:

    COGS goes down this quarter.

    Currency may have a positive impact if we start to the Euro rally against the dollar going into December and year end.

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