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Level 3 Reports First Quarter 2014 Results

.04.2014 – .
– Core Network Services revenue grew 6.6 percent year-over-year, on a constant currency basis
– Enterprise Core Network Services revenue grew 11 percent year-over-year, on a constant currency basis
– Gross margin increased to 61.8 percent in the first quarter 2014, from 60.1 percent in the first quarter 2013
– Strong Adjusted EBITDA of $458 million
– Free Cash Flow improved by $140 million, compared to the first quarter 2013
– Based on strong first quarter performance, raising outlook for Adjusted EBITDA and Free Cash Flow for the full year 2014
Level 3 Communications, Inc. (NYSE: LVLT) reported total revenue of $1.609 billion for the first quarter 2014, compared to $1.577 billion for the first quarter 2013.
In the first quarter 2014, the company generated net income of $112 million and basic and diluted earnings per share of $0.48 and $0.47, respectively. For the first quarter 2013, the company had a net loss of $78 million and $0.36 per share (basic and diluted), including $0.11 in foreign exchange losses in EMEA and Latin America and a $0.10 loss for the devaluation of the Venezuelan Bolivar.
Adjusted EBITDA was $458 million in the first quarter 2014. For the first quarter 2013, Adjusted EBITDA on a pro forma basis was $371 million, which has been adjusted to include $15 million in bonus-related non-cash compensation expense in that quarter. In 2013, the company accrued 60 percent of its annual employee bonus compensation expense in the form of equity. For 2014, the company is accruing 100 percent of its bonus compensation expense in cash.
“We started out the year with another good quarter,” said Jeff Storey, president and CEO of Level 3. “The results reflect our focus on execution and emphasis on profitable growth. We continue to capture market share by helping enterprises optimize their cost structure while moving to newer, more scalable technologies.”
Core Network Services (CNS)
CNS revenue was $1.457 billion in the first quarter 2014, increasing 6.6 percent year-over-year on a constant currency basis.
“The first quarter 2014 marks the ninth consecutive quarter of growth in Enterprise CNS revenue, which grew 11 percent year-over-year on a constant currency basis,” said Sunit Patel, executive vice president and CFO of Level 3. “We saw strength in the quarter in part due to turning up service ahead of schedule and better than expected usage revenue.”
Deferred Revenue
The deferred revenue balance was $1.163 billion at the end of the first quarter 2014, compared to $1.129 billion at the end of the first quarter 2013.
Cost of Revenue
Cost of revenue was $614 million in the first quarter 2014, compared to $629 million in the first quarter 2013.
Gross margin increased to 61.8 percent for the first quarter 2014, compared to 60.1 percent in the first quarter 2013.
Selling, General and Administrative Expenses (SG&A)
Excluding non-cash compensation expense, SG&A declined to $537 million in the first quarter 2014, compared to $577 million in the first quarter 2013, on a pro forma basis to include the $15 million in bonus-related non-cash compensation.
Including non-cash compensation expense, SG&A was $547 million for the first quarter 2014. This compared to $599 million for the first quarter 2013. Non-cash compensation expense was $10 million for the first quarter 2014. For the first quarter 2013, non-cash compensation was $22 million, excluding the $15 million in bonus-related non-cash compensation.
Adjusted EBITDA
For the first quarter 2014, Adjusted EBITDA increased to $458 million. This compared to Adjusted EBITDA for the first quarter 2013 of $371 million, on a pro forma basis.
Adjusted EBITDA margin increased to 28.5 percent for the first quarter 2014, compared to Adjusted EBITDA margin of 23.5 percent for the first quarter 2013, on a pro forma basis.
Cash Flow and Liquidity
During the first quarter 2014, Unlevered Cash Flow was $106 million, compared to $28 million in the first quarter 2013.
Free Cash Flow was negative $22 million for the first quarter 2014, compared to negative $162 million in the first quarter 2013.
Capital expenditures were $163 million for the first quarter 2014, compared to $169 million for the first quarter 2013.
As of March 31, 2014, the company had cash and cash equivalents of approximately $607 million.
Business Outlook
“With the performance in CNS revenue and Adjusted EBITDA this quarter, we are updating our full year 2014 outlook,” said Patel. “We now expect Adjusted EBITDA to grow 14 to 18 percent for the full year 2014 compared to our prior outlook of 11 to 14 percent. In addition, we expect to generate Free Cash Flow in the range of $250 to $300 million for the full year 2014 up from our prior outlook range of $225 to $275 million. All other outlook measures are unchanged.”
Conference Call and Web Site Information
Level 3 will hold a conference call to discuss the company-s first quarter 2014 results today at 10 a.m. ET. The call will be broadcast live on Level 3-s Investor Relations website at http://investors.level3.com/investor-relations/presentations-and-events/default.aspx. Additional information regarding the first quarter 2014 results, including the presentation that management will review on the conference call, will be available on Level 3-s Investor Relations website. If you are unable to join the call via the Web, the call can be accessed live at 1 877-283-5643 (U.S. Domestic) or 1 312-281-1201 (International). Questions can also be sent to Investor.Relations(at)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 2 p.m. ET on April 30 until 1 p.m. ET on July 29. The replay can be accessed by dialing 1 800-633-8284 (U.S. Domestic) or 1 402-977-9140 (International), conference code 21711663.
For additional information, please call 1 720-888-2518.

Level 3 Communications, Inc. (NYSE: LVLT) ist ein Fortune-500-Unternehmen, das regionale, nationale und globale Kommunikationsdienstleistungen für Unternehmens-, Behörden- und Carrierkunden bereitstellt. Das umfassende Level 3 Portfolio an sicheren, gemanagten Lösungen bietet Glasfaser- und Infrastrukturlösungen, Sprach- und Datenübertragung auf IP-Basis, Wide-Area-Ethernet-Dienste, Bereitstellung von Videos und Inhalten sowie Datacenter- und cloudbasierte Lösungen. Level 3 betreut Kunden in mehr als 500 Märkten und 60 Ländern. Dazu nutzt es eine globale Service-Plattform, die auf eigenen Glasfasernetzen in drei Kontinenten mit Anbindung an die umfangreich ausgebaute Seekabeltechnik aufbaut. Weitere Informationen finden Sie unter www.level3.com. Besuchen Sie uns auch bei Twitter, Facebook und LinkedIn.