In a release that offered a blizzard of combined, standalone, and pro-forma results for the fourth quarter of 2014, Level 3 started a new chapter of its story with the incorporation of tw telecom. Lots of data, but just what does it say? My initial take is that North American enterprise revenue growth remained pretty strong for both legacy Level 3 and tw, wholesale was weak, and acquisition costs were big enough to distort it all quite effectively.
Rather than try to mirror it all, I’m going to just put the pro-forma numbers for Q4 we do have alongside Level 3’s past quarters. That will hopefully show the change in shape and give starting point and new shape of the company, i.e. the place with which we’ll be comparing Q1 in a few months. For a more detailed look at the performance of the two businesses on a standalone basis, see the main release (and good luck).
|$ in millions||Q4/13||Q1/14||Q2/14||Q3/14||Q4/14
|– North America – Wholesale||374||368||367||368||443||Strong enterprise growth, weak wholesale.|
|– North America – Enterprise||651||675||684||695||1063|
|– EMEA – Wholesale||89||87||86||80||75||Strong enterprise growth, weak wholesale.|
|– EMEA – Enterprise||134||138||143||139||143|
|– Latin America – Wholesale||41||40||42||42||41||Down sequentially, strong dollar?|
|– Latin America – Enterprise||154||149||157||158||150|
|Total Core Network Services||1,443||1,457||1,479||1,482||1,915|
|– Wholesale Voice & Other||159||152||146||147||137||A steep drop sequentially, but last number’s quarter was probably the outlier.|
|Total Comm. Services||1,602||1,609||1,625||1,629||2052|
|Network Access Costs||618||607|
|Network Related Costs||298||307|
|Comm. Adjusted EBITDA||466||458||459||471||625||excludes $156M in acquisition expenses else EBITDA was $469M|
|Adjusted earnings per share||0.06||0.47||0.21||0.35||0.35|
|Adj. Gross margin %||61.4%||61.8%||62.3%||62.7%|
|Adj. EBITDA margin %||29.1%||28.5%||28.2%||28.9%||30.5%||including acquisition expenses, 22.9%|
|Capital Expenditures||189||163||241||204||346||17% of revenue, I wonder how high this will go now|
|Free Cash Flow||197||(22)||62||117|
For 2015, Level 3 offered a powerful free cash flow range of $550-600M for the full year. Adjusted EBITDA is expected to grow 12-16% from $2.271B, which works out to $2.54-2.63B. Net cash interest will be about $640M, capex will be about 15% of revenue, D&A will be $1.16B, taxes will be about $60M, and non-cash compensation about $120M.
For further color, I’ll be listening to the call and trying to digest the rest of the data this morning.
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