Next generation internet backbone Level 3 Communications (NYSE:LVLT, news, filings) checked in with third quarter earnings this morning. The company has had a rough year as the economic crisis and other factors have compounded to pressure revenue. I don't think anyone was expecting much this quarter, but while the revenue pressure didn't go away it did at least ebb somewhat as promised. Here is a quick summary of the relevant numbers, followed by my own thoughts:
|Core Network Services||729||707||701||up from Q3|
|Other Comm. Revs||62||49||42|
|Total Comm. Revs||961||926||901|
|Comm Cost of Service||390||379||369|
|Comm Gross Margins||59.5%||59.1%||59.0%|
|Comm SG&A (ex stock comp)||322||311||316|
|Comm. Adjusted EBITDA||249||230||215||206-256|
|Earnings per share||-0.07||-0.08||-0.10|
|Free Cash Flow||-82M||20M||9M||~53M (Neutral for FY)|
Revenues - while core network services declined again, $701M was just about what I expected to see. Wholesale markets revenue actually ticked upward slightly - a good sign since this is the company's growth engine. Business markets revenue on the other hand was quite weak. The overall revenue number declined more substantially due to a lower wholesale voice number, but it is the core network services revenues that are the key.
EBITDA - $215 was a bit disappointing, largely due to higher SG&A than I had hoped to see. That number does tend to jump around a bit, so I will be listening to the company's comments regarding it.
Free Cash Flow - Ever so slightly positive at $9M, the second quarter in a row. Seasonality probably guarantees that the fourth quarter will be similar, and that they will not breach their FCF neutral guidance for the full year.
Guidance - They maintained guidance for EBITDA and again indicated that this should be the bottom for CNS revenues, so not much has changed yet.
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