With the CenturyLink/Level 3 deal still in process, there are still earnings reports to keep an eye on. This afternoon, Level 3 posted its numbers for the fourth quarter of 2016, showing relatively stable results relative to the third quarter. Relative to analyst estimates, Q4 revenue came in light at $2.032B while earnings per share of $0.70 was above expectations.
|$ in millions||Q4/15||Q1/16||Q2/16||Q3/16||Q4/16||Comments|
|– North America – Wholesale||425||434||443||412||405||Stronger Enterprise numbers this quarter|
|– North America – Enterprise||1146||1167||1162||1160||1179|
|– EMEA – Wholesale||69||65||63||61||58||Nothing special here|
|– EMEA – Enterprise||118||107||110||104||106|
|– EMEA – UK Government||22||19||18||17||16|
|– Latin America – Wholesale||35||39||37||37||34||Down, partially currency?|
|– Latin America – Enterprise||125||116||123||139||136|
|Total Core Network Services||1,943||1,947||1,956||1,930||1,934||Below expectations, but still up sequentially|
|– Wholesale Voice & Other||110||104||100||103||98||Broke down through the 100 barrier finally|
|Total Revenue||2,053||2,051||2,056||2,033||2,032||Down sequentially, and below expectations.|
|Network Access Costs||708||694||676||675||680|
|Adjusted EBITDA||681||710||715||716||709||The first sequential decline in a while.|
|Adjusted earnings per share||0.53||0.35||0.41||0.40||0.70|
|Network access margin %||65.5%||66.2%||67.1%||66.8%||66.5%|
|Adj. EBITDA margin %||33.2%||34.6%||34.8%||35.2%||34.9%|
|Capital Expenditures||330||297||367||364||306||Guidance for capex raised.|
|Free Cash Flow||226||213||264||281||251|
In North America, enterprise revenues rose strongly during the quarter, more than offsetting softness on the wholesale side. Enterprise growth also returned to the scene in Europe, while in Latin America they held most of last quarter's surge. In both cases, wholesale and government revenues ebbed. Combined, core network services went up by $4M, and total revenues down by $1M. For the full year, Level 3 generated $7.767B in revenue.
EBITDA fell sequentially on slightly higher access costs and SG&A, but earnings per share jumped up due to a tax benefit - will have to listen to the call for details on that. Free cash flow was a healthy $251M.
Looking ahead, Level 3 forecast 2017 EBITDA of $2.94-3.00B, free cash flow of $1.10-1.16B, and capital expenditures of about 16% of revenue.
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