CenturyLink Sees Improving EBITDA, Lower Dividends, NOL Protection

February 14th, 2019 by · Leave a Comment

CenturyLink reported its Q4 numbers yesterday after the market closed, continuing the integration process and boosting adjusted EBITDA.  The company decided to cut its dividend from $2.16 per share down to $1.00, which won't make the markets very happy.  They also announced a plan to protect the company's $7.3B pile of NOLs (net operating losses).

$ in millions Q4/17

(pro forma)

Q1/18 Q2/18 Q3/18 Q4/18
Total Revenue 6005 5945 5902 5818 5778
 - SME 874 860 884 860 825
 - Enterprise 1324 1315 1295 1278 1329
 - Int'l & Global Accounts 941 937 903 892 925
 - Wholesale 1276 1271 1283 1255 1237
 - Consumer 1401 1379 1352 1355 1285
 - Regulatory 189 183 185  178 177
Adjusted EBITDA 1992 2074 2111 2228 2189
Adj. EBITDA Margin 33.2% 34.9% 35.8% 38.3% 37.9%
Adj. EBITDA after items 2210 2181 2271 2287 2301
Capex 844 805 771 684 915
Free Cash Flow 457 862 811 1103  1081

Revenues fell sequentially again but less than they have seen recently, as declines in consumer, SME, and wholesale were partially offset by growth in enterprise and in international and global accounts.

Adjusted EBITDA was up $197M over the same period last year, and down sequentially by $39M.  But when you take out the one time and integration expenses, it was up sequentially again as the company continues to squeeze synergies out of the Level 3 combination.  Free cash flow was also strong at $1.081B.

Looking forward CenturyLink is expecting 2019 EBITDA of $9.0-9.2B, and free cash flow of $3.1-3.4B.  The company expects to spend $3.5-3.8B in free cash flow.  There are also another $800M-$1B in annualized integration synergies left to derive over the next three years, for which they will spend $450-650M to achieve.

The new NOLs protection plan is directed toward avoiding shifts in share distribution that would result in an ownership change, although the company clarified it is not an anti-takeover provision. Through the issuance of rights with an expiration date of December 2020, they hope to deter trading that might head in the wrong direction from a NOLs valuation perspective.

I haven't been closely following CenturyLink's results since the Level 3 deal, so I'll avoid too much commentary just now.  I do plan to rectify that situation as 2019 continues.

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Categories: Fiber Networks · Financials · Internet Backbones

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