Previous Statements by LVLT
» Level 3 Communications Q1 2010 Earnings Call Transcript
» Level 3 Communications, Inc. Q4 2009 Earnings Call Transcript
» Level 3 Communications, Inc. Q3 2009 Earnings Call Transcript
Finally, please note that on today's call, we will be referring to certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the most comparable GAAP financial measures are available in the press release, which is posted on our website at www.level3.com. I will now turn the call over to Jim.James Crowe Thanks, Valerie. As is our normal practice in our prepared remarks, we'll start with Sunit Patel, our CFO, who will discuss some financial results for the quarter. Sunit will turn it over to our COO, Jeff Storey, who will discuss sales and operational matters, including segment results. I'll provide a bit of a summary and some context, and we will then take questions. Sunit? Sunit Patel Thank you, Jim, and good morning, everyone. I'll start with the summary of the quarter. This highlights on the presentation on our Investor Relations website, Slide 3. Core Network Services revenue grew 1.3% sequentially on a constant-currency basis, excluding the $7 million asset sale in the first quarter. We continue to expect sequential Core Network Services growth for the rest of 2010. Core Network Services sales grew by 2% sequentially in the second quarter on top of the 15% sequential growth we saw from the fourth quarter of 2009 to the first quarter of 2010. Churn remained relatively stable this quarter compared to the first quarter. We saw consolidated adjusted EBITDA growth during the quarter, driven by improvement in our cost of sales and better SG&A performance. Our sales force increased by over 2% in the quarter, and we ended the quarter with 509 quota-bearing salespeople. With the increase in sales in the previous quarter, our capital expenditures increased to $104 million in the quarter. Overall, demand for our services is healthy, and we remain focused on sales growth and execution in turning up service.
Turning to the detailed results for the second quarter on Slide 4, Core Network Services revenue was $699 million, up 1.3% sequentially on a constant-currency basis. Core Network Services revenue from wholesale was $342 million, up 2% sequentially. Large enterprise and federal grew 4% sequentially to $142 million.Mid-market's revenue declined by 3% sequentially to $146 million in the second quarter. We saw declines in voice usage and churn outpacing installs in the quarter. However, we are encouraged by the over 30% increase in sales in the quarter and expect better revenue performance for the second half of the year. European Core Network Services revenue grew 3% sequentially on a constant-currency basis but declined by 3% on an as-reported basis as a result of the decline in the euro and the U.K. pound. From a product perspective, on a sequential basis, we saw strong growth in Wavelength and Colocation, or data center revenues. Our CDN, or Content Delivery Network revenues, were up 18% sequentially this quarter. Our Broadcast revenues are up 5% sequentially. Wholesale Voice Services revenue was $163 million this quarter compared to $165 million in the first quarter of 2010 and $171 million in the second quarter last year. We expect continued volatility in Wholesale Voice Services revenue as we manage for margin contribution versus revenue growth. Turning to Slide 5, gross margin was 59.9% this quarter compared to 58.8% in the first quarter of 2010 and 59.1% in the second quarter of 2009. The sequential improvement in gross margin is a result of continued network optimization, improved margin mix and dispute settlements in the quarter. Dispute settlements were about $1 million in the quarter. Communications SG&A expense, excluding non-cash compensation and restructuring charges, was $324 million compared to $327 million in the first quarter of 2010. We expect SG&A to increase next quarter as a result of the typical third quarter increase in utility cost. However, outside of this seasonal increase, we expect SG&A to remain relatively flat for the rest of 2010. We continue to invest in sales, sales support and service delivery resources and manage expenses in other parts of the business. Read the rest of this transcript for free on seekingalpha.com