With the CenturyLink deal inching closer every day, this is probably the last pure Level 3 earnings report to cover. Level 3 had a good second quarter, seeing its third consecutive quarter of CNS revenue growth and beating analyst expectations on the bottom line. Here are Level 3's numbers in some context:
|$ in millions||Q2/16||Q3/16||Q4/16||Q1/17||Q2/17||Comments|
|– North America – Wholesale||443||412||405||403||415||N.A. wholesale was strong, while enterprise held the line.|
|– North America – Enterprise||1162||1160||1179||1191||1192|
|– EMEA – Wholesale||63||61||55||55||55||EMEA remarkably stable sequentially.|
|– EMEA – Enterprise||110||104||108||106||107|
|– EMEA – UK Government||18||17||16||14||14|
|– Latin America – Wholesale||37||37||34||36||36||Strong L.A. enterprise growth.|
|– Latin America – Enterprise||123||139||136||141||146|
|Total Core Network Services||1,956||1,930||1,934||1,946||1,965||Best CNS quarter in a long while|
|– Wholesale Voice & Other||100||103||98||102||96|
|Total Revenue||2,056||2,033||2,032||2,048||2,061||Inline with expectations|
|Network Access Costs||676||675||680||691||675|
|Adjusted EBITDA||715||716||709||705||722||Included $22M in acquisition costs in Q2, else $744M|
|Adjusted earnings per share||0.41||0.40||0.70||0.34||0.42||Beating the composite analyst estimate of $0.38.|
|Network access margin %||67.1%||66.8%||66.5%||66.3%||67.2%|
|Adj. EBITDA margin %||34.8%||35.2%||34.9%||34.4%||35.0%|
|Free Cash Flow||264||281||251||171||233||Includes $2M in acquisition expenses|
Revenue growth was found in North American wholesale and in Latin American enterprise, which counterbalanced losses in, well, nothing. The only revenue category that fell was the declining basket of wholesale voice and other, and that just gave back unexpected gains from the prior quarter.
Meanwhile, excluding expenses related to the CenturyLink deal of $22M, EBITDA would have risen all the way to $744M or 36.1% of total revenue, and earnings per share checked in four pennies above expectations.
Looking ahead, Level 3 simply maintained its guidance for 2017 EBITDA of $2.94-3.0 and FCF of $1.10-1.16B going into the closing of the CenturyLink merger.
Along with its win at the GSA EIS contract, it's been a very good week for Level 3 I'd say.