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"It was great to see a 4% increase in North America Enterprise sales, which is the space we play in. When some of Level 3's peers are flat to down, Level 3 is showing great momentum and building a solid base for future growth. We have already seen an uptick in 2012 sales for Level 3, and although our experience is just a microcosm of the overall number, we remain very bullish."
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Adam Edwards
President
Telarus Inc.
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Telecom Channel Updates - Breaking Industry News
Level 3 Reports First Quarter 2012 Results
Company sees strong revenue performance from enterprise customers and is positioned for sequential growth
Author: Austin Holverson | Original Source
Date: May 3, 2012
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| Level 3 expects Core Network Services revenue to continue to grow sequentially for the rest of the year and they remain confident in their expectations for 20 to 25 percent Adjusted EBITDA growth for the full year 2012. |
BROOMFIELD, Colo., May 3, 2012 /PRNewswire/ -- Level 3 Communications, Inc. (NYSE: LVLT) reported total revenue of $1.586 billion for the first quarter 2012, an increase compared to $1.579 billion for the fourth quarter 2011.
The net loss for the first quarter 2012 was $138 million compared to a net loss from continuing operations of $235 million in the fourth quarter 2011. On a per share basis and excluding losses on extinguishment of debt, these losses were $0.37 for the first quarter 2012 and $1.02 for the fourth quarter 2011.
Consolidated Adjusted EBITDA increased to $327 million in the first quarter 2012, compared to $271 million in the fourth quarter 2011.
"We made good progress on integration this quarter, while delivering growth in revenue and Adjusted EBITDA," said James Q. Crowe, CEO of Level 3. With our continued focus on customer experience and the strong demand we see in the market, we believe we are well-positioned for continued growth."
Core Network Services
Core Network Services revenue grew sequentially to $1.382 billion in the first quarter 2012, an increase of approximately 1.2 percent on a constant currency basis.
"We were pleased to see that sequential Core Network Services revenue growth strengthened this quarter," said Sunit Patel, executive vice president and CFO of Level 3. "We saw strong revenue performance from our enterprise customers, with Core Network Services growth on a constant currency basis of 3 percent sequentially and 11 percent year-over-year. On a constant currency basis, Core Network Services revenue in EMEA declined 0.8 percent sequentially, also improving compared to the declines we saw last quarter. We believe that the EMEA business has now stabilized, and is positioned for sequential growth."
Deferred Revenue
The deferred revenue balance was $1.143 billion at the end of the first quarter 2012, compared to $1.149 billion at the end of the fourth quarter 2011.
Cost of Revenue
Cost of revenue decreased to $657 million in the first quarter 2012, compared to $660 million in the fourth quarter 2011.
Gross margin improved to 58.6 percent for the first quarter 2012, compared to 58.2 percent in the fourth quarter 2011.
Selling, General and Administrative Expenses (SG&A)
Excluding non-cash compensation expense, SG&A was $602 million in the first quarter 2012, compared to $648 million in the fourth quarter 2011. SG&A included $15 million of integration costs in the first quarter 2012, compared to $62 million of transaction and integration costs in the fourth quarter 2011.
SG&A, including non-cash compensation expense, was $626 million for the first quarter 2012, compared to $681 million for the fourth quarter 2011. Non-cash compensation expense was $24 million and $33 million for the first quarter 2012 and fourth quarter 2011, respectively.
Adjusted EBITDA
Adjusted EBITDA increased sequentially to $327 million for the first quarter 2012, compared to $271 million for the fourth quarter 2011, including transaction and integration expenses in both periods. Pro forma Adjusted EBITDA for the first quarter 2011 was $298 million.
Adjusted EBITDA margin increased to 20.6 percent for the first quarter 2012, compared to 17.2 percent for the fourth quarter 2011.
Consolidated Cash Flow and Liquidity
During the first quarter 2012, Unlevered Cash Flow was $14 million, compared to negative $1 million in the first quarter 2011 on a pro forma basis.
Free Cash Flow was negative $213 million for the first quarter 2012, compared to negative $207 million in the first quarter 2011 on a pro forma basis. Consistent with previous years, free cash flow use is heavy in the first quarter, due to working capital uses including annual bonus payments, prepayments, maintenance contracts, property and payroll tax payments.
Cash interest expense was $66 million higher in the first quarter 2012 compared to the fourth quarter 2011.
During the first quarter 2012, Level 3 Financing, Inc., issued $900 million aggregate principal amount of its 8.625% Senior Notes due 2020. In conjunction with this transaction, Level 3 Financing redeemed all $807 million aggregate principal amount outstanding of its 9.25% Senior Notes due 2014.
Also during the quarter, the company completed an exchange of approximately $100 million aggregate principal amount of its outstanding 15% Convertible Senior Notes due 2013 for a total of approximately 5.4 million shares of common stock.
As of March 31, 2012, the company had cash of approximately $748 million.
Integration Update
"We continued to make progress with our integration initiatives this quarter," said Jeff Storey, president and COO of Level 3. "We established our product roadmap for 2012 and have already begun to make services such as CDN and collaboration available across our larger network footprint. We continue to integrate our network assets by further interconnecting our networks and optimizing the underlying cost of providing services. The customer experience remains our top priority, and to that end, we have implemented a unified customer survey process to closely monitor customer satisfaction. I am pleased to say our customers tell us that they are continuing to receive the excellent level of customer service they have come to expect from Level 3."
Business Outlook
"We are reiterating the guidance we provided on our fourth quarter 2011 call," said Patel. "We expect Core Network Services revenue to continue to grow sequentially for the rest of the year. We remain confident in our expectations for 20 to 25 percent Adjusted EBITDA growth for the full year 2012 from the starting point of $1.216 billion of pro forma Adjusted EBITDA for 2011."
"Given the capital markets transactions we completed in the first quarter, we are updating our interest expense guidance for the full year 2012, and now expect GAAP interest expense of approximately $730 million and net cash interest expense of approximately $675 million. We continue to expect capital expenditures for the full year 2012 to be approximately 12 percent of total revenue. In the aggregate for the remaining three quarters of 2012, we expect Free Cash Flow to be positive. We continue to have confidence in our outlook for this year, and expect to grow the business for the remainder of 2012."
Conference Call and Website Information
Level 3 will hold a conference call to discuss the company's first quarter 2012 results today at 9 a.m. ET. The conference call will be broadcast live on Level 3's Investor Relations website at http://lvlt.client.shareholder.com/events.cfm. If you are unable to join the call via the Web, the call can be accessed live at 1 877-368-9472 (U.S. Domestic) or 1 212-231-2908 (International). Questions can also be sent to Investor.Relations@Level3.com.
The call will be archived and available on Level 3's Investor Relations website or can be accessed as an audio replay starting at 1 p.m. ET on May 3, 2012 until 1 p.m. ET on Aug 3, 2012. The replay can be accessed by dialing 1 800-633-8284 (U.S. Domestic) or 1 402-977-9140 (International), conference code 21588027.
For additional information, please call 720-888-2502.
About Level 3 Communications
Level 3 Communications, Inc. (NYSE: LVLT) provides local, national and global communications services to enterprise, government and carrier customers. Level 3's comprehensive portfolio of secure, managed solutions includes fiber and infrastructure solutions; IP-based voice and data communications; wide-area Ethernet services; video and content distribution; data center and cloud-based solutions. Level 3 serves customers in more than 450 markets in 45 countries over a global services platform anchored by owned fiber networks on three continents and connected by extensive undersea facilities. For more information, please visit www.level3.com
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