Level 3 Posts Lower Revenue for Q3

October 31st, 2016 by · Leave a Comment

Along with the blockbuster news of its merger with CenturyLink, Level 3 also reported its earnings this morning, a few days early -- getting all the news out there at once apparently.  Revenues were down sequentially, both total and core, as weakness in both the US and Europe was only partially offset by a big quarter in Latin America.  Earnings per share of $0.40 was a couple pennies light.  Here's a summary of their numbers in some context:

$ in millions Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Comments
 – North America – Wholesale 421 425 434 443 412  Wholesale was ugly, Enterprise didn't offset it.
 – North America – Enterprise 1130 1146 1167 1162 1160
 – EMEA – Wholesale 69 69 65 63 61 Enterprise was lower than hoped for.
 – EMEA – Enterprise 117 118 107 110 104
 – EMEA – UK Government 26 22 19 18 17
 – Latin America – Wholesale 39 35 39 37 37 Big Enterprise number here, the only revenue bright spot.
 – Latin America – Enterprise 144 125 116 123 139
Total Core Network Services 1,946 1,943 1,947 1,956 1,930 Down sequentially, and below expectations.
 – Wholesale Voice & Other 116 110 104 100 103 Surprisingly steady.
Total Revenue 2,062 2,053 2,051 2,056 2,033 Down sequentially, and below expectations.
Network Access Costs 706 708 694 676 675
Network Expenses 356 337 331 335 331
Cash SG&A 325 323 316 33o 311 Savings here helped hold the EBITDA line
Adjusted EBITDA 657 681 710 715 716 Up sequentially again, but barely
Adjusted earnings per share 0.00 0.53 0.35 0.41 0.40
Network access margin % 65.8% 65.5% 66.2% 67.1% 66.8%
Adj. EBITDA margin % 31.9% 33.2% 34.6% 34.8% 35.2%
Capital Expenditures 328 330 297 367 364 Guidance for capex raised.
Free Cash Flow 247 226 213 264 281

Wholesale revenues in the US were quite soft, while enterprise revenues in Europe dipped as well.  Latin American enterprise sales were the only bright spot on the growth front.   Cost savings on the SG&A line compensated in part, and thus EBITDA went up for another consecutive quarter and kept the company on-track to meet its EBITDA guidance for the full year.

Level 3 updated its capex guidance for 2016 to 16% of revenue in light of higher demand for dark fiber and wavelength services.  Free cash flow was steady and still strong, though I'll bet they hoped for a higher number.

All in all, Level 3 investors will be happy to have the merger announcement as cover today, as I expect the markets wouldn't take the revenue shortfall well otherwise.   I look forward to additional color on the conference call later today.

If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!

Categories: Financials · Internet Backbones

Discuss this Post


Leave a Comment

You may Log In to post a comment, or fill in the form to post anonymously.





  • Ramblings’ Jobs

    Post a Job - Just $99/30days
  • Event Calendar